1 COMMERCIAL EXPLOITATION LICENSE AGREEMENT FOR QUAKE 2 3 This Commercial Exploitation License Agreement for QUAKE 4(the "Agreement") is between Id Software, Inc., a Texas 5Corporation, (hereinafter "Id Software") and Licensee (as described 6on the signature page hereof) and is made effective beginning on 7the date of last signature hereto (the "Effective Date"). 8 9 R E C I T A L S 10 11 WHEREAS, Id Software is the owner and developer of the 12computer software game entitled QUAKE; 13 14 WHEREAS, Id Software desires to license certain 15non-exclusive rights regarding QUAKE to Licensee; and 16 17 WHEREAS, Licensee desires to receive a license for such 18rights. 19 20 T E R M S A N D C O N D I T I O N S 21 22 NOW, THEREFORE, for and in consideration of the mutual 23premises contained herein and for other good and valuable 24consideration, the receipt and sufficiency of which is hereby 25acknowledged, the undersigned parties do hereby agree as follows: 26 27 1. DEFINITIONS. As used in this Agreement, the parties 28hereto agree the words set forth below shall have the specified 29meanings: 30 31 a. "Authorized Copy" shall mean one (1) copy of the 32 Subject Game actually purchased by Licensee from an 33 Id Software approved retailer; and 34 35 b. "Subject Game" shall mean the full registered 36 version of QUAKE on a CD-ROM and shall not mean the 37 shareware or any other version. 38 39 2. GRANT OF RIGHTS. Id Software hereby grants to 40Licensee and Licensee hereby accepts, subject to the provisions and 41conditions hereof, a world-wide (except as otherwise provided 42herein), non-exclusive, non-transferable, and non-assignable 43license to: 44 45 a. publicly display an Authorized Copy in exchange for 46 rental payment; 47 48 b. run the Authorized Copy so that it will accept 49 network/modem connections in exchange for payments 50 from end-users who also must have actually purchased 51 an Authorized Copy; and 52 53 c. otherwise commercially exploit an Authorized Copy, 54 except that Licensee shall not copy, reproduce, 55 manufacture or distribute the Authorized Copy. 56 57 3. RESERVATION OF RIGHTS AND PROHIBITIONS. Id Software 58expressly reserves all rights not granted herein. Under no 59circumstances shall Licensee copy, reproduce, manufacture or 60distribute (free of charge or otherwise) the Authorized Copy or the 61Subject Game. Licensee shall not reverse engineer, decompile, 62disassemble, modify or alter the Authorized Copy. Licensee is not 63receiving any rights hereunder regarding the Trademark or any 64artwork, sound, music or other element of the Subject Game. 65 66 4. OWNERSHIP. Title to and all ownership rights in and 67to the Subject Game, and the QUAKE Trademark (the "Trademark") and 68the copyrights, trademarks, patents and other intellectual property 69rights related thereto shall remain with Id Software which shall have 70the exclusive right to protect the same by copyright or otherwise. 71Licensee shall have no ownership rights in or to the Subject Game or 72the Trademark and Licensee shall not own any intellectual property 73rights regarding the Authorized Copy, including, without limitation, 74the copyright regarding the Authorized Copy. Licensee acknowledges 75that it only has a limited license to use the Authorized Copy, as 76specified in that certain QUAKE Enduser License contained within the 77Authorized Copy and as specified in this Agreement. 78 79 5. TERM AND TERMINATION. 80 81 a. The term of this Agreement and the license granted 82herein begins on the Effective Date and shall expire on a date one 83(1) calendar year from the Effective Date. 84 85 b. Either party may terminate this Agreement, for any 86reason or no reason, on thirty (30) days written notice to the 87other party. Termination will be effective on the thirtieth (30th) 88day following delivery of the described notice. Notwithstanding 89anything to the contrary herein, this Agreement shall immediately 90terminate, without the requirement of any notice from Id Software 91to Licensee, upon the occurrence of any of the following: (a) if 92Licensee shall file a petition in bankruptcy or make an assignment 93for the benefit of creditors, or if any bankruptcy proceeding or 94assignment for benefit of creditors, shall be commenced against 95Licensee and not be dismissed within sixty (60) days after the date 96of its commencement; (b) the insolvency of Licensee; (c) the 97cessation by Licensee of its business; or (d) the cessation by 98Licensee, without the prior written consent of Id Software of the 99distribution, manufacture, and sale responsibilities embodied 100herein. Further, Id Software may elect to terminate this Agreement 101upon the occurrence of any of the following: (1) if Licensee's 102business operations are interrupted for forty (40) consecutive 103calendar days; or (2) if each of two Id Software audit inspections 104during any eighteen (18) month period demonstrates an 105understatement by Licensee of Royalty payments due Id Software for 106the six (6) month period immediately preceding each such inspection 107of five percent (5%) or more. Upon the occurrence of such 108terminating event, and the election of Id Software, if necessary, 109to cause such termination, this Agreement and any and all rights 110thereunder shall terminate without prejudice to any rights or 111claims Id Software may have, and all rights hereunder shall 112thereupon terminate, revert to and be vested in Id Software. 113 114 6. EFFECT OF TERMINATION OR EXPIRATION. Termination or 115expiration of this Agreement, either by Id Software or 116automatically, shall not create any liability against Id Software. 117Upon expiration or earlier termination of this Agreement, Licensee 118shall have no further right to exercise the rights licensed 119hereunder or otherwise acquired in relation to this Agreement. 120 121 7. INDEMNIFICATION. Licensee hereby agrees to 122indemnify, hold harmless and defend Id Software and Id Software's 123predecessors, successors, assigns, officers, directors, 124shareholders, employees, agents, representatives, licensees, 125sublicensees, distributors, attorneys and accountants 126(collectively, the "Id Related Parties") from and against any and 127all damages, claims, losses, causes of action, liabilities, 128lawsuits, judgments and expenses (including, without limitation, 129reasonable attorneys' fees and expenses) arising from, relating to 130or in connection with a breach of this Agreement by Licensee and 131arising from, relating to or in connection with the Licensee's use 132or non-use of the Authorized Copy (collectively, the "Claims"). Id 133Software agrees to notify Licensee of any such Claims within a 134reasonable time after Id Software learns of same. Licensee, at its 135own expense, shall defend Id Software and the Id Related Parties 136from any and all Claims. Id Software and the Id Related Parties 137reserve the right to participate in any defense of the Claims with 138counsel of their choice, and at their own expense. In the event 139Licensee fails to provide a defense, then Licensee shall be 140responsible for paying the attorneys' fees and expenses incurred by 141Id Software and the Id Related Parties regarding the defense of the 142Claims. Id Software and the Id Related Parties, as applicable, 143agree to reasonably assist in the defense of the Claims. No 144settlement by Licensee of any Claims shall be valid unless Licensee 145receives the prior written consent of Id Software and the Id 146Related Parties, as applicable, to any such settlement. 147 148 8. CONFIDENTIALITY. It is understood and agreed that 149any proprietary information of Id Software that may from time to 150time be made available or become known to Licensee is to be treated 151as confidential, is to be used solely in connection with Licensee's 152performance under this Agreement, and is to be disclosed only to 153employees of Licensee who have a need for access. Such proprietary 154information shall include, but not be limited to, trade secrets, 155release information, financial information, personnel information, 156and the like. Reasonable measures shall be taken by Licensee to 157protect the confidentiality of Id Software's proprietary 158information and any memoranda or papers containing proprietary 159information of Id Software's that Licensee may receive are to be 160returned to Id Software upon request. Licensee's obligations and 161duties under this paragraph shall survive expiration or earlier 162termination of this Agreement. Licensee shall obtain from its 163employees an undertaking in a form which may be supplied by Id 164Software, and which is subject to Id Software's prior written 165approval, not to use or disclose to any third party any information 166or knowledge concerning the business of Id Software which may be 167communicated to such employees. 168 169 9. LIMITATION OF LIABILITY. ID SOFTWARE EXPRESSLY 170DISCLAIMS ALL WARRANTIES NOT PROVIDED BY ID SOFTWARE HEREUNDER. 171UNDER NO CIRCUMSTANCES SHALL ID SOFTWARE BE LIABLE TO LICENSEE FOR 172ACTUAL, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR 173ANY OTHER DAMAGES, WHETHER OR NOT ID SOFTWARE RECEIVES NOTICE OF 174ANY SUCH DAMAGES. 175 176 10. COMPLIANCE WITH APPLICABLE LAWS. In performing 177under this Agreement, Licensee agrees to comply with all applicable 178laws, [including, without limitation, 22 U.S.C., 2778 and 22 179U.S.C. C.F.R. Parts 120-130 (1995)] regulations, ordinances and 180statutes, including, but not limited to, the import/export laws and 181regulations of the United States and its governmental and 182regulatory agencies (including, without limitation, the Bureau of 183Export Administration and the U.S. Department of Commerce) and all 184applicable international treaties and laws. Further, Licensee 185shall defend, indemnify and hold harmless Id Software from any and 186all sales tax, tariffs and/or duties in connection with Licensee's 187performance hereunder. 188 189 11. SPECIFIC UNDERTAKINGS BY LICENSEE. In addition to 190the obligations of Licensee otherwise set forth in this Agreement, 191during the term of this Agreement, and thereafter where specified, 192Licensee agrees that: 193 194 a. It will not attack the title of Id Software to the 195Subject Game or the Trademark and any copyright, patent or 196trademark or other intellectual property right related thereto and 197it will not attack the validity of the license granted hereunder 198during the term hereof or thereafter; and 199 200 b. It will promptly inform Id Software of any 201unauthorized use of the Authorized Copy, the Subject Game and the 202Trademark and any portions thereof and reasonably assist Id 203Software in the enforcement of any rights Id Software may have 204against such unauthorized users. 205 206 12. FINANCIAL OBLIGATIONS AND ACCOUNTING. 207 208 a. Payment of Royalties. Licensee agrees to pay Id 209Software a royalty ("Royalty") at the rate of twelve and one-half 210percent (12.5%) of Net Income. The term "Net Income" shall mean 211all revenue received by Licensee from the commercial use of the 212Authorized Copy, less only Licensee's actual, documented costs 213relating directly to such use. A Royalty shall only be due for 214those months in which Licensee's gross revenue from QUAKE 215distribution exceeds U.S. Five Thousand Dollars ($5,000.00) and in 216such months Licensee shall pay a full Royalty on all revenue 217received. 218 219 b. Rendition of Statements. Licensee shall account to 220Id Software with regard to transactions hereunder within forty-five 221(45) days following the conclusion of each calendar quarter. 222Licensee hereby represents and warrants that such statements of 223account to be prepared shall be true and correct. The accounts 224shall show in summary form the appropriate calculations relating to 225the computation of Royalties, if any. The statements shall also 226show the gross revenue received by Licensee per month. The 227Royalties payable to Id Software hereunder shall be remitted with 228the particular statement indicating such amount to be due. All 229statements hereunder shall be deemed rendered when deposited, 230postage prepaid, in the United States mail, addressed to Id 231Software at Id Software's address set forth on the signature page 232hereof. 233 234 c. Books of Account and Audits. Licensee shall keep 235books of account relating to the commercial use of the Authorized 236Copy on the basis of generally accepted accounting principles and 237shall maintain such books of account for a period of at least two 238(2) years after the expiration or earlier termination of this 239Agreement; provided, however, that Licensee shall not be required 240to keep such records longer than seven (7) years from their date of 241origination. Id Software may, upon reasonable notice and at its 242own expense, audit the applicable records at Licensee's office, in 243order to verify statements rendered hereunder. Any such audit 244shall take place during reasonable business hours and in such 245manner so as not to interfere with Licensee's normal business 246activities. Id Software agrees that such information inspected 247and/or copied on behalf of Id Software hereunder shall be used only 248for the purpose of determining the accuracy of the statements, and 249shall be revealed only to such officers, directors, employees, 250agents and/or representatives of Id Software as necessary to verify 251the accuracy of the statements. If in an audit of Licensee's books 252and records it is determined that there is a short fall of ten 253percent (10%) or more in Royalties reported for any calendar 254quarter, in addition to payment of such short fall and interest as 255may be due, as provided herein, Licensee shall reimburse Id 256Software for the full out-of-pocket costs of the audit including 257reasonable travel costs and expenses; provided, however, that the 258amount of reimbursement paid by Licensee shall not exceed U.S. 259Fifteen Thousand Dollars ($15,000.00) for any audit. 260 261 d. Payment of the Royalty. Licensee assumes all risks 262associated with fluctuations in foreign currency exchange rates. 263Licensee shall pay and agrees to pay all sums due Id Software in 264United States Dollars. With respect to Royalties due for 265commercial use outside the United States, other currencies shall be 266exchanged at the expense of Licensee into United States Dollars 267using the bid price quoted at the Citibank, N.A. of New York, New 268York, for the purchase of United States Dollars at the close of 269business on the last day of the calendar quarter during which any 270amounts accrue. Payment of the Royalties shall be made in Dallas 271County, Texas. 272 273 e. Interest. If Id Software does not receive the 274applicable Royalty payment on or before the due date of such 275payment, Licensee agrees to pay and shall pay interest on Royalties 276owed to Id Software from such date as specified in the following 277sentence at a rate per annum equal to the Index Rate. For purposes 278of clarification, the interest will begin to accrue on the first 279(1st) day following the due date of the Royalty payment, unless the 280Royalty payment is paid timely. The "Index Rate" shall be the 281prime rate as published in The Wall Street Journal's "Money Rates" 282table. If multiple prime rates are quoted in the table, then the 283highest prime rate will be the Index Rate. In the event that the 284prime rate is no longer published in the "Money Rates" table, then 285Id Software will choose a substitute Index Rate which is based upon 286comparable information. The applicable interest rate will be 287determined and take effect on the first day of each month. 288 289 NOTHING HEREIN SHALL BE CONSTRUED AS A REQUEST OR DEMAND BY 290ID SOFTWARE OF INTEREST AT A RATE HIGHER THAN ALLOWED BY APPLICABLE 291LAW. IT IS THE INTENT OF THE PARTIES HERETO THAT NO INTEREST BE 292CHARGED HEREUNDER WHICH EXCEEDS THE MAXIMUM RATE ALLOWED BY 293APPLICABLE LAW. IF THE RATE REFERENCED ABOVE EXCEEDS THE MAXIMUM 294RATE ALLOWED BY APPLICABLE LAW, THEN THE INTEREST RATE MADE 295APPLICABLE HEREIN SHALL BE THE MAXIMUM RATE ALLOWED BY APPLICABLE 296LAW. 297 298 13. SUBLICENSE. Licensee shall not be entitled to 299sublicense any of its rights under this Agreement. 300 301 14. GOODWILL. Licensee recognizes the great value of 302the goodwill associated with the Subject Game and the Trademark, 303and acknowledges that such goodwill, now existing and hereafter 304created, exclusively belongs to Id Software and that the Trademark 305has acquired a secondary meaning in the mind of the public. 306 307 15. REMEDIES. In the event of a breach of this 308Agreement by Id Software, Licensee's sole remedy shall be to 309terminate this Agreement. In the event of a breach by Licensee of 310this Agreement, Id Software may pursue the remedies to which it is 311entitled under applicable law, including, but not limited to, 312termination of this Agreement. Licensee agrees that its failure to 313comply with the terms of this Agreement upon expiration or earlier 314termination hereof or Licensee's unauthorized use of the Authorized 315Copy may result in immediate and irreparable damage to Id Software 316for which there is no adequate remedy at law, and in the event of 317such failure by Licensee, Id Software shall be entitled to 318injunctive relief. Pursuit of any remedy by Id Software shall not 319constitute a waiver of any other right or remedy of Id Software 320under this Agreement or under applicable law. Termination of this 321Agreement shall not be a pre-condition to Id Software pursuing its 322other remedies for breach. 323 324 16. LICENSEE'S WARRANTIES. Licensee warrants and 325represents that it has full legal rights to enter into this 326Agreement and to perform its obligations hereunder and that it will 327comply, at all times during the terms of this Agreement, with all 328applicable laws, as set forth hereinabove. 329 330 17. BANKRUPTCY. If Licensee's liabilities exceed its 331assets, or if Licensee becomes unable to pay its debts as they 332become due or if Licensee files for voluntary bankruptcy, or is 333placed in bankruptcy which is not dissolved or dismissed after 334thirty (30) days from the petition filing date, or if Licensee 335becomes insolvent, or makes an assignment for the benefit of its 336creditors or an arrangement pursuant to any bankruptcy laws or if 337Licensee discontinues its business or if a receiver is appointed 338for its business, this Agreement shall automatically terminate, 339without notice, and become null and void; provided, however, all 340duties of Licensee upon termination or expiration of this Agreement 341shall continue in full force and effect. 342 343 18. ENTIRE AGREEMENT AND ASSIGNMENT. This Agreement 344constitutes the entire understanding between Licensee and Id 345Software regarding the Subject Game. Each and every clause of this 346Agreement is severable from the whole and shall survive unless the 347entire Agreement is declared unenforceable. No prior or present 348agreements or representations shall be binding upon any of the 349parties hereto unless incorporated in this Agreement. No 350modification or change in this Agreement shall be valid or binding 351upon the parties unless in writing, executed by the parties to be 352bound thereby. This Agreement shall bind and inure to the benefit 353of Id Software, its successors and assigns, and Id Software may 354assign its rights hereunder, in Id Software's sole discretion. 355This Agreement is personal to Licensee, and Licensee shall not 356sublicense, assign, transfer, convey nor franchise its rights 357granted hereunder. 358 359 19. CHOICE OF LAW, VENUE AND SERVICE OF PROCESS. This 360Agreement shall be construed in accordance with the laws of the 361State of Texas and applicable U.S. federal law and all claims 362and/or lawsuits in connection with this Agreement must be brought 363in Dallas County, Texas. Licensee hereby agrees that service of 364process by certified mail to the address set forth below, with 365return receipt requested, shall constitute valid service of process 366upon Licensee. If for any reason Licensee has moved or cannot be 367validly served, then Licensee appoints the Secretary of State of 368the state of Texas to accept service of process on Licensee's 369behalf. 370 371 20. EXCUSED PERFORMANCE. Neither party shall be deemed 372to be in default of any provision of this Agreement nor be liable 373for any delay, failure in performance or interruption of service, 374resulting directly or indirectly from acts of God, civil or 375military authority, civil disturbance, military action, war, 376strikes, other catastrophes or any other similar cause beyond its 377reasonable control. Written notice to the non-affected party of any 378such condition shall be given by the affected party within ten (10) 379days of the event. 380 381 21. DELIVERY OF NOTICES, AND DELIVERY OF PAYMENTS. 382Unless otherwise directed in writing by the parties, all notices 383given hereunder and all payments made hereunder shall be sent to 384the addresses set forth on the signature page hereof. All 385notices, requests, consents and other communications under this 386Agreement shall be in writing and shall be deemed to have been 387delivered on the date personally delivered or on the date deposited 388in the United States Postal Service, postage prepaid, by certified 389mail, return receipt requested, or telegraphed and confirmed, or 390delivered by electronic facsimile and confirmed. Any notice to Id 391Software shall also be sent to its counsel: D. Wade Cloud, Jr., 392Hiersche, Martens, Hayward, Drakeley & Urbach, P.C., 15303 Dallas 393Parkway, Suite 700, LB 17, Dallas, Texas 75248. 394 395 22. NO PARTNERSHIP, ETC. This Agreement does not 396constitute and shall not be construed as constituting a partnership 397or joint venture between Id Software and Licensee. Neither party 398shall have any right to obligate or bind the other party in any 399manner whatsoever, and nothing herein contained shall give, or is 400intended to give, any rights of any kind to any third persons. 401 402 23. COUNTERPARTS. This Agreement may be executed in 403several counterparts, each of which will be deemed to be an 404original, and each of which alone and all of which together, shall 405constitute one and the same instrument, but in making proof of this 406Agreement it shall not be necessary to produce or account for each 407copy of any counterpart other than the counterpart signed by the 408party against whom this Agreement is to be enforced. This 409Agreement may be transmitted by facsimile, and it is the intent of 410the parties for the facsimile of any autograph printed by a 411receiving facsimile machine to be an original signature and for the 412facsimile and any complete photocopy of the Agreement to be deemed 413an original counterpart. 414 415 24. MEDIATION. If a dispute arises out of or relates to 416this Agreement, or a breach of this Agreement, and if the dispute 417cannot be settled through direct discussion, then the parties agree 418to endeavor to settle the dispute in an amicable manner by 419mediation, under the applicable provisions of Section 154.00 et 420seq., Texas Civil Practices and Remedies Code, as supplemented by 421the rules of the Association of Attorney Mediators. 422 423 25. SURVIVAL. The following provisions shall survive 424the expiration or earlier termination of this Agreement: 425paragraphs 4., 7., 8., and the audit rights of Id Software in 426paragraph 12.c. 427 428 26. MISCELLANEOUS. 429 430 a. All captions in this Agreement are intended solely 431for the convenience of the parties, and none shall effect the 432meaning or construction of any provision. 433 434 b. The terms and conditions of this Agreement have been 435negotiated fully and freely among the parties. Accordingly, the 436preparation of this Agreement by counsel for a given party will not 437be material to the construction hereof, and the terms of this 438Agreement shall not be strictly construed against such party. 439 440 By signing in the spaces provided below, the parties have 441agreed to all of the terms and conditions set forth in this 442Agreement. 443 444 445AGREED: 446 447LICENSEE: 448 449 450Signed:_______________________________ 451Printed Name:_________________________ 452Title:________________________________ 453Address:______________________________ 454______________________________________ 455______________________________________ 456Telephone #: _________________________ 457Fax #:________________________________ 458E-Mail Address:_______________________ 459Date: ________________________________ 460 461 462AGREED: 463 464ID SOFTWARE, INC. 465 466 467Signed:_______________________________ 468Printed Name:_________________________ 469Title:________________________________ 470Address:______________________________ 471______________________________________ 472______________________________________ 473Telephone #: _________________________ 474Fax #:________________________________ 475E-Mail Address:_______________________ 476Date: ________________________________ 477 478 479 480June 10, 1996 481 482 483 484COMMERCIAL EXPLOITATION LICENSE AGREEMENT FOR QUAKE 485(DWC:dw:3406.0299:dwc\doc:5017) 486 487 488