EXHIBIT 10.6
OPTION AGREEMENT
This Option Agreement is delivered this June 25, 2002, by Princeton Video
Image, Inc. ("PVI"), to Cablevision Services Corp ("Cablevision"), in order to
induce Cablevision to authorize and direct its subsidiary corporation, PVI
Holding, LLC, to execute, deliver and perform under that certain Note Purchase
and Security Agreement, dated the date hereof (the "Agreement"). All capitalized
terms used but not defined herein shall have the meanings given to them in the
Agreement. For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Grant. PVI grants to Cablevision, or to its designated Affiliate as
defined below and their respective successors and assigns, the option (the
"Option") to purchase a sole, exclusive, perpetual, fully paid up, royalty free
license (the "License") in the United States of America, its territories and
possessions (collectively, the "Territory") to use, make, have made, sell, offer
to sell, modify and create derivative works of all Technology of PVI and its
Affiliates and grant sublicenses to use, make, have made, sell, offer to sell,
modify and create derivative works of all Technology of PVI and its Affiliates
subject to all license, sublicense and other rights agreements involving the
right to use the Technology held by customers of PVI or its Affiliates or other
third parties, if any, that may be outstanding on the date of exercise;
provided, however that until the expiration or termination of this Option
Agreement PVI shall not grant any license of or option to license the Technology
to any third party outside the ordinary course of business and shall be
expressly prohibited from granting any exclusive license or option for an
exclusive license with respect to the Technology to any third party in the
Territory. Upon the Closing (as defined below), such License shall supersede any
other agreement that the parties may have regarding Cablevision's use of the
Technology in the Territory. Until the expiration or termination of this Option
Agreement, PVI shall give written notice to Cablevision of any agreements that
PVI or its Affiliates enter into with respect to the Technology, whether written
or oral and whether or not in the ordinary course of business and shall state,
with reasonable specificity the terms of such agreements.
For purpose of this Option Agreement, "Technology" shall refer to all
industrial and intellectual property, including without limitation all domestic
patents, patent applications, patent rights, any continuing or related patent
applications thereto, trademarks, trademark applications, common law trademarks,
internet domain names, trade names, service marks, service ▇▇▇▇ applications,
common law service marks, and good will associated therewith, copyrights, in
both published and unpublished works, whether registered or unregistered,
copyright applications, licenses, know-how, trade secrets, technical data,
designs, confidential and proprietary information, processes and formulae, all
computer software programs (including source codes), layouts, inventions and any
improvements thereof, development tools and all documentation and media
constituting, describing or relating to the above, including manuals, memoranda,
and records, and whether such intellectual property has been created, applied
for or obtained anywhere throughout the world that is used, owned or controlled
by or on behalf of PVI or its Affiliates or licensed to PVI or its Affiliates
including without limitation the L-VIS System (as such term is defined in the
L-VIS System License Agreement) and the iPoint Technology (as such term is
defined in the iPoint Technology License Agreement) as of the date the Option is
exercised.
For the purpose of this Option Agreement, the term "Affiliate" shall be
defined as follows: with respect to any entity, "Affiliate" shall mean any
Person controlled by such entity. For these purposes, "control" shall refer to
(a) the possession, directly or indirectly, of the power to direct the
management, policies or television operations of such Person, whether through
the ownership of voting securities, by contract or otherwise, or (b) the
ownership, directly or indirectly, of at least 50% of the voting securities or
other ownership interest of a Person. For purposes of this Agreement, National
Sports Partners (or its affiliate which operates the national "Fox Sports Net")
shall be considered to be an Affiliate of Cablevision. "Person" shall mean any
individual, corporation, partnership, limited liability company, joint venture
or other entity.
Upon Closing (as defined in Section 4), neither PVI nor its Affiliates
shall have any rights in the Territory to use, make, have made, sell, offer to
sell, sublicense or otherwise exploit or commercialize the Technology, but PVI
and its Affiliates shall retain all rights to use, make, have made, sell, offer
to sell, sublicense or otherwise exploit or commercialize the Technology outside
of the Territory.
2. Deadline; Option Period. Subject to Section 7, Cablevision may
exercise the Option at any time from March 31, 2003 until 5:00 p.m. New York
time on June 30, 2003 (the "Deadline"). As used herein, the term "Option Period"
shall refer to that period commencing on March 31, 2003 and concluding on (i)
the later of the date on which the Election Period (as defined below) ends or,
if applicable, the approval of the stockholders of PVI required by Section 5 is
obtained; or (ii) the date on which this Option Agreement is terminated in
accordance with its terms.
3. Purchase Price.
(a) The purchase price for the License shall be the Fair Market
Value of the License as of the date of exercise, as determined in accordance
with Section 3(b) hereof. Cablevision may offset the unpaid balance of the
Convertible Debt against payment of the Purchase Price.
(b) The "Fair Market Value" shall be determined by a qualified
appraiser (as defined below). When making its determination, such qualified
appraiser shall consider (i) all bona fide offers to purchase the Technology, or
parts thereof, received by PVI from any person or entity other than Cablevision,
PVI and their respective Affiliates (each a "Third Party"), (ii) all license,
sublicense and other rights agreements or encumbrances affecting the value of
the Technology, including without limitation the benefits conferred and the
burdens imposed by all existing licenses of the Technology to Cablevision and
other parties, and all existing limitations on PVI's rights to transfer the
Technology and (iii) the relative risks and rewards associated with continued
development and commercialization of the Technology based upon its state of
development and commercialization at the time the Option is exercised including
the costs of developing a viable product and bringing it to market (to the
extent not already viable and ready for market at the time the Option is
exercised). In reaching its determination, such qualified appraiser shall be
prohibited from considering the specific consideration paid or payable for the
license granted to Cablevision from PVI pursuant to that certain license
agreement of even date herewith between Cablevision and PVI concerning the
iPoint Technology and the parties hereto
- 2 -
acknowledge and agree that any fees paid in connection with such license and the
absence of future running royalties being payable in connection with such
license are not necessarily indicative of the Fair Market Value of the
Technology.
(c) If the parties are unable to agree upon the identity of the
qualified appraiser within 10 business days of PVI's receipt of the Election
Notice (as defined in Section 4), PVI and Cablevision shall each choose an
appraiser, who in turn shall jointly choose a qualified appraiser within the
next 10 business days, which jointly chosen appraiser shall make the valuation.
If the two initial appraisers cannot agree on a third appraiser within such 10
business day time limit, either party may apply to the American Arbitration
Association to appoint a qualified appraiser in accordance with its rules on an
expedited basis. The determination of Fair Market Value by the qualified
appraiser chosen in accordance with the foregoing provisions shall be
conclusive, final and binding on all parties. Cablevision shall be responsible
for all costs of the appraisal, but shall be entitled to deduct one half of such
costs from the Purchase Price if Cablevision chooses to exercise its right to
acquire the License pursuant to the terms of this Option Agreement.
(d) For purposes of this Section 3, a "qualified appraiser" shall
be deemed to mean an independent nationally recognized investment banking firm
with expertise in valuation of proprietary technologies and businesses similar
to those of PVI that has no other material business relationship or affiliation
with either entity or their respective Affiliates, and who agrees to provide a
written appraisal to the parties within 60 days of its appointment.
4. Exercise of Option; Closing. Cablevision may exercise the Option by
delivering to PVI, prior to the Deadline, at the address set forth below,
written notice stating that it elects to exercise the Option (the "Election
Notice"); provided that, notwithstanding anything else in this Option Agreement
to the contrary, Cablevision shall have 10 business days after Cablevision is
notified in writing of the final determination of the Fair Market Value of the
Technology to decide whether or not to deliver the Purchase Price to PVI (such
10 business day period the "Election Period") and consummate the exercise of the
Option. If during the Election Period Cablevision notifies PVI in writing that
Cablevision elects not to deliver the Purchase Price to PVI and not to
consummate the exercise of the Option or if the Election Period expires and
Cablevision has not notified PVI of its intent to consummate the exercise of the
Option, except for Cablevision's obligations to pay for the appraisal
contemplated by Section 3(b), this Option Agreement shall terminate and be of no
further force or effect. The parties agree to cooperate and use reasonable
efforts to obtain the appraisal contemplated by Section 3(b) as soon as
practicable following PVI's receipt of the Election Notice. Following their
receipt of such appraisal in final form, the parties shall, subject to the
provisions of Section 6 and to the proviso in the first sentence of this Section
4, cooperate and use reasonable efforts to schedule a closing on the sale of the
License (the "Closing") as soon as practicable. At the Closing, Cablevision
shall deliver the Purchase Price to PVI in cash, net of 50% of the costs of the
appraisal of Fair Market Value of the Technology pursuant to Section 3(c) above,
and PVI shall execute and deliver such other documents as the parties deem
reasonably necessary and appropriate to confirm the grant of the License and
permit Cablevision to exploit the Technology.
- 3 -
5. Ownership of Technology; Enforcement; Infringement. PVI represents
and warrants to Cablevision that it and its Affiliates are, and shall be until
the termination or expiration of the Option Period, the sole owners of their
respective patent rights, copyrights and trade secrets and other proprietary
information and rights, or have the right to grant licenses therefor, which
comprise the Technology, and which are necessary to grant the licenses for the
Technology as provided in this Option Agreement. Except as otherwise permitted
hereunder or under the Note Purchase and Security Agreement of even date
herewith (the "Note Purchase Agreement"), neither PVI nor its Affiliates shall
sell, loan, exchange, assign, deliver, or transfer the Technology or otherwise
dispose of any material part of the Technology or any of their respective
material rights in or to the Technology. Except as otherwise permitted hereunder
or under the Note Purchase Agreement, neither PVI nor its Affiliates shall
voluntarily: (i) permit any other security interest to attach to any of the
Technology; (ii) permit the Technology to be levied upon under any legal
process; or (iii) permit anything to be done that may impair the value of any of
the Technology or the security intended to be afforded by this Option Agreement.
Except as otherwise permitted hereunder or under the Note Purchase Agreement,
PVI or its Affiliates, as applicable, shall use reasonable commercial efforts to
defend the title to the Technology against all persons and all claims and
demands whatsoever and shall keep the Technology free and clear of all liens,
charges, encumbrances, taxes and assessments not in existence of the date
hereof; provided, however, that Cablevision shall, upon exercise of the Option
and payment of the consideration therefor, acquire the exclusive right to
control the use and protection of the Technology in the Territory, including,
without limitation, the first right, but not the duty, to institute infringement
actions against any Third Party. If Cablevision does not institute an
infringement proceeding against an offending Third Party, PVI shall have the
right, but not the duty, to institute such an action, provided that Cablevision
shall also appear as a party as licensee and shall have the right to assume
control of any infringement proceeding instituted by PVI by reimbursing PVI for
all of the reasonably documented out-of-pocket costs and expenses incurred by
PVI in connection therewith. Further, if PVI does not defend a challenge to the
validity or enforceability of PVI's Technology by a Third Party outside of the
Territory, and if a U.S. counterpart of the PVI Technology exists, Cablevision
shall have the right, but not the duty, to defend such challenge outside of the
Territory, at Cablevision's expense and in cooperation and coordination with
PVI, provided that PVI shall also appear as a party as owner and shall have the
right to assume control of any defense of such challenge from Cablevision by
reimbursing Cablevision for all of the costs and expenses incurred by
Cablevision in connection therewith. PVI shall execute all necessary and proper
documents and take such actions as shall be appropriate to allow Cablevision to
defend such challenge. Any award paid by Third Parties as a result of any such
action (whether by way of settlement or otherwise) shall be paid to the party
who defended, such action. If, however, both parties did so, then such award
shall be allocated between the parties in proportion to their respective costs
and expenses incurred in such action, or as they may have otherwise agreed. The
costs and expenses of any action under this Section 5 (including reasonable fees
of attorneys and other professionals) shall be borne by the party instituting
and maintaining, or defending, such action, as the case may be. If, however, the
parties together institute and maintain or defend such action, such costs and
expenses shall be borne by the parties in such proportions as they may
reasonably agree in writing. Each party shall execute all necessary and proper
documents and take such actions as shall be appropriate to allow the other party
to institute and maintain, or defend, such action,
- 4 -
provided such other party has the right to do so under this Section 5. Any award
paid by Third Parties as a result of any such action (whether by way of
settlement or otherwise) shall be paid to the party who instituted and
maintained, or defended, such action, as the case may be. If, however, both
parties did so, then such award shall be allocated between the parties in
proportion to their respective injuries and contributions to the costs and
expenses incurred in such action, or as they may have otherwise agreed. If
Cablevision exercises the Option, Cablevision and PVI agree to keep the
non-public information concerning in the Technology in confidence under such
terms as they may agree to preserve the value of such information for the
benefit of both parties.
6. Stockholder Approval. If under applicable law or the applicable NASD
Rules, the affirmative vote of the stockholders of PVI is, in the written
opinion of PVI's outside legal counsel, necessary to approve PVI's actions taken
or to be taken in connection with this Option Agreement, then such approval will
be a prior condition to the taking of such action; and, in such event, as soon
as practicable following its receipt of notice that Cablevision elects to
exercise the Option, PVI will use its best efforts to hold a meeting of its
stockholders within 90 days for the purpose of acting upon the sale of the
License, and shall recommend that its stockholders approve such sale. PVI
acknowledges that if the exercise of the Option and the Closing of the
transactions contemplated hereby require the approval of the stockholders of
PVI, that Cablevision will be materially damaged if, after Cablevision's
election to exercise the Option, such stockholder approval is not obtained.
Accordingly, if such stockholder approval is required to consummate the exercise
of the Option but not obtained, in addition to any other remedies available to
Cablevision in equity or at law, PVI shall pay to Cablevision an amount, in
cash, equal to the sum of (i) all costs associated with ascertaining the Fair
Market Value of the Technology (including the costs of the appraisal) and (ii)
5% of the Fair Market Value of the Technology as assessed pursuant to Section
3(b) hereof.
7. Early Termination. This Option Agreement shall terminate and become
null and void in the event that PVI meets the Financial Test (defined below) and
gives notice to Cablevision in accordance with the last sentence of this Section
7 at any time on or before March 31, 2003. For purposes of this Option
Agreement, "Financial Test" shall mean if, at any time after the date hereof,
PVI has obtained aggregate cash proceeds (without deduction for related
transaction expenses) of at least ten million dollars ($10,000,000) by means of
any combination of (i) any equity financing and (ii) any non-refundable cash
funding that does not require PVI to incur associated liabilities, which is
received by PVI and not restricted to use by an Affiliate of PVI or subject to
any other restriction that would prevent its use of such funds for working
capital, from (A) new foreign territory license grants (excluding payments in
lieu of running royalties) (B) any non-recurring extraordinary transaction, such
as sale of special or preferential rights, that PVI may recognize as current
revenue or gain under GAAP from any new (i.e. non-current) customer, or (C) the
sale of equity by any affiliate of PVI to the extent that such funds are not
restricted to use by such Affiliate. If PVI determines that the Financial Test
is met on or before ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇ shall promptly provide written notice to
Cablevision setting forth with reasonable specificity of how the Financial Test
has been met.
8. Entire Agreement. This Option Agreement (as amended from time to
time) and the other writings referred to herein or delivered pursuant hereto
which form a part hereof
- 5 -
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
9. Further Assurances. PVI shall execute and deliver such other
documents, documentation, equipment or agreements as may be necessary or
desirable for the implementation of this Option Agreement and the consummation
of the transactions contemplated hereby, including, without limitation, if
Cablevision acquires the License pursuant to the exercise of this Option: (a)
providing all source code, object code, testing software and related equipment
necessary to understand the design, operation and maintenance of the Technology
and perform debugging and further development of the Technology; (b) providing
all existing documentation for the Technology; and (c) allowing Cablevision to
solicit key U.S. personnel of PVI and making all key personnel of PVI available
to Cablevision to provide in-person and/or telephonic assistance to Cablevision
personnel for technical assistance and/or tutorials regarding the design,
operation, maintenance, debugging and further development of the Technology for
as long as PVI retains any technical expertise relating to the Technology, PVI
shall provide all of the technical assistance described above as requested by
Cablevision. The parties agree that if Cablevision exercises its right to
acquire the License pursuant to this Option Agreement that Cablevision would not
receive the benefit of its bargain hereby without PVI's compliance with this
Section 9.
10. No Impairment of Rights. Nothing contained herein, including without
limitation, the exercise of the Option, shall impair the rights of Cablevision
as a secured party under that certain Note Purchase and Security Agreement of
even date herewith or the obligations of PVI under such Note Purchase and
Security Agreement. Further, PVI acknowledges and agrees that nothing contained
in this Option Agreement derogates, limits or otherwise qualifies any existing
consent or other rights of Cablevision with respect to PVI which rights may be
exercised solely in Cablevision's own best interests and without regard to the
interest of PVI or any other person.
11. Notices. All notices or other communications to be delivered in
connection with this Option Agreement shall be in writing and shall be
considered given when personally delivered or when mailed by registered or
certified mail, postage prepaid, return receipt requested, or when sent via
commercial courier or telecopier, directed, as follows or to such other address
as a party may designate by notice:
(a) If to Cablevision:
Cablevision Systems Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 6 -
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to PVI:
Princeton Video Image, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: Chief Executive Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
Smith, Stratton, Wise, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
12. Changes. The terms and provisions of this Option Agreement may not
be modified or amended, or any of the provisions hereof waived, temporarily or
permanently, except by a written instrument signed by the parties hereto.
13. Counterparts. This Option Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
14. Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its laws concerning conflicts of laws.
- 7 -
15. Severability. In case any provision of this Option Agreement shall
be found by a court of law to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this Option
Agreement shall not in any way be affected or impaired thereby.
16. Headings. The headings of the sections and subsections of this
Option Agreement are for convenience of reference only and are not to be
considered in construing this Option Agreement.
17. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to a party hereto shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any breach or default under
this Option Agreement, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any delay or omission to
exercise any right, power or remedy or any waiver of any single breach or
default be deemed a waiver of any other right, power or remedy or breach or
default theretofore or thereafter occurring.
- 8 -
IN WITNESS WHEREOF, PVI has granted this Option.
PRINCETON VIDEO IMAGE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Co-CEO
ACCEPTED AND AGREED to
this 25th day of June, 2002.
CABLEVISION SYSTEMS CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice Chairman and General Counsel
