COMMERCIAL EXPLOITATION LICENSE AGREEMENT FOR QUAKE This Commercial Exploitation License Agreement for QUAKE (the "Agreement") is between Id Software, Inc., a Texas Corporation, (hereinafter "Id Software") and Licensee (as described on the signature page hereof) and is made effective beginning on the date of last signature hereto (the "Effective Date"). R E C I T A L S WHEREAS, Id Software is the owner and developer of the computer software game entitled QUAKE; WHEREAS, Id Software desires to license certain non-exclusive rights regarding QUAKE to Licensee; and WHEREAS, Licensee desires to receive a license for such rights. T E R M S A N D C O N D I T I O N S NOW, THEREFORE, for and in consideration of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned parties do hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, the parties hereto agree the words set forth below shall have the specified meanings: a. "Authorized Copy" shall mean one (1) copy of the Subject Game actually purchased by Licensee from an Id Software approved retailer; and b. "Subject Game" shall mean the full registered version of QUAKE on a CD-ROM and shall not mean the shareware or any other version. 2. GRANT OF RIGHTS. Id Software hereby grants to Licensee and Licensee hereby accepts, subject to the provisions and conditions hereof, a world-wide (except as otherwise provided herein), non-exclusive, non-transferable, and non-assignable license to: a. publicly display an Authorized Copy in exchange for rental payment; b. run the Authorized Copy so that it will accept network/modem connections in exchange for payments from end-users who also must have actually purchased an Authorized Copy; and c. otherwise commercially exploit an Authorized Copy, except that Licensee shall not copy, reproduce, manufacture or distribute the Authorized Copy. 3. RESERVATION OF RIGHTS AND PROHIBITIONS. Id Software expressly reserves all rights not granted herein. Under no circumstances shall Licensee copy, reproduce, manufacture or distribute (free of charge or otherwise) the Authorized Copy or the Subject Game. Licensee shall not reverse engineer, decompile, disassemble, modify or alter the Authorized Copy. Licensee is not receiving any rights hereunder regarding the Trademark or any artwork, sound, music or other element of the Subject Game. 4. OWNERSHIP. Title to and all ownership rights in and to the Subject Game, and the QUAKE Trademark (the "Trademark") and the copyrights, trademarks, patents and other intellectual property rights related thereto shall remain with Id Software which shall have the exclusive right to protect the same by copyright or otherwise. Licensee shall have no ownership rights in or to the Subject Game or the Trademark and Licensee shall not own any intellectual property rights regarding the Authorized Copy, including, without limitation, the copyright regarding the Authorized Copy. Licensee acknowledges that it only has a limited license to use the Authorized Copy, as specified in that certain QUAKE Enduser License contained within the Authorized Copy and as specified in this Agreement. 5. TERM AND TERMINATION. a. The term of this Agreement and the license granted herein begins on the Effective Date and shall expire on a date one (1) calendar year from the Effective Date. b. Either party may terminate this Agreement, for any reason or no reason, on thirty (30) days written notice to the other party. Termination will be effective on the thirtieth (30th) day following delivery of the described notice. Notwithstanding anything to the contrary herein, this Agreement shall immediately terminate, without the requirement of any notice from Id Software to Licensee, upon the occurrence of any of the following: (a) if Licensee shall file a petition in bankruptcy or make an assignment for the benefit of creditors, or if any bankruptcy proceeding or assignment for benefit of creditors, shall be commenced against Licensee and not be dismissed within sixty (60) days after the date of its commencement; (b) the insolvency of Licensee; (c) the cessation by Licensee of its business; or (d) the cessation by Licensee, without the prior written consent of Id Software of the distribution, manufacture, and sale responsibilities embodied herein. Further, Id Software may elect to terminate this Agreement upon the occurrence of any of the following: (1) if Licensee's business operations are interrupted for forty (40) consecutive calendar days; or (2) if each of two Id Software audit inspections during any eighteen (18) month period demonstrates an understatement by Licensee of Royalty payments due Id Software for the six (6) month period immediately preceding each such inspection of five percent (5%) or more. Upon the occurrence of such terminating event, and the election of Id Software, if necessary, to cause such termination, this Agreement and any and all rights thereunder shall terminate without prejudice to any rights or claims Id Software may have, and all rights hereunder shall thereupon terminate, revert to and be vested in Id Software. 6. EFFECT OF TERMINATION OR EXPIRATION. Termination or expiration of this Agreement, either by Id Software or automatically, shall not create any liability against Id Software. Upon expiration or earlier termination of this Agreement, Licensee shall have no further right to exercise the rights licensed hereunder or otherwise acquired in relation to this Agreement. 7. INDEMNIFICATION. Licensee hereby agrees to indemnify, hold harmless and defend Id Software and Id Software's predecessors, successors, assigns, officers, directors, shareholders, employees, agents, representatives, licensees, sublicensees, distributors, attorneys and accountants (collectively, the "Id Related Parties") from and against any and all damages, claims, losses, causes of action, liabilities, lawsuits, judgments and expenses (including, without limitation, reasonable attorneys' fees and expenses) arising from, relating to or in connection with a breach of this Agreement by Licensee and arising from, relating to or in connection with the Licensee's use or non-use of the Authorized Copy (collectively, the "Claims"). Id Software agrees to notify Licensee of any such Claims within a reasonable time after Id Software learns of same. Licensee, at its own expense, shall defend Id Software and the Id Related Parties from any and all Claims. Id Software and the Id Related Parties reserve the right to participate in any defense of the Claims with counsel of their choice, and at their own expense. In the event Licensee fails to provide a defense, then Licensee shall be responsible for paying the attorneys' fees and expenses incurred by Id Software and the Id Related Parties regarding the defense of the Claims. Id Software and the Id Related Parties, as applicable, agree to reasonably assist in the defense of the Claims. No settlement by Licensee of any Claims shall be valid unless Licensee receives the prior written consent of Id Software and the Id Related Parties, as applicable, to any such settlement. 8. CONFIDENTIALITY. It is understood and agreed that any proprietary information of Id Software that may from time to time be made available or become known to Licensee is to be treated as confidential, is to be used solely in connection with Licensee's performance under this Agreement, and is to be disclosed only to employees of Licensee who have a need for access. Such proprietary information shall include, but not be limited to, trade secrets, release information, financial information, personnel information, and the like. Reasonable measures shall be taken by Licensee to protect the confidentiality of Id Software's proprietary information and any memoranda or papers containing proprietary information of Id Software's that Licensee may receive are to be returned to Id Software upon request. Licensee's obligations and duties under this paragraph shall survive expiration or earlier termination of this Agreement. Licensee shall obtain from its employees an undertaking in a form which may be supplied by Id Software, and which is subject to Id Software's prior written approval, not to use or disclose to any third party any information or knowledge concerning the business of Id Software which may be communicated to such employees. 9. LIMITATION OF LIABILITY. ID SOFTWARE EXPRESSLY DISCLAIMS ALL WARRANTIES NOT PROVIDED BY ID SOFTWARE HEREUNDER. UNDER NO CIRCUMSTANCES SHALL ID SOFTWARE BE LIABLE TO LICENSEE FOR ACTUAL, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR ANY OTHER DAMAGES, WHETHER OR NOT ID SOFTWARE RECEIVES NOTICE OF ANY SUCH DAMAGES. 10. COMPLIANCE WITH APPLICABLE LAWS. In performing under this Agreement, Licensee agrees to comply with all applicable laws, [including, without limitation, 22 U.S.C., 2778 and 22 U.S.C. C.F.R. Parts 120-130 (1995)] regulations, ordinances and statutes, including, but not limited to, the import/export laws and regulations of the United States and its governmental and regulatory agencies (including, without limitation, the Bureau of Export Administration and the U.S. Department of Commerce) and all applicable international treaties and laws. Further, Licensee shall defend, indemnify and hold harmless Id Software from any and all sales tax, tariffs and/or duties in connection with Licensee's performance hereunder. 11. SPECIFIC UNDERTAKINGS BY LICENSEE. In addition to the obligations of Licensee otherwise set forth in this Agreement, during the term of this Agreement, and thereafter where specified, Licensee agrees that: a. It will not attack the title of Id Software to the Subject Game or the Trademark and any copyright, patent or trademark or other intellectual property right related thereto and it will not attack the validity of the license granted hereunder during the term hereof or thereafter; and b. It will promptly inform Id Software of any unauthorized use of the Authorized Copy, the Subject Game and the Trademark and any portions thereof and reasonably assist Id Software in the enforcement of any rights Id Software may have against such unauthorized users. 12. FINANCIAL OBLIGATIONS AND ACCOUNTING. a. Payment of Royalties. Licensee agrees to pay Id Software a royalty ("Royalty") at the rate of twelve and one-half percent (12.5%) of Net Income. The term "Net Income" shall mean all revenue received by Licensee from the commercial use of the Authorized Copy, less only Licensee's actual, documented costs relating directly to such use. A Royalty shall only be due for those months in which Licensee's gross revenue from QUAKE distribution exceeds U.S. Five Thousand Dollars ($5,000.00) and in such months Licensee shall pay a full Royalty on all revenue received. b. Rendition of Statements. Licensee shall account to Id Software with regard to transactions hereunder within forty-five (45) days following the conclusion of each calendar quarter. Licensee hereby represents and warrants that such statements of account to be prepared shall be true and correct. The accounts shall show in summary form the appropriate calculations relating to the computation of Royalties, if any. The statements shall also show the gross revenue received by Licensee per month. The Royalties payable to Id Software hereunder shall be remitted with the particular statement indicating such amount to be due. All statements hereunder shall be deemed rendered when deposited, postage prepaid, in the United States mail, addressed to Id Software at Id Software's address set forth on the signature page hereof. c. Books of Account and Audits. Licensee shall keep books of account relating to the commercial use of the Authorized Copy on the basis of generally accepted accounting principles and shall maintain such books of account for a period of at least two (2) years after the expiration or earlier termination of this Agreement; provided, however, that Licensee shall not be required to keep such records longer than seven (7) years from their date of origination. Id Software may, upon reasonable notice and at its own expense, audit the applicable records at Licensee's office, in order to verify statements rendered hereunder. Any such audit shall take place during reasonable business hours and in such manner so as not to interfere with Licensee's normal business activities. Id Software agrees that such information inspected and/or copied on behalf of Id Software hereunder shall be used only for the purpose of determining the accuracy of the statements, and shall be revealed only to such officers, directors, employees, agents and/or representatives of Id Software as necessary to verify the accuracy of the statements. If in an audit of Licensee's books and records it is determined that there is a short fall of ten percent (10%) or more in Royalties reported for any calendar quarter, in addition to payment of such short fall and interest as may be due, as provided herein, Licensee shall reimburse Id Software for the full out-of-pocket costs of the audit including reasonable travel costs and expenses; provided, however, that the amount of reimbursement paid by Licensee shall not exceed U.S. Fifteen Thousand Dollars ($15,000.00) for any audit. d. Payment of the Royalty. Licensee assumes all risks associated with fluctuations in foreign currency exchange rates. Licensee shall pay and agrees to pay all sums due Id Software in United States Dollars. With respect to Royalties due for commercial use outside the United States, other currencies shall be exchanged at the expense of Licensee into United States Dollars using the bid price quoted at the Citibank, N.A. of New York, New York, for the purchase of United States Dollars at the close of business on the last day of the calendar quarter during which any amounts accrue. Payment of the Royalties shall be made in Dallas County, Texas. e. Interest. If Id Software does not receive the applicable Royalty payment on or before the due date of such payment, Licensee agrees to pay and shall pay interest on Royalties owed to Id Software from such date as specified in the following sentence at a rate per annum equal to the Index Rate. For purposes of clarification, the interest will begin to accrue on the first (1st) day following the due date of the Royalty payment, unless the Royalty payment is paid timely. The "Index Rate" shall be the prime rate as published in The Wall Street Journal's "Money Rates" table. If multiple prime rates are quoted in the table, then the highest prime rate will be the Index Rate. In the event that the prime rate is no longer published in the "Money Rates" table, then Id Software will choose a substitute Index Rate which is based upon comparable information. The applicable interest rate will be determined and take effect on the first day of each month. NOTHING HEREIN SHALL BE CONSTRUED AS A REQUEST OR DEMAND BY ID SOFTWARE OF INTEREST AT A RATE HIGHER THAN ALLOWED BY APPLICABLE LAW. IT IS THE INTENT OF THE PARTIES HERETO THAT NO INTEREST BE CHARGED HEREUNDER WHICH EXCEEDS THE MAXIMUM RATE ALLOWED BY APPLICABLE LAW. IF THE RATE REFERENCED ABOVE EXCEEDS THE MAXIMUM RATE ALLOWED BY APPLICABLE LAW, THEN THE INTEREST RATE MADE APPLICABLE HEREIN SHALL BE THE MAXIMUM RATE ALLOWED BY APPLICABLE LAW. 13. SUBLICENSE. Licensee shall not be entitled to sublicense any of its rights under this Agreement. 14. GOODWILL. Licensee recognizes the great value of the goodwill associated with the Subject Game and the Trademark, and acknowledges that such goodwill, now existing and hereafter created, exclusively belongs to Id Software and that the Trademark has acquired a secondary meaning in the mind of the public. 15. REMEDIES. In the event of a breach of this Agreement by Id Software, Licensee's sole remedy shall be to terminate this Agreement. In the event of a breach by Licensee of this Agreement, Id Software may pursue the remedies to which it is entitled under applicable law, including, but not limited to, termination of this Agreement. Licensee agrees that its failure to comply with the terms of this Agreement upon expiration or earlier termination hereof or Licensee's unauthorized use of the Authorized Copy may result in immediate and irreparable damage to Id Software for which there is no adequate remedy at law, and in the event of such failure by Licensee, Id Software shall be entitled to injunctive relief. Pursuit of any remedy by Id Software shall not constitute a waiver of any other right or remedy of Id Software under this Agreement or under applicable law. Termination of this Agreement shall not be a pre-condition to Id Software pursuing its other remedies for breach. 16. LICENSEE'S WARRANTIES. Licensee warrants and represents that it has full legal rights to enter into this Agreement and to perform its obligations hereunder and that it will comply, at all times during the terms of this Agreement, with all applicable laws, as set forth hereinabove. 17. BANKRUPTCY. If Licensee's liabilities exceed its assets, or if Licensee becomes unable to pay its debts as they become due or if Licensee files for voluntary bankruptcy, or is placed in bankruptcy which is not dissolved or dismissed after thirty (30) days from the petition filing date, or if Licensee becomes insolvent, or makes an assignment for the benefit of its creditors or an arrangement pursuant to any bankruptcy laws or if Licensee discontinues its business or if a receiver is appointed for its business, this Agreement shall automatically terminate, without notice, and become null and void; provided, however, all duties of Licensee upon termination or expiration of this Agreement shall continue in full force and effect. 18. ENTIRE AGREEMENT AND ASSIGNMENT. This Agreement constitutes the entire understanding between Licensee and Id Software regarding the Subject Game. Each and every clause of this Agreement is severable from the whole and shall survive unless the entire Agreement is declared unenforceable. No prior or present agreements or representations shall be binding upon any of the parties hereto unless incorporated in this Agreement. No modification or change in this Agreement shall be valid or binding upon the parties unless in writing, executed by the parties to be bound thereby. This Agreement shall bind and inure to the benefit of Id Software, its successors and assigns, and Id Software may assign its rights hereunder, in Id Software's sole discretion. This Agreement is personal to Licensee, and Licensee shall not sublicense, assign, transfer, convey nor franchise its rights granted hereunder. 19. CHOICE OF LAW, VENUE AND SERVICE OF PROCESS. This Agreement shall be construed in accordance with the laws of the State of Texas and applicable U.S. federal law and all claims and/or lawsuits in connection with this Agreement must be brought in Dallas County, Texas. Licensee hereby agrees that service of process by certified mail to the address set forth below, with return receipt requested, shall constitute valid service of process upon Licensee. If for any reason Licensee has moved or cannot be validly served, then Licensee appoints the Secretary of State of the state of Texas to accept service of process on Licensee's behalf. 20. EXCUSED PERFORMANCE. Neither party shall be deemed to be in default of any provision of this Agreement nor be liable for any delay, failure in performance or interruption of service, resulting directly or indirectly from acts of God, civil or military authority, civil disturbance, military action, war, strikes, other catastrophes or any other similar cause beyond its reasonable control. Written notice to the non-affected party of any such condition shall be given by the affected party within ten (10) days of the event. 21. DELIVERY OF NOTICES, AND DELIVERY OF PAYMENTS. Unless otherwise directed in writing by the parties, all notices given hereunder and all payments made hereunder shall be sent to the addresses set forth on the signature page hereof. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or on the date deposited in the United States Postal Service, postage prepaid, by certified mail, return receipt requested, or telegraphed and confirmed, or delivered by electronic facsimile and confirmed. Any notice to Id Software shall also be sent to its counsel: D. Wade Cloud, Jr., Hiersche, Martens, Hayward, Drakeley & Urbach, P.C., 15303 Dallas Parkway, Suite 700, LB 17, Dallas, Texas 75248. 22. NO PARTNERSHIP, ETC. This Agreement does not constitute and shall not be construed as constituting a partnership or joint venture between Id Software and Licensee. Neither party shall have any right to obligate or bind the other party in any manner whatsoever, and nothing herein contained shall give, or is intended to give, any rights of any kind to any third persons. 23. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which will be deemed to be an original, and each of which alone and all of which together, shall constitute one and the same instrument, but in making proof of this Agreement it shall not be necessary to produce or account for each copy of any counterpart other than the counterpart signed by the party against whom this Agreement is to be enforced. This Agreement may be transmitted by facsimile, and it is the intent of the parties for the facsimile of any autograph printed by a receiving facsimile machine to be an original signature and for the facsimile and any complete photocopy of the Agreement to be deemed an original counterpart. 24. MEDIATION. If a dispute arises out of or relates to this Agreement, or a breach of this Agreement, and if the dispute cannot be settled through direct discussion, then the parties agree to endeavor to settle the dispute in an amicable manner by mediation, under the applicable provisions of Section 154.00 et seq., Texas Civil Practices and Remedies Code, as supplemented by the rules of the Association of Attorney Mediators. 25. SURVIVAL. The following provisions shall survive the expiration or earlier termination of this Agreement: paragraphs 4., 7., 8., and the audit rights of Id Software in paragraph 12.c. 26. MISCELLANEOUS. a. All captions in this Agreement are intended solely for the convenience of the parties, and none shall effect the meaning or construction of any provision. b. The terms and conditions of this Agreement have been negotiated fully and freely among the parties. Accordingly, the preparation of this Agreement by counsel for a given party will not be material to the construction hereof, and the terms of this Agreement shall not be strictly construed against such party. By signing in the spaces provided below, the parties have agreed to all of the terms and conditions set forth in this Agreement. AGREED: LICENSEE: Signed:_______________________________ Printed Name:_________________________ Title:________________________________ Address:______________________________ ______________________________________ ______________________________________ Telephone #: _________________________ Fax #:________________________________ E-Mail Address:_______________________ Date: ________________________________ AGREED: ID SOFTWARE, INC. Signed:_______________________________ Printed Name:_________________________ Title:________________________________ Address:______________________________ ______________________________________ ______________________________________ Telephone #: _________________________ Fax #:________________________________ E-Mail Address:_______________________ Date: ________________________________ June 10, 1996 COMMERCIAL EXPLOITATION LICENSE AGREEMENT FOR QUAKE (DWC:dw:3406.0299:dwc\doc:5017)