Exhibit 10.1
OPTION AGREEMENT
This Option Agreement (this
“Agreement”) made as of this 7 th day of April, 2004 by and between
PokerTek, LLC, a North Carolina limited liability company
(“PokerTek”) and World Poker Tour, LLC, a Delaware
limited liability company (“WPT”).
WITNESSETH
WHEREAS, PokerTek has determined it
needs to potentially raise $1,500,000 (the “Development
Costs”) for development of a table permitting automated live
poker games through the use of an electronic facsimile of chips and
playing cards and usable during live tournaments (the
“Table”);
WHEREAS, PokerTek has agreed to give
WPT certain options (the “Options”) as more fully
described herein to purchase units (as defined in the Operating
Agreement of PokerTek, dated as of the date hereof), subject to the
terms and conditions hereof; and
WHEREAS, WPT desires to purchase
such Options;
NOW, THEREFORE, in consideration of
the foregoing and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Terms and Conditions of
Option .
1.1 First Option . PokerTek
hereby grants WPT an option (the “First Option”)
exercisable during the First Option Term (as defined below) to
purchase all, but not less than all, of 67,181.64 Units (the
“First Optioned Securities”). The aggregate exercise
price for the First Optioned Securities shall be $200,000.00 and
shall be paid by certified check or wire transfer to an account
designated by PokerTek. The “First Option Term” shall
mean the period beginning on the date hereof and ending on the
first to occur of (a) the tenth (10 th ) day following the date on which
WPT has received evidence, satisfactory to WPT in its reasonable
discretion, of a working prototype of the Table; or (b) April 15,
2009.
1.2 Second Option . PokerTek
hereby grants WPT an option (the “Second Option”)
exercisable during the Second Option Term (as defined below) to
purchase all, but not less than all, of 78,651.69 Units (the
“Second Optioned Securities”). The aggregate exercise
price for the Second Optioned Securities shall be $200,000.00 and
shall be paid by certified check or wire transfer to an account
designated by PokerTek. The “Second Option Term” shall
mean the period beginning on the date following exercise of the
First Option and ending on the first to occur of (a) the tenth
(10 th ) day following the date on which
PokerTek provides evidence to WPT, satisfactory to WPT in its
reasonable discretion, of a bona fide purchase order for the Table;
or (b) April 15, 2009.
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1.3 Exercise of Options . In
order to exercise either the First Option or the Second Option, WPT
must deliver to PokerTek, on or prior to the last day of the
relevant Option Period, written notice of exercise of the
applicable Option (the “Option Exercise Notice”). Upon
receipt of the applicable Option Exercise Notice, PokerTek must
deliver evidence to WPT, reasonably satisfactory to WPT, that
simultaneously with or prior to WPT’s delivery of the
exercise price for the Optioned Securities, PokerTek has received
or is receiving equity or debt investments in PokerTek (the
“Additional Investments”) that are equal, in the
aggregate, to the exercise price being paid for the applicable
Optioned Securities received by WPT multiplied by 2.333 (the
“Pro Rata Evidence”). Once WPT has received the Pro
Rata Evidence, then WPT will pay PokerTek (a) the exercise price
for the First Optioned Securities if the Option Exercise Notice is
given for the exercise of the First Option; or (b) the exercise
price for the Second Optioned Securities if the Option Exercise
Notice is given for the exercise of the Second Option. Nothing
herein shall deemed to (i) require PokerTek to seek any Additional
Investments; (ii) require any other Member of PokerTek to make any
Additional Investments; or (iii) impose any liability on PokerTek
for the failure to obtain Additional Investments. Notwithstanding
anything herein to the contrary, and except as may otherwise be
required by law, if WPT decides to exercise either the First Option
and/or the Second Option, it may elect to contribute the exercise
price therefore (payable in cash pursuant to Section 1.1 or 1.2, as
applicable) either in the combination of debt and equity pursuant
to which the investments subject to the Pro Rata Evidence are being
made or in such combination of debt and equity as the parties shall
mutually agree.
1.4 License to Use Trademarks
. In the event WPT elects to exercise the First Option, then WPT
grants to PokerTek a royalty-free, license to use the Licensed
Property (as defined on Schedule 1 attached hereto and incorporated
herein by reference) on the Table during the License Term (as
defined below) in the Authorized Channels of Distribution (as
defined below) in the License Territory (as defined below) upon the
following terms and conditions:
1.4.1 The use of the Licensed
Property must at all times comply with the specifications set forth
in the Style Guide attached hereto as Schedule 2 and
incorporated herein by reference, as the same may be modified by
WPT from time to time.
1.4.2 No Tables marked with or
containing the Licensed Property, or materials advertising,
marketing, promoting, displaying or describing any Tables marked
with or containing the Licensed Property, shall be used, sold or
distributed by PokerTek without WPT’s prior written approval
(which such approval shall not unreasonably be withheld). WPT shall
approve or disapprove of any Table, or each piece of related
artwork or marketing material in writing within thirty (30) days of
receipt. After samples of any Table marked with or containing the
Licensed Property, related artwork or marketing material have been
approved by WPT, PokerTek shall not change them without further
written approval. Any such Table, related artwork or marketing
materials not so approved in writing shall be deemed unlicensed and
shall not be manufactured, distributed, sold or used. If any
changes or modifications are required to be made to any Table,
related artwork or marketing materials submitted to WPT for its
approval, PokerTek agrees to make such changes or
modifications.
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1.4.3 PokerTek warrants that it will
provide a legally sufficient trademark notice by causing the
letters TM or the symbol ® , as specified by WPT, to be imprinted,
prominently, irremovably and legibly, directly after the trademark,
each time each trademark identified in Schedule A is used on
any Table and/or on any material advertising, marketing, promoting,
displaying or referencing the Tables including, without limitation,
any packaging, wrapping and inserts bearing any reproduction of the
Tables and/or the Licensed Property, together with the following
statement: “World Poker Tour is a trademark of Word Poker
Tour, LLC used with permission. All rights reserved.” (The
use of the letters TM or the symbol ® shall be as instructed in writing by
Licensor).
1.4.4 PokerTek shall not use any
trademark, service mark, trade name, logo, internet domain name or
design which is the same or substantially similar to the Licensed
Property such as to constitute infringement of the Licensed
Property under applicable law. PokerTek also agrees to notify WPT
of any infringement or unauthorized use of the Licensed Property
that comes to its attention.
1.4.5 The license shall be exclusive
with respect to the use of the Licensed Property on tables
featuring automated live poker games and live poker tournaments
through the use of an electronic facsimile of chips and playing
cards in the Licensed Territory during the License Term, and WPT
shall not, from and after the date hereof until the first to occur
of the expiration of the First Option (if the First Option is not
exercised by WPT) or the end of the License Term (if the First
Option is exercised by WPT), grant any other license in and to, or
otherwise permit the use of, the Licensed Property on any tables
featuring automated live poker games and live poker tournaments
through the use an electronic facsimile of chips and playing cards
other than PokerTek’s Tables. Notwithstanding anything to the
contrary contained in the Agreement, WPT specifically reserves the
right to use itself, or to license third party(s) to use, the
Licensed Property for any purpose including, but not limited to, in
connection with promotions, co-promotions, and commercial tie-ins
for the World Poker Tour, Travel Channel (or other telecasting
networks) and/or member casinos or event sponsors.
1.4.6 PokerTek shall not be entitled
to sublicense any of its rights under this Agreement. In the event
PokerTek is not the manufacturer of the Tables, PokerTek shall,
subject to the prior written approval of WPT, which approval shall
not be unreasonably withheld, be entitled to use a third party
manufacturer to manufacture the Tables, provided that such
manufacturer executes a letter in the form of Exhibit A
attached hereto.
1.4.7 As used herein, “License
Term” shall mean the period commencing on the date of
exercise of the First Option and ending on the 10
th
anniversary
thereof.
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Notwithstanding the foregoing, WPT
may terminate PokerTek’s license to use the Licensed Property
at any time if:
1.4.7.1 PokerTek breaches any
material term, representation, warranty, obligation or condition of
this Agreement and fails to cure such breach within thirty (30)
days after receipt of written notice of the same;
1.4.7.2 PokerTek fails to adhere
with the Style Guide or to the Approval process herein and fails to
cure such breach within thirty (30) days after receipt of written
notice of the same; or
1.4.7.3 PokerTek becomes the subject
of: (i) a voluntary petition in bankruptcy or any voluntary
proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors; or (ii) an involuntary
petition in bankruptcy or any involuntary proceeding relating to
insolvency, receivership, liquidation, or composition for the
benefit of creditors, and such petition or proceeding is not
dismissed within thirty (30) days of filing.
Upon the termination of its license
to use the Licensed Property for any reason, PokerTek shall
discontinue any use of the Licensed Property, and PokerTek shall
not thereafter operate or conduct business under any name or in any
manner that would tend to give the impression to a reasonable
observer that this Agreement is still in force, or that PokerTek
has any right to use the Licensed Property.
1.4.8 As used herein,
“Territory” shall mean the United States, its
territories and possessions, including military bases. During the
Term, and from time to time, PokerTek may request, and WPT shall
provide, an updated list of all jurisdictions in which WPT has
received evidence of the registration of Licensor’s trademark
interests in and to the Licensed Property, and upon receipt of such
list in writing from WPT, the Territory shall be expanded to
include any identified jurisdictions not previously included in the
Territory; provided that, WPT shall have no obligation to undertake
the registration of WPT’s trademark interests in any
jurisdiction; provided that, WPT acknowledges that it is currently
in the process of registering the Licensed Property in various
classifications in various territories throughout the world and
that the intent is for the Territory to be expanded beyond the
United States. PokerTek agrees to take all reasonable steps
necessary to ensure that PokerTek’s customers do not
redistribute the Tables outside of the Territory.
1.4.9 As used herein,
“Authorized Channels of Distribution” shall mean the
lease, sale or distribution of the Tables to Casinos and other
commercial poker/card rooms. In no event shall PokerTek lease, sell
or distribute “in-home use” versions of the Table, or
lease, sell or distribute the Tables to the general
public.
1.4.10 PokerTek agrees to obtain and
maintain, at PokerTek’s sole cost and expense, errors and
omissions insurance and a po
