Document:

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 I
                                   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.

<PAGE>

         "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.

         "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.  ss.ss.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.

<PAGE>

         "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).

         "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

<PAGE>

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  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.

<PAGE>

         "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.

         "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;

<PAGE>

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.

         "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).

<PAGE>

         "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."

              (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.

              (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 Section,
     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) 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.

<PAGE>

              (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.

                                   ARTICLE II
                               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 III
                             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  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;

<PAGE>

                   (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:

              (a) 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.

              (b) 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.

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

<PAGE>

                                   ARTICLE IV
                    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,  a valid and legally  binding
obligation  of  Seller  enforceable   against  Seller  in  accordance  with  its
respective terms.

<PAGE>

         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

<PAGE>

applications  for  registration  or  issuance  have been  timely  filed with the
appropriate authorities for the patents,  copyrights,  trademarks,  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:

              (a) 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

              (b) There are no Orders outstanding against Seller.

<PAGE>

         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 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.

              (a) 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

<PAGE>

     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.

         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

<PAGE>

"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 software license with Broadcom Corporation
prohibits Seller from transferring or distributing Broadcom proprietary software
used to create the existing iPoint(tm) 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.

<PAGE>

                                   ARTICLE V
                     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  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.

<PAGE>

         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 VI
                            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.

         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

<PAGE>

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 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

<PAGE>

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 VII
                    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:

              (a)  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.

              (b) 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.

              (c)   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.

              (d) 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 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.

              (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

<PAGE>

     discretion,  or the Creditors  Committee shall have waived in writing or on
     the record the right to file any Claim Challenge.

              (f) 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.

              (g) 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.

              (h) 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:

              (a)   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.

              (b) 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.

              (c)   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.

<PAGE>

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

              (e) 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.

              (f) 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 VIII
                                   TERMINATION

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

              (a) by written agreement of Seller and Buyer;

              (b) 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;

              (c) 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;

              (d) 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;

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

              (f) by Buyer if Seller enters into an Alternative  Transaction (as
     defined  below) or presents an  Alternative  Transaction  to the Bankruptcy
     Court;

<PAGE>

              (g) 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;

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

              (i) 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).

                                       1
<PAGE>

                                   ARTICLE IX
                             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 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 X
                                  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

<PAGE>

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:

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

                                       3
<PAGE>

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

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

<PAGE>

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.

         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:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                       PRINCETON VIDEO IMAGE, INC.

                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------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 1

                   DEFINITIONS, CONSTRUCTION AND RATIFICATION

         1.1. 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.

                                      -2-
<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

                                      -3-
<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

                                      -4-
<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.

                                      -5-
<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.

                                      -6-
<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).

         "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).

                                      -7-
<PAGE>

         "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.

         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."

         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.

                                      -8-
<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.

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

         1.4. 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 2

                          ADVANCES AND TERMS OF PAYMENT

         2.1. 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

                                      -9-
<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.

         2.2. 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.

         2.3.  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.

         2.4. 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

                                      -10-
<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 3

                                      TERM

         3.1. 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.

         3.2. 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 4

                    CREATION OF CONTINUING SECURITY INTEREST

         4.1. 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.

         4.2. 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.

         4.3.  DELIVERY OF ADDITIONAL  DOCUMENTATION  REQUIRED.  Borrower  shall
execute  and  deliver  to Lender  concurrently  with  Borrower's  execution  and
delivery of this Agreement and at any time thereafter immediately at the request
of Lender, all financing

                                      -11-
<PAGE>

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.

         4.4. 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.

         4.5. 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.

                                      -12-
<PAGE>

         4.6.  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. ss. 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

                                      -13-
<PAGE>

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 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 5

                         REPRESENTATIONS AND WARRANTIES

         Borrower   represents   and  warrants  to  Lender  the   following  and
acknowledges:

         5.1.  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.

         5.2.  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

         5.3.  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.

         5.4. 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.

         5.5.  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).

         5.6.  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.

                                      -14-
<PAGE>

         5.7.  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.

         5.8. 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.

         5.9.  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.

         5.10.  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.

         5.11. 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.

         5.12. ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS.

                                      -15-
<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.

         5.13. 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.

         5.14.  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.

                                      -16-
<PAGE>

         5.15. EQUITY INTERESTS.  All Equity Interests owned by Borrower are set
forth on Schedule 5.15.

         5.16.  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.

         5.17.  EVENTS  OF  DEFAULT.  No event of  default  has  occurred  or is
existing under any of the Loan Documents.

         5.18.  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.

         5.19.  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.

         5.20. 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 6

                              AFFIRMATIVE COVENANTS

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

         6.1. 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-

                                      -17-
<PAGE>

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 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.

         6.2.  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.

         6.3. 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.

         6.4. 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.

         6.5.  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.

         6.6. 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

                                      -18-
<PAGE>

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 execute and deliver to Lender, on
demand, appropriate certificates attesting to the payment or deposit thereof.

         6.7. 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.

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

         6.9.  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.

         6.10. 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.

         6.11.  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.

                                      -19-
<PAGE>

                                    ARTICLE 7

                               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:

         7.1. 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.

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

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

         7.4.  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.

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

         7.6.  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.

         7.7.  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.

         7.8.  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.

         7.9.  CONSIGNMENTS  OF  INVENTORY.  Consign any  Inventory or Equipment
except to persons or entities as to which Borrower has furnished to Lender prior
written notice

                                      -20-
<PAGE>

and 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.

         7.10.  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.

         7.11. 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.

         7.12. BUSINESS SUSPENSION. Suspend or go out of business.

         7.13.  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 8

                                EVENTS OF DEFAULT

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

         8.1. 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);

         8.2. 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

                                      -21-
<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;

         8.3.   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;

         8.4. 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;

         8.5. 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;

         8.6. 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;

         8.7.  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;

         8.8.  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;

         8.9. 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

                                      -22-
<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;

         8.10.  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;

         8.11.  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;

         8.12.  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;

         8.13.  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;

         8.14.  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;

         8.15.  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

                                      -24-
<PAGE>

(25%), or (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

         8.16. CHANGE IN CONTROL. Any Change of Control.

                                   ARTICLE 9

                          LENDER'S RIGHTS AND REMEDIES

         9.1.  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,

                                      -24-
<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.

         9.2. 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.

                                      -25-
<PAGE>

                                   ARTICLE 10

                   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 11

                                     WAIVERS

         11.1.  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.

         11.2.  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.

         11.3. 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.

                                      -26-
<PAGE>

                                   ARTICLE 12

                                     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

                                      -27-
<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 13

                               GENERAL PROVISIONS

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

         13.2.  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.

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

         13.4.  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.

         13.5.  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.

                                      -28-
<PAGE>

         13.6.  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.

         13.7.  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.

         13.8. 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 14

                   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

                                      -29-
<PAGE>

CONVENIENS"  OR TO OBJECT TO VENUE TO THE  EXTENT ANY  PROCEEDING  IS BROUGHT IN
ACCORDANCE WITH THIS ARTICLE 14.

                                      -30-

<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:
                                     ---------------------------------
                                        Name:
                                        Title:

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

                                  By:
                                     ---------------------------------
                                        Name:
                                        Title:

                                      -31-
<PAGE>

                                  UPDATE/SEARCH

EXHIBIT
-------

Exhibit A          Form of Borrowing Request
Exhibit B          Initial Budget

SCHEDULES
---------

Schedule 5.1(a)    Permitted Liens
Schedule 5.1(b)    Prepetition Secured Loan Documents and Prepetition Secured
                   Obligations
Schedule 5.2       Locations of Inventory and Equipment
Schedule 5.5       Other Names
Schedule 5.9       Litigation
Schedule 5.14      Intellectual Property
Schedule 5.15      Equity Interests

                                      -32-
<PAGE>

                                    EXHIBIT A

                            FORM OF BORROWING REQUEST

[DATE]

PVI Virtual Media Services, LLC
[---------]
[---------]
Attention:  [_________]

Reference is made to the Loan and Security Agreement,  dated as of May __, 2003,
among PVI Virtual Media Services, LLC ("Lender") and Princeton Video Image, Inc.
("Borrower")  (as the same may be amended,  supplemented  or otherwise  modified
from time to time, the "Loan Agreement"). Capitalized terms used herein that are
defined in the Loan Agreement shall have the meanings therein defined.

Pursuant to Section 2.3 of the Loan Agreement,  the Borrower hereby gives notice
of its request for an Advance in the principal  amount of $_______ on ______ __,
200_.

The Borrower hereby certifies that:
          (i)  this  request  for an  Advance  is made in  accordance  with  the
               provisions set forth in Section 2.1 of the Loan Agreement;
          (ii) the funds will be used in accordance with the Approved Budget;
          (iii) after giving  effect to the  requested  Advance,  the  aggregate
          Advances made to date will total $__________________; and
          (iv) the aggregate  "Cash  Shortfall" for the period  beginning on the
               Filing Date and ending as of the end of the  most-recently  ended
               semi-monthly   period   reflected  in  the  Approved   Budget  is
               $___________.

The Borrower hereby further certifies that on the date hereof and on the date of
the  proposed  new Advance,  and after  giving  effect to the Advance  requested
hereby,  there  exists  and  shall  exist  no  Event  of  Default,  each  of the
representations  and warranties  contained in each Loan Document is and shall be
true  and  correct  in  all  material  respects,   except  to  the  extent  such
representations and warranties  specifically relate to an earlier date, in which
case such  representations  and warranties were true and correct in all material
respects at such earlier date.

IN WITNESS  WHEREOF,  the  Borrower  has  caused  this  Borrowing  Request to be
executed by its authorized  representative as of the date and year first written
above.

PRINCETON VIDEO IMAGE, INC.

By:
   ------------------------------------
Name:
Title:

                                      -33-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]