Document:

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                                                                    Exhibit 10.1

                            ASSET PURCHASE AGREEMENT

                  This ASSET PURCHASE AGREEMENT is dated as of May ___, 2003
(the "Agreement Date") by and between Princeton Video Image, Inc., a Delaware
corporation ("Seller"), and PVI Virtual Media Services, LLC, a Delaware limited
liability company ("Buyer").

                              W I T N E S S E T H:

                  WHEREAS, Seller is engaged in the business, directly and
through its Subsidiaries, of developing and marketing its Intellectual Property,
including a real-time video insertion system with its patented computer vision
technology and proprietary hardware and software system, known as the Live Video
Insertion System ("L-VIS(R)") and to develop products to allow viewers to
interact with video programming (the "Business");

                  WHEREAS, Seller, on or about this date, is commencing a case
(the "Chapter 11 Case") under chapter 11 of title 11 of the United States Code,
11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court"); and

                  WHEREAS, Seller desires to sell to Buyer all of the assets of
the Business, and Buyer desires to purchase such assets, all in the manner and
subject to the terms and conditions set forth in this Agreement and pursuant to
Sections 105, 363, 365 and 1146 of the Bankruptcy Code and Fed. R. Bankr. P.
2002, 6004, 6006, 9014 and 9019.

                  NOW, THEREFORE, the parties hereby agree as follows:

                                   ARTICLE 1
                                   DEFINITIONS

                  1.1 Defined Terms. As used herein, the terms below shall have
the following respective meanings:

                  "Affiliate" means, as to any Person, any other Person or group
acting in concert in respect of the Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with that Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person or group of Persons, means
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the Person, whether through the
ownership of voting securities, by contract, or otherwise.

                  "Agreement" means this Asset Purchase Agreement, together with
the Exhibits and Schedules, in each case as amended, restated, supplemented or
otherwise modified from time to time.
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                  "Agreement Date" has the meaning specified in the preamble.

                  "Alternative Transaction" has the meaning specified in Section
8.1.

                  "Assumed Agreements" means all contracts and leases related to
the Business listed on Exhibit A and all other contracts and leases related to
the Business which Buyer agrees to assume by giving notice to Seller of such
assumption within 10 days prior to Closing; and Buyer may also elect to remove
any contract or lease from Exhibit A on notice to Seller given at least 5 days
prior to Closing.

                  "Assumed Liabilities" means all liabilities which arise and
relate to the period after the Closing Date under the Assumed Agreements. For
avoidance of doubt, Assumed Liabilities excludes any Liability attributable to
any act, occurrence or omission which occurred prior to Closing.

                  "Auction" means the sale of the Purchased Assets by auction as
provided in the Bidding Procedures Order.

                  "Bankruptcy Code" has the meaning specified in the recitals.

                  "Bankruptcy Court" has the meaning specified in the recitals.

                  "Bankruptcy Court Approval" has the meaning specified in
Section 7.1(d).

                  "Bidding Procedures Order" means the order of the Bankruptcy
Court pursuant to 11 U.S.C. Sections 363(b) and 105(a) and Fed. R.
Bankruptcy P. 2002, 6004, 6006, 9014 and 9019, in substantially the foRm of
Exhibit G, approving (a) the Bidding Procedures, (b) the Form and Manner of
Notice of (i) the Sale of Certain Assets to PVI Virtual Media Services, LLC and
(ii) the Assumption and Assignment of Certain Executory Contracts and Unexpired
Leases, and Granting Related Relief and (c) such other terms as Buyer or its
counsel may reasonably require.

                  "Business Day" means any day other than a Saturday, Sunday or
a legal holiday on which banking institutions in the State of Delaware are not
required to open.

                  "Buyer" has the meaning specified in the preamble.

                  "Challenge Deadline" shall mean the earlier of the date (a) 60
days after the formation of the Creditors Committee or (b) 75 days after the
filing of the Chapter 11 petition commencing the Chapter 11 Case.

                  "Chapter 11 Case" has the meaning specified in the recitals.

                  "Claim Challenges" has the meaning specified in the order to
be entered by the Bankruptcy Court approving the DIP Facility.

                  "Closing" has the meaning specified in Section 3.1(a).
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                  "Closing Date" has the meaning specified in Section 3.1(a).

                  "Contract" means any oral or written agreement, lease,
license, purchase order, commitment for the purchase of goods, or other
contract, instrument or arrangement to which Seller is a party and which relates
to the Business.

                  "Creditors Committee" means the official committee of
unsecured creditors in the Chapter 11 Case.

                  "Cure Amount" means the amount necessary for Seller to assume
and assign to Buyer the Assumed Agreements pursuant to Section 365 of the
Bankruptcy Code, subject only to the Assumed Liabilities, as such amount is
determined in accordance with the Bidding Procedure Order or is otherwise
determined by the Bankruptcy Court.

                  "DIP Facility" means that certain Debtor-in-Possession Loan
and Security Agreement by and between Seller, as borrower, and Buyer, as lender,
in the aggregate principal amount of up to $1.76 million.

                  "Excluded Assets" means (i) any cash or cash equivalents, (ii)
any accounts receivable, (iii) any avoidance actions under the Bankruptcy Code,
(iii) any rights under any lease or executory contract which is not an Assumed
Agreement, (iv) any real estate owned or leased by Seller except leases which
are Assumed Agreements and (v) all of Seller's interest in Princeton Video Image
Europe, N.V.

                  "Excluded Liabilities" has the meaning specified in Section
2.2.

                  "Final Order" means an order or judgment of the Bankruptcy
Court or any other court of competent jurisdiction (i) that is not the subject
of a pending appeal, petition for certiorari, motion for reconsideration or
other proceeding for review, rehearing or reargument, (ii) that has not been
reversed, stayed, modified or amended and (iii) respecting which the time to
appeal, to petition for certiorari, to move for reconsideration or to seek
review, rehearing or reargument shall have expired, as a result of which said
order shall have become final in accordance with Rule 8002 of the Federal Rules
of Bankruptcy Procedure and other applicable Laws.

                  "Intellectual Property" means the following property of
Seller: (i) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all rights arising under
or in connection with all Patents, Patent Applications and Patent disclosures
related to the Purchased Assets, (ii) all trademarks, service marks, trade
dress, logos, slogans, trade names and corporate names (including, without
limitation, "L-VIS(R)" and "iPoint(TM)"), together with all translations,
adaptations, derivations and combinations thereof (including all goodwill
associated therewith), and all applications, registrations and renewals related
to the Purchased Assets, (iii) all copyrightable works, all copyrights and all
applications, registrations and renewals related to the Purchased Assets, (iv)
all trade secrets and confidential business information (including, without
limitation, ideas, research, know-how, techniques, methods, data, product
drawings, training manuals, clinical and regulatory strategies, and business and
marketing plans and proposals) related to the Purchased Assets, (v) all computer
software related solely to the Purchased Assets and not other applications, (vi)
all computer generated data and documentation related to the Purchased Assets,
(vii) all Third Party License
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Rights related to the Purchased Assets, (viii) all designs, plans and
documentation in whatever form related to products under development or products
subject to a change in design or composition, (ix) all other proprietary rights
related to the Purchased Assets, and (x) all copies and tangible embodiments
thereof (in whatever form or medium) related to the Purchased Assets.

                  "Interests" means all liens (including mechanics',
materialmen's and other consensual and non-consensual liens and statutory
liens), security interests, encumbrances and claims (including, but not limited
to, any "claim" as defined in section 101(5) or "lien" as defined in section
101(37) of the Bankruptcy Code), reclamation claims, mortgages, deeds of trust,
pledges, covenants, restrictions, hypothecations, charges, indentures, loan
agreements, instruments, contracts, leases, licenses, options, rights of first
refusal, contracts, offsets, recoupment, rights of recovery, judgments, orders
and decrees of any court or foreign or domestic governmental entity, claims for
reimbursement, contribution, indemnity or exoneration, assignment, preferences,
debts, charges, suits, licenses, options, rights of recovery, interests,
products liability, alter-ego, environmental, successor liability, tax and other
liabilities, causes of action and claims, or other encumbrances or restrictions
on or conditions to transfer or assignment of any kind (including without
limitation to the generality of the foregoing restrictions or conditions on or
to the transfer, assignment, or renewal of licenses, permits, registrations, and
authorizations or approvals of or with respect to governmental units and
instrumentalities) to the fullest extent of the law, in each case whether
secured or unsecured, choate or inchoate, filed or unfiled, scheduled or
unscheduled, noticed or unnoticed, recorded or unrecorded, perfected or
unperfected, allowed or disallowed, contingent or non-contingent, liquidated or
unliquidated, matured or unmatured, material or non-material, disputed or
undisputed, or known or unknown, whether arising prior to, on, or subsequent to
the commencement of the Bankruptcy Case, whether imposed by agreement,
understanding, law, equity or otherwise.

                  "Inventory" means all inventory related to the Business which
is owned by Seller on the Closing Date including all inventories of raw
materials, work-in-process, finished goods, supplies, parts and packaging
materials.

                  "Liabilities" means, as to any Person, all debts, claims of
any kind or nature, including contingent or unliquidated claims or any other
claims falling within the definition set forth in Section 101(5) of the
Bankruptcy Code, liabilities, commitments, responsibilities, and obligations of
any kind or nature whatsoever, direct or indirect, absolute or contingent,
whether known or unknown and whether or not actually reflected, or required to
be reflected, in such Person's balance sheet or other books and records.

                  "Machinery and Equipment" has the meaning specified in Section
2.1(a).

                  "Material Adverse Effect" means any state of facts, events,
changes or effects that, individually or aggregated with other states of facts,
events, changes or effects, is directly and materially adverse to or directly
and materially impairs, the value, condition or use of the Purchased Assets.

                  "Notices" has the meaning specified in Section 10.4.
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                  "Order" means and includes any writ, judgment, decree,
injunction, award or other order of any court, arbitrator or governmental or
regulatory authority.

                  "Patent" means United States Letters Patent and design patent,
including, without limitation, any extension, registration, confirmation,
continuation, division, continuation-in-part, reissue, re-examination or renewal
thereof, and including any foreign equivalents of the foregoing, relating to
L-VIS(R) or iPoint(TM) or any other Intellectual Property of Seller.

                  "Patent Application" means an application, including a
provisional application, for a Patent.

                  "Permits" has the meaning specified in Section 4.8.

                  "Person" means an individual, a partnership, a joint venture,
a corporation, a business trust, a limited liability company, a trust, an
unincorporated organization, a joint stock company, a labor union, an estate, a
Governmental Entity or any other entity.

                  "Pre-Petition Facility" means the following credit facilities:
(a) the Note Purchase and Security Agreement, dated as of June 25, 2002, between
Seller and PVI Holding, LLC, as amended and (b) the Note Purchase and Security
Agreement, dated as of February 18, 2003, between Seller, Presencia en Medios,
S. A. de C.V. and PVI Holding, LLC, as amended.

                  "Purchase Price" has the meaning specified in Section 3.2.

                  "Purchased Assets" means all of the tangible and intangible
personal property of Seller, including all assets related to the Company's use,
assembly, manufacture, design, development, marketing and sale of L-VIS(R) and
iPoint(TM), wherever located, including, but not limited to: its interest in the
Subsidiaries; drawings; specifications; procedures; processes; complaint files;
all records related to regulatory matters; Machinery and Equipment; fixtures;
tooling; dies; molds; all computer generated drawings and information related to
the Purchased Assets; computer hardware related to the Purchased Assets;
Inventory; data bases; regulatory filings; assignable Permits; prepaid airtime,
prepaid discounts, other obligations owing to the Company; goodwill; all
Intellectual Property; customer and prospect lists; all Assumed Agreements; the
right to do business with existing customers and vendors; proprietary or other
rights regarding the Business; sales and promotional materials, and all assets
related to the developing and marketing a real-time video insertion system; with
the exception of the Excluded Assets.

                  "Sale Order" means an order substantially in the Form of
Exhibit D entered by the Bankruptcy Court that includes (i) a finding that the
Transaction is in good faith and otherwise satisfies the provisions of Section
363, including Sections 363(m) and (n), of the Bankruptcy Code; (ii)
authorization and approval of the Transaction pursuant to this Agreement; (iii)
a provision that the Purchased Assets are being transferred free and clear of
all Interests; (iv) a provision that the permits the Buyer to acquire the
obligations represented by the Secured Loan Credit Amount from its Affiliates
prior to the Closing and to "credit bid" and use the Secured Loan Credit Amount
as a set off to its payment of the Purchase Price and (v) such other terms as
Buyer or its counsel may reasonably require.
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                  "Secured Loan Credit Amount" means all amounts due to the
Buyer or any of its Affiliates at the Closing Date, including but not limited to
Cablevision, PVI Holding, LLC and Presencia en Medios, S.A. de C.V., under the
DIP Facility and the Pre-Petition Facility.

                  "Seller" has the meaning specified in the preamble.

                  "Subsidiaries" means all entities wholly or partially owned by
Seller, directly or indirectly, including but not limited to Princeton Video
Image Latin America, LLC, PVI LA, LLC, Publicidad Virtual, S.A. de C.V.,
Princeton Video Image Israel, Ltd., and those other entities listed on Exhibit
E, but excluding Princeton Video Image Europe, N.V.

                  "Successful Bid" means, in the event the Purchased Assets are
sold by Auction, the bid accepted by Seller pursuant to which the Purchased
Assets are sold.

                  "Successful Bidder" means the Person who submits the
Successful Bid.

                  "Third Party License Rights" means all permissions, licenses,
covenants not to sue, grants, and other express or implied authorization to
make, use, sell, import, create derivative works, publicly display, publicly
perform, rent, or otherwise operate that may be needed by the Business to avoid
violating an Intellectual Property right of a third party relating to L-VIS(R)
and iPoint(TM).

                  "Transaction" means the sale of the Purchased Assets pursuant
to the terms of this Agreement.

                  1.2 Interpretation.

                        (a) Whenever the words "include," "includes" or
            "including" are used in this Agreement they shall be deemed to be
            followed by the words "without limitation."

                  (a) Words denoting any gender shall include all genders. Where
         a word or phrase is defined herein, each of its other grammatical forms
         shall have a corresponding meaning.

                  (b) A reference to any party to this Agreement or any other
         agreement or document shall include such party's successors and
         permitted assigns.

                  (c) A reference to any legislation or to any provision of any
         legislation shall include any modification or re-enactment thereof, any
         legislative provision substituted therefor and all regulations and
         statutory instruments issued thereunder or pursuant thereto.

                  (d) All references to "$" and dollars shall be deemed to refer
         to United States currency.

                  (e) All references to any financial or accounting terms shall
         be defined in accordance with GAAP as applicable in the United States.
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                  (f) The words "hereof," "herein" and "hereunder" and words of
         similar import when used in this Agreement shall refer to this
         Agreement as a whole and not to any particular provision of this
         Agreement, and Section, Schedule and Exhibit references are to this
         Agreement unless otherwise specified.

                  (g) The meanings given to terms defined herein shall be
         equally applicable to both singular and plural forms of such terms.

                  (h) Buyer and Seller hereby acknowledge that (i) Buyer and
         Seller jointly and equally participated in the drafting of this
         Agreement and all other agreements contemplated hereby, (ii) Buyer and
         Seller have been adequately represented and advised by legal counsel
         with respect to this Agreement and the transactions contemplated
         hereby, and (iii) no presumption shall be made that any provision of
         this Agreement shall be construed against either party by reason of
         such role in the drafting of this Agreement and any other agreement
         contemplated hereby.

                  (i) The headings of the Articles and Sections herein are
         inserted for convenience of reference only and are not intended to be a
         part of, or to affect the meaning or interpretation of, this Agreement.

                                   ARTICLE 2
                               TRANSFER OF ASSETS

         2.1 Assets to be Acquired. At the Closing, and upon the terms and
conditions set forth herein, Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire and accept, all right, title
and interest, free and clear of all Interests and Liabilities, in each and all
of the Purchased Assets including but not limited to all of Seller's interest in
the Subsidiaries, the Intellectual Property and the machinery and equipment
listed on Exhibit B (the "Machinery and Equipment").

                  For the avoidance of doubt, Seller shall retain and shall not
transfer to Buyer any of the Excluded Assets.

         2.2 Liabilities. With the exception of the Assumed Liabilities, Buyer
shall not and does not assume any Liability of Seller or the Business
whatsoever, disclosed or undisclosed, liquidated or unliquidated, or contingent
or noncontingent (collectively, the "Excluded Liabilities").

                                   ARTICLE 3
                             CLOSING; PURCHASE PRICE

         3.1 Closing; Transfer of Possession; Certain Deliveries.

                  (a) The consummation of the transactions contemplated herein
         (the "Closing") shall take place on or before eleven (11) calendar days
         after entry of the Sale Order, provided that all of the conditions set
         forth in Section 7.1 hereof have been satisfied or waived by Buyer, or
         on such other date as the parties hereto shall mutually agree. The
         Closing shall be held at the offices of Lowenstein Sandler PC, 65
         Livingston
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         Avenue, Roseland, New Jersey at 10:00 a.m., local time, unless the
         parties hereto otherwise agree. The actual date of the Closing is
         herein called the "Closing Date." For purposes of this Agreement, from
         and after the Closing, the Closing shall be deemed to have occurred at
         12:01 A.M. on the Closing Date.

            (b) At the Closing, Seller shall deliver to Buyer:

                (i) duly executed bills of sale, in the form provided by Buyer,
         transferring the Purchased Assets to Buyer;

                (ii) Assignment and Assumption of Assumed Agreements duly
         executed by Seller in the form attached hereto as Exhibit C (the
         "Assignment of Agreements");

                (iii) all other instruments of conveyance and transfer, in form
         provided by Buyer, as are necessary to convey the Purchased Assets to
         Buyer, including an assignment of all Patents, Patent Applications and
         Trademarks in to be recorded in the U.S. Patent and Trademark Office in
         the form attached hereto as Exhibit F (the "Patent Assignment") and
         such other instruments of conveyance and transfer as are necessary or
         desirable for transferring Seller's rights in the Intellectual Property
         in any foreign jurisdictions, including all jurisdictions referenced on
         Schedule 4.6; and

                (iv) evidence satisfactory to Buyer that the Cure Amount has
         been or will be paid by Seller.

            (c) At the Closing, Buyer shall deliver to Seller:

                (i) the Purchase Price; and

                (ii) an Assignment of Agreements duly executed by Buyer.

         3.2 Purchase Price. The Purchase Price is (i) $200,000 plus (ii)
satisfaction of the obligations of the Seller to repay principal, interest and
other charges under the DIP Facility plus (iii) satisfaction of the obligations
of the Seller to repay principal, interest and other charges under the
Pre-Petition Facility (approximately $8.3 million), plus (iv) waiver by
Presencia of its claim for Cure Costs (approximately $64,000), plus (v) the
assumption of the Assumed Liabilities, decreased by the sum of all transfer
taxes and sales taxes, if any, payable by Buyer in connection with the transfer
of the Purchased Assets to Buyer.

         3.3 Payment of Purchase Price. The Purchase Price shall be paid as
follows:

                  (b) The Buyer shall credit bid the Secured Loan Credit Amount,
         so that the Secured Loan Credit Amount is treated as a cash payment by
         Buyer to Seller, followed by a cash payment by Seller to Buyer in
         satisfaction of all amounts due under the DIP Facility and the
         Pre-Petition Facility.
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                  (a) The Buyer shall execute such documents, or cause the
         execution of such documents, as are necessary to waive the Presencia
         Cure Cost claim and assume the Assumed Liabilities.

                  (b) The balance of the Purchase Price shall be paid in
         immediately available funds by wire transfer to an account specified by
         Seller.

                                   ARTICLE 4
                    REPRESENTATIONS AND WARRANTIES OF SELLER

                  Except as expressly set forth on the Disclosure Schedule
annexed hereto, Seller hereby represents and warrants to Buyer that, as of the
Agreement Date and as of the Closing Date (except with respect to
representations and warranties made as of a particular date, which shall be
deemed to be made only as of such date), as follows. Any exception to the
following representations and warranties listed on the Disclosure Schedule shall
apply to each representation herein to which the exception clearly relates,
whether or not each representation is specifically cross-referenced in the
exception.

         4.1 Due Organization. (a) Seller is a corporation, duly organized under
the laws of Delaware, with full power and authority to conduct its business as
presently conducted and to own or use its properties and assets. Seller is duly
qualified to do business and in good standing under the laws of New Jersey and
New York, which constitute all of the jurisdictions in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so qualified and in good standing would not reasonably be expected
to have a Material Adverse Effect. (b) Each Subsidiary is a corporation or
limited liability company, duly organized under the laws of its jurisdiction of
organization, with full power and authority to conduct its business as presently
conducted and to own or use its properties and assets. Each Subsidiary is duly
qualified to do business and in good standing under the Laws of each
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to be so qualified and in good standing
would not reasonably be expected to have a Material Adverse Effect. Exhibit E
accurately and completely sets forth the details of ownership of the securities
of each direct and indirect Subsidiary and other entity in which Seller holds an
equity interest. Seller holds such securities free and clear of all Interests
except Interests in favor of the Buyer and its Affiliates.

         4.2 Authorization; Validity. Seller has the requisite corporate power
and authority to execute and deliver this Agreement and the other documents and
instruments to be executed and delivered by it pursuant hereto and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement by Seller and the other agreements to be executed and delivered by
Seller pursuant hereto, and the performance by Seller of its obligations
hereunder, including the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of
Seller, including by any action or required approval of the equityholder or
equityholders of Seller and approval by all board members not Affiliated with
Buyer or any of its Affiliates. This Agreement has been duly and validly
executed and delivered by Seller and constitutes, and each of the other
agreements to be executed and delivered by Seller pursuant hereto upon such
Seller's execution and delivery will constitute,
<PAGE>
a valid and legally binding obligation of Seller enforceable against Seller in
accordance with its respective terms.

         4.3 No Violation. The execution, delivery and performance by Seller of
this Agreement and the transactions contemplated hereby do not and will not: (a)
conflict with or result in, with or without the giving of notice or lapse of
time or both, any violation of or constitute a breach or default, or give rise
to any right of acceleration, payment, amendment, cancellation or termination,
under (i) the Articles of Incorporation, Bylaws or other organizational
documents of Seller or any Subsidiary, or (ii) any law or order pertaining to
the Business, the Purchased Assets or to which any Seller is otherwise subject;
or (b) result in the creation of any Interests in or upon any of the Purchased
Assets.

         4.4 Third Party Approvals. Except for certain transfer restrictions
specifically described in Section 4.14, no order, consent, approval, waiver or
authorization of any governmental entity is required in connection with the
execution, delivery and performance by Seller of this Agreement and the other
documents and instruments to be executed and delivered by Seller pursuant hereto
and the transactions contemplated hereby and thereby other than orders,
consents, approvals, waivers or authorizations of, or declarations or filings
with, the Bankruptcy Court.

         4.5 Title to Assets and Location of Assets. Seller has good and
marketable title to each of the Purchased Assets owned by such Seller, free of
any Interests other than liens for current taxes not yet due and Interests in
favor of the Buyer and/or its Affiliates, all of which Interests in favor of
Buyer or its Affiliates Seller shall cause to be released at Closing (including
the release of Interests held by Buyer or Affiliates of the Buyer by way of
setoff against the Purchase Price of all amounts due to Buyer or its
Affiliates). Schedule 4.5 sets forth (i) a description (including model number)
of each Purchased Asset that is not located on the premises of Seller, (ii) the
location of each such Purchased Asset, (iii) the name of each Person who holds
such Purchased Asset and the name, address, telephone number and fax number of
the individuals employed by each such Person who are primarily responsible for
the business relationship with Seller and (iv) the terms pursuant to which each
such Purchased Asset is held.

         4.6 Patents, Copyrights, Trademarks, Trade Secrets and Trade Names.
Schedule 4.6 contains a complete and accurate list, and indicates the ownership
of (i) all currently used patents and patent applications owned by Seller or its
Subsidiaries, or which are used or held for use by Seller or its Subsidiaries in
the Business whether domestic or international, (ii) all currently used
trademarks and service marks owned by Seller, or which are used or held for use
by Seller in the Business which are unregistered and material to the Business or
for which registrations have been obtained or applications therefor have been
filed by Seller, and (iii) all currently used rights in Internet web sites and
Internet domain names owned by Seller, or which are presently used or held for
use in the Business. Except as set forth in Schedule 4.6, (a) no Person other
than Seller has the right to use any of the Intellectual Property, and Seller
has all right, title and interest to all Intellectual Property, free and clear
of all Interests or other encumbrances (except Interests in favor of Affiliates
of Buyer being acquired by Buyer prior to closing and discharged by set-off
against the Purchase Price) without any conflict known to Seller with the rights
of others, (b) documentation for the continuance of registration and
applications for registration or issuance have been timely filed with the
appropriate authorities for the patents, copyrights, trademarks,
<PAGE>
trade names, and service marks included in the Intellectual Property and such
items of Intellectual Property which are used by, or registered or the subject
of an application filed with, as applicable, the U.S. Patent and Trademark
Office, the U.S. Copyright Office and each foreign patent or trademark office in
which filing has been made (as listed on Schedule 4.6) are currently in
compliance with formal legal requirements and are valid and enforceable, (c)
neither the operation of the Business nor use of any of the Intellectual
Property infringes on or conflicts with any right of any Person, (d) Seller has
not received any written notice alleging that (i) any operation of Seller or the
Business or use of any of the Intellectual Property requires payment for the use
of, or infringes on, conflicts with or otherwise interferes with, any patent,
copyright, trade secret, trade name, trademark, service mark or other
intellectual property right of another Person, or any such right which might be
so infringed has been applied for by another Person, or (ii) any of the
Intellectual Property has been legally declared invalid or unenforceable or is
the subject of a pending or threatened action for opposition or cancellation or
a declaration of invalidity, or is infringed or misappropriated by the
activities of another Person, (e) to the knowledge of Seller, there is no
violation or infringement by a third party of any of the Intellectual Property,
(f) Seller is not a party to any licenses or other agreements (i) which grant
Seller any right to use any patents, copyrights, trademarks, trade secrets,
trade names, service marks and other intellectual property of others or (ii)
under which Seller grants a third party the right to use any of the Intellectual
Property, and, to the extent that it is a party to the licenses or agreements
described in the foregoing subsections (i) or (ii), all such licenses and
agreements, are set forth on Schedule 4.6 and are each in full force and effect
and are valid, binding and enforceable in accordance with their terms and, to
the best of Seller's knowledge, there are no existing defaults or events which,
with the giving of notice or the lapse of time or both, would constitute a
default thereunder by Seller, (g) the Intellectual Property constitutes all
patents, copyrights, trademarks, trade secrets, know-how, trade names, service
marks, Internet web sites and Internet domain names and other intellectual
property necessary or appropriate to conduct the Business as it was conducted at
March 31, 2003 and as it is being conducted and (h) Seller has taken reasonable
security measures to protect the secrecy, confidentiality and value of Seller
Trade Secrets.

         4.7 Legal and Administrative Proceedings. Schedule 4.7 sets forth each
instance in which Seller or any Subsidiary is (i) subject to any outstanding
judgment, injunction, order, decree, ruling or settlement agreement related to
the Business or (ii) is a party or, to the knowledge of Seller, is threatened to
be made a party to any action, suit, proceeding, hearing or investigation
related to the Business of, in or before any court or quasi-judicial or
administrative agency of any jurisdiction or before any arbitrator. Except as
disclosed in Schedule 4.7:

                  (c) There are no lawsuits or arbitrations pending or, to the
         knowledge of Seller, threatened against Seller or any Subsidiary or
         which Seller or any Subsidiary intend to initiate; and

            (a) There are no Orders outstanding against Seller.

         4.8 Compliance with Laws and Orders. Except as disclosed in Schedule
4.8, neither Seller nor any Subsidiary is in material violation of or in
material default under any Law applicable to the Business, the Purchased Assets
or the Assumed Liabilities. The Seller and its Subsidiaries hold all material
licenses, permits, registrations, authorizations, certificates and approvals
("Permits") of any governmental entity or authority necessary or required to
operate
<PAGE>
the Business. Schedule 4.8 lists all of such Permits. All Permits are valid and
effective as of the date hereof and will be as of the Closing Date, and all of
such Permits are transferable to the Buyer, except as set forth on Schedule 4.8.

         4.9 Condition of the Machinery and Equipment. (a) As of the date of
this Agreement, the Machinery and Equipment is satisfactory and in good working
condition to produce the products it has produced in recent experience, in
similar quantities and with similar quality and will, to the knowledge of
Seller, be in such condition on the Closing Date.

            (b) Schedule 4.9 separately lists certain machinery and equipment
owned by Cablevision Systems Corporation ("Cablevision") or its Affiliates which
is located on Seller's premises (in addition to other equipment previously
purchased by and delivered to Cablevision or its Affiliates). Seller
acknowledges that it has no interest in such machinery and equipment, and that
such machinery and equipment are not part of the Purchased Assets.

         4.10 Material Contracts.

              (d) Schedule 4.10 and Exhibit A collectively is a true and correct
         list of all of the following Contracts to which Seller is a party and
         which pertain to the Business ("Material Contracts"):

              (i)   Any lease of tangible personal property;

              (ii)  Any Contract pursuant to which Seller receives any
         consulting or advisory services, excluding Contracts for legal, audit
         or routine accounting services;

              (iii) Any Contract to which Seller or any Subsidiary is a party
         pertaining to Intellectual Property;

              (iv) Any Contracts pertaining to the Business to which Seller or
         any Subsidiary is a party and which contain covenants limiting the
         freedom of Seller or any Subsidiary to compete with any Person; and

              (v) Any other material Contracts pertaining to the Business.

                  (b) Seller has delivered to Buyer a correct and complete copy
         of each written Contract listed in Exhibit A or Schedule 4.10. Except
         as set forth in Exhibit A or Schedule 4.15A, with respect to each
         Contract listed in Exhibit A: (i) the Contract is, with respect to
         Seller and, to Seller's knowledge, each other party thereto, legal,
         valid, binding, enforceable, and in full force and effect; (ii) Seller
         is not now and, to Seller's knowledge, no other party is, in material
         breach or default, and no event has occurred which with notice or lapse
         of time would constitute a material breach or default, or permit
         termination, modification, or acceleration under the Contract; and
         (iii) Seller has not and, to Seller's knowledge, no other party has
         repudiated any material provision of the Contract.
<PAGE>
         4.11 ERISA. Neither Seller or any ERISA Affiliate, nor any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a), or any of the published
interpretations thereof. No lien upon the assets of Seller has arisen with
respect to any Plan. No "prohibited transaction" within the meaning of ERISA
Section 406 or IRC Section 4975(c) has occurred with respect to any Plan.
Neither Seller nor any ERISA Affiliate has incurred any withdrawal liability
with respect to any Multiemployer Plan. Seller and each ERISA Affiliate have
made all contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan, whether
or not waived.

         4.12 Tax Compliance. Seller has filed all tax returns required to be
filed by it and has paid all taxes due and payable on said returns and on any
assessment made against it or its assets, except for returns which have not been
filed but are the subject of appropriate extensions.

         4.13 SEC Reports. Reference is made to Seller's Annual Report on Form
10-K for the fiscal year ended December 31, 2002, as amended on Form 10-K/A, and
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2003 (the
"SEC Reports"). As of their filing dates, the SEC Reports complied (and all
other reports and registration statements, if any, filed by Seller with the SEC
after the date thereof and prior to Closing will comply) in all material
respects with the applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (other
than timely filing), and at the time filed did not 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 light of the
circumstances under which they were made, not misleading.

         4.14 Transfer Restrictions.

            (a) Seller is not subject to any restrictions on the transfer, sale,
assignment, pledge or hypothecation ("Transfer Restrictions") of any of its
direct and indirect equity ownership interests in other entities that will
materially interfere with the ownership, use or enjoyment of such ownership
interests, except for the following: (i) Seller's ownership interest in the
Revolution Company, LLC, is subject to the Operating Agreement dated January 24,
2001, by and among CBS Technology Corporation, Core Digital Technologies, Inc.,
and Seller (the "Revolution Company Operating Agreement"); and (ii) any transfer
of Seller's ownership interest in Princeton Video Image Israel, Ltd. requires
the consent or approval of the government of Israel and its Office of the Chief
Scientist.

            (b) Neither Seller's nor its Subsidiaries' Intellectual Property are
subject to any Transfer Restrictions that will materially interfere with the
ownership, use or enjoyment of such Intellectual Property in the manner used by
Seller and its Subsidiaries to carry on their businesses as presently conducted
or proposed to be conducted, including without limitation the planned commercial
deployment of Seller's L-VIS(R) and iPoint(TM) products, except for the
following: (i) any transfer of the Intellectual Property of Princeton Video
Image Israel, Ltd. will require the consent or approval of the government of
Israel and its Office of the Chief Scientist; (ii) the Cross-License Agreement
among Seller, Sportvision, Inc. and the others named therein dated as of July
29, 2002 contains restrictions on the assignment of the licenses granted to
Seller thereby to parties other than Cablevision or Presencia, or their
respective affiliates; (iii) Seller's
<PAGE>
software license with Broadcom Corporation prohibits Seller from transferring or
distributing Broadcom proprietary software used to create the existing iPointTM
interface with Broadcom products to third parties other than in object code
form; and (iv) any Transfer Restriction identified in Schedule 4.6.

         4.15 Liabilities. (a) Schedule 4.15A accurately and completely lists
(a) all Liabilities of Seller as of the Agreement Date and (b) Seller's good
faith reasonable estimate of all Liabilities of Seller as of the projected
Closing Date. Schedule 4.15A separately identifies secured and unsecured
liabilities, liabilities due to employees, and estimated costs of administering
the Chapter 11 case. Schedule 4.15A also identifies the Cure Costs to be
incurred with respect to the Assumed Agreements.

            (b) Schedule 4.15B accurately and completely lists all Liabilities
of the Subsidiaries as of the Agreement Date.

         4.16 Related Party Contracts. Schedule 4.16 accurately and completely
lists all contracts, agreements or relationships between the Subsidiaries and
any Affiliate of the Seller.

         4.17 Brokers and Finders. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission from Buyer in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller.

EXCEPT AS SET FORTH ABOVE, (A) ALL THE PURCHASED ASSETS SHALL BE TRANSFERRED ON
AN AS-IS, WHERE-IS BASIS, AND (B) SELLER MAKES NO FURTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, IN RESPECT OF THE PHYSICAL CONDITION OF THE
PURCHASED ASSETS, AND ANY SUCH REPRESENTATION AND WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED.

                                   ARTICLE 5
                     REPRESENTATIONS AND WARRANTIES OF BUYER

                  Buyer hereby represents and warrants to Seller, as of the
Agreement Date and as of the Closing Date (except with respect to
representations and warranties made as of a particular date, which shall be
deemed to be made only as of such date), as follows:

         5.1 Due Organization. Buyer is a limited liability company validly
existing and in good standing under the laws of the state of Delaware and has
the requisite power and authority to acquire and own the Purchased Assets.

         5.2 Authority; Validity. Buyer has the requisite power and authority to
execute and deliver this Agreement and the other documents and instruments to be
executed and delivered by Buyer pursuant hereto and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
other agreements to be executed and delivered by Buyer pursuant hereto, and the
consummation by Buyer of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary limited liability company action on the
part of Buyer. This Agreement has been duly and validly executed and delivered
by Buyer and
<PAGE>
constitutes, and each of the other agreements to be executed and delivered by
Buyer pursuant hereto upon its execution and delivery by Buyer will constitute,
valid and legally binding obligations of Buyer enforceable against Buyer in
accordance with its terms.

         5.3 No Violation. The execution, delivery and performance by Buyer of
this Agreement and the transactions contemplated hereby, do not and will not
conflict with or result in, with or without the giving of notice or lapse of
time or both, any violation of or constitute a breach or default, or give rise
to any right of acceleration, payment, amendment, cancellation or termination,
under (a) the Certificate of Formation, Operating Agreement or other
organizational documents of Buyer, (b) any mortgage, indenture, lease, contract
or other agreement to which Buyer is a party or by which Buyer or any of its
properties or assets is bound or subject, or (c) any law or order to which Buyer
is bound or subject.

         5.4 Third Party Approvals. Except for certain transfer restrictions
specifically described in Section 4.14, no order, consent, approval, waiver or
authorization of any governmental entity is required in connection with the
execution, delivery and performance by Buyer of this Agreement and the other
documents and instruments to be executed and delivered by Buyer pursuant hereto
and the transactions contemplated hereby and thereby other than orders,
consents, approvals, waivers or authorizations of, or declarations or filings
with, the Bankruptcy Court.

         5.5 Financing. As of the Closing Date, the Buyer will have adequate
financing available to it to pay the Purchase Price in accordance with the terms
of this Agreement.

         5.6 Brokers and Finders. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission from Seller in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.

                                   ARTICLE 6
                            COVENANTS OF THE PARTIES

         6.1 Conduct of Business. So long as the DIP Facility remains effective
and is not terminated, Seller will continue to operate the Business, including
the Business of its Subsidiaries, as in effect immediately prior to and on
January 1, 2003, and will not engage in any practice, take any action, or enter
into any transaction outside of the ordinary and usual course of business
without the prior written consent of Buyer. Seller will maintain adequate
liquidity, retain its essential personnel, and operate the Business in
accordance with customary operating covenants as a debtor and
debtor-in-possession until the Closing. Seller will not reject any contract or
agreement to which it or any Subsidiary is a party without Buyer's prior written
consent unless it properly terminates this Agreement. Seller will take all
actions reasonably necessary to maintain its workforce, including incentive
bonuses as appropriate if consented to in advance by Buyer, and permitting Buyer
to communicate plans, status, activities and events related to Buyer's business
and plans with such employees, and will cause key personnel to assist Buyer with
transition of the Purchased Assets, all on terms acceptable to Buyer.
<PAGE>
         6.2 Cooperation of the Parties. Buyer and Seller will promptly take
such actions as are reasonably requested by the other party to assist in
obtaining the Bidding Procedures Order and the Sale Order and consummating the
Transaction in the most expeditious manner permitted under the Bankruptcy Code
and the Bankruptcy Rules, including furnishing affidavits, testimony or other
documents or information for filing with or presentation to the Bankruptcy Court
for purposes, among others, of demonstrating that Buyer is a "good faith" Buyer
under Section 363(m) of the Bankruptcy Code. Seller shall (a) take, or cause to
be taken, such additional appropriate actions and do, or cause to be done, all
things necessary, proper or advisable under applicable law or otherwise to
consummate the Transaction and (b) promptly confer with all appropriate federal,
state and local regulators to obtain their support for the Transaction, if
required. In the event the Bankruptcy Court Approval shall be appealed and Buyer
waives the condition that the Bankruptcy Court Approval be a Final Order, Seller
shall use all reasonable efforts to defend such appeal.

         6.3 Access. From the date hereof until the Closing Date, Seller shall
give Buyer and its Representatives reasonable access during normal business
hours to the offices, properties, officers, employees, accountants, auditors,
counsel and other representatives, books and records of Seller, including
without limitation all books, records, files and papers, whether in hard copy or
electronic format, relating primarily to the Contracts, the Machinery and
Equipment and the Inventory. Buyer shall keep such information confidential
except as necessary for the Chapter 11 Case, and except for information which
(i) is or becomes generally available to the public (other than as a result of a
disclosure by the Buyer), (ii) becomes available on a non-confidential basis
from a source other than the Seller or one of its representatives which the
Buyer reasonably believes is entitled to disclose it, (iii) was developed by or
known by the Buyer prior to its disclosure, or (iv) is otherwise in the public
domain. From and after the Closing Date and until the closure of the Seller's
Chapter 11 Case, the parties shall cooperate with each other to enable the
Seller and the Buyer to obtain information related to the Business from
employees and former employees regardless of any confidentiality agreement that
was executed by such employee and to enable Seller to obtain access to the books
and records and other information related to and in connection with the Business
and the Seller's financial affairs for the purpose of (i) the administration and
completion of the Chapter 11 Case, (ii) preparation and filing of tax returns
and (iii) Seller's compliance with any obligations under securities laws or
other applicable law.

         6.4 Regulatory Compliance. Subsequent to the Closing, Seller will take
such actions as may be required to complete the transfer of any Permits and to
otherwise comply with all laws, orders and regulations. Seller shall provide
Buyer with all documentation and communications with any regulatory body which
are related to such compliance. Both parties shall complete such forms and make
all filings by June 30, 2003 which are reasonably required to obtain requisite
consent of the Office of Chief Scientist of the State of Israel to the transfer
of the shares of Princeton Video Image Israel, Ltd. to the Buyer.

         6.5 Compliance with Bidding Procedures Order. Seller will comply with
all of the terms and conditions of the Bidding Procedures Order.

         6.6 Public Announcements. The parties will consult with each other
before issuing, and provide the other the opportunity to review and comment
upon, any press release, any court
<PAGE>
filing or pleading filed with the Bankruptcy Court relating to this Agreement or
the transactions contemplated hereby, or other public statements with respect to
the transactions contemplated by this Agreement. Notwithstanding the foregoing,
nothing shall limit the ability of either party to timely make any announcement
or filing which they are required to make by applicable law, court rule or
regulation of any governmental or regulatory authority or stock exchange.

         6.7 Employment Matters. Buyer shall have no obligation to offer
employment or employ any employees of Seller. Notwithstanding the foregoing,
Buyer shall be free to offer employment and to employ any of Seller's employees,
or former employees, that Buyer desires to employ and Seller shall not object to
or make any claim against Buyer or its employees or former employees by reason
of their hiring by Buyer.

         6.8 Further Assurances. Subsequent to the Closing Date, Seller shall
execute and deliver to Buyer such bills of sale, endorsements, assignments and
other good and sufficient instruments of assignment, transfer and conveyance, in
form and substance reasonably satisfactory to Buyer, as shall be necessary to
vest in Buyer all of Seller's right, title and interest in and to the Purchased
Assets. Simultaneously with such delivery, Seller shall take such reasonable
steps as may be reasonably necessary or appropriate at and after the Closing, so
that Buyer shall be placed in actual possession and operating control of the
Purchased Assets. Seller shall provide copies or otherwise make available to
Buyer and Buyer's Representatives, all information and records (financial and
otherwise) relating to the Purchased Assets.

                                   ARTICLE 7
                    CONDITIONS TO OBLIGATIONS OF THE PARTIES

         7.1 Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is subject
to the satisfaction (or waiver by Buyer in Buyer's sole discretion) at or prior
to the Closing Date of each of the following conditions:

                  (e) Accuracy of Representations and Warranties. Each of the
         representations and warranties of Seller contained herein shall be true
         and correct in all material respects on the date hereof and shall be
         true and correct in all respects on and as of the Closing Date, with
         the same force and effect as though such representations and warranties
         had been made on and as of the Closing Date.

                  (a) Performance of Obligations. Seller shall have performed in
         all material respects all obligations and agreements contained in this
         Agreement required to be performed by it on or prior to the Closing
         Date.

                  (b) Officer's Certificates. Buyer shall have received
         certificates, dated the Closing Date, of an executive officer of Seller
         to the effect that the conditions specified in Sections 7.1(a) and (b)
         above have been fulfilled.

                  (c) Bankruptcy Court Approval. The Bankruptcy Court shall have
         entered a Sale Order on or before August 4, 2003. The Sale Order shall
         be in full force and shall have become a Final Order on or before
         August 15, 2003. Seller shall have delivered to Buyer (i) a certified
         copy of the Sale Order and (ii) copies of all affidavits, certificates
         of
<PAGE>
         service or notices required to be filed, served or published in
         connection with the approval of the Bidding Procedures Order and the
         Sale Order. The Bidding Procedures Order shall have been entered by the
         Bankruptcy Court and shall have become a Final Order.

                  (d) Validity of Claims and Liens. The Challenge Deadline shall
         have passed without the Creditors Committee having asserted or filed
         any Claim Challenges, or all Claims Challenges raised or asserted by
         the Creditors Committee shall have been dismissed by a Final Order or
         otherwise resolved favorably to the Buyer in its sole discretion, or
         the Creditors Committee shall have waived in writing or on the record
         the right to file any Claim Challenge.

                  (e) Governmental Approval; Israel. All necessary federal,
         state and local regulatory and other third-party consents, approvals
         and filings will have been obtained or made, including but not limited
         to, the consent of Office of the Chief Scientist of the Ministry of
         Trade and Industry of the State of Israel to the transfer of the shares
         of Princeton Video Image Israel, Ltd. to the Buyer.

                  (f) No Adverse Government Action. No governmental authority,
         including any federal or state court of competent jurisdiction, will
         have enacted, issued, promulgated, enforced or entered any statute,
         rule, regulation, executive order, judgment, decree, injunction or
         other order (whether temporary, preliminary or permanent), which, in
         either case, is in effect and which has the effect of making the
         Transaction illegal, or otherwise restrains consummation of the
         Transaction, or that could reasonably be expected to adversely affect
         Buyer's ownership and control or rights to use or otherwise receive the
         benefit of any of the Purchased Assets or to operate the Business.

                  (g) Operation of Business. Since the date of this Agreement,
         the Business has been operated and continues to operate in the ordinary
         and usual course within the parameters of the Approved Budget set forth
         in the DIP Facility, and there has been no material adverse change in
         the business, assets, properties, results of operations or condition of
         the Purchased Assets (other than the commencement of the Chapter 11
         Case).

         7.2 Conditions Precedent to the Obligations of Seller. The obligation
of Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction (or waiver by Seller) at or prior to the Closing
Date of each of the following conditions:

                  (f) Accuracy of Representations and Warranties. The
         representations and warranties of Buyer contained herein shall be true
         and correct in all material respects on the date hereof in and shall be
         true and correct in all respects on and as of the Closing Date, with
         the same force and effect as though such representations and warranties
         had been made on and as of the Closing Date.

                  (a) Performance of Obligations. Buyer shall have performed in
         all material respects all obligations and agreements contained in this
         Agreement required to be performed by it prior to or on the Closing
         Date.
<PAGE>
                  (b) Officer's Certificate. Seller shall have received a
         certificate, dated the Closing Date, of an officer of Buyer to the
         effect that the conditions specified in Sections 7.2(a) and (b) above
         have been fulfilled.

                  (c) Bankruptcy Court Approval. The Sale Order shall be in full
         force and effect and shall not have been stayed, enjoined or modified.

                  (d) No Adverse Government Action. No governmental authority,
         including any federal or state court of competent jurisdiction, will
         have enacted, issued, promulgated, enforced or entered any statute,
         rule, regulation, executive order, judgment, decree, injunction or
         other order (whether temporary, preliminary or permanent), which, in
         either case, is in effect and which has the effect of making the
         Transaction illegal, or otherwise restrains consummation of the
         Transaction.

                  (e) Validity of Claims and Liens. The Challenge Deadline shall
         have passed without the Creditors Committee having asserted or filed
         any Claim Challenges, or all Claims Challenges raised or asserted by
         the Creditors Committee shall have been dismissed by a Final Order or
         otherwise resolved favorably to the Buyer in its sole discretion, or
         the Creditors Committee shall have waived in writing or on the record
         the right to file any Claim Challenge.

                                   ARTICLE 8
                                   TERMINATION

         8.1 Termination of Agreement. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:

                  (g) by written agreement of Seller and Buyer;

                  (h) by Buyer, if the Bidding Procedures Order is not entered
         by June 20, 2003 or, after it is entered if the Bidding Procedures
         Order is rescinded, or modified without Buyer's consent;

                  (a) by Buyer if a Sale Order is not entered on or before
         August 4, 2003 or if the Sale Order does not become a Final Order on or
         before August 15, 2003;

                  (b) by Buyer if the Closing shall not have occurred on or
         before ten (10) calendar days following the date that the Sale Order
         becomes a Final Order and, provided, however, that Buyer is not in
         material breach of any of its representations and warranties contained
         in this Agreement and has not failed in any material respect to perform
         any of its obligations hereunder;

                  (c) by Buyer if the DIP Facility is terminated prior to
         Closing other than by reason of a breach of the DIP Facility by Buyer;

                  (d) by Buyer if Seller enters into an Alternative Transaction
         (as defined below) or presents an Alternative Transaction to the
         Bankruptcy Court;
<PAGE>
                  (e) by Seller if Seller enters into a merger, consolidation,
         sale or similar transaction involving any portion of the Purchased
         Assets with any person other than Buyer or its assignee (an
         "Alternative Transaction") and such Alternative Transaction is approved
         by the Bankruptcy Court;

                  (f) by Seller if the DIP Facility is terminated prior to
         Closing by reason of a breach of the DIP Facility by Buyer; or

                  (g) by Seller if all of the following occur: (i) the Sale
         Order has become a Final Order, (ii) the Buyer has ceased providing any
         financing to the Seller, whether pursuant to the DIP Facility or
         otherwise, (iii) the Seller is not in material breach of any of its
         representations and warranties contained in this Agreement and has not
         failed in any material respect to perform any of its obligations
         hereunder and (iv) the Closing has not been consummated by the close of
         business on September 26, 2003.

         8.2 Consequences of Termination. In the event of any termination of
this Agreement by either or both of Buyer and Seller pursuant to Section 8.1,
written Notice thereof shall forthwith be given by the terminating party to the
other party hereto, specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall thereupon terminate and become
void and of no further force and effect, and the transactions contemplated
hereby shall be abandoned without further action of the parties hereto;
provided, however, that such termination shall not relieve any party hereto of
any Liability for breach of this Agreement prior to termination.

         8.3 Special Provision regarding Cure Costs. The parties have entered
into this Agreement on the understanding that Seller has made the representation
in Section 4.15 with respect to the aggregate amount of Cure Costs (the
"Represented Cure Amount") to the best of its ability and in good faith. If it
is finally determined, on or prior to the date that the Sale Order is entered,
that Seller's estimate was in good faith but that actual Cure Costs exceed the
Represented Cure Amount by more than $100,000, then Buyer shall have the option
to either (a) terminate this Agreement, (b) increase the Purchase Price by the
amount of the aggregate Cure Costs in excess of the sum of the Represented Cure
Amount plus $100,000 or (c) maintain the same Purchase Price but require that
Seller reject such of the Assumed Agreements as Buyer designates in its sole
discretion so as to reduce the amount of the actual aggregate Cure Costs to an
amount less than the sum of the Represented Cure Amount plus $100,000. If Buyer
fails to take one of the foregoing actions under the foregoing circumstances
notwithstanding the Seller's request that it do so, then the Seller shall have
the option of terminating this Agreement at the earlier of ten (10) days after
the date of delivery of its demand (or at Closing if Closing is scheduled for
less than 10 days after the date that the Sale Order is entered).

                                   ARTICLE 9
                             LIMITATION ON REMEDIES

         9.1 No Survival of Representations and Warranties. The representations
and warranties of Buyer and Seller made in this Agreement and the covenants of
Buyer and Seller contained in this Agreement that, by their terms, are to be
performed prior to the Closing shall not survive the Closing Date and shall be
extinguished by the Closing and the consummation of
<PAGE>
the transaction contemplated by this Agreement. Absent fraud, Buyer shall not
have any remedy against Seller or its Affiliates, and Seller shall not have any
remedy against Buyer or its Affiliates for (i) any breach of a representation or
warranty contained in this Agreement (other than to terminate the Agreement in
accordance with the terms hereof) and (ii) if the Closing occurs, any breach of
a covenant contained in this Agreement with respect to the period prior to the
Closing Date.

                                   ARTICLE 10
                                  MISCELLANEOUS

         10.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, each party hereto shall bear all costs and expenses incurred or to
be incurred by such party in connection with this Agreement and the consummation
of the transactions contemplated hereby. As between Buyer and Seller, Seller
shall bear all costs of any Persons (other than Buyer, its agents or
Affiliates), entitled to payment of compensation or reimbursement of expenses
pursuant to the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.

         10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Seller without the prior written
consent of Buyer. This Agreement and Buyer's rights and obligations hereunder
may be assigned by Buyer without Seller's consent. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.

         10.3 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of Seller and Buyer and Buyer's assignees, if any,
and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other Person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement except as expressly set forth
herein.

         10.4 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be given
hereunder or that are given with respect to this Agreement shall be in writing
and shall be personally served, delivered by a nationally recognized overnight
delivery service with charges prepaid, or transmitted by hand delivery, or
facsimile, addressed as set forth below, or to such other address as such party
shall have specified most recently by written Notice. Notice shall be deemed
given on the date of service or transmission if personally served or transmitted
by facsimile with confirmation of receipt; provided, that if delivered or
transmitted on a day other than a Business Day or after normal business hours,
notice shall be deemed given on the next Business Day. Notice otherwise sent as
provided herein shall be deemed given on the next Business Day following timely
deposit of such Notice with an overnight delivery service:
<PAGE>
If to Seller:                Princeton Video Image, Inc.
                             15 Princess Road
                             Lawrenceville, New Jersey  08646
                             Attention:  President
                             Tel:  609.912.9400
                             Fax:  609.912.0004

With copies to:              Fox Rothschild LLP
                             Princeton Pike Corporate Center
                             997 Lenox Drive, Building 3 (Lawrenceville)
                             Princeton, New Jersey  08648-2311
                             Attention:  Hal L. Baume, Esq.
                             Tel:  609.896.3600
                             Fax:  609.896.1469

                             Smith, Stratton, Wise, Heher & Brennan LLP
                             600 College Road East
                             Princeton, NJ 08540
                             Attention: Richard Pinto, Esq.
                             Tel: 609.924.6000
                             Fax: 609.987.6651

                             Kleinberg, Kaplan, Wolff & Cohen, P.C.
                             551 Fifth Avenue
                             New York, NY 10176
                             Attention: Christopher P. Davis, Esq. and David
                                        Parker, Esq.
                             Tel: 212.986.6000
                             Fax: 212.986.8866

If to Buyer:                 Lowenstein Sandler PC
                             65 Livingston Avenue
                             Roseland, New Jersey  07068
                             Attention:  Kenneth A. Rosen, Esq.
                                         Paul Kizel, Esq.
                             Tel:  973.597.2548
                             Fax:  973.597.2549

With a copy to:              Sullivan & Cromwell LLP
                             125 Broad Street
                             New York, New York  10004-2498
                             Attention:  Robert Wilson Downes, Esq.
                             Tel:  212.558.4000
                             Fax:  212.558.3588
<PAGE>
Rejection of or refusal to accept any Notice, or the inability to deliver any
Notice because of changed address of which no Notice was given, shall be deemed
to be receipt of the Notice as of the date of such rejection, refusal or
inability to deliver.

         10.5 Successful Bidder. If the sale of the Purchased Assets becomes
subject to an Auction and Buyer is the Successful Bidder, then this Agreement
shall remain in full force and effect except as expressly amended by the
Successful Bidder.

         10.6 Choice of Law. This Agreement shall be construed and interpreted,
and the rights of the parties shall be determined, in accordance with the
substantive laws of the State of Delaware, without giving effect to any
provision thereof that would require the application of the substantive laws of
any other jurisdiction, except to the extent that such laws are superseded by
the Bankruptcy Code.

         10.7 Entire Agreement; Amendments and Waivers. This Agreement and all
agreements entered into pursuant hereto and all certificates and instruments
delivered pursuant hereto and thereto constitute the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations, and discussions, whether oral or
written, of the parties. This Agreement may be amended, supplemented or
modified, and any of the terms, covenants, representations, warranties or
conditions may be waived, only by a written instrument executed by the Buyer and
Seller, or in the case of a waiver, by the party waiving compliance. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), and no such
waiver shall constitute a continuing waiver unless otherwise expressly provided.

         10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Counterparts to this
Agreement may be delivered via facsimile.

         10.9 Invalidity. If any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, the parties
shall use their reasonable efforts, including the amendment of this Agreement,
to ensure that this Agreement shall reflect as closely as practicable the intent
of the parties hereto on the date hereof.

         10.10 Exclusive Jurisdiction. Without limiting any party's right to
appeal any order of the Bankruptcy Court and except as otherwise provided
herein, (a) the Bankruptcy Court shall retain exclusive jurisdiction to enforce
the terms of this Agreement and to decide (insofar as they relate to Seller) any
claims or disputes which may arise or result from, or be connected with, this
Agreement, any breach or default hereunder, or the transactions contemplated
hereby, and (b) any and all claims, actions, causes of action, suits and
proceedings related to the foregoing shall be filed and maintained only in the
Bankruptcy Court, and the parties hereby consent to and submit to the
jurisdiction and venue of the Bankruptcy Court and shall receive Notices at such
locations as indicated in Section 10.4.
<PAGE>
         10.11 WAIVER OF RIGHT TO TRIAL BY JURY. SELLER AND BUYER HEREBY WAIVE
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).

                  [Remainder of Page Intentionally Left Blank]
<PAGE>
         IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed and delivered by the duly authorized officers of Seller and Buyer as of
the date first above written.

                              PVI VIRTUAL MEDIA SERVICES, LLC

                              By:  /s/ Eduardo Sitt
                                 -----------------------------------------------
                              Name:
                                 -----------------------------------------------
                              Title:
                                 -----------------------------------------------

                              PRINCETON VIDEO IMAGE, INC.

                              By:       /s/ James Green
                                 -----------------------------------------------
                              Name:   J. Green
                                 -----------------------------------------------
                              Title:     COO
                                 -----------------------------------------------<PAGE>

                                                                    Exhibit 10.2

                           LOAN AND SECURITY AGREEMENT

      This LOAN AND SECURITY AGREEMENT is entered into as of May 29, 2003
between PVI Virtual Media Services, LLC, a Delaware limited liability company
("Lender") and Princeton Video Image, Inc., a Delaware corporation and a debtor
and a debtor in possession, ("Borrower").

                                    RECITALS

      WHEREAS, on May , 2003 ("Filing Date"), Borrower filed a petition under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of New Jersey and Borrower has retained possession of its assets and is
authorized under Sections 1107 and 1108 of the Bankruptcy Code to continue the
management and operation of its business as a debtor in possession;

      WHEREAS, Borrower has requested that Lender provide a debtor in possession
financing facility to Borrower that will provide the additional funds that
Borrower requires to supplement the available cash collateral that Borrower is
permitted to use in accordance with the terms of an Approved Budget and
permitted variances from that Approved Budget;

      WHEREAS, Lender has indicated its willingness to agree to extend that
financing to Borrower upon the terms and conditions set forth in this Agreement
and upon the entry of a Financing and Cash Collateral Order acceptable to
Lender;

      WHEREAS, Borrower has agreed to provide such other protection, including
collateral security, as described in this Agreement and the Financing and Cash
Collateral Order, subject to the approval of the Bankruptcy Court; and

      WHEREAS, the Bankruptcy Court has entered a Financing and Cash Collateral
Order pursuant to which Borrower is permitted to use cash collateral and Lender
may make post-petition loans, advances and other financial accommodations to
Borrower secured by all assets and properties of Borrower as set forth in, and
subject to the exclusions as set forth in, the Financing and Cash Collateral
Order and the Loan Documents.

      NOW, THEREFORE, in consideration of these premises and of the mutual
undertakings set forth herein, the parties hereto agree to as follows:

                                   ARTICLE 11

                   DEFINITIONS, CONSTRUCTION AND RATIFICATION

11.1  TERMS. As used in this Agreement, the following terms shall have the
      following meanings:
<PAGE>
      "Accounts" means, in addition to the definition of accounts in the UCC,
all presently existing and hereafter arising accounts receivable, contract
rights, and all other forms of obligations owing to Borrower arising out of the
sale, lease, license or assignment of goods or other property, or the rendition
of services by Borrower, whether or not earned by performance, all credit
insurance, guaranties, and other security therefor, and Borrower's Books
relating to any of the foregoing.

      "Advances" means all loans, advances and other financial accommodations by
Lender to or on account of Borrower under Section 2.1.

      "Agreement" means this Loan and Security Agreement.

      "Approved Budget" means the most current Budget that has been approved by
Lender, in its absolute discretion. The initial Approved Budget is attached as
Exhibit B.

      "Asset Purchase Agreement" means the asset purchase agreement between
Lender and Borrower.

      "Authorized Officer" means any officer or other representative of Borrower
authorized in a writing delivered to Lender to transact business with Lender.

      "Avoidance Actions" means recoveries from, or settlements of, actions
commenced by Borrower's bankruptcy estate under Chapter 5 of the Bankruptcy
Code.

      "Bankruptcy Code" means Title 11, United States Code.

      "Bankruptcy Court" means the United States Bankruptcy Court for the
District of New Jersey or such other court having jurisdiction over the Case.

      "Borrower's Books" means all of Borrower's books and records including all
of the following: ledgers; records indicating, summarizing, or evidencing
Borrower's assets or liabilities, or the Collateral; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information, and the facilities containing such information, but specifically
excluding Borrower's corporate minute books, stock ledgers and the like.

      "Borrowing Request" means a Borrowing Request in the form of Exhibit A.

      "Budget" has the meaning ascribed to that term in Section 5.10 and any
revisions provided by Borrower to Lender pursuant to this Agreement.

      "Business Day" means any day which is not a Saturday, Sunday, or other day
on which banks in the State of New York are authorized or required to close.

      "Carve Out" has the meaning ascribed to that term in Section 4.6.
<PAGE>
      "Carve Out Replenishment" has the meaning ascribed to that term in Section
4.6.

      "Case" means Borrower's reorganization case under Chapter 11 of the
Bankruptcy Code, pending in the United States Bankruptcy Court (Chapter 11 Case
No. [to be inserted]).

      "Cash Shortfall" means, for any period, the amount, if any, that (x) cash
requirements of Borrower for the categories of expenses and costs included in
the Approved Budget exceed (y) cash collections received by Borrower that are
available for use by Borrower in the ordinary course of business.

      "Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) of Equity
Interests representing more than 20% of either the aggregate ordinary voting
power or the aggregate equity value represented by the issued and outstanding
Equity Interests in the Company, other than any present holders of Equity
Interests having such voting power or equity value; (b) the occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Company by Persons who were not nominated by the current board of directors of
the Company; or (c) the acquisition of direct or indirect Control of the Company
by any Person or group other than any such Person or group who presently has
direct or indirect Control of the Company.

      "Chattel Paper" shall have the same meaning ascribed to such term in the
UCC.

      "Collateral" means all assets of Borrower, whether now owned or existing,
or hereafter acquired or arising, and wherever located, and whether owned before
or after the Filing Date including all of the following assets, properties and
interests in property of Borrower: all Accounts; Commercial Tort Claims,
Equipment; General Intangibles; Chattel Paper; Inventory; Negotiable Collateral;
Investment Property; Financial Assets; Letter of Credit Rights; Supporting
Obligations; Deposit Accounts; Documents; money or any assets of Borrower,
including assets which hereafter come into the possession, custody, or control
of Lender; all real property; all proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all tangible or intangible property
resulting from the sale, lease, license or other disposition of the foregoing,
or any portion thereof or interest therein, and all proceeds thereof; and all
other property of Borrower's estate in the Case or otherwise, including all tax
refunds and choses in action. However, Collateral shall not include the proceeds
of Avoidance Actions, other than in any Carve Out Replenishment.

      "Commercial Tort Claims" means any "commercial tort claim" as defined in
Article 9 of the UCC.

      "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to
<PAGE>
exercise voting power by contract or otherwise. "Controlling" and "Controlled"
have meanings correlative thereto.

      "Daily Balance" means the amount of the Obligations owed at the end of a
given day.

      "Deposit Account" shall have the meaning ascribed to such term in the UCC.

      "Documents" shall have the meaning ascribed to such term in the UCC.

      "Equipment" means in addition to the definition of equipment in the UCC
all of Borrower's present and hereafter acquired equipment, machinery, machine
tools, motors, furniture, furnishings, fixtures, motor vehicles, rolling stock,
processors, tools, goods (other than consumer goods or farm products) and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located.

      "Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.

      "ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.

      "Event of Default" means any event specified in Article 8.

      "Filing Date" shall have the meaning ascribed to such term in the above
Recitals.

      "Financial Assets" shall have the meaning ascribed to such term in the
UCC.

      "Financing and Cash Collateral Order" means the order authorizing, inter
alia, (a) the use of the Prepetition Secured Lenders' cash collateral pursuant
to Section 363(c) of the Bankruptcy Code and (b) the granting of credit by
Lender to Borrower pursuant to Section 364 of the Bankruptcy Code, entered by
the Bankruptcy Court in the Case, and any subsequent order pursuant to Section
363(c) or 364 of the Bankruptcy Code, in each case, that is consented to by
Lender in its absolute discretion.

      "General Intangibles" means, in addition to the definition of general
intangibles in the UCC, all of Borrower's present and future general intangibles
and other personal property (including choses or things in action, goodwill,
Patents, Patent Applications, Intellectual
<PAGE>
Property, trade names; trademarks, service marks, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds (other than
"trust funds"), route lists, infringement claims, computer programs, computer
discs, computer tapes, Borrower's Books, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds, and tax refund claims) other
than goods and Accounts. However, General Intangibles shall not include
Avoidance Actions.

      "Ineligible Professional Fees" shall have the meaning ascribed to that
term in Section 4.6.

      "Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the Bankruptcy Code, as amended, or
under any other state or federal insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, or extensions
generally with its creditors.

      "Instruments" shall have the meaning ascribed to such term in the UCC.

      "Intellectual Property" means the following property of Borrower: (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all rights arising under or in
connection with all Patents, Patent Applications and Patent disclosures related
to the Purchased Assets, (ii) all trademarks, service marks, trade dress, logos,
slogans, trade names and corporate names (including, without limitation,
"L-VIS(R)" and "i-Point(TM)"), together with all translations, adaptations,
derivations and combinations thereof (including all goodwill associated
therewith), and all applications, registrations and renewals related to the
Purchased Assets, (iii) all copyrightable works, all copyrights and all
applications, registrations and renewals related to the Purchased Assets, (iv)
all trade secrets and confidential business information (including, without
limitation, ideas, research, know-how, techniques, methods, data, product
drawings, training manuals, clinical and regulatory strategies, and business and
marketing plans and proposals) related to the Purchased Assets, (v) all computer
software related solely to the Purchased Assets and not other applications, (vi)
all computer generated data and documentation related to the Purchased Assets,
(vii) all Third Party License Rights related to the Purchased Assets, (viii) all
designs, plans and documentation in whatever form related to products under
development or products subject to a change in design or composition, (ix) all
other proprietary rights related to the Purchased Assets, and (x) all copies and
tangible embodiments thereof (in whatever form or medium) related to the
Purchased Assets.

      "Inventory" means, in addition to the definition of inventory in the UCC,
all present and future inventory in which Borrower has any interest, including
goods held for sale or lease or to be furnished under a contract of service,
Borrower's present and future raw materials, work in process, finished goods,
tangible property, stock in trade, wares, and materials used in or consumed in
Borrower's business, goods which have been returned to, repossessed by, or
stopped in transit by Borrower, packing and shipping materials, wherever
located, any documents of title representing any of the above, and Borrower's
Books relating to any of the foregoing.
<PAGE>
      "Investment Property" means, in addition to the definition of investment
property in the UCC, all Equity Interests.

      "IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.

      "Lender" means the Lender named in the caption of this Agreement.

      "Lender Expenses" means all of the following: costs and expenses (whether
taxes, assessments, insurance premiums or otherwise) required to be paid by
Borrower under any of the Loan Documents which are paid or advanced by Lender;
filing, recording, publication, appraisal and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower; costs and
expenses incurred by Lender in the disbursement or collection of funds to or
from Borrower; charges resulting from the dishonor of checks; costs and expenses
incurred by Lender to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; and costs and expenses incurred by Lender in enforcing or defending
the Loan Documents, including costs and expenses incurred in connection with any
proceeding, suit, enforcement of judgment, or appeal.

      "Letter of Credit Rights" shall have the meaning ascribed to such term in
the UCC.

      "Liens" means all liens (including mechanics', materialmen's and other
consensual and non-consensual liens and statutory liens), security interests,
encumbrances and claims (including, but not limited to, any "claim" as defined
in section 101(5) or "lien" as defined in section 101(37) of the Bankruptcy
Code), reclamation claims, mortgages, deeds of trust, pledges, covenants,
restrictions, hypothecations, charges, indentures, loan agreements, instruments,
contracts, leases, licenses, options, rights of first refusal, contracts,
offsets, recoupment, rights of recovery, judgments, orders and decrees of any
court or foreign or domestic governmental entity, claims for reimbursement,
contribution, indemnity or exoneration, assignment, preferences, debts, charges,
suits, licenses, options, rights of recovery, interests, products liability,
alter-ego, environmental, successor liability, tax and other liabilities, causes
of action and claims, or other encumbrances or restrictions on or conditions to
transfer or assignment of any kind (including without limitation to the
generality of the foregoing restrictions or conditions on or to the transfer,
assignment, or renewal of licenses, permits, registrations, and authorizations
or approvals of or with respect to governmental units and instrumentalities) to
the fullest extent of the law, in each case whether secured or unsecured, choate
or inchoate, filed or unfiled, scheduled or unscheduled, noticed or unnoticed,
recorded or unrecorded, perfected or unperfected, allowed or disallowed,
contingent or non-contingent, liquidated or unliquidated, matured or unmatured,
material or non-material, disputed or undisputed, or known or unknown, whether
arising prior to, on, or subsequent to the commencement of the Case, whether
imposed by agreement, understanding, law, equity or otherwise.
<PAGE>
      "Loan Documents" means, collectively, this Agreement, the Note, any
Financing and Cash Collateral Order, any security agreements, pledge agreements,
mortgages, deeds of trust or other encumbrances or agreements which secure the
Obligations, and any other agreement entered into between Borrower and Lender or
by Borrower or a Guarantor in favor of Lender relating to or in connection with
this Agreement or the Obligations.

      "Multiemployer Plan" means a multiemployer plan as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f).

      "Negotiable Collateral" means all of Borrower's present and future letters
of credit, notes, drafts, instruments, documents, leases and Chattel Paper.

      "Note" means the promissory note made by Borrower to the order of Lender
concurrently herewith or at any time hereafter.

      "Obligations" means all loans, advances, debts, liabilities, obligations,
covenants, and duties owing by Borrower to Lender of any kind and description in
connection with any Loan Documents, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, including
any debt, liability or obligation owing from Borrower to others which Lender may
obtain by assignment or otherwise, all interest thereon and all Lender Expenses.

      "Operating Report" means an operating report to be supplied by Borrower
pursuant to Section 6.1.

      "Patent" means United States Letters Patent and design patent, including
any extension, registration, confirmation, continuation, division,
continuation-in-part, reissue, re-examination or renewal thereof, including
L-VIS(R), and also including any foreign equivalents of any of the foregoing.

      "Patent Application" means an application, including a provisional
application, for a Patent.

      "Permitted Liens" means all Liens listed on the attached Schedule 5.1(a).

      "Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

      "Prepetition Secured Lenders" means the holders of the Prepetition Secured
Obligations."

      "Prepetition Secured Loan Documents" means the documents listed on
Schedule 5.1(b).
<PAGE>
      "Prepetition Secured Obligations" means the prepetition obligations that
are secured under the Prepetition Secured Loan Documents in amounts not to
exceed the amount set forth on Schedule 5.1(b).

      "Projected Cash Shortfall" means, for any period, the amount by which
"Total Cash Requirements" (as indicated in an Approved Budget), exceeds "A/R
Collections" as indicated in an Approved Budget.

      "Super-Priority Administrative Expense" means a claim against Borrower or
its estate in the Case that is an administrative expense claim having priority
over (a) any and all allowed administrative expenses and (b) unsecured claims
now existing or hereafter arising, including administrative expenses of the kind
specified in Section 503(b), 506(c) or 507(b) of the Bankruptcy Code.

      "Supporting Obligation" shall have the meaning ascribed to such term in
the UCC.

      "Term" means the period from the date of the execution and delivery by
Lender of this Agreement through and including the later of (a) the Termination
Date and (b) the indefeasible payment and performance in full of the
Obligations.

      "Termination Date" means (a) the earliest of (i) August 29, 2003 and (ii)
the date on which Lender has the right to terminate its obligation to purchase
assets pursuant to the Asset Purchase Agreement (the period through such date
the "Initial Term"), unless such date is extended pursuant to Section 3.1, and
if so extended on one or more occasions the last date of the last such extension
and (iii) the closing of the purchase of assets pursuant to the Asset Purchase
Agreement, or (b) if earlier terminated by Lender pursuant to Section 9.1, the
date of such termination.

      "Third Party License Rights" means all permissions, licenses, covenants
not to sue, grants, and other express or implied authorization to make, use,
sell, import, create derivative works, publicly display, publicly perform, rent,
or otherwise operate that may be needed by the Business to avoid violating an
Intellectual Property right of a third party, including those relating to
L-VIS(R) and iPoint(TM).

      "UCC" means the New York Uniform Commercial Code.

      11.2 INTERPRETATION.

               a. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation."

               b. Words denoting any gender shall include all genders. Where a
word or phrase is defined herein, each of its other grammatical forms shall have
a corresponding meaning.

               c. A reference to any party to this Agreement or any other
agreement or document shall include such party's successors and permitted
assigns.
<PAGE>
               d. A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.

               e. All references to "$" and dollars shall be deemed to refer to
United States currency.

               f. All references to any financial or accounting terms shall be
defined in accordance with GAAP as applicable in the United States.

               g. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Article,
Section, Recitals, Schedule and Exhibit references are to this Agreement unless
otherwise specified.

               h. The meanings given to terms defined herein shall be equally
applicable to both singular and plural forms of such terms.

               i. Borrower and Lender hereby acknowledge that (i) Borrower and
Lender jointly and equally participated in the drafting of this Agreement and
all other agreements contemplated hereby, (ii) Borrower and Lender have been
adequately represented and advised by legal counsel with respect to this
Agreement and the transactions contemplated hereby, and (iii) no presumption
shall be made that any provision of this Agreement shall be construed against
either party by reason of such role in the drafting of this Agreement and any
other agreement contemplated hereby.

               j. The headings of the Articles and Sections herein are inserted
for convenience of reference only and are not intended to be a part of, or to
affect the meaning or interpretation of, this Agreement.

               k. References to any document, instrument, mortgage or agreement
of any kind shall refer to any permitted amendments, restatements or other
modifications thereof.

      11.3 EXHIBITS. All of the exhibits, addenda or riders attached to this
Agreement shall be deemed incorporated herein by reference.

      11.4 UCC. Any terms used in this Agreement that are defined in the UCC
shall be construed and defined as set forth in the UCC, unless otherwise defined
herein.

                                   ARTICLE 12

                          ADVANCES AND TERMS OF PAYMENT

      12.1 ADVANCES; ADVANCE LIMIT. Upon the request of Borrower, made at any
time or from time to time during the Term and so long as no Event of Default has
occurred and is continuing, Lender shall make Advances in an amount up to the
lesser of (a) an amount equal to (i) 110% of the aggregate semi-monthly amounts
of Projected Cash Shortfall on a cumulative basis from the effective date of
this Agreement through such date of determination minus (ii) the
<PAGE>
aggregate amount outstanding of all Advances made to the Borrower hereunder from
the Closing Date through such date of determination and (b) the actual
semi-monthly amounts of Cash Shortfall as indicated in the current Operating
Report as of the time of any request for an Advance. Without the consent of the
Lender, Borrower may make no more than one request for an Advance in any
semi-monthly period.

      12.2 OVERADVANCES. All Advances shall be added to and be deemed part of
the Obligations when made. If, at any time and for any reason, the aggregate
amount of the outstanding Advances exceeds the amounts permitted under Section
2.1 (an "Overadvance") then Borrower shall, upon demand by Lender, immediately
pay to Lender, in cash, the amount of that Overadvance.

      12.3 AUTHORIZATION TO MAKE ADVANCES. Lender is hereby authorized to make
Advances based upon telephonic or other instructions received from anyone
purporting to be an Authorized Officer, or, at the discretion of Lender, if such
Advances are necessary to satisfy any Obligations. All requests for Advances
shall be made pursuant to a Borrowing Request specifying the date on which such
Advance is to be made (which day shall be a Business Day at least one Business
Day after the request of such Advance) and the amount of such Advance. Requests
received after 12:00 p.m. Eastern Standard Time on any day shall be deemed to
have been made as of the opening of business on the immediately following
Business Day. All Advances made under this Agreement shall be conclusively
presumed to have been made to, at the request of, and for the benefit of
Borrower when deposited to the credit of Borrower or otherwise disbursed in
accordance with the instructions of Borrower or in accordance with the terms and
conditions of this Agreement. Unless otherwise requested by Borrower, all
Advances shall be made by a wire transfer to the deposit account of Borrower
designated by Borrower from time to time in a writing delivered to Lender.

      12.4 INTEREST.

               a. Except where specified to the contrary in the Loan Documents,
the aggregate outstanding balances of the Obligations shall accrue interest at
the per annum rate of ten percent (10%). The Obligations shall bear interest
from and after written notice by Lender to Borrower of the occurrence of an
Event of Default, and without constituting a waiver of any such Event of
Default, at the per annum rate of twelve percent (12%) (the "Default Rate"). All
interest payable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed on the
Daily Balance. Interest as provided for herein shall continue to accrue until
the Obligations are paid in full.

               b. All interest payable by Borrower shall be due and payable on
the date that all Advances are due and payable. Lender may, at its option, add
such interest and all Lender Expenses to the Obligations, and such amount shall
thereafter accrue interest at the rate then applicable under this Agreement.

               c. In no event shall interest on the Obligations exceed the
highest lawful rate in effect from time to time. It is not the intention of the
parties hereto to make an agreement which violates any applicable state or
federal usury laws. In no event shall Borrower pay or Lender accept or charge
any interest which, together with any other charges upon the principal or
<PAGE>
any portion thereof, exceeds the maximum lawful rate of interest allowable under
any applicable state or federal usury laws. Should any provision of this
Agreement or any existing or future Notes or Loan Documents between the parties
be construed to require the payment of interest or any other fees or charges
which could be construed as interest which, together with any other charges upon
the principal or any portion thereof and any other fees or charges which could
be construed as interest, exceeds the maximum lawful rate of interest, then any
such excess shall be applied to the remaining principal balance of the
Obligations, if any, and the remainder refunded to Borrower.

                                   ARTICLE 13

                                      TERM

      13.1 TERM AND RENEWAL DATE. This Agreement shall become effective upon
execution by Lender and upon approval by the Bankruptcy Court, and continue in
full force through the Termination Date. This Agreement may be extended by
mutual written agreement of the parties. In addition, Lender shall have the
right to terminate this Agreement immediately at any time upon the occurrence of
an Event of Default. No such termination shall relieve or discharge Borrower of
its duties, Obligations and covenants hereunder until all Obligations have been
paid and performed in full, and Lender's continuing security interest in the
Collateral shall remain in effect until the Obligations have been fully and
irrevocably paid and satisfied in cash or cash equivalent. On the Termination
Date of this Agreement, the Obligations shall be immediately due and payable in
full.

      13.2 FINANCING AND CASH COLLATERAL ORDERS. Prior to making any Advance,
the Bankruptcy Court shall have entered the Financing and Cash Collateral Order
and such Financing and Cash Collateral Order shall be in full force and effect
and shall not have been amended, modified, stayed or reversed, without Lender's
Consent.

                                   ARTICLE 14

                    CREATION OF CONTINUING SECURITY INTEREST

      14.1 GRANT OF CONTINUING SECURITY INTEREST. Borrower (as debtor and as
debtor in possession) hereby grants to Lender a security interest in all
presently existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of the Obligations and in order to secure prompt
performance by Borrower of each of its covenants and Obligations under the Loan
Documents.

      14.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower shall
notify Lender and upon the request of Lender (but only to the extent not
prohibited under the Prepetition Secured Loan Documents), immediately endorse
and assign such Negotiable Collateral to Lender and deliver physical possession
of such Negotiable Collateral to Lender.

      14.3 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall execute
and deliver to Lender concurrently with Borrower's execution and delivery of
this Agreement and at
<PAGE>
any time thereafter immediately at the request of Lender, all financing
statements, continuation financing statements, fixture filings, security
agreements. chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, patent assignments, trademark
assignments, and all other documents that Lender may request, in form
satisfactory to Lender, to perfect and maintain perfected Lender's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents and Borrower hereby
authorizes Lender to file and/or record such financing statements and other
documents as Lender deems necessary to perfect and maintain Lender's continuing
security interest in the Collateral, and agrees any such financing statement may
contain an "all asset" or "all property" description of the Collateral, and
Borrower hereby ratifies any such financing statement or other document
heretofore filed by Lender.

      14.4 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes and
appoints Lender (and any person designated by Lender) as Borrower's true and
lawful attorney-in-fact with power to sign the name of Borrower on any of the
above described documents or on any other similar documents to be executed,
recorded or filed in order to perfect or continue perfected Lender's continuing
security interest in the Collateral including patent assignments and trademark
assignments. In addition, Borrower hereby appoints Lender (and any person
designated by Lender) as Borrower's attorney-in-fact with power to: (a) sign
Borrower's name on verifications of Accounts, on other Collateral and, upon the
continuance of an Event of Default, on notices to Account debtors; (b) send
requests for verification of Accounts and other Collateral; (c) upon the
continuance of an Event of Default, endorse Borrower's name on any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into Lender's possession; (d) upon the occurrence of an Event of
Default (except as provided in the Financing and Cash Collateral Order and
subject to the rights of the holders of the Prepetition Secured Obligations),
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, to receive and open all mail
addressed to Borrower, and to retain all mail relating to the Collateral and
forward all other mail to Borrower; (e) upon the occurrence of an Event of
Default (but subject to the rights of the holders of the Prepetition Secured
Obligations) make, settle and adjust all claims under Borrower's policies of
insurance, endorse the name of Borrower on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance and make all
determinations and decisions with respect to such policies of insurance. The
appointment of Lender as Borrower's attorney-in-fact and each and every one of
Lender's rights and powers, being coupled with an interest, is irrevocable so
long as any Accounts in which Lender has a continuing security interest remain
unpaid and until all of the Obligations have been fully repaid and performed.

      14.5 RIGHT TO INSPECT. Lender shall have the right at any time or times
hereafter during Borrower's usual business hours, or during the usual business
hours of any third party having control over Borrower's Books to inspect
Borrower's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral or Borrower's financial condition. Lender
also shall have the right at any time or times hereafter during Borrower's usual
business hours to inspect and examine the Inventory, the Equipment and the other
Collateral and to check and test the same as to quality, quantity, value and
condition.
<PAGE>
      14.6 CARVE OUT. Notwithstanding anything to the contrary in this
Agreement, Lender's security interest in the Collateral shall be subject to a
carve out (the "Carve Out") for the sum of allowed administrative expenses in
the Case payable pursuant to 28 U.S.C. Section 1930(a)(6) and Priority
Professional Expenses (as defined below) in the Case. "Priority Professional
Expenses" means allowed fees, costs and reasonable expenses allowed or permitted
pursuant to Sections 330 and 331 of the Bankruptcy Code, exclusive of
prepetition retainers, of: (a) Fox Rothschild, LLP, general counsel for the
Borrower, up to the amount of $150,000.00; (b) Smith, Stratton, Wise, Heher &
Brennan, LLP, special counsel to the Borrower, up to the amount of $75,000.00;
(c) PricewaterhouseCoopers, Borrower's accountant, up to the amount of
$50,000.00; (d) Broadband Capital Management, Borrower's financial advisor, in
an amount up to $100,000.00 and (e) any professionals retained by any official
creditors committee in the Case that may be appointed in this Case up the amount
of $25,000.00, provided, however, Priority Professional Expenses shall not
include any fees or expenses (collectively the "Ineligible Professional Fees")
incurred by any such professional in preventing, hindering or delaying the
Lender or the Prepetition Secured Lenders from enforcing or realizing upon any
of their collateral once an Event of Default has occurred, using or seeking to
use cash collateral or selling any collateral subject to the liens of the
Prepetition Secured Lenders or the Lender without the prior written consent of
the Prepetition Secured Lender or the Lender objecting to or contesting in any
manner, or raising any defenses to, the validity, extent, amount, perfection,
priority or enforceability of the Prepetition Secured Obligations the Liens
securing, or purporting to secure, the Prepetition Secured Obligations, any
Prepetition Secured Loan Documents, any Obligations, and Liens securing, or
purporting to secure, any Obligations or any Loan Documents or any other rights
or interest of the Prepetition Secured Lenders and the Lender, or in asserting
any claims or causes of action, including any actions under Chapter 5 or Section
724(a) of the Bankruptcy Code, or for equitable subordination, against the
Lender or the Prepetition Secured Lenders. The exclusion of the Ineligible
Professional Fees from Priority Professional Expenses shall not include fees and
expenses related to the investigation of the extent, validity and priority of
the Prepetition Secured Obligations and Liens, the investigation of claims or
causes of action against the Prepetition Secured Lenders, or litigation
respecting whether an Event of Default has occurred. However, if after payment
of any of the above-amounts from the Collateral or unencumbered assets are
received by the Borrower, including its bankruptcy estate, such funds shall be
used to replenish the amount of the proceeds of such Collateral used for such
payments included in the Carve Out to the extent such payments result in a
diminution in value of the Lender in the Collateral or leaves the Lender
undersecured or, if applicable, further undersecured. Any such payment will be
referred to in this Agreement as a "Carve Out Replenishment". Nothing herein
shall be construed as consent to the allowance of any Priority Professional
Expenses or shall effect the rights of the Lender or the Prepetition Secured
Lenders to object to the allowance in payment of such expenses. Any payments
made to any of the professionals pursuant to the Approved Budget and permitted
to be paid under Sections 330 and 331 of the Bankruptcy Code or otherwise
pursuant to an order of the Bankruptcy Court shall reduce the respective
Priority Professional Expenses allocated to each such professional.
Notwithstanding the expiration of the Term or the termination of the Lender's
obligation to make Advances to the Debtor pursuant to the Loan Agreement, Lender
shall nevertheless continue to make Advances under the Loan Agreement for the
purposes of (i) funding the Carve Out (or any unpaid portion of the Carve Out)
but only to the extent amounts covered by the Carve Out have been incurred, and
not paid, whether or not applied for or allowed prior to the termination of the
Lender's obligation to make advances under the Loan Agreement and (ii) funding
any expenses set forth in the Approved Budget which have been incurred but not
paid prior to the termination of the
<PAGE>
Lender's obligation to make Advances under the Loan Agreement. Upon the
expiration of the Term or the termination of the Lender's obligation (the
"Termination Date") to make advances to the Debtor pursuant to the Loan
Agreement, the Lender shall have no obligation to fund any Professional Fee
Expenses incurred after the Termination Date except to the extent (i) of an
aggregate of $25,000 for all professionals covered by the Carve Out and (ii)
such Professional Fee Expenses are within the individual Carve Out limits set
forth in this Section 4.6

                                   ARTICLE 15

                         REPRESENTATIONS AND WARRANTIES

               Borrower represents and warrants to Lender the following and
acknowledges:

      15.1 PRIOR ENCUMBRANCES; SECURITY INTERESTS. Borrower has good and
marketable title to the Collateral, free and clear of liens, except for the
continuing security interests granted to Lender by Borrower and Permitted Liens.
Other than Permitted Liens, Borrower will not create or permit to be created any
Lien on any Collateral or any of its other assets. The Permitted Liens secure
only the Prepetition Secured Obligations and obligations specified on the
Financing and Cash Collateral Order.

      15.2 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment is
not now, and shall not at any time or times hereafter be stored, with a bailee,
warehouseman, processor, or similar party. Borrower shall keep the Inventory and
Equipment only at the addresses set forth on Schedule 5.2, unless Inventory or
Equipment are required to be moved to a different location to enable Debtor to
provide services to a customer in which case Borrower shall promptly notify
Lender of the new location of such Inventory and Equipment

      15.3 RELOCATION OF CHIEF EXECUTIVE OFFICE. The chief executive office of
Borrower is at the address indicated on the first page of this Agreement and
Borrower will not, without ten days' prior written notice to Lender, relocate
such office.

      15.4 DUE INCORPORATION AND QUALIFICATION. Borrower is and shall at all
times hereafter be a corporation duly organized and existing under the laws of
the state of its incorporation as set forth on the first page hereof and is
qualified and licensed to do business and is in good standing in any state in
which the conduct of its business or its ownership of assets requires that it be
so qualified.

      15.5 FICTITIOUS NAME. Borrower is conducting its business under the trade
or fictitious name(s) listed on Schedule 5.5 and no others. Borrower has
complied with the fictitious name laws of all jurisdictions in which compliance
is required in connection with its use of such name(s).

      15.6 PERMITS AND LICENSES. Borrower holds all licenses, permits,
franchises, approvals and consents required for the conduct of its business and
the ownership and operation of its assets.
<PAGE>
      15.7 DUE AUTHORIZATION. Borrower has the right and power and is duly
authorized by all appropriate corporate action to enter into each of the Loan
Documents to which it is a party.

      15.8 COMPLIANCE WITH ARTICLES; BYLAWS. The execution by Borrower of the
Loan Documents to which it is a party does not constitute a breach of any
provision contained in Borrower's Certificate or Articles of Incorporation or
its Bylaws, nor does it constitute an event of default under any material
agreement to which Borrower is now or may hereafter become a party.

      15.9 LITIGATION. Except as disclosed on Schedule 5.9 hereto there are no
actions, proceedings or claims pending by or against Borrower whether or not
before any court or administrative agency and Borrower has no knowledge or
notice of any pending, threatened or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrower, except for ongoing collection matters in which Borrower is the
plaintiff. If any such actions, proceedings or claims presently exist or arise
during the Term, Borrower shall promptly notify Lender in writing and shall,
from time to time, notify Lender of all material events relating thereto.

      15.10 ACCURACY OF INFORMATION AND NO MATERIAL ADVERSE CHANGE IN FINANCIAL
STATEMENTS. All information furnished by Borrower to Lender and all statements
made by Borrower to Lender including information set forth in any loan
application, is true, accurate and complete in all respects and does not contain
any misstatement of fact or omit to state any facts necessary to make the
statements or information contained therein not misleading in any material
respect. All financial statements relating to Borrower which have been or may
hereafter be delivered to Lender (a) have been prepared in accordance with GAAP;
(b) fairly present Borrower's financial condition as of the date thereof and
Borrower's results of operations for the period then ended; and (c) disclose all
contingent obligations of Borrower. The Borrower has delivered to the Lender a
three-month cash revenue and expense budget (the "Budget"). The Budget has been
prepared in good faith based upon reasonable assumptions. The Budget is attached
hereto as Exhibit B. To the knowledge of the Borrower, no facts exist that
(individually or in the aggregate) would result in any material change in any of
the assumptions in the Budget. The Budget is based upon reasonable estimates and
assumptions, has been prepared on the basis of the assumptions stated therein
and reflect the reasonable estimates of the Borrower of the results of
operations and other information projected therein.

      15.11 ERISA. Neither Borrower or any ERISA Affiliate, nor any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a), or any of the published
interpretations thereof. No lien upon the assets of Borrower has arisen with
respect to any Plan. No "prohibited transaction" within the meaning of ERISA
Section 406 or IRC Section 4975(c) has occurred with respect to any Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal liability
with respect to any Multiemployer Plan. Borrower and each ERISA Affiliate have
made all contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan, whether
or not waived.

      15.12 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS.
<PAGE>
               a. Borrower has complied, and at all times through the Term will
comply, with all Environmental Laws. Borrower has not and will not cause or
permit any Hazardous Materials to be located, incorporated, generated, stored,
manufactured, transported to or from, released, disposed of, or used at, upon,
under, or within any premises at which Borrower conducts its business, or in
connection with Borrower's business, except in compliance with applicable law.
To the best of Borrower's knowledge, no prior owner or operator of any premises
at which Borrower conducts its business has caused or permitted any of the above
to occur at, upon, under, or within any of the premises. Borrower will not
permit any lien to be filed against the Collateral or any part thereof under any
Environmental Law, and will promptly notify Lender of any proceeding, inquiry or
claim relating to any alleged violation of any Environmental Law, or any alleged
loss, damage or injury resulting from any Hazardous Material. Lender shall have
the right to join and participate in, as a party if it so elects, any legal or
administrative proceeding initiated with respect to any Hazardous Material or in
connection with any Environmental Law. "Hazardous Material" includes without
limitation any substance, material, emission, or waste which is or hereafter
becomes regulated or classified as a hazardous substance, hazardous material,
toxic substance or solid waste under any Environmental Law, asbestos, petroleum
products, urea formaldehyde, polychlorinated biphenyls (PCBs), radon, and any
other hazardous or toxic substance, material, emission or waste. "Environmental
Law" means the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
regulations pertaining to such statutes, and any other safety, health or
environmental statutes, laws, regulations or ordinances of the United States or
of any state, county or municipality in which Borrower conducts its business or
the Collateral is located.

               b. All present business operations of Borrower's businesses
including those involving Hazardous Materials are in material compliance with
all applicable Environmental Laws.

      15.13 TAX COMPLIANCE. Borrower has filed all tax returns required to be
filed by it and has paid all taxes due and payable on said returns and on any
assessment made against it or its assets, except for returns which have not been
filed but are the subject of appropriate extensions.

      15.14 INTELLECTUAL PROPERTY. Schedule 5.14 attached to this Agreement
contains a true, complete and current listing of all copyrights, copyright
applications, trademarks, trademark rights, trade names, patents, patent rights
or licenses, patent applications and other Intellectual Property of the Borrower
that are registered with any governmental authority as of the Closing Date.
Borrower owns or possesses rights to use all franchises, licenses, copyrights,
copyright applications, patents, patent rights or licenses, patent applications,
trademarks, trademark rights, trade names, trade name rights, copyrights and
rights with respect to the foregoing which are required to conduct its business.
No event has occurred which permits, or after notice or lapse of time or both
would permit, the revocation or termination of any such rights, and no Borrower
is liable to any Person for infringement under applicable law with respect to
any such rights as a result of its business operations.

      15.15 EQUITY INTERESTS. All Equity Interests owned by Borrower are set
forth on Schedule 5.15.
<PAGE>
      15.16 USE OF PROCEEDS. All proceeds provided by Lender to Borrower
pursuant to any Financing and Cash Collateral Order, this Agreement or
otherwise, shall be used by Borrower in accordance with the Approved Budget. No
portion of any administrative expense claim or other claim relating to the Case
shall be used for Ineligible Professional Expenses. 15.17 EVENTS OF DEFAULT. No
event of default has occurred or is existing under any of the Loan Documents.

      15.18 FINANCING AND CASH COLLATERAL ORDER. Each applicable Financing and
Cash Collateral Order has been duly entered, is valid, subsisting and continuing
and has not been vacated, modified, reversed on appeal, or vacated or modified
by any order of the Bankruptcy Court (other than as consented to by Lender) and
is not subject to any pending appeal or stay.

      15.19 SUPER-PRIORITY ADMINISTRATIVE EXPENSES. Upon the entry of the
Financing and Cash Collateral Order, the Obligations: (a) shall at all times
constitute a Super-Priority Administrative Expense having priority, pursuant to
Sections 364(c)(1) of the Bankruptcy Code, over any other claims of any entity,
including any claims under Sections 503, 507, 1113, and 1114 of the Bankruptcy
Code, other than claims of the lenders under the Prepetition Secured
Obligations, and (b) pursuant to Sections 364(c)(2) and (3) and 364(d) of the
Bankruptcy Code, shall at all times be secured by a perfected lien in all of the
assets (other than Avoidance Actions), whether now owned or hereafter acquired
of Borrower and its estates, pursuant to the terms of the Loan Documents prior
to all Liens, other than the Liens of the lenders under the Prepetition Secured
Obligations.

      15.20 RELIANCE BY LENDER; CUMULATIVE. Each warranty, representation and
agreement contained in this Agreement shall be automatically deemed repeated by
Borrower with each request for an Advance and shall be conclusively presumed to
have been relied on by Lender regardless of any investigation made or
information possessed by Lender. The warranties, representations and agreements
set forth herein shall be cumulative and in addition to any and all other
warranties, representations and agreements which Borrower shall now or hereafter
give, or cause to be given, to Lender.

                                   ARTICLE 16

                              AFFIRMATIVE COVENANTS

      Borrower covenants and acknowledges that during the Term Borrower shall
comply with all of the following:

      16.1 COLLATERAL AND OTHER REPORTS. Borrower shall provide to Lender the
following: (a) as soon as available and in any event no later than three
Business Days after each semi-monthly period, an operating report ("Operating
Report") (in form and substance satisfactory to Lender as of the last day of the
preceding semi-monthly period, setting forth the following information for the
Borrower for the preceding semi-monthly period on both a semi-monthly and
cumulative basis from the Filing Date to such date, together with a
reconciliation report comparing such results with the Borrower's Budget for such
period, on a cash basis: (i) total disbursements and (ii) total cash receipts;
(b) within one Business Day of Borrower's filing with
<PAGE>
the Bankruptcy Court, all Monthly Operating Reports required by the Office of
the United States Trustee and all schedules and statements required by Section
521 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 1007; and
(c) within one Business Day of filing or distribution, as the case may be,
copies of all pleading, motions, applications, judicial information, financial
information and other documents filed by or on behalf of Borrower with the
Bankruptcy Court in the Case, or distributed by or on behalf of Borrower to any
official committee appointed in the Case or to any unofficial committee.

      16.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver
to Lender as soon as available, but in any event within ninety (90) days after
the end of each of Borrower's fiscal years, financial statements of Borrower for
each such fiscal year. Such financial statements shall include a balance sheet
and profit and loss statement, and the accountants' management letter, if any,
and shall be prepared in accordance with GAAP. Together with the above, Borrower
shall also deliver Borrower's Form 10-Qs, 10-Ks or 8-Ks, if any, as soon as the
same become available, and any other report reasonably requested by Lender
relating to the Collateral and the financial condition of Borrower and a
certificate signed by its chief financial officer to the effect that all
reports, statements or computer prepared information of any kind or nature
delivered or caused to be delivered to Lender under this Section 6.2 to fairly
present its financial condition and that there exists on the date of delivery of
such certificate to Lender no condition or event which constitutes an Event of
Default.

      16.3 TAX RETURNS, RECEIPTS. Borrower shall deliver to Lender copies of
each of its future federal income tax returns, and any amendments thereto,
within thirty (30) days of the filing thereof. Borrower further shall promptly
deliver to Lender, upon request, satisfactory evidence of Borrower's payment of
all withholding and other taxes required to be paid by it.

      16.4 TITLE TO EQUIPMENT. Upon Lender's request, Borrower shall promptly
deliver to Lender, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.

      16.5 MAINTENANCE OF EQUIPMENT. Borrower shall keep and maintain the
Inventory and Equipment in good operating condition and repair, and shall make
all necessary replacements thereto so that its value and operating efficiency
shall at all times be maintained and preserved. Borrower shall not permit any
item of Collateral to become a fixture to real estate or an accession to other
property, and the Collateral is now and shall at all times remain Borrower's
personal property.

      16.6 TAXES. All Federal, state and local assessments and taxes, whether
real, personal or otherwise, due or payable by, or imposed, levied or assessed
against Borrower or any of its assets or in connection with Borrower's business
shall hereafter be paid in full, before they become delinquent or before the
expiration of any extension period except for those taxes, assessments and the
like being contested by Borrower in good faith and by appropriate proceedings
and as to which Borrower has established appropriate reserves, provided, that no
Lien is placed on any assets of Borrower during any such contest as a
consequence of the failure to pay such tax, assessment or the like. Borrower
shall make due and timely payment or deposit of all federal, state and local
taxes, assessments or contributions required of it by law, and will
<PAGE>
execute and deliver to Lender, on demand, appropriate certificates attesting to
the payment or deposit thereof.

      16.7 INSURANCE. Borrower, at its expense, shall keep and maintain the
Collateral insured against all risk of loss or damage from fire, theft,
vandalism, malicious mischief, explosion, sprinklers, and all other hazards and
risks of physical damage included within the meaning of the term "extended
coverage" in such amounts as are ordinarily insured against by similar
businesses. Borrower shall also keep and maintain comprehensive general public
liability insurance and property damage insurance, and insurance against loss
from business interruption, insuring against all risks relating to or arising
from Borrower's ownership and use of the Collateral and its other assets and the
operation of its business. All such policies shall be in such form, with such
companies and in such amounts as may be reasonably satisfactory to Lender.
Borrower shall deliver to Lender certified copies of such policies and evidence
of the payments of all premiums therefor upon request. All such policies (except
those of public liability and liability property damage) shall contain a
Lender's Loss Payable endorsement in a form satisfactory to Lender, naming
Lender as sole loss payee thereof, and containing a waiver of warranties. All
proceeds payable under such policies shall be payable to Lender. In the event of
partial or total destruction of the collateral by fire or other casualty, the
insurance proceeds shall, if an Event of Default exists, at the option of
Lender, be paid to Lender to reduce the Obligations, or, alternatively, be held
in a trust fund with Lender to be disbursed solely for repairs and
reconstruction of such collateral or if no Event of Default exists such
insurance proceeds shall at the option of Borrower, be applied to reduce the
balance owing on the Obligations or be held in a trust fund with Lender to be
disbursed solely for repairs and reconstruction of the collateral. Any such
trust fund shall be additional security for the Obligations. Borrower shall
notify Lender of its exercise of its option as to the use of such insurance
proceeds within thirty (30) days of the subject casualty occurrence.

      16.8 LENDER EXPENSES. All reasonable Lender Expenses shall be paid at the
same time as all of the Obligations are paid.

      16.9 COMPLIANCE WITH LAW. Borrower shall comply, in all material respects,
with the requirements of all applicable laws, rules, regulations and orders of
governmental authorities relating to Borrower and the conduct of its business.

      16.10 ACCOUNTING SYSTEM. Borrower at all times hereafter shall maintain a
standard and modern system of accounting in accordance with GAAP with ledger and
account cards or computer tapes, disks, printouts and records pertaining to the
Collateral containing such information as may from time to time be requested by
Lender.

      16.11 COMPLIANCE WITH BANKRUPTCY COURT. Borrower shall comply in full with
the notice and other requirements of the Bankruptcy Code and all other
applicable rules with respect to any relevant Financing and Cash Collateral
Order in a manner acceptable to Lender and its counsel.
<PAGE>
                                   ARTICLE 17

                               NEGATIVE COVENANTS

               Borrower covenants and acknowledges that during the Term Borrower
shall not undertake any of the following without the prior written consent of
Lender:

      17.1 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into any
transaction not in the ordinary and usual course of its business as conducted on
the date hereof, including but not limited to the sale, lease, disposal,
movement, relocation or transfer, whether by sale or otherwise, of any its
assets other than the licensing of its Equipment and technology in the ordinary
and usual course of its business as presently conducted; incur any indebtedness
for borrowed money or any other indebtedness outside the ordinary and usual
course of its business as conducted on the date hereof except for renewals or
extensions of existing debts permitted by Lender and transactions contemplated
by the Bidding Procedures Order (as defined in the Asset Purchase Agreement);
make any advance or loan to any third party; or grant a lien on any of its
assets except (a) in favor of Lender or (b) the Permitted Liens.

      17.2 CHANGE NAME. Change its name, business structure or identity or add
any new fictitious name.

      17.3 MERGE, ACQUIRE. Merge, acquire, or consolidate with or into any other
business organization.

      17.4 GUARANTY. Guaranty or otherwise become in any way liable with respect
to the obligations of any third party, except by endorsement of instruments or
items of payment for deposit to the account of Borrower for negotiation and
delivery to Lender.

      17.5 RESTRUCTURE. Make any material change in its financial structure or
business operations.

      17.6 PREPAYMENTS. Prepay any existing indebtedness owing to any third
party other than expenses in the Budget that are due no later than 15 days
thereafter.

      17.7 LOANS AND ADVANCES. Make any loans, advances or extensions of credit
to any officer, director, executive employee or shareholder of Borrower (or any
relative of any of the foregoing), or to any entity which is a subsidiary of,
related to, affiliated with or has common shareholders, officers or directors
with Borrower. Notwithstanding the foregoing, Borrower shall be permitted to
make reasonable travel expense advances and similarly related expense advances
as made in the Borrower's ordinary course of business in accordance with the
Approved Budget.

      17.8 CAPITAL EXPENDITURES. Make any capital expenditure, or any commitment
therefor, or purchase or lease any real or personal assets or replacement
Equipment in excess of sums, if any, set forth for this purpose in the Approved
Budget.

      17.9 CONSIGNMENTS OF INVENTORY. Consign any Inventory or Equipment except
to persons or entities as to which Borrower has furnished to Lender prior
written notice and
<PAGE>
provided Borrower has filed such UCC-1 financing statements or taken such other
action as required by applicable law to perfect Borrower's interest in such
consigned Inventory.

      17.10 DISTRIBUTIONS. Make any distribution or declare or pay any dividends
(in cash or in stock) on, or purchase, acquire, redeem or retire any of its
capital stock, of any class, whether now or hereafter outstanding.

      17.11 ACCOUNTING METHODS. Modify or change its method of accounting or
enter into, modify or terminate any agreement presently existing or at any time
hereafter entered into with any third party for the preparation or storage of
Borrower's records of Accounts and financial condition without said party
agreeing to provide Lender with information regarding the Collateral or
Borrower's financial condition. Borrower waives the right to assert a
confidential relationship, if any, it may have with any such third party in
connection with any information requested by Lender hereunder, and agrees that
Lender may contact any such party directly in order to obtain such information.

      17.12 BUSINESS SUSPENSION. Suspend or go out of business.

      17.13 BANKRUPTCY CASE. Seek, consent or suffer to exist: (a) any
modification, stay, vacation or amendment to any Financing and Cash Collateral
Order, unless Lender has consented to such modification, stay, vacation or
amendment in writing, (b) a priority claim for any administrative expense or
unsecured claim against Borrower (now existing or hereafter arising of any kind
or nature whatsoever, including any administrative expense of the kind specified
in Section 503(b), 506(c) or 507(b) of the Bankruptcy Code) equal or superior to
the priority claim of Lender in respect of the Obligations except as expressly
permitted in favor of the Prepetition Secured Lenders as provided in the
Financing and Cash Collateral Order, or (c) any Lien on any Collateral, having a
priority equal or superior to the liens in favor of Lender in respect of the
Obligations except Permitted Liens securing the Secured Prepetition Obligations.

                                   ARTICLE 18

                                EVENTS OF DEFAULT

      The occurrence of any one or more of the following events shall constitute
an Event of Default by Borrower hereunder:

      18.1 FAILURE TO PAY. Borrower's failure to pay when due and payable, or
when declared due and payable, any portion of the Obligations (whether
prepetition or post-petition, and whether principal, interest, taxes, Lender
Expenses, or otherwise);

      18.2 FAILURE TO PERFORM. Borrower's failure to perform, keep or observe
any term, provision, condition, representation, warranty, covenant or agreement
contained in this Agreement, in any of the Loan Documents, in any Financing and
Cash Collateral Order, or in any other present or future agreement between
Borrower and Lender. Notwithstanding the foregoing, with respect to a failure of
Borrower to timely deliver any Operating Report due on a monthly basis to Lender
pursuant to Section 6.1 or to meet any timely delivery obligations under Section
6.3, Lender shall provide Borrower with written notice of any such default
hereunder and
<PAGE>
provide Borrower with five (5) days from receipt of such notice to cure such
default. If Borrower fails to cure any such default within this cure period,
Lender may exercise any and all of its rights and remedies as set forth in this
Agreement;

      18.3 MISREPRESENTATION. Any material misstatement or material
misrepresentation now or hereafter exists in any warranty, representation,
statement, aging or report made to Lender by, Borrower or any officer, employee,
agent or director thereof, or if any such warranty, representation, statement,
aging or report is withdrawn by such person;

      18.4 MATERIAL ADVERSE CHANGE. Borrower is enjoined from conducting any
part of its business as a debtor in possession, or there is a material adverse
change in Borrower's business or financial condition, provided, that the
commencement of the Case shall not constitute a material adverse change;

      18.5 LEVY OR ATTACHMENT. Any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant or is levied upon, or
comes into the possession of any judicial officer or assignee;

      18.6 INJUNCTION AGAINST BORROWER. Borrower is enjoined, restrained or in
any way prevented by court order from continuing to conduct all or any material
part of its business;

      18.7 GOVERNMENT LIEN. A notice of lien, levy or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, or any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, securing an amount of $10,000 or more upon any of Borrower's assets
and the same is not paid on the payment date thereof;

      18.8 DEFAULT TO THIRD PARTY. There is a default in any material
post-Filing Date agreement to which Borrower is a party which binds Borrower or
any of its assets and which permits the counterparty to exercise its rights and
remedies and such counterparty does exercise its rights and remedies;

      18.9 ERISA VIOLATION. A prohibited transaction within the meaning of ERISA
Section 406 or IRC Section 1975(c) shall occur with respect to a Plan which
could have a material adverse effect on the financial condition of Borrower; any
lien upon the assets of Borrower in connection with any Plan shall arise;
Borrower or any ERISA Affiliate shall completely or partially withdraw from a
Multiemployer Plan and such withdrawal could, in the good faith opinion of
Lender, have a material adverse effect on the financial condition of Borrower.
Borrower or any of its ERISA Affiliates shall fail to make full payment when due
of all amounts which Borrower or any of its ERISA Affiliates may be required to
pay to any Plan or any Multiemployer Plan as one or more contributions thereto;
Borrower or any of its ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency, whether or not waived; the voluntary or
involuntary termination of any Plan which termination could, in the good faith
opinion of Lender, have a material adverse effect on the financial condition of
Borrower or Borrower shall fail to notify Lender promptly and in any event
within ten (l0) days
<PAGE>
of the occurrence of an event which constitutes an Event of Default under this
clause or would constitute an Event of Default upon the exercise of Lender's
judgment;

      18.10 BANKRUPTCY COURT. The Bankruptcy Court enters any order that has not
been consented to by Lender: (a) amending, supplementing, altering, staying,
vacating, rescinding or otherwise modifying any Financing and Cash Collateral
Order or any other order with respect to any of the Case affecting in any
material respect this Agreement, (b) appointing a Chapter 11 trustee or an
examiner with enlarged powers relating to the operation of the business (powers
beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code)
under Section 1106(b) of the Bankruptcy Code in any of the Case, (c) dismissing
the Case or converting the Case to a Chapter 7 case, (d) permitting a sale of
any of Borrower's assets where the proceeds are not used to pay the Prepetition
Secured Obligations and the Obligations in cash at the closing of that
transaction, or (e) permitting a sale of a material portion of Borrower's assets
where all Obligations are not indefeasibly paid in full in cash at the closing
of that transaction;

      18.11 JUDGMENTS OR EXECUTION ACTION. There remains undischarged for more
than ten (10) days any final post-petition judgment or execution action against
Borrower, or relief from the automatic stay of Section 362(a) of the Bankruptcy
Code shall be granted to any creditor or creditors of Borrower with respect to
assets having an aggregate value in excess of $50,000 or where the deprivation
of Borrower of such assets would reasonably be expected to have a material
adverse effect on Borrower, considered as a whole;

      18.12 MOTIONS. Borrower files a motion in the Case without Lender's
consent (a) except as provided in any Financing and Cash Collateral Order, to
use cash collateral under Section 363(c) of the Bankruptcy Code, (b) to recover
from any portions of the Collateral any costs or expenses of preserving or
disposing of such Collateral under Section 506(c) of the Bankruptcy Code, (c) to
take any other action or actions adverse to Lender or its rights and remedies
hereunder or under any of the other Loan Documents or any of the documents
evidencing or creating Lender's interest in any of the Collateral, or (d) to
take any other action that would be an Event of Default;

      18.13 ACTIONS. A suit or action against Lender is commenced by Borrower,
any federal, state environmental protection or health and safety agency, any
shareholder or any official committee in any Case, any suit or action which
asserts any claim or legal or equitable remedy contemplating subordination of
any claim or lien of Lender or its affiliates, and shall remain undismissed or
unstayed for thirty (30) days after its commencement without any preliminary
relief of the nature sought having been granted;

      18.14 REORGANIZATION PLAN. Borrower files a plan of reorganization in the
Case or a motion for the sale of a material portion of the assets pursuant to
Section 363 of the Bankruptcy Code which does not provide for indefeasible
payment in full of the Obligations in cash on the effective date thereof or to
which Lender does not otherwise consent;

      18.15 BUDGET VARIANCES. If as, of any date, either (a) cumulative expenses
and costs exceed the amounts set forth in the Budget by more than five percent,
(b) any line item expenses and costs exceed the amounts set forth in the Budget
by more than twenty-five percent (25%), or
<PAGE>
(c) cumulative collections (that are available for use by the Borrower in the
ordinary course of business) are less than the amounts set forth in the Budget
by more than ten percent; or

      18.16 CHANGE IN CONTROL. Any Change of Control.

                                   ARTICLE 19

                          LENDER'S RIGHTS AND REMEDIES

      19.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event of Default,
Lender may, at its election, and the expiration of any applicable cure period
without notice of such election and without demand except as provided in
paragraph 13 of the Financing and Cash Collateral Order, do any one or more of
the following:

               a. Declare all Obligations, whether evidenced by the Loan
Documents or otherwise, immediately due and payable in full:

               b. Cease advancing money or extending credit to or for the
benefit of Borrower under the Loan Documents or under any other agreement
between Borrower and Lender;

               c. Terminate this Agreement as to any future liability or
obligation of Lender, but without affecting Lender's rights and security
interest in the Collateral and without affecting the Obligations;

               d. Subject to the rights of the holders of the Prepetition
Secured Obligations, settle or adjust disputes and claims directly with Account
debtors for amounts and upon terms which Lender considers advisable and, in such
cases, Lender will credit the Obligations with the net amounts received by
Lender in payment of such disputed Accounts, after deducting all Lender
Expenses;

               e. Subject to the rights of the holders of the Prepetition
Secured Obligations, cause Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other property of Borrower or
in Borrower's possession and conspicuously label said returned Inventory as the
property of Lender;

               f. Without notice to or demand upon Borrower, make such payments
and do such acts as Lender considers necessary or reasonable to protect its
security interest in the Collateral. Borrower shall assemble the Collateral if
Lender so requires and deliver or make the Collateral available to Lender at a
place designated by Lender. Borrower authorizes Lender to enter any premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest or compromise any
encumbrance, charge or lien which in Lender's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith;

               g. Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, lease, license or other disposition, advertise for sale,
lease, license or other disposition, and sell,
<PAGE>
lease, license or otherwise dispose of (in the manner provided for herein or in
the UCC) the Collateral. Lender is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any asset of a similar nature, pertaining to the Collateral, in
completing the production of, advertising for sale, lease, license or other
disposition, and sale, lease license or other disposition of the Collateral.
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit;

               h. Subject to the rights of the holders of the Prepetition
Secured Obligations, sell, lease, license or otherwise dispose of the Collateral
at either a public or private proceeding, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as is commercially reasonable. It is not
necessary that the Collateral be present at any such sale;

               i. Lender shall give notice of the disposition of the Collateral
as follows:

                  (i) To Borrower and each holder of a security interest in the
Collateral who has filed with Lender a written request for notice, a notice in
writing of the time and place of public sale or other disposition or, if the
sale or other disposition is a private sale or some other disposition other than
a public sale is to be made, then the time on or after which the private sale or
other disposition is to be made;

                  (ii) The notice hereunder shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at least ten
(10) calendar days before the date fixed for the sale or other disposition, or
at least five (5) calendar days before the date on or after which the private
sale or other disposition is to be made, unless the Collateral is perishable or
threatens to decline speedily in value. Notice to persons other than Borrower
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to Lender;

               j. Lender may credit bid and purchase at any public sale;

               k. Any deficiency that exists after disposition of the Collateral
as provided herein shall be immediately paid by Borrower. Any excess will be
remitted without interest by Lender to the party or parties legally entitled to
such excess; and

               l. In addition to the foregoing, Lender shall have all rights and
remedies provided by law (including those set forth in the UCC) and any rights
and remedies contained in any Loan Documents and all such rights and remedies
shall be cumulative.

      19.2 NO WAIVER. No delay on the part of Lender in exercising any right,
power or privilege under any Loan Document shall operate as a waiver, nor shall
any single or partial exercise of any right, power or privilege under such Loan
Documents or otherwise, preclude other or further exercise of any such right,
power or privilege.
<PAGE>
                                   ARTICLE 20

                   TAXES AND EXPENSES REGARDING THE COLLATERAL

      If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums or otherwise) due to third persons or entities, or fails to make any
deposits or furnish any required proof of payment or deposit, or fails to
perform any of Borrower's other covenants under any of the Loan Documents, then
in its discretion and upon prior notice to Borrower, Lender may do any or all of
the following: (a) make any payment which Borrower has failed to pay or any part
thereof; (b) set up such reserves in Borrower's loan account as Lender, in its
reasonable discretion, deems necessary to protect Lender from the exposure
created by such failure; (c) obtain and maintain insurance policies of the type
described in Section 6.10 and take any action with respect to such policies as
Lender deems prudent; or (d) take any other action, in its reasonable
discretion, deemed necessary to preserve and protect its interests and rights
under the Loan Documents. Any payments made by Lender shall not constitute: (a)
an agreement by Lender to make similar payments in the future or (b) a waiver by
Lender of any Event of Default. Lender need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance or lien and
the receipt of notice for the payment thereof shall be conclusive evidence that
the same was validly due and owing.

                                   ARTICLE 21

                                     WAIVERS

      21.1 DEMAND, PROTEST. Except as provided in paragraph 13 of the Financing
and Cash Collateral Order, Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, and notice of nonpayment at maturity and acknowledges that Lender may
compromise, settle or release, without notice to Borrower, any Collateral and/or
guaranties at any time held by Lender. Borrower hereby consents to any
extensions of time of payment or partial payment at, before or after the
Termination Date.

      21.2 NO MARSHALING. Borrower, on its own behalf and on behalf of hereby
expressly waives all rights, if any, to require a marshaling of assets by Lender
or to require that Lender first resort to some portion(s) of the Collateral
before foreclosing upon, selling or otherwise realizing on any other portion
thereof.

      21.3 LENDER'S NON-LIABILITY FOR INVENTORY OR EQUIPMENT OR FOR PROTECTION
OF RIGHTS. So long as Lender complies with its obligations, if any, under
Section 9-207 of the UCC, Lender shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Inventory or Equipment; (b) any loss
or damage thereto occurring or arising in any manner or fashion from any cause;
(c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency or other person whomsoever. All
risk of loss, damage or destruction of the Inventory or Equipment shall be borne
by Borrower. Lender shall have no obligation to protect any rights of Borrower
against any person obligated on any Collateral.
<PAGE>
                                   ARTICLE 22

                                     NOTICES

      Unless otherwise provided herein, all consents, waivers, notices or
demands by any party relating to the Loan Documents shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be telecopied (followed up by a
mailing), personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by receipted overnight delivery service to
Borrower or to Lender, as the case may be, at their addresses set forth below

       IF TO BORROWER:           Princeton Video Image, Inc.
                                 15 Princess Road
                                 Lawrenceville, New Jersey 08648
                                 Attn:  President
                                 Fax #  (609) 912-0044

       WITH A COPY TO:           Fox Rothschild LLP
                                 P.O. Box 5231
                                 Princeton, NJ 08543-523
                                 Attn:  Hal L. Baume, Esq.
                                 Fax #  (609) 896-1469

       WITH A COPY TO:           Smith, Stratton, Wise, Heher & Brennan, LLP
                                 660 College Road East
                                 Princeton, NJ 08540-
                                 Attn:  Richard J. Pinto
                                 Fax #  (609) 987-6651

       WITH A COPY TO:           Kleinberg, Kaplan, Wolff & Cohen, P.C.
                                 551 Fifth Avenue
                                 New York, NY  10176
                                 Attn:  Christopher P. Davis and David Parker
                                 Fax #  (212) 986-8866

       IF TO LENDER:             Lowenstein Sandler PC
                                 65 Livingston Avenue
                                 Roseland, New Jersey  07068
                                 Attn:  Kenneth A. Rosen, Esq.
                                        Paul Kizel, Esq.
                                 Fax #  (973) 597-2479
                                 Fax #  (973) 597-2400
<PAGE>
       WITH A COPY TO:           Sullivan & Cromwell, LLP
                                 125 Broad Street
                                 New York, New York  10004-2498
                                 Attn:  Robert W. Downes, Esq.
                                        Amy C. Wu, Esq.
                                 Fax #  (212) 558-3588

      Any party may change the address at it is to receive notices hereunder by
notice in writing in the foregoing manner given to the other. All notices or
demands sent in accordance with this Article 12 shall be deemed received on the
earlier of the date of actual receipt or five (5) calendar days after the
deposit thereof in the mail or on the date telecommunicated if telecopied. The
failure to provide a copy of any notice, consent, waiver, demand or other
document or communication to Borrower's or Lender's counsel as indicated above
shall not affect its validity.

                                   ARTICLE 23

                               GENERAL PROVISIONS

      23.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrower and executed and delivered by Lender.

      23.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights
hereunder and any prohibited assignment shall be absolutely void. No consent to
an assignment by Lender shall release Borrower from its Obligations. Without
notice to or the consent of Borrower, Lender may assign this Agreement and its
rights and duties hereunder and Lender reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in Lender's rights and benefits hereunder. In connection therewith,
Lender may disclose all documents and information which Lender now or hereafter
may have relating to Borrower or Borrower's business. Borrower and Lender do not
intend any of the benefits of the Loan Documents to inure to any third party,
and no third party shall be a third party beneficiary hereof or thereof.

      23.3 SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only.

      23.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Lender or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by each party and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of the parties hereto.

      23.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of such provision.
<PAGE>
      23.6 AMENDMENTS IN WRITING. This Agreement cannot be changed or terminated
orally. This Agreement is the entire agreement between the parties with respect
to the matters contained herein. This Agreement supersedes all prior agreements,
understandings and negotiations, if any, all of which are merged into this
Agreement.

      23.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which, when executed and delivered, shall be deemed to be
an original and all of which, when taken together, shall constitute but one and
the same Agreement.

      23.8 INDEMNIFICATION. Borrower hereby indemnifies, protects, defends and
saves harmless Lender and any member, officer, director, official, agent,
employee and attorney of Lender, and their respective heirs, successors and
assigns (collectively, the "Indemnified Parties"), from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims or demands, including reasonable counsel fees incurred in
investigating or defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with the
Loan Documents and the transactions contemplated therein or the Collateral
(unless caused by the gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (a) losses, damages, expenses or
liabilities sustained by Lender in connection with any environmental cleanup or
other remedy required or mandated by any Environmental Law; (b) breach of any
material representation or warranty contained in any Loan Documents; (c) the
failure of Borrower to perform any obligations required to be performed by
Borrower under the Loan Documents; and (d) the ownership, construction,
occupancy, operations, use and maintenance of any of Borrower's assets. The
provisions of this Section 13.8 shall survive termination of this Agreement and
the other Loan Documents.

                                   ARTICLE 24

                   CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

      THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS
SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE STATE OF
NEW YORK, THE BANKRUPTCY COURT, AND/OR THE FEDERAL COURTS WHOSE VENUE INCLUDES
THE STATE OF NEW YORK, OR AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN
WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER AND LENDER EACH
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY
JURY IN ANY PROCEEDING UNDER THE LOAN DOCUMENTS OR RELATING TO THE DEALINGS OF
BORROWER AND LENDER AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM
NON
<PAGE>
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS ARTICLE 14.
<PAGE>
      Borrower and Lender have executed this Agreement as of the date first
above written.

                                    PRINCETON VIDEO IMAGE, INC.

                                    a Delaware corporation, Debtor in Possession

                                    By:      /s/ James Green
                                       --------------------------------
                                             Name:  J. Green
                                                   --------------------
                                             Title:    COO
                                                   --------------------

                                    PVI VIRTUAL MEDIA SERVICES, LLC
                                    a Delaware limited liability company, Lender

                                    By:       /s/ Eduardo Sitt
                                        -------------------------------
                                             Name:
                                             Title:

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