Software License And Development Agreement

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933. A COMPLETE COPY OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.


INTEL/QUOKKA CONFIDENTIAL


SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT


THIS SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT (the "Agreement") is made as of this 20th day of March, 1998, by and between INTEL CORPORATION, a Delaware corporation with an office at 2111 NE 25th Avenue, Hillsboro, Oregon ("Intel") and QUOKKA SPORTS, INC., a Delaware corporation with an office at 525 Brannan Street, Ground Floor, San Francisco, CA, 94107 ("Quokka").


RECITALS


Intel is a manufacturer of microprocessors, software and systems. Quokka has certain expertise in Total Sports Immersion ("TSI") and related businesses. Intel and Quokka desire to work together to create a TSI application using broadband broadcast distribution (as described below, the "Project").


Intel and Quokka have entered into that certain Series A Preferred Stock Purchase Agreement dated as of December 19, 1997 and related agreements (the "Equity Agreements"). The Equity Agreements contemplate that Intel and Quokka enter into a development and licensing agreement such as the one set forth herein.


NOW THEREFORE, based on the Recitals and the terms and conditions herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows:


AGREEMENT


SECTION 1. DEFINITIONS


1.1 "PROJECT" means the development of a specific TSI application, the Quokka Application and general industry enabling technologies on which it is based, the Intel Software and the Quokka Venue Based Software, to be delivered over a satellite down link to and experienced by the end user on a home personal computer. The targeted client system may have a back channel that need not be operational during the entire time the user is deriving value from the application, but may be available at the end user's option for enhanced functionality. Critical features of the Quokka Application shall be documented in the Project Specification but may include (i) an interactive game that uses telemetry data from a real event to create a 3D simulation in which the user can participate in the event, (ii) an event viewer that allows users to (a) view the event, competitors or groups of competitors (such as the event leader, all competitors, split times between competitors, etc.) (b) switch between multiple video feeds that may be broadcast as part of the event and (c) watch the broadcaster feed. The Project contemplates Intel developing the Intel Software, Quokka developing the Quokka Venue Based Software, and Quokka developing the specific Quokka Application to interface with the Intel Software and the Quokka Venue Based Software. The parties contemplate a TSI SDK emerging from the Project on which additional TSI applications can be produced, which TSI SDK shall be the property of Intel as described in this Agreement, but Intel shall not be obligated to produce the TSI SDK.


1.2 "INTEL SOFTWARE" means the software developed by the Dedicated Resources for the Project as delivered to Quokka together with all Quokka Improvements. Intel may at its discretion incorporate pre-existing Intel or third party software into the Intel Software which shall be provided to Quokka in accordance with the terms and conditions of this Agreement and the licenses granted to Quokka in Sections 3.1 and 3.2 or as otherwise agreed by the parties in writing.


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1.3 "QUOKKA VENUE BASED SOFTWARE" means the software developed by Quokka for the Project that is (i) specifically targeted towards manipulating audio, video and data from a sporting venue (ii) includes APIs and protocols for application to a sporting venue (iii) is independent of any specific Quokka implementation and (iv) does not contain the product specific proprietary elements of the Quokka Application. The Quokka Venue Based Software will be a logical layer on top of the more generic Intel Software and will have elements on the server side as well as on the client system. It is Quokka's intent that the Quokka Venue Based Software become broadly diffused into the industry in order to proliferate a more standard way of interfacing between sports venue systems and broadband means of data transmission.


1.4 "QUOKKA APPLICATION" means the specific TSI application that Quokka will develop in the Project to interface with the Intel Software and the Quokka Venue Based Software. The Quokka Application will be targeted at a sporting event to be determined by Quokka in accordance with the terms and provisions of this Agreement.


1.5 "QUOKKA IMPROVEMENTS" means bug fixes that Quokka may make to the Intel Software in the course of creating the Quokka Venue Based Software, the Quokka Application, Quokka Derivatives or otherwise, which Quokka shall provide to Intel in source and object code form designated as Quokka Improvements.


1.6 "INTEL IMPROVEMENTS" means bug fixes that Intel may make to the Quokka Venue Based Software in the course of creating the TSI SDK or other Intel product incorporating the Quokka Venue Based Software, which Intel shall provide to Quokka in source and object code form designated as Intel Improvements.


1.7 "DERIVATIVE WORK" means a work based upon one or more preexisting works, such as a translation, abridgment, condensation, modification, or any other form in which a work may be recast, transformed, or adapted.


1.8 "QUOKKA DERIVATIVES" means any Derivative Works of the Intel Software created by Quokka (but not including Quokka Improvements).


1.9 "INTEL DERIVATIVES" means any Derivative Works of the Quokka Venue Based Software created by Intel (but not including Intel Improvements).


1.10 "PROJECT SPECIFICATION" means identification of the prime target sport for the Quokka Application, a description of the Project Trial, and identification of the bandwidth provider.


1.11 "TSI SDK" means the Intel Software and the Quokka Venue Based Software in an integrated software development kit type of format, together with appropriate documentation and sample code, which Intel may use to enable the industry in the creation of TSI applications like the Quokka Application.


1.12 "LICENSED PRODUCTS" means any product offered by Quokka, including but not limited to the Quokka Application, that (i) incorporates the Intel Software and at Quokka's election, the Quokka Venue Based Software and (ii) adds significant functionality to the Intel Software.


1.13 "DEDICATED RESOURCES" shall mean [*] engineer man years, with one (1) engineer man year being equal to forty hours of work per week for forty-eight weeks; provided, however,


[*] Confidential Treatment Requested
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that (i) Intel shall not be required to have [*] engineers dedicated to the Project at any one time, (ii) Intel shall be free to allocate its engineering resources to the Project and change staff assigned to the Project at its sole discretion. Notwithstanding the foregoing, however, Intel shall reasonably endeavor to maintain continuity of staffing on the Project and will take into reasonable consideration Quokka's requests regarding staffing, including without limitation identity, qualifications and number of engineers dedicated to the Project and removal of specific engineers from the Project; provided, however, all such decisions shall be made by Intel at its sole discretion. Dedicated Resources shall also include all costs and expenses incurred by Intel in connection with furnishing such engineering resources.


1.14 "PROJECT COMPLETION" shall mean the earlier of (i) delivery of the Intel Software to Quokka, delivery of the Quokka Venue Based Software to Intel and completion of a Project Trial (ii) failure to reach agreement on the Project Specification by September 30, 1998 and (iii) November 1, 1999.


1.15 "PROJECT TRIAL" shall mean a trial of the Project to test the success of the Project and its commercial feasibility. The Project Trial shall be further described in the Project Specification.


1.16 "INTELLECTUAL PROPERTY RIGHTS" means copyrights in software as delivered and, to the minimum extent necessary to exercise the copyright license, (i) claims of patents and patent applications that read on inventions incorporated in the software as delivered and (ii) trade secrets in the software as delivered.


SECTION 2. OBLIGATIONS OF THE PARTIES


2.1 PROJECT DEVELOPMENT. Subject to the terms and conditions of this Agreement, Intel and Quokka will cooperate with each other and use commercially reasonable efforts to complete the Project, including the Quokka Application, by April 30, 1999. The parties will use commercially reasonable efforts to agree in writing upon the Project Specification by September 30,1998. The Project shall be deemed complete upon the occurrence of an event constituting Project Completion.


2.2 INTEL SOFTWARE. The Intel Software will be delivered with full documentation including architecture, design and usage specifications. Components of the Intel Software will be aggregated in a feasibility prototype that demonstrates how they all fit together, but Quokka shall have no rights to the feasibility prototype or any Intel intellectual property incorporated therein other than the Intel Software. Depending on the final Project Specification and the mutual agreement of the parties, Intel staff may, but shall have no obligation to, perform work or take action in connection with areas such as:


1) Developing a prototype that demonstrates how near real time data and video can be delivered from a sporting event to the end user PC.


2) Integration of specific content providers' communication stack into the client side components.


3) Interface components that provide a high level abstraction (to be defined jointly with Quokka) that can be used by all of the viewer's components to create the required application.


4) Technology to deliver the data from the event itself to the service provider for broadcast.


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5) Technology required to synchronize the video and the data within several frames (frame synchronization may or may not be possible in the time frame required).


6) Video compression and decompression technology (including scalable video)


7) Defining, developing and integrating a service provider solution that fulfills the requirements of both the client side application, as well as the delivery of near real time data from the event itself.


8) Refining the definition of the application including items such as a product requirements document, over-all system level architecture and design overview.


9) A concept prototype that can be used to sell the Quokka Application.


10) Assisting Quokka in identifying and securing bandwidth transmission with a satellite service provider.


11) Assisting in identifying and integrating third party components and services (such as a game engine).


The list above is included in this Agreement only as a guideline and does not represent specific obligations of Intel. The specific obligation of Intel shall be to use commercially reasonable efforts to develop the Intel Software.


2.3 INTEL DEDICATED RESOURCES. Intel shall commit the Dedicated Resources to the Project and use commercially reasonable efforts to develop the Intel Software in accordance with the Project Specifications. Intel shall have no obligation under this Agreement to provide any goods or services or otherwise contribute resources to the Project and the development of the Intel Software beyond the Dedicated Resources. If Intel's development of the Intel Software and completion of the Project requires less than the Dedicated Resources, Intel's obligations in regard to the Dedicated Resources shall terminate upon Project Completion and (i) Intel shall have no further obligation in regard to the Dedicated Resources and (ii) Quokka shall not be entitled to any credit and/or offset of any kind in regard to any consideration given by it to Intel hereunder or otherwise. If development of the Intel Software for the Project, or Project Completion, requires Intel to commit resources beyond the Dedicated Resources, the parties shall enter into good faith negotiations to determine whether Intel shall commit any additional resources to the Project and, if so, the amount and nature of the consideration that Intel should receive for such additional contribution. Notwithstanding the foregoing, the parties reiterate that Intel shall have no obligation under this Agreement to provide any goods or services or otherwise contribute resources to the Project and the development of the Intel Software beyond the Dedicated Resources.


2.4 QUOKKA VENUE BASED SOFTWARE. Quokka shall dedicate the resources necessary to develop the Quokka Venue Based Software and otherwise complete the Project. Quokka shall maintain continuity of staffing on development of the Quokka Based Venue Software and the Project and will take into reasonable consideration Intel's requests regarding staffing, including without limitation identity, qualifications and number of engineers dedicated to the Project and removal of specific engineers from the Project; provided, however, all such decisions shall be made by Quokka at its sole discretion. Quokka shall deliver the Quokka Venue Based Software to Intel in source and binary code form both (i) integrated with the Intel Software, and (ii) separate from the Intel Software, for Intel's use solely in accordance with the license grant set forth in Section 3.6 and 3.6. Quokka shall provide Intel all documentation and sample code necessary for Intel to develop the TSI SDK ("SDK Materials").


2.5 QUOKKA APPLICATION. Quokka shall have the right to define, market and position the Quokka Application consistent with the Project Specification. Quokka shall have the right to all


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revenue streams generated by the Quokka Application, including without limitation subscriptions, transaction fees and advertising revenue. Quokka will develop (or cause to be developed) all aspects of the Project and the Quokka Application other than the development of the Intel Software, including but not limited to all Project testing and software (Intel Software and Quokka Venue Based Software) integration responsibilities. Quokka specifically agrees to dedicate the resources necessary to develop or take action in connection with, inter alia, the following elements of the Project:


1) Market, positioning and revenue models associated with the Quokka Application.


2) Negotiating bandwidth with a service provider.


3) End user experience including user interface, look and feel, etc.


4) Data acquisition at the sports venue. This includes all relationships with the data acquisition equipment of choice as well as driver requirements to take the data from the data acquisition equipment to and make it acceptable for consumption by the client side application.


5) Sponsorship.


6) Business arrangements with all third parties (such as vendors, event organizers, sports governing bodies, third party vendors, etc.).


7) System integration and testing for both the trial and the Quokka Application.


8) Securing all relevant rights to data, video, etc. needed to develop, test and market the Quokka Venue Based Software and the Quokka Application (including, inter alia, using all commercially reasonable efforts to acquire rights to the broadcaster feed at the event selected for the Quokka Application).


9) Development of venue specific software for use in the Quokka Application.


2.6 PROJECT TRIAL. Quokka shall conduct a Project Trial. The Project Trial will be further defined as part of the Project Specification, but the responsibility to conduct and finance the Project Trial shall be Quokka's.


2.7 CONSIDERATION AND CLOSING. Upon execution of this Agreement, Quokka will issue to and deliver to Intel warrants to purchase 490,196 (four hundred ninety thousand one hundred ninety six) shares of Quokka preferred stock for US$1.02 (One Dollar and 02/100) per share (collectively, the "Quokka Warrants") in the form attached hereto as Exhibit A. Half of such Quokka Warrants will be for Quokka Series A Preferred Stock and half will be for Quokka Series B Preferred Stock having the rights, preferences and privileges as determined in connection with a sale of Series B Preferred Stock in an aggregate amount of at least One Million Dollars ($1,000,000) (a "Qualified Financing"). In the event a Qualified Financing does not take place within at least one hundred eighty (180) days from the execution date of this Agreement, the Quokka Warrants shall be for Series A Preferred Stock. Closing shall take place on March 20, 1998, or such other time, and at such place, as the parties shall agree. Intel shall have the right to exercise the Quokka Warrants upon: (i) delivery of the Intel Software to Quokka, (ii) material breach of this Agreement by Quokka, or (iii) Project Completion. The Quokka Warrants shall terminate unless exercised upon or prior to Quokka's initial public offering or any merger, consolidation, sale of substantially all the assets or similar event resulting in the payment of cash or marketable securities to the holders of Quokka's capital stock.


Upon execution of this Agreement the Put Agreement between Intel and Quokka dated December 19, 1997 shall terminate.


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SECTION 3. LICENSES


Intel grants to Quokka and Quokka grants to Intel the following rights:


3.1 INTEL SOFTWARE SOURCE CODE. Intel hereby grants to Quokka a worldwide, perpetual, irrevocable (except as set forth in Section 9.3.2), non-exclusive, non-sublicensable, royalty-free license under Intel's Intellectual Properly Rights in the Intel Software to use, reproduce, perform and display the Intel Software in source code form for internal use only, solely for the purpose of (i) preparing the Quokka Venue Based Software, (ii) integrating the Quokka Venue Based Software with the Intel Software to create a format suitable for the TSI SDK and the Quokka Application, (iii) preparing Quokka Derivatives for incorporation into the Quokka Application and other Licensed Products, (iv) preparing Quokka Derivatives for the purpose of correcting any infringement of any third party intellectual property right, (v) making Quokka Improvements, and (vi) providing technical support for the Quokka Application and other Licensed Products. The Quokka Derivatives, the Quokka Venue Based Software, the Quokka Application and other Licensed Products shall be the property of Quokka subject to Intel's ownership of the Intel Software, and Quokka shall be the owner (subject to the proviso below) of all right, title and interest (including without limitation, all intellectual property rights) therein; provided, however, that to the extent that Intel or any Intel employee, agent or contractor may make any contribution the Quokka Derivatives, the Quokka Venue Based Software, the Quokka Application or any Licensed Product (other than the Intel Software), Intel agrees to license under the Intel Intellectual Property Rights in such contribution and hereby grants to Quokka a worldwide, perpetual, irrevocable (except as set forth in Section 9.3.2), non-exclusive, royalty-free license under the Intel Intellectual Property Rights in such contribution (to the extent that Intel has the right to grant such a license) to use, reproduce, perform, display, sublicense and distribute such contributions as incorporated in the Quokka Derivatives, the Quokka Venue Based Software, the Quokka Application or any Licensed Product as contemplated by this Agreement. The parties intend the Quokka Derivatives, the Quokka Venue Based Software and the Quokka Application be the property of Quokka and not jointly owned by Quokka and Intel.


3.2 INTEL SOFTWARE OBJECT CODE. Intel hereby grants to Quokka a worldwide, irrevocable (except as set forth in Section 9.3.2), perpetual, non-exclusive, royalty-free license to reproduce, distribute, license through multiple levels of distribution, display and perform the Intel Software only in binary code form and only incorporated into Licensed Products (including without limitation the Quokka Application). The Intel Software may only be licensed without warranties of non-infringement of third party intellectual property rights.


3.3 RESTRICTIONS ON QUOKKA. Quokka shall not assign, sub-license, lease, or in any other way transfer, use, perform, display or disclose the Intel Software to any third party or reproduce or distribute any part of the Intel Software except as specifically provided in this Agreement. Intel acknowledges, however, that third party vendors may require temporary access to source code for the Intel Software in emergency situations, and, subject to Intel's prior written approval, which will not unreasonably be withheld, Quokka may grant such access (subject to appropriate confidentiality agreements) as reasonably necessary to remedy an emergency situation.


3.4 NO OTHER RIGHTS IN INTEL PROPERTY. No rights or licenses are granted by Intel to Quokka under this Agreement, expressly, by estoppel or by implication, with respec ...