QUOKKA SPORTS INC
S-1, 1999-04-23
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<PAGE>   1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999
 
                                                     REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                              QUOKKA SPORTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                    <C>                                    <C>
               DELAWARE                                 7999                                94-3250045
   (STATE OR OTHER JURISDICTION OF          (PRIMARY STANDARD INDUSTRIAL                 (I.R.S. EMPLOYER
    INCORPORATION OR ORGANIZATION)          CLASSIFICATION CODE NUMBER)                IDENTIFICATION NO.)
</TABLE>
 
                            ------------------------
 
                        525 BRANNAN STREET, GROUND FLOOR
                            SAN FRANCISCO, CA 94107
                                 (415) 908-3800
         (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
            AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                                  ALAN RAMADAN
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                        525 BRANNAN STREET, GROUND FLOOR
                            SAN FRANCISCO, CA 94107
                                 (415) 908-3800
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
                            ------------------------
 
                                   COPIES TO:
 
<TABLE>
<S>                                                      <C>
                  KENNETH L. GUERNSEY                                       DAVID C. DRUMMOND
                    ISOBEL A. JONES                                          GEOFFREY B. HALE
                     STEVE R. DAETZ                                           BRYAN D. KURTZ
                     DAVID J. PAUL                                   WILSON SONSINI GOODRICH & ROSATI
                   COOLEY GODWARD LLP                                    PROFESSIONAL CORPORATION
             ONE MARITIME PLAZA, 20TH FLOOR                                 650 PAGE MILL ROAD
            SAN FRANCISCO, CALIFORNIA 94111                                PALO ALTO, CA 94304
                     (415) 693-2000                                           (650) 493-9300
</TABLE>
 
                            ------------------------
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
                               ------------------
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
                               ------------------
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
                               ------------------
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
          TITLE OF EACH CLASS OF                      PROPOSED MAXIMUM                           AMOUNT OF
       SECURITIES TO BE REGISTERED               AGGREGATE OFFERING PRICE(1)                 REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                                    <C>
Common Stock, par value $.0001 per
  share...................................               $57,500,000                              $15,985
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) Estimated solely for the purpose of computing the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933.
                            ------------------------
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2
 
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
 
                             SUBJECT TO COMPLETION
 
                  PRELIMINARY PROSPECTUS DATED APRIL   , 1999
 
PROSPECTUS
 
                                                  SHARES
                               QUOKKA SPORTS LOGO

                                  COMMON STOCK
                            -----------------------
 
     Quokka Sports, Inc. is offering                shares. This is our initial
public offering, and no public market currently exists for our stock. We
anticipate that the initial public offering price will be between $     and
$     per share. We have filed an application for the common stock to be quoted
on the Nasdaq National Market under the symbol "QKKA."
 
                            -----------------------
 
     INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
                            -----------------------
 
<TABLE>
<CAPTION>
                                                             PER SHARE           TOTAL
                                                             ---------           -----
<S>                                                          <C>               <C>
Initial public offering price..............................  $                 $
Underwriting discount......................................  $                 $
Proceeds, before expenses, to Quokka.......................  $                 $
</TABLE>
 
     The underwriters may also purchase up to an additional           shares
from Quokka at the public offering price, less the underwriting discount, within
30 days from the date of this prospectus to cover over-allotments.
 
     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
 
     The underwriters expect that the shares of common stock will be ready for
delivery in New York, New York on or about                , 1999.
 
                            -----------------------
 
MERRILL LYNCH & CO.
                  LEHMAN BROTHERS
 
                                    BANCBOSTON ROBERTSON STEPHENS
 
                            -----------------------
 
              THE DATE OF THIS PROSPECTUS IS                , 1999
<PAGE>   3
                              (INSIDE FRONT COVER)



                                   [to come]
<PAGE>   4
                         (INSIDE FRONT COVER GATE FOLD)



    [COLOR CODED WORLD MAP IDENTIFYING LOCATIONS OF CERTAIN SPORTING EVENTS
 COVERED BY QUOKKA WITH PICTURE OF MOUNTAINEER, PICTURE OF CAR RACE, PICTURE OF
           MARATHON RUNNER AND PICTURE OF SAILBOAT SUPERIMPOSED ON MAP.]


<PAGE>   5
 
     You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
 
     No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
                            ------------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................     5
Risk Factors................................................     8
Use of Proceeds.............................................    21
Dividend Policy.............................................    21
Capitalization..............................................    22
Dilution....................................................    23
Selected Consolidated Financial Data........................    24
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................    25
Business....................................................    31
Management..................................................    53
Certain Transactions........................................    64
Principal Stockholders......................................    66
Description of Capital Stock................................    69
Shares Eligible for Future Sale.............................    75
Underwriting................................................    76
Legal Matters...............................................    78
Experts.....................................................    78
Change in Principal Accountants.............................    78
Additional Information......................................    78
Index to Consolidated Financial Statements..................   F-1
</TABLE>
 
     Quokka Sports(R) and Quokka Sports Immersion(TM) are trademarks of Quokka.
This prospectus also includes trade dress, trade names and trademarks of other
companies. All other brand names or trademarks appearing in this prospectus are
the property of their respective holders.
 
                                        4
<PAGE>   6
 
                               PROSPECTUS SUMMARY
 
     You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our financial statements and notes to those statements appearing
elsewhere in this prospectus. Unless otherwise indicated, all information in
this prospectus (1) assumes the automatic conversion of our outstanding
preferred stock into common stock on a one-for-one basis upon closing of the
offering, (2) assumes the underwriters' option to purchase additional shares in
the offering will not be exercised and (3) assumes the exercise of certain
warrants to purchase 508,848 shares. See "Description of Capital Stock" and
"Underwriting." References in this prospectus to "Quokka," "Quokka Sports," "our
company," "we," "our," and "us" refer to Quokka Sports, Inc.
 
                              QUOKKA SPORTS, INC.
 
     Quokka Sports has pioneered a unique new genre of global sports programming
that uses the digital information sharing and communications power of the
Internet and other interactive distribution systems to immerse our global
audience in a compelling sports entertainment experience. Our programming is
designed to engage viewers, give them control of the action sequence and let
them experience and view sports from a variety of perspectives. Our coverage of
sporting events incorporates a wide range of digital assets, which might
include: video, text, audio, images, athlete biometrics, telemetry,
environmental data, e-mails, results and timing. Our programming can be accessed
over the Internet at www.quokka.com and may be available through other
interactive distribution systems in the future. With unique, rich content that
leverages technology's potential for merging entertainment and information, we
are positioned to become a leading provider of digital sports entertainment
addressing the entertainment passions of a global community of sports
enthusiasts.
 
     We are creating an interactive digital sports network that offers a variety
of engaging sports entertainment programming. In developing our programming
calendar, we currently target sports events that are generally rich in digital
assets and long in duration, have a global audience and involve continuous
action with multiple simultaneous activities. We have selected the Olympics,
motor racing, sailing and adventure sports as the first four channels of our
network.
 
     We generate revenues primarily through the sale of sponsorships. Sponsors
secure an exclusive sponsorship category and the opportunity to embed and
promote their products in our rich digital programming. Our technology and
communication sponsors also have the opportunity to showcase the technological
capabilities of their products and services in the production of our immersive
programming. Additionally, we deliver a global audience having demographic
qualities desired by sponsors and advertisers.
 
     Our first digital sports program was the 1997-98 Whitbread Round The World
Race, a 32,000 nautical mile, around-the-world sailing race featuring an
international field of competitors. Our coverage attracted more than 1.8 million
unique users from 177 countries, more than half of whom accessed our Whitbread
Web site from outside the United States. Sports fans visiting the Whitbread site
were primarily between 25 and 34 years old and had an average annual household
income of $75,000, while 64% were college educated and 63% held professional,
executive or technical positions, providing an attractive, targeted audience for
sponsors and advertisers. These users spent an average of approximately 9.9
minutes per visit at the site. This compares favorably to an average of 5.8
minutes per visit at other leading sports-related Web sites, according to our
estimates based on Media Metrix statistics. We generated $9.4 million of
revenues from sponsorships related to the Whitbread race.
 
     In February 1999, we established a joint venture with NBC Olympics, Inc. to
develop interactive digital coverage of the Olympics through August 2004. In
March 1999, through a joint venture with Forsythe Racing, Inc., we acquired
digital rights to cover Championship Auto Racing Teams events through 2003.
Additionally, in March 1999, we acquired digital rights to cover FIM 500cc Road
Racing World Championship motorcycle races through 2003. We began coverage of
the nine-month Around
 
                                        5
<PAGE>   7
 
Alone sailing race in September 1998. We covered the 14th Marathon des Sables
desert footrace and are also covering a variety of Quokka-created, adventure
sports events as part of our adventure sports channel. We plan to add
programming to each of our four existing channels and may create additional
channels in the future.
 
     Participatory and spectator sports are among the leading passions in
developed nations around the globe as evidenced by the popularity of sports and
the amount of money consumers spend on sports events, products and related
services. The ESPN Chilton Sports Poll estimates that 86.6% of the general
population 12 years of age or older in the United States are sports fans. Today,
sporting events generate revenue from a wide range of sources, including the
sale of broadcast rights, sponsorships, advertising, merchandising, publishing
and venue access. The Georgia Institute of Technology estimated that revenue
streams derived from spectator sports, sporting goods and sporting publications
in the United States in 1995 exceeded $130 billion. In addition, based on
research conducted by Sponsorship Research International, an independent
research organization that measures global sponsorship opportunities, we
estimate that in 1998 $13.2 billion was invested globally in sports through the
sponsorship of events, federations, teams, individuals and stadiums.
 
     In August 1996, we adopted our current business model and incorporated in
Delaware under the name Quokka Productions, Inc. Shortly thereafter, in
September 1996, we changed our name to Quokka Sports, Inc. Prior to August 1996,
we operated as an Australian software development and consulting company, Ozware
Developments Unit Trust, an Australian unit trust. Our main offices are located
at 525 Brannan Street, San Francisco, California 94107, and our phone number is
(415) 908-3800. Our primary Web site is located at www.quokka.com. Information
contained on our Web site does not constitute part of this prospectus.
 
                                  THE OFFERING
 
Common stock offered by Quokka......                    shares
 
Common stock to be outstanding after
the offering........................                    shares(1)
 
Use of proceeds.....................     For general corporate purposes,
                                         including working capital, expansion of
                                         operations, capital contributions to
                                         our joint ventures and capital
                                         expenditures.
 
Proposed Nasdaq National Market
symbol..............................     QKKA
- ---------------
(1) Based on shares outstanding as of March 31, 1999. Excludes: (a) 2,391,750
    shares issuable upon the exercise of warrants outstanding as of March 31,
    1999 at a weighted average per share price of $4.95; (b) 7,145,025 shares
    issuable upon the exercise of options outstanding as of March 31, 1999 at a
    weighted average per share price of $4.35; (c) 6,460,401 additional shares
    reserved for issuance under Quokka's 1997 Equity Incentive Plan; (d) 450,000
    shares reserved for issuance under Quokka's 1999 Non-Employee Director's
    Stock Option Plan, and (e) 1,000,000 shares reserved for issuance under
    Quokka's 1999 Employee Stock Purchase Plan. Includes 508,848 shares issuable
    upon the exercise of certain warrants outstanding as of March 31, 1999 at a
    weighted average per share price of $1.06, which will expire if not
    exercised prior to the closing of this offering. See "Capitalization,"
    "Management -- Director Compensation," "Management -- Employee Benefit
    Plans" and "Description of Capital Stock."
 
                                        6
<PAGE>   8
 
                   SUMMARY CONSOLIDATED FINANCIAL INFORMATION
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                           THREE MONTHS ENDED
                                          YEARS ENDED DECEMBER 31,                              MARCH 31,
                       --------------------------------------------------------------   -------------------------
                          1994          1995         1996        1997         1998         1998          1999
                       -----------   -----------   ---------   ---------   ----------   -----------   -----------
                       (UNAUDITED)   (UNAUDITED)                                        (UNAUDITED)   (UNAUDITED)
<S>                    <C>           <C>           <C>         <C>         <C>          <C>           <C>
CONSOLIDATED
  STATEMENT OF
  OPERATIONS:
  Revenues...........   $     399     $      82    $      39   $   4,000   $    8,635    $   4,867    $      897
  Operating
    expenses.........         311           100        1,595       8,871       18,493        5,289         8,461
  Income/(loss) from
    operations.......          88           (18)      (1,556)     (4,871)      (9,858)        (422)       (7,564)
  Net
    income/(loss)....   $      90     $      (6)   $  (1,560)  $  (4,942)  $   (9,538)   $    (390)   $   (7,848)
  Historical basic
    and diluted net
    income/(loss) per
    share............   $    0.02     $    0.00    $   (0.41)  $   (0.73)  $    (0.99)   $   (0.04)   $    (0.80)
  Shares used in
    computing
    historical basic
    and diluted net
    income/(loss) per
    share............   3,800,000     3,800,000    3,800,000   6,791,534    9,654,835    9,651,566     9,756,059
Pro forma net loss
  per share -- basic
  and diluted........                                                      $    (0.40)                $    (0.23)
Shares used in
  computing pro forma
  net loss per
  share -- basic and
  diluted............                                                      23,914,934                 34,000,923
</TABLE>
 
<TABLE>
<CAPTION>
                                                                       MARCH 31, 1999
                                                              --------------------------------
                                                                  ACTUAL        AS ADJUSTED(1)
                                                              --------------    --------------
                                                               (UNAUDITED)
<S>                                                           <C>               <C>
CONSOLIDATED BALANCE SHEET DATA:
  Cash and cash equivalents.................................     $ 15,263
  Working capital...........................................       13,953
  Total assets..............................................       22,853
  Debt and leases, long-term portion........................          699
  Accumulated deficit.......................................      (23,894)
  Total stockholders' equity................................       18,612
</TABLE>
 
- ---------------
(1) Adjusted to give effect to the sale of the                shares offered by
    Quokka hereby, at an assumed public offering price of $     , after
    deducting the estimated underwriting discount and estimated offering
    expenses, and the application of the net proceeds therefrom. See "Use of
    Proceeds" and "Capitalization."
 
                                        7
<PAGE>   9
 
                                  RISK FACTORS
 
     You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also could harm our business.
If any of the following risks actually occur, our business could suffer and the
trading price of our common stock could decline.
 
     This prospectus contains forward-looking statements. The outcome of the
events described in these forward-looking statements is subject to risks and you
should not put undue reliance on these forward-looking statements. When used in
this prospectus, the words "intend," "anticipate," "believe," "estimate," "plan"
and "expect" and similar expressions as they relate to us are included to
identify forward-looking statements. Our actual results could differ materially
from those discussed in the forward-looking statements contained in this
prospectus. This section and the sections entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
contain a discussion of some of the factors that could contribute to those
differences.
 
                     RISK FACTORS RELATED TO OUR OPERATIONS
 
WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE
 
     We adopted our current business model in August 1996 and began generating
revenues in connection with this model during the first quarter of 1997. As of
March 31, 1999, we had an accumulated deficit of approximately $23.9 million. We
expect to incur losses for the foreseeable future, largely due to substantial
planned increases in marketing expenses and expenses associated with our digital
sports entertainment programming. We may be unable to generate sufficient
revenues or control operating expenses to achieve or sustain profitability or
generate positive cash flow.
 
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE OUR BUSINESS AND
PROSPECTS
 
     Our limited operating history makes it difficult to evaluate our business
and prospects. As a digital sports entertainment company in an early stage of
development, we face significant risks, uncertainties, expenses and
difficulties. In order to succeed, we must do most, if not all, of the
following:
 
     - develop immersive programming to attract and retain our audience;
 
     - secure and retain additional sponsors and advertisers;
 
     - acquire rights on commercially feasible terms to cover additional
       sporting events;
 
     - develop, enhance and carefully manage our brand;
 
     - deliver multiple programming events simultaneously to one or more global
       distribution networks;
 
     - promote our name in the sports and media markets;
 
     - respond appropriately to competitive developments;
 
     - develop and implement a successful electronic commerce strategy;
 
     - develop a successful line of product merchandise;
 
     - secure additional distribution systems for our content;
 
     - continue to develop and improve our know-how, to enhance our Web sites to
       meet the needs of a changing market and to adapt to changing technology;
 
     - successfully execute our business and marketing strategies; and
 
     - attract, integrate, retain and motivate qualified personnel.
 
Our business will suffer if we are unable to accomplish these things.
 
                                        8
<PAGE>   10
 
OUR QUARTERLY OPERATING RESULTS ARE EXPECTED TO FLUCTUATE
 
     Our quarterly operating results have varied in the past, and we expect them
to fluctuate in future periods depending on a number of factors described below
and elsewhere in this "Risk Factors" section of the prospectus. Many of these
factors are outside our control. Our revenues in any quarter depend on the
sports programming we offer, the sponsorship arrangements we have in place at
that time and finalize during the quarter and, to a lesser extent, the
advertising and electronic commerce transactions we execute. We expect that our
electronic commerce revenues will be higher leading up to and during our major
sports programming. It is likely that sponsorship deals will have a long sales
cycle and may be unevenly distributed across fiscal quarters. We expect our
expenses to increase over time for production and other operational costs. The
timing of these expenses, as well as our obligations under existing and future
contracts, could fluctuate from quarter to quarter and intensify leading up to
and during significant sporting events such as the Olympic Games. We may be
unable to predict our future revenues accurately or to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. Any
significant shortfall of revenues would have a negative impact on our results of
operations. For these and other reasons, we may not meet the earnings estimates
of securities analysts or investors and our stock price could suffer.
 
OUR BUSINESS DEPENDS ON OUR ABILITY TO ACQUIRE RIGHTS TO KEY SPORTING EVENTS
 
     We need to acquire rights to key sporting events to succeed. Our limited
operating history makes it difficult to assess our ability to acquire rights in
the future. Holders of rights may not be willing to enter into strategic
relationships with us or to sell rights to us at prices we can afford, or at
all. We expect the cost of acquiring rights to increase significantly as
competition for these rights increases. We may not be successful in acquiring
the rights we need, especially if third parties, such as traditional media
companies, have significantly greater resources, experience and bargaining
leverage than we do, compete for those rights.
 
WE HAVE LIMITED EXPERIENCE DEVELOPING AND COORDINATING A COMPREHENSIVE
PROGRAMMING SCHEDULE
 
     We have limited experience developing our programming. The programming we
have developed required significantly fewer resources and technical skills than
the major sports programming we are scheduled to produce, including the Olympic
Games and coverage of motor sports. Our programming may not keep pace with
technological developments, evolving industry standards or competing programming
alternatives. We have not developed multiple large-scale programming events
simultaneously and may lack the financial and technical resources to develop
immersive content for multiple simultaneous sporting events. Even if the
resources are available, we may be unable to coordinate a comprehensive
programming schedule. To be successful, we will need to staff and operate
24-hour production facilities that are capable of collecting, repackaging and
distributing digital coverage to a global audience. Our business will suffer if
we are unable to coordinate a comprehensive programming schedule.
 
OUR AUDIENCE MAY NOT LIKE OUR WEB SITES OR THE INTERACTIVE NATURE OF OUR
PROGRAMMING
 
     It is difficult to predict whether our audience will like the layout and
design of our Web sites or adapt to the interactive nature of our programming.
If our layout and design are not user-friendly in the eyes of a wide and diverse
audience, we will not be successful in attracting repeat users. Additionally,
the nature of our programming requires our audience to actively navigate through
multiple pages to experience the depth of coverage. Sports fans who are
accustomed to passive listening or viewing sports coverage provided by
traditional media may not be willing to participate in the interactive nature of
sports entertainment on our Web sites. Our audience could reduce its viewing of
our existing programming due to dissatisfaction with our programming or greater
satisfaction with programming developed by one or more of our competitors. If
the size of our audience or the duration of visits to our sites decrease or fail
to grow as expected, we may be unable to achieve the audience exposure we have
committed and will commit to
 
                                        9
<PAGE>   11
 
provide to our sponsors, which could result in lost sponsorship revenues. Our
business will suffer if our Web site design and programming do not appeal to the
general public.
 
WE HAVE LIMITED EXPERIENCE WITH OUR SPONSORSHIP MODEL
 
     Our revenue model is primarily based on securing long-term digital
entertainment sponsorships that provide sponsors exclusivity within a
sponsorship category and product promotion that is embedded in our programming.
We have limited experience with this sponsorship model and have entered into
only one digital entertainment sponsorship. Prospective sponsors may not be
interested in entering into these digital entertainment sponsorships at the
rates we set, if at all. Our business will suffer if we are unable to maintain
our existing sponsors and secure additional sponsors.
 
     Additionally, our sponsorship agreements typically require the delivery of
a specified number of brand impressions. Our fulfillment of these commitments
assumes that we will be able to create these brand impressions on sports
programming that we acquire or create. Owners of rights to sporting events often
have pre-arranged sponsor lists they require us to honor. Pre-existing
sponsorship relationships may prevent us from meeting the minimum commitments we
have to our exclusive sponsors and could cause us to allocate impressions to our
sponsors that were otherwise available for additional revenue generating
purposes. We might acquire or create additional programming which would allow us
to provide our sponsors with sufficient brand impressions for which we would
incur additional expenses.
 
WE WILL DEPEND ON A SMALL NUMBER OF SPONSORS, THE LOSS OF WHICH COULD HARM OUR
BUSINESS
 
     To date, we have depended on a limited number of sponsors for a majority of
our revenues. In 1998, two sponsors accounted for 68% of our revenues.
 
     We anticipate that our results of operations will depend to a significant
extent upon revenues from a small number of digital entertainment sponsors.
Although we seek to enter into multi-year agreements with our digital
entertainment sponsors, we cannot guarantee that these sponsors will maintain
their association with us. The loss of one or more digital entertainment
sponsors could negatively affect our business.
 
OUR SYSTEMS MAY FAIL OR EXPERIENCE A SLOW DOWN
 
     Substantially all of our communications hardware and computer hardware
operations are located in our facilities in San Francisco, California and at
Frontier GlobalCenter in Sunnyvale, California, where our Web sites are hosted.
Our operations depend on our ability to protect these systems against damage
from fire, earthquakes, power loss, telecommunications failures, break-ins and
similar events. Additionally, computer viruses, electronic break-ins or other
similar disruptive problems could harm our Web sites. A disaster or malfunction
that disables either our San Francisco production facility or our Sunnyvale
hosting services could cause an interruption in the production and distribution
of our programming, limit the quantity or timeliness of updates to our
productions or limit the speed at which our audience can access our content. Our
insurance policies may not adequately compensate us for any losses that may
occur due to any failures or interruptions in our systems. We do not presently
have a formal disaster recovery plan.
 
     Our Web sites have experienced significant increases in traffic during
coverage of certain sporting events. As we deliver additional programming, we
expect our audience base to increase significantly. This will require our Web
sites to accommodate a high volume of traffic and deliver frequently updated
information. Failure of our systems to have the capacity to accommodate higher
volumes of traffic could harm our business. Our Web sites in the past have
experienced slower response times or other problems for a variety of reasons,
including delays or malfunctions as a result of third-party distributors on
which we rely.
 
OUR BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO SUCCEED
 
     We believe that broad recognition and a favorable audience perception of
the Quokka brand will be essential to our success. Accordingly, we intend to
build traffic and brand recognition by aggressively
 
                                       10
<PAGE>   12
 
marketing www.quokka.com as the first interactive network that offers immersive
sports programming. We believe building brand awareness of www.quokka.com and
the Quokka Sports Immersion experience will develop an association between our
style of programming and a distinctive user experience that inspires lengthy
repeat visits and strong audience loyalty. We plan to market www.quokka.com
through an extensive traditional media campaign employing advertising on
television, printed publications, outdoor signage and radio. We also plan to
have a simultaneous online advertising campaign and to gain significant exposure
through our co-branded initiatives. These initiatives will involve significant
expense and we may lack the resources necessary to accomplish these initiatives.
Even if the resources are available, we cannot be certain that our brand
enhancement strategy will deliver the brand recognition and favorable audience
perception that we seek. If our strategy is unsuccessful, these expenses may
never be recovered and we may be unable to increase future revenues. Even if we
achieve greater recognition of our brand, competitors with greater resources or
a more recognizable brand could reduce our market share of the emerging digital
sports entertainment market.
 
WE DEPEND ON KEY STRATEGIC RELATIONSHIPS
 
     We depend on agreements with certain established media entities and sports
governing bodies, such as NBC Olympics, Inc. and Championship Auto Racing Teams,
Inc. Our agreements with these parties enable development of certain Olympic and
motor sports programming. Additionally, these strategic relationships, among
others, provide us with credibility in the marketplace to negotiate sponsorships
and acquire rights to cover additional sports. While these strategic
relationships are grounded in contractual agreements, these parties can
terminate the agreements for various reasons, including contractual breaches and
a change in control of our company. We cannot guarantee that our strategic
partners will perform their contractual obligations. Even if the contracts run
for the full term, we may not be able to renew the agreements on comparable
terms, if at all. The loss of any of these strategic relationships could impact
the breadth of our sports programming and affect our ability to acquire
additional rights or secure sponsorships.
 
WE DEPEND ON THIRD PARTIES FOR INTERNET ACCESS, DELIVERY OF OUR PROGRAMMING AND
GENERATION OF MULTIPLE REVENUE STREAMS
 
     Our audience depends on Internet service providers, online service
providers and other Web site operators for access to our Web sites. Many of them
have experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
Access by our audience outside the United States could also be delayed or
interrupted due to the uncertainty of the telecommunications infrastructure in
foreign countries.
 
     We depend on various domestic and international third parties for software,
systems and delivery of much of our programming. Many of these third parties
have limited operating histories, early generation technology and are themselves
dependent on reliable delivery from others. Any delays or malfunctions in the
distribution of our content would limit our ability to deliver our programming.
We also depend on Frontier GlobalCenter in Sunnyvale, California. If the
Frontier GlobalCenter hosting facility is disabled or malfunctions, access to
our Web sites would be limited or eliminated.
 
     Our plans to generate multiple revenue streams also depend on third
parties. In particular, we depend on encryption technology by others to enable
secure electronic commerce transactions. In addition, our ability to obtain
sponsorship and advertising interest will depend on whether third parties we
hire can generate meaningful and accurate data to measure the demographics of
our audience and the delivery of advertisements on our Web sites. Companies may
choose not to advertise on our Web sites or may pay less if they do not perceive
these measurements made by third parties to be reliable.
 
OUR SPONSORSHIP MODEL COULD PREVENT US FROM ACQUIRING CRITICAL TECHNOLOGY
 
     A significant feature of our sponsorship model is the exclusive right to be
the sole sponsor of a sponsorship category, such as computing, database
software, digital distribution, consumer electronics or
 
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<PAGE>   13
 
wireless communications. While we expect this exclusivity feature to be central
to our marketing strategy for securing and retaining these sponsorships, it may
bind us to undesirable sponsorship arrangements and limit our ability to acquire
technology we may otherwise want or need. Exclusive sponsors acquire multi-year
rights to a sponsorship category and sometimes provide us with equipment or
technical expertise to enable us to develop and distribute our programming. We
are limited in our ability to terminate an existing sponsor relationship if a
sponsor fails to provide us with necessary equipment and expertise, or is
otherwise less desirable than a prospective sponsor in the same sponsorship
category. An existing sponsor also may prevent us from acquiring desirable
technology from competitors of the sponsor, which could harm our programming.
 
WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE
 
     The market for digital sports programming is characterized by rapid
technological change. To be successful, we must adapt to this rapidly changing
market by continually improving the features we offer and developing new
features. We may not maintain our competitive position in the digital sports
entertainment market for a number of reasons, including the following:
 
     - our technology infrastructure may not provide high-quality, reliable and
       immersive programming or adequately scale to support multiple
       simultaneous events;
 
     - we may be unable to afford substantial expenditures to adapt our service
       to changing technologies;
 
     - we may be unable to license leading technologies or develop new
       proprietary technologies; and
 
     - we may fail to utilize new technologies effectively or adapt to
       technological changes.
 
Our business will suffer if we are unable to adapt in a timely manner in
response to technological developments, evolving industry standards, changing
market conditions or customer requirements.
 
OUR BUSINESS IS SUBJECT TO MANY RISKS ASSOCIATED WITH WORLDWIDE SPORTS EVENT
COVERAGE AND OTHER INTERNATIONAL ACTIVITIES
 
     Our coverage of adventure sports is not limited geographically. We have
developed, and expect to continue to develop, programming covering sporting
events throughout the world and across the oceans. For example, our coverage of
yachting races and of adventure sports, such as mountaineering in the Karakoram
range in China and treks across deserts in Morocco, require us to traverse
international borders. Coverage of these events requires that we deploy
production staff to locations throughout the world. Additionally, we expect to
maintain offices in several foreign countries, including Great Britain,
Switzerland and Australia. As a result, we are subject to numerous risks
associated with doing business internationally, including the following:
 
     - regulatory requirements, including export requirements, tariffs and other
       barriers, health and safety requirements and labor and immigration laws;
 
     - difficulties in staffing and managing foreign operations;
 
     - differences in reliability of telecommunications infrastructure and
       Internet access;
 
     - varying technological standards and capabilities;
 
     - differences in standards of protection for intellectual property;
 
     - political instability;
 
     - hostile action against event participants or our employees;
 
     - currency fluctuations;
 
     - potentially adverse tax consequences; and
 
     - restrictions against the repatriation of earnings from a foreign country.
 
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<PAGE>   14
 
     Any one of these or other risks could harm the success of our international
operations or prevent or delay our coverage of a particular sports event.
Additionally, regional events that we choose to cover may fail to attract a
global audience. In that case, we would incur the significant expenses inherent
in the coverage of an international event without achieving the audience
exposure we have committed or may commit to provide to our sponsors.
 
WE ARE GROWING RAPIDLY AND MAY BE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH
 
     We are experiencing a period of significant expansion. We had 40 employees
at December 31, 1997, compared to 118 employees at December 31, 1998 and 186
employees at March 31, 1999. This growth is placing, and we expect any further
growth to continue to place, a significant strain on our management, operational
and financial resources. This will require us to implement additional management
information systems and to develop additional operating, administrative,
financial and accounting systems and controls. If we are unable to develop these
systems and manage our growth effectively, our business will suffer.
 
     Many of our senior management have only recently joined us. Eight of our
thirteen most senior officers have worked for us for less than one year. These
individuals have not previously worked together and are becoming integrated as a
management team. Our business will suffer if our senior management is unable to
successfully manage our growth.
 
OUR SUCCESS WILL DEPEND ON OUR KEY PERSONNEL, WHO WE MAY BE UNABLE TO RETAIN
 
     Our success will depend on the continued services of our senior management
and other key personnel, as well as our ability to attract, train, retain and
motivate other highly skilled technical, managerial, marketing and customer
service personnel. Competition for these personnel is intense, and we may not be
able to successfully attract, integrate or retain sufficiently qualified
personnel. Our anticipated programming schedule in the near future will require
that we attract and retain personnel who are skilled in production, computer and
other technical fields. Skilled technical personnel are in high demand and have
multiple employment opportunities, especially in the San Francisco Bay Area,
where our headquarters are located. As a matter of practice, we do not generally
enter into employment agreements with our employees. The loss of the services of
any of our executive officers, particularly Alan Ramadan, our president and
chief executive officer, or other key employees could harm our business.
 
ACCEPTANCE OF PROPERTY OR SERVICES AS PAYMENT MAY LIMIT THE AVAILABILITY OF
WORKING CAPITAL
 
     We have received property or services, including computer equipment,
Internet access, digital cameras and telecommunications equipment and services
as payment for our sponsorships. While these property and services allow us to
develop and distribute our programming content, they do not provide us with the
same working capital flexibility that a cash payment would provide. We expect to
reduce the amount of property and services accepted as payment in future
periods, but may not be successful in doing so.
 
WE MAY BE SUBJECT TO NEGATIVE PUBLICITY AND LIABILITY FOR ATHLETES OR OUR
EMPLOYEES ASSOCIATED WITH OUR EVENTS
 
     Many of our events, including sailing and mountain climbing, involve
significant risks to athletes and our employees that participate in or document
the events. Additionally, many of our events take place in regions of the world
where there may be increased danger of external threats such as terrorism. We
will experience adverse publicity, and may be subject to liability claims by
athletes, employees or their relatives, for injuries or deaths that occur as a
result of our events. Any incidents like this during our events could disrupt
our programming and reduce sponsorships and athlete and employee participation
in future events. Liability claims, regardless of merit, could require us to
expend significant resources. Additionally, our insurance coverage may be
inadequate to protect us against any claims.
 
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<PAGE>   15
 
WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS
 
     We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our success. We rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to protect our proprietary rights in products and
services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors and nondisclosure agreements with
parties with which we conduct significant business to limit access to and
disclosure of our proprietary information. These contractual arrangements and
the other measures taken by us to protect our intellectual property may not
prevent misappropriation of our technology or deter independent third-party
development of similar technologies. In addition, we may need to engage in
litigation in order to enforce our intellectual property rights in the future or
to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of management and
other resources, either of which could harm our business.
 
     We pursue the registration of our trademarks and service marks in the
United States and internationally. Effective trademark, service mark, copyright
and trade secret protection may not be available in every country in which our
programming is accessible online. We have licensed in the past, and expect to
license in the future, certain of our proprietary rights, such as trademarks or
copyrighted material, to third parties. These licensees may take actions that
might adversely affect the value of our proprietary rights or reputation, which
could adversely affect our business. We also rely on certain off-the-shelf
technologies that we license from third parties. These third-party licenses may
not continue to be available to us on commercially reasonable terms or at all.
The inability to use licensed technology important to our business could require
us to obtain substitute technology of lower quality or performance standards or
at greater cost, which could harm our business. In the future, we may seek to
license additional technology or content in order to enhance our current
programming or to introduce new content. We cannot be certain that any such
licenses will be available on commercially reasonable terms or at all. The loss
of or inability to obtain or maintain any of these technology licenses could
result in delays in providing our programming until equivalent technology, if
available, is identified, licensed and integrated. Such delays could harm our
business.
 
     Because we license some data and content from third parties, our exposure
to copyright infringement actions may increase because we must rely upon these
third parties for information as to the origin and ownership of the licensed
content. We generally obtain representations as to the origins and ownership of
licensed content and obtain indemnification to cover any breach of any
representations. However, we cannot be certain that these representations are
accurate or that any indemnification amounts will be sufficient to provide
adequate compensation for any breach of representations.
 
     We cannot guarantee that infringement or other claims will not be asserted
or prosecuted against us in the future whether resulting from our internally
developed intellectual property or licenses or content from third parties. Any
future assertions or prosecutions could harm our business. Any claims, with or
without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel or require us to introduce new
content or trademarks, develop non-infringing technology or enter into royalty
or licensing agreements. These royalty or licensing agreements, if required, may
not be available on acceptable terms, if at all. Our business will suffer if a
successful claim of infringement is brought against us and we are unable to
introduce new content or trademarks, develop non-infringing technology or
license the infringed or similar technology on a timely basis.
 
WE FACE A NUMBER OF RISKS ASSOCIATED WITH ATTAINING YEAR 2000 COMPLIANCE
 
     Computer systems, software packages and microprocessor dependent equipment
may cease to function or generate erroneous data when the year 2000 arrives. To
correctly identify the year 2000, a four-digit date code field will be required
to be what is commonly termed "year 2000 compliant." Our business may suffer if
the systems we depend on to conduct day-to-day operations are not year 2000
compliant. The potential areas of exposure include electronic data exchange
systems operated by third parties with which we transact business and computers,
software, telephone systems and other equipment used internally.
 
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<PAGE>   16
 
While we have established a year 2000 compliance program, this program may not
uncover all year 2000 problems. If systems material to our operations are not
year 2000 compliant or if third parties fail to make their systems year 2000
compliant in a timely manner, the year 2000 issue could harm our business.
 
WE MAY BE SUBJECT TO LIABILITY FOR PUBLISHING OR DISTRIBUTING CONTENT
 
     We may be subject to claims relating to content associated with us,
including content that may appear on our Web sites or be obtained through other
distribution channels. These claims could take the form of lawsuits for
defamation, negligence, copyright or trademark infringement or other theories
based on the nature and content of such materials. In addition, we could be
subject to liability with respect to content that may be accessible through our
Web sites or third-party Web sites accessed from our sites. Although we carry
general liability insurance, our insurance may not cover potential claims of
this type or may not be adequate to cover all costs incurred in defense of
potential claims or to indemnify us for all liability that may be imposed.
 
ACQUISITIONS COULD RESULT IN DILUTION, OPERATING DIFFICULTIES OR OTHER HARMFUL
CONSEQUENCES
 
     If appropriate opportunities arise, we intend to acquire businesses,
technologies, services or products that we believe are strategic for our
success. We currently do not have any understandings, commitments or agreements
with respect to any material acquisition. We may be unable to identify,
negotiate or finance future acquisitions successfully, or to integrate
successfully any acquisitions with our current business. The process of
integrating an acquired business, technology, service or product into our
business and operations may result in unforeseen operating difficulties and
expenditures, including the allocation of significant management time and
company resources that would otherwise be available for ongoing development of
our business. Moreover, the anticipated benefits of any acquisition may not be
realized. Future acquisitions could require us to obtain additional equity or
debt financing, which may not be available on favorable terms or at all and
which may be dilutive to existing stockholders.
 
                     RISKS RELATED TO THE INTERNET INDUSTRY
 
OUR BUSINESS DEPENDS ON THE DEVELOPMENT AND GROWTH OF THE INTERNET AND COULD BE
AFFECTED BY DELAYS IN THE DEVELOPMENT OF NEW INTERACTIVE DISTRIBUTION SYSTEMS
 
     Our success will depend on the continued development and growth of the
Internet. While Internet technologies have been evolving rapidly in recent
years, future growth may not continue at comparable rates. As the Internet
continues to experience increased numbers of users and increased frequency of
use, the Internet infrastructure may be unable to support the demands of a
global audience or the bandwidth requirements of consumers. The Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and it could face outages and delays in the
future. This might include outages and delays resulting from the Year 2000
problem. These outages and delays could adversely affect the level of Internet
usage as well as the level of traffic on our Web sites. In addition, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols to handle increased levels of activity or due to
regulation by governments, businesses or other organizations. Our business will
suffer if the necessary infrastructure, standards or protocols or complementary
products, services or facilities are not developed in a timely manner.
 
     Our programming is designed to operate on today's Internet platform as well
as future broadband interactive distribution systems. These systems are expected
to enable increased bandwidth for content and provide faster access for
consumers. Delays in the development of broadband systems could harm our ability
to distribute our programming through subscription services and pay-per-view
events, which could adversely effect plans to generate multiple revenue streams
and existing revenue streams.
 
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<PAGE>   17
 
THE ONLINE DIGITAL ENTERTAINMENT MARKET IS INTENSELY COMPETITIVE
 
     The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated. We expect that competition will
continue to intensify.
 
     We compete, directly and indirectly, for sponsors, rights and the attention
of sports viewers with the following categories of companies:
 
     - Web sites targeted to sports enthusiasts generally, such as
       www.cbs.sportsline.com, www.cnnsi.com and www.espnsportszone.com, many of
       which have been established by traditional media companies, and Web sites
       targeted to enthusiasts of particular sports, such as
       www.majorleaguebaseball.com, www.nascar.com, www.nba.com, www.nfl.com and
       www.nhl.com;
 
     - publishers and distributors of traditional media targeted to sports
       enthusiasts such as the ESPN networks, the FoxSports network and Sports
       Illustrated;
 
     - online services such as America Online and the Microsoft Network, which
       provide access to sports-related content and services;
 
     - vendors of sports information, merchandise, products and services
       distributed through other means, including retail stores, mail, facsimile
       and private bulletin board services; and
 
     - Web search and retrieval services, such as Excite, Infoseek, Lycos and
       Yahoo! and other high-traffic Web sites, such as those operated by cYnet
       and Netscape.
 
     We expect that the number of our direct and indirect competitors will
increase in the future. We anticipate that, as the Internet and other
interactive distribution systems converge with traditional television
broadcasting and cable, significant competition may come from the cable arena,
including such sports-oriented cable networks as the ESPN networks.
 
     Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical and marketing resources,
significantly greater name recognition and substantially larger user or
membership bases than us and, therefore may have a significantly greater ability
to attract advertisers and users. In addition, many of these competitors may be
able to respond more quickly than we can to new or emerging technologies and
changes in Internet user requirements and to devote greater resources than we
can to the development, promotion and sale of their services. Our current or
potential competitors may develop products and services comparable or superior
to those developed by us or adapt more quickly than we can to new technologies,
evolving industry trends or changing Internet user references. Increased
competition could result in price reductions, reduced margins or loss of market
share, any of which would harm our business. In addition, as we expand
internationally, we may face new competition. We may be unable to compete
successfully against current and future competitors and competitive pressures
may harm our business.
 
OUR REVENUES DEPEND ON ADOPTION OF THE INTERNET AS AN ATTRACTIVE MEDIUM FOR
SPONSORS AND ADVERTISERS
 
     Our ability to generate sponsorship and advertising revenues will depend on
many factors, including the following:
 
     - the development of the Internet as an attractive medium for sponsors and
       advertisers;
 
     - the level of use of the Internet by consumers and the amount of traffic
       on our Web sites; and
 
     - our ability to achieve and measure demographic characteristics that are
       attractive to sponsors and advertisers.
 
     Market acceptance of the Internet as a medium for sponsorship and
advertising is highly uncertain. Most potential sponsors and advertisers have
only limited experience with the Internet as an advertising medium and have not
devoted a significant portion of their advertising expenditures to
Internet-based
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<PAGE>   18
 
campaigns. Even if sponsors and advertisers are persuaded to allocate portions
of their budgets to Internet-based advertising, they may not find the medium to
be effective for promoting their products and services relative to traditional
print and broadcast media. Additionally, no standards are widely accepted to
measure the effectiveness of the Internet as a medium for targeting consumers
with particular demographics and influencing consumer behavior. If these
standards do not develop, existing sponsors or advertisers may not continue
their current level of Internet-based sponsorships or advertising, and sponsors
or advertisers who are not currently buying sponsorships or advertising on the
Internet may be reluctant to do so.
 
CHANGES IN REGULATION OF THE INTERNET COULD LIMIT OUR BUSINESS PROSPECTS
 
     We are subject to the same federal, state and local laws as other
businesses on the Internet. Today there are relatively few laws directed towards
online services. However, due to the increasing popularity and use of the
Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online
services. These laws and regulations could cover issues such as user privacy,
freedom of expression, pricing, fraud, content and quality of products and
services, taxation, advertising, intellectual property rights and information
security. Applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Those laws that do reference the
Internet, such as the recently passed Digital Millenium Copyright Act, have not
yet been interpreted by the courts and their applicability and reach are
therefore uncertain.
 
     Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could directly affect the way
we do business or could create uncertainty in the marketplace. This could reduce
demand for our services or increase the cost of doing business as a result of
litigation costs or increased service delivery costs, or could in some other
manner have a material adverse effect on our business, results of operations and
financial condition. In addition, because our services are accessible worldwide
and cover events of global interest, other jurisdictions may claim that we are
required to comply with their laws or qualify to do business as a foreign
corporation in a particular state or foreign country.
 
     In addition to government regulation of the Internet, businesses and other
organizations may restrict access to the Internet at work. Many users access the
Internet through computer terminals at work, either because they do not have
access at home or because the networks at work provide faster and more reliable
access. Access at work may increase if employers upgrade their technology more
quickly than individual consumers in response to the development of broadband
solutions. In response to Internet use by employees or consultants at work,
employers may impose regulations limiting or eliminating Internet or broadband
access on their equipment. To the extent that many of our users access our Web
sites at work, our business will suffer if businesses and other organizations
restrict Internet access at work.
 
OUR INTERNET ACTIVITIES MAY BE SUBJECT TO TAXES
 
     Tax authorities in a number of states are currently reviewing the
appropriate tax treatment of companies engaged in electronic commerce.
Therefore, we may become subject to additional state sales and income taxes. As
our content is available over the Internet in multiple states and foreign
countries, these jurisdictions may claim that we are required to qualify to do
business as a foreign corporation in each such state and foreign country. We are
qualified to do business in six states in the United States, and failure by us
to comply with foreign laws or to qualify as a foreign corporation in a
jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in the inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the
 
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<PAGE>   19
 
application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could subject us to additional taxes or
penalties.
 
INTERNET SECURITY CONCERNS COULD HINDER ELECTRONIC COMMERCE
 
     The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. A key component of our business model includes selling products
associated with the sports entertainment programming that we deliver. Any
compromise of security could deter people from using the Internet and our Web
sites to conduct transactions that involve transmitting confidential
information. We may need to expend significant resources to protect against
security breaches or to address problems caused by such breaches.
 
                         RISKS RELATED TO THIS OFFERING
 
AN ACTIVE PUBLIC MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP
 
     Prior to this offering, there has not been a public market for our common
stock. An active public market for our common stock may not develop or be
sustained after this offering. The initial offering price may vary significantly
from the market price after this offering.
 
OUR COMMON STOCK PRICE IS LIKELY TO BE VOLATILE
 
     The stock markets in general, and the Nasdaq National Market and the market
for Internet-related and technology companies in particular, have experienced
extreme price and volume fluctuations in recent months. These fluctuations often
have been unrelated or disproportionate to the operating performance of these
companies. The trading prices of many technology company stocks, particularly
Internet company stocks, are at or near historical highs and reflect valuations
substantially above historical levels. Our stock price could be subject to wide
fluctuations in response to a variety of factors, including factors that may be
beyond our control. These include:
 
     - actual or anticipated variations in our quarterly operating results;
 
     - announcements of technological innovations or new sports entertainment
       programming by us or our competitors;
 
     - changes in financial estimates by securities analysts;
 
     - conditions or trends in the Internet and online entertainment industries;
 
     - changes in the market valuations of other Internet companies;
 
     - announcements by us or our competitors of significant acquisitions,
       strategic partnerships, joint ventures or capital commitments;
 
     - additions or departures of key personnel; and
 
     - sales of substantial amounts of our common stock or other securities in
       the open market.
 
     These broad market and industry factors could harm the market price of our
common stock, regardless of our performance. Market fluctuations, as well as
general political and economic conditions such as recession or interest rate or
currency rate fluctuations, also could harm the market price of our common
stock. Volatility in the market price of our common stock could result in
securities class action litigation. Any litigation like this could result in
substantial costs and a diversion of management's attention and resources.
 
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OUR MANAGEMENT HAS BROAD DISCRETION TO DETERMINE HOW TO USE THE FUNDS RAISED IN
THIS OFFERING AND MAY USE THEM IN WAYS THAT STOCKHOLDERS MAY NOT DEEM DESIRABLE
 
     We plan to use the net proceeds of this offering for general corporate
purposes, including working capital associated with the expansion of our network
production operations and our marketing campaigns. In addition, we may use a
portion of the net proceeds for the license or acquisition of additional
programming rights, creation of programming associated with these rights,
meeting our capital contribution obligations under our joint venture
arrangements, establishing additional joint ventures as well as capital
equipment purchases associated with both the production of our programming and
general business services. Our management will have significant discretion as to
the use of the net proceeds of this offering. This could result in the proceeds
being applied to uses stockholders may not deem desirable. In addition, we
cannot be certain that the proceeds invested will yield a significant return, if
any.
 
WE MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH WOULD RESULT IN ADDITIONAL
DILUTION
 
     We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital, capital expenditures and business expansion through at least
the next 12 months. Thereafter, we will need to raise additional capital. We
may, however, need to raise additional capital sooner in order to fund
unanticipated opportunities or respond to competitive pressures. If additional
funds are raised through the issuance of equity or convertible debt securities,
the percentage ownership of our stockholders will be reduced and the securities
issued may have rights, preferences and privileges senior to those of our common
stock. Additional financing may not be available on favorable terms or at all.
If adequate funds are not available or are not available on acceptable terms, we
may not be able to fund our expansion, take advantage of unanticipated
opportunities or respond to competitive pressures.
 
SALES OF OUR SHARES AFTER THIS OFFERING COULD NEGATIVELY AFFECT THE MARKET PRICE
OF OUR STOCK AND RESULT IN FURTHER DILUTION
 
     Sales of a substantial number of shares in the public market after this
offering could negatively affect the market price of our common stock and could
impair our ability to raise capital through the sale of additional equity
securities. Immediately following this offering, we will have        shares of
common stock outstanding assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants after
March 31, 1999. Of these shares, all the shares sold in this offering will be
freely tradable without restrictions or further registration under the
Securities Act of 1933. The remaining 34,134,206 shares of common stock will be
"restricted securities" as defined by Rule 144 adopted under the Securities Act
of 1933. These shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701
adopted under the Securities Act of 1933. We can not predict the effect that
future sales made under Rule 144, Rule 701 or otherwise will have on the market
price of our common stock.
 
     In addition, following closing of this offering we intend to register
shares of common stock issuable upon the exercise of stock options granted under
our stock option plans. After the effective date of such registration, shares
issued upon the exercise of stock options generally will be available for sale
in the public market. Our executive officers and directors and certain
stockholders beneficially owning in the aggregate 34,092,719 shares of common
stock have agreed, subject to certain limited exceptions, not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any
shares of common stock, without the prior written consent of Merrill Lynch,
Pierce, Fenner & Smith Incorporated for a period of 180 days after the first day
any of the common stock to be sold in this offering is released by the
underwriters for sale to the public. Any shares subject to these lock-up
agreements may be released at any time by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, with or without notice. The holders of approximately 33,896,430
shares of common stock are entitled to certain registration rights with respect
to such shares. The holders of warrants to purchase approximately 2,553,288
shares of common stock are also entitled to certain registration rights with
respect to such shares.
 
                                       19
<PAGE>   21
 
OUR EXISTING STOCKHOLDERS HAVE SIGNIFICANT CONTROL OF OUR MANAGEMENT AND
AFFAIRS, WHICH THEY COULD EXERCISE AGAINST YOUR BEST INTEREST
 
     Upon completion of this offering, our executive officers, directors and
their affiliates will, in the aggregate, own approximately      % of our
outstanding common stock,      % if the underwriters' over-allotment option is
exercised in full. As a result, these persons, acting together, will have the
ability to control all matters submitted to our stockholders for approval and to
control our management and affairs. Matters that would require stockholder
approval include the following:
 
     - election and removal of directors;
 
     - merger or consolidation of our company; and
 
     - sale of all or substantially all of our assets.
 
     This concentration of ownership may have the effect of delaying or
preventing a change in control or discourage a potential acquirer from making a
tender offer or otherwise attempting to obtain control of our company, which
could decrease the market price of our common stock.
 
SOME ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY
DELAY OR PREVENT A TAKEOVER OF OUR COMPANY
 
     Some provisions of our charter documents and Delaware law may make it more
difficult for a third party to acquire control of us, even if a change in
control would be beneficial to our stockholders. Our board of directors can
issue up to 10,000,000 shares of preferred stock without stockholder approval.
The issuance of preferred stock could make it more difficult for a third party
to acquire our company. These provisions could diminish the opportunities for a
stockholder to participate in tender offers, including tender offers at a price
above the then-current market value of our common stock. Additionally, certain
of our material agreements, including our agreement with NBC Olympics, Inc.,
allow the other party to terminate the agreement if a change in control occurs.
This could also have the effect of deterring a change in control.
 
     In addition, our charter documents provide that special meetings of
stockholders may be called only by the chairman of the board of directors, our
chief executive officer, a majority of the board of directors and holders of 50%
of the outstanding capital stock. Our charter documents also provide for a
classified board of directors, require advance notice of stockholder proposals
and nominations and do not provide for cumulative voting in the election of
directors. These provisions may make it more difficult for stockholders to
replace current members of our board of directors and may make the acquisition
of our company by a third party more difficult.
 
                                       20
<PAGE>   22
 
                                USE OF PROCEEDS
 
     We estimate that the net proceeds from the sale of the
shares of common stock in this offering will be approximately $
($               if the underwriter's over-allotment option is exercised in
full), assuming an initial public offering price of $               per share
and after deducting underwriting discounts and commissions and estimated
offering expenses of $               . The principal purposes of this offering
are to obtain additional working capital, increase awareness of our brand,
create a public market for our common stock, enhance our ability to acquire
other businesses, products or technologies and facilitate future access to
public equity markets.
 
     We currently expect to use the net proceeds of this offering for general
corporate purposes, including working capital associated with the expansion of
our network production operations and our marketing campaigns. In addition, we
may use a portion of the net proceeds for the license or acquisition of
additional programming rights, creation of programming associated with these
rights, meeting our capital contribution obligations under our joint venture
arrangements, establishing additional joint ventures as well as capital
equipment purchases associated with both the production of our programming and
general business services.
 
     As of the date of this prospectus, we cannot specify with certainty the
particular uses for the net proceeds to be received upon completion of this
offering. Accordingly, our management will have broad discretion in the
application of the net proceeds. Pending such uses, the net proceeds will be
primarily invested in short-term, interest bearing obligations, investment grade
instruments, certificates of deposit or direct or guaranteed obligations of the
United States.
 
                                DIVIDEND POLICY
 
     We have not declared or paid any cash dividends on our capital stock and do
not anticipate paying any cash dividends in the foreseeable future. In addition,
the terms of our subordinated debt and equipment lease lines prohibit the
payment of cash dividends on our stock.
 
                                       21
<PAGE>   23
 
                                 CAPITALIZATION
 
     The following table sets forth our capitalization as of March 31, 1999: (1)
on an actual basis; (2) on a pro forma basis to reflect the conversion of all
outstanding shares of preferred stock into common stock upon the closing of this
offering; and (3) on a pro forma as adjusted basis to reflect this conversion
and the application of the net proceeds from the sale of the           shares
offered hereby, after deducting the estimated underwriting discount and
estimated offering expenses.
 
<TABLE>
<CAPTION>
                                                                        MARCH 31, 1999
                                                              ----------------------------------
                                                                                      PRO FORMA
                                                               ACTUAL    PRO FORMA   AS ADJUSTED
                                                              --------   ---------   -----------
                                                                        (IN THOUSANDS)
<S>                                                           <C>        <C>         <C>
Long-term debt and lease obligations, net of current
  portion...................................................  $    699   $    699
Stockholders' equity:
  Preferred stock, $0.0001 par value; actual -- 27,600,000
     shares authorized, 23,736,016 shares issued and
     outstanding; pro forma -- 27,600,000 shares authorized,
     no shares issued and outstanding; pro forma as
     adjusted --           shares authorized, no shares
     issued and outstanding.................................         2          0        --
  Common stock(1):
     Voting stock, $0.0001 par value; actual -- 45,400,000
       shares authorized, 9,589,342 shares issued and
       outstanding; pro forma -- 45,400,000 shares
       authorized, 33,834,206 shares issued and outstanding;
       pro forma as adjusted --           shares authorized,
                 shares issued and outstanding..............         1          3
     Non-voting stock, $0.0001 par value; actual -- 300,000
       shares authorized, 300,000 shares issued and
       outstanding; pro forma -- 300,000 shares authorized,
       300,000 shares issued and outstanding; pro forma as
       adjusted -- 300,000 shares authorized, 300,000 shares
       issued and outstanding...............................        --         --        --
Additional paid-in capital..................................    41,087     41,627
Stock warrants..............................................     1,416      1,416
Accumulated deficit.........................................   (23,894)   (23,894)
                                                              --------   --------
          Total stockholders' equity........................    18,612     19,152
                                                              --------   --------
          Total capitalization..............................  $ 19,311   $ 19,851
                                                              ========   ========
</TABLE>
 
- ---------------
(1) Based on shares outstanding as of March 31, 1999. Excludes: (a) 2,391,750
    shares issuable upon the exercise of warrants outstanding as of March 31,
    1999 at a weighted average per share price of $4.95; (b) 7,145,025 shares
    issuable upon the exercise of options outstanding as of March 31, 1999 at a
    weighted average per share price of $4.35; (c) 6,460,401 additional shares
    reserved for issuance under Quokka's 1997 Equity Incentive Plan; (d) 450,000
    shares reserved for issuance under Quokka's 1999 Non-Employee Director's
    Stock Option Plan; and (e) 1,000,000 shares reserved for issuance under
    Quokka's 1999 Employee Stock Purchase Plan. Includes 508,848 shares issuable
    upon the exercise of certain warrants outstanding as of March 31, 1999 at a
    weighted average per share price of $1.06, which will expire if not
    exercised prior to the closing of this offering. See "Capitalization,"
    "Management -- Director Compensation," "Management -- Employee Benefit
    Plans" and "Description of Capital Stock."
 
                                       22
<PAGE>   24
 
                                    DILUTION
 
     The pro forma net tangible book value of Quokka as of March 31, 1999 was
$19.2 million, or $0.56 per share of common stock. "Pro forma net tangible book
value per share" is determined by dividing the pro forma number of outstanding
shares of common stock (assuming the conversion of all outstanding shares of
preferred stock into shares of common stock and the exercise of certain
warrants) into the net tangible book value of Quokka (total tangible assets less
total liabilities). After giving effect to the receipt of the estimated net
proceeds from the sale by Quokka of the           shares of common stock offered
by Quokka hereby (after deducting the underwriting discount and estimated
offering expenses), the pro forma net tangible book value of Quokka as of
December 31, 1998 would have been approximately $          million, or $     per
share. This represents an immediate increase in pro forma net tangible book
value of $     per share to existing stockholders and an immediate dilution of
$     per share to new investors purchasing shares at the initial public
offering price. The following table illustrates the per share dilution:
 
<TABLE>
<S>                                                           <C>     <C>
Assumed initial public offering price per share.............
  Pro forma net tangible book value per share as of March
     31, 1999...............................................  $0.56
  Increase per share attributable to new investors..........
                                                              -----
Pro forma net tangible book value per share after the
  offering..................................................
                                                                      -----
Dilution per share to new investors.........................          $
                                                                      =====
</TABLE>
 
     The following table summarizes as of March 31, 1999, on the pro forma basis
described above, the number of shares of common stock purchased from Quokka, the
total consideration paid to Quokka and the average price per share paid by
existing stockholders and by investors purchasing shares of common stock in this
offering (before deducting the underwriting discount and estimated offering
expenses):
 
<TABLE>
<CAPTION>
                                 SHARES PURCHASED        TOTAL CONSIDERATION       AVERAGE
                               ---------------------    ----------------------      PRICE
                                 NUMBER      PERCENT      AMOUNT       PERCENT    PER SHARE
                               ----------    -------    -----------    -------    ---------
<S>                            <C>           <C>        <C>            <C>        <C>
Existing stockholders........  34,134,206               $41,630,080                 $1.22
New stockholders.............
                               ----------      ---      -----------      ---
          Total..............                  100%     $                100%
                               ==========      ===      ===========      ===
</TABLE>
 
     The foregoing discussion and tables assume no exercise of any stock options
outstanding as of March 31, 1999. As of March 31, 1999, there were options
outstanding to purchase a total of 7,145,025 shares with a weighted average
exercise price of $4.35 per share. Additionally, the foregoing discussion and
tables assume no exercise of warrants outstanding as of March 31, 1999 to
purchase a total of 2,391,750 shares at a weighted average exercise price of
$4.95 per share. However, the discussion and tables assume the exercise of
certain warrants outstanding as of March 31, 1999 to purchase a total of 508,848
shares at a weighted average exercise price of $1.06 per share, which will
expire if not exercised prior to the closing of this offering. To the extent
that any of these warrants or options are exercised, other than the warrants
which we have assumed will be exercised, there will be further dilution to new
public investors. See "Capitalization," and "Management -- Employee Benefit
Plans."
 
                                       23
<PAGE>   25
 
                      SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, the Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus. The consolidated statement of operations data is qualified by
reference to (1) the audited consolidated statement of operations for each of
the three one-year periods ended December 31, 1996, 1997 and 1998, (2) the
unaudited consolidated statement of operations for each of the two one-year
periods ended December 31, 1994 and 1995 and (3) the unaudited consolidated
statement of operations for each of the two three-month periods ended March 31,
1998 and 1999. The consolidated balance sheet data is qualified by reference to
(1) the audited consolidated balance sheet data as of December 31, 1996, 1997
and 1998 and (2) the unaudited consolidated balance sheet data as of December
31, 1994 and 1995, and as of March 31, 1999, not included in this prospectus.
 
<TABLE>
<CAPTION>
                                                                                                    THREE MONTHS ENDED
                                                   YEARS ENDED DECEMBER 31,                              MARCH 31,
                                 -------------------------------------------------------------   -------------------------
                                    1994          1995         1996        1997        1998         1998          1999
                                 -----------   -----------   ---------   ---------   ---------   -----------   -----------
                                 (UNAUDITED)   (UNAUDITED)                                       (UNAUDITED)   (UNAUDITED)
                                                      (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                              <C>           <C>           <C>         <C>         <C>         <C>           <C>
CONSOLIDATED STATEMENT OF
  OPERATIONS:
Revenues.......................   $     399     $      82    $      39   $   4,000   $   8,635   $    4,867    $      897
Production costs...............          25            21          611       5,130       7,779        3,431         2,718
Research and engineering.......          41            18          423       1,030       4,480          585         2,132
Sales and marketing............          --             5           53         816       2,519          358         1,390
General and administration.....         245            56          508       1,827       3,185          871         1,792
Depreciation and
  amortization.................          --            --           --          68         530           44           430
                                  ---------     ---------    ---------   ---------   ---------   ----------    ----------
         Total costs and
           expenses............         311           100        1,595       8,871      18,493        5,289         8,462
         Income/(loss) from
           operations..........          88           (18)      (1,556)     (4,871)     (9,858)        (422)       (7,565)
Equity and losses of associated
  venture......................          --            --           --          --          --           --           452
Interest (income)/expense,
  net..........................          (2)          (12)           4          71        (320)         (32)         (169)
                                  ---------     ---------    ---------   ---------   ---------   ----------    ----------
         Net income/(loss).....   $      90     $      (6)   $  (1,560)  $  (4,942)  $  (9,538)  $     (390)   $   (7,848)
                                  =========     =========    =========   =========   =========   ==========    ==========
Historical basic and diluted
  net income/(loss) per
  share(1).....................   $    0.02     $    0.00    $   (0.41)  $   (0.73)  $   (0.99)  $    (0.04)   $    (0.80)
Shares used in computing
  historical basic and diluted
  net income/(loss) per
  share........................   3,800,000     3,800,000    3,800,000   6,791,534   9,654,835    9,651,566     9,756,059
Pro forma net loss per
  share -- basic and diluted...                                                      $   (0.40)                $    (0.23)
Shares used in computing pro
  forma net loss per
  share -- basic and diluted...                                                      23,914,934                34,000,923
</TABLE>
 
<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                 ---------------------------------------------------------          MARCH 31,
                                   1994        1995        1996        1997        1998               1999
                                 ---------   ---------   ---------   ---------   ---------          ---------
                                                                                                   (UNAUDITED)
                                                      (IN THOUSANDS)                             (IN THOUSANDS)
<S>                              <C>         <C>         <C>         <C>         <C>         <C>          <C>
CONSOLIDATED BALANCE SHEET
  DATA:
Cash and cash equivalents......  $      72   $       0   $      65   $   4,027   $  23,994          $ 15,263
Working capital................          1          (8)     (1,566)      1,444      23,218           13,953
Total assets...................        117           0         113       4,651      28,212           22,853
Debt and leases, long-term
  portion......................          0           0           0          83         501             699
Accumulated deficit............          0          (8)     (1,566)     (6,508)    (16,046)         (23,894)
Total stockholders' equity.....          1          (8)     (1,566)      1,663      25,453           18,612
</TABLE>
 
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements for a description
    of the method used to compute the pro forma basic and diluted net income per
    share.
 
                                       24
<PAGE>   26
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes included elsewhere in this prospectus. This
discussion contains certain forward-looking statements that involve risks and
uncertainties. When used in this prospectus, the words "intend," "anticipate,"
"believe," "estimate," "plan" and "expect" and similar expressions as they
relate to us are included to identify forward-looking statements. Our actual
results could differ materially from the results discussed in the
forward-looking statements as a result of certain of the risk factors set forth
below and elsewhere in this prospectus.
 
OVERVIEW
 
     Quokka Sports has pioneered a unique new genre of global sports programming
that uses the digital information sharing and communications power of the
Internet and other interactive distribution systems to immerse our global
audience in a compelling sports entertainment experience. Our programming is
designed to engage viewers, give them control of the action sequence and let
them experience and view sports from a variety of perspectives. Our coverage of
sporting events incorporates a wide range of digital assets, which might
include: video, text, audio, images, athlete biometrics, telemetry,
environmental data, e-mails, results and timing. Our programming can be accessed
over the Internet at www.quokka.com and may be available through other
interactive distribution systems in the future. With unique, rich content that
leverages technology's potential for merging entertainment and information, we
are positioned to become a leading provider of digital sports entertainment,
satisfying the entertainment passions of a global community of sports
enthusiasts.
 
     In August 1996, we adopted our current business model, incorporated in
Delaware under the name Quokka Productions, Inc. and relocated our headquarters
to San Francisco. Shortly thereafter, in September 1996, we changed our name to
Quokka Sports, Inc. Prior to August 1996, we operated as an Australian software
development and consulting company, Ozware Developments Unit Trust, an
Australian unit trust. The primary focus of our operating activities is to
develop our digital sports entertainment network. In addition to pursuing our
primary focus over the last few years, we have also provided consulting and Web
design services to strategic partners including the International Olympic
Committee, Sydney Organizing Committee for the Olympic Games, News America
Digital Publishing, and others.
 
     We generate revenues from digital entertainment sponsorships, advertising,
electronic commerce and studio services. The majority of our revenues are
derived from the sale of sponsorship packages to corporations. In the past, we
have accepted property and services as payment for sponsorships, including
Internet access, computer equipment, digital cameras, hosting servers, and
telecommunications equipment and services. Property and services received as
payment are valued at fair-market value based on the amounts normally charged to
third parties for similar property and services. We intend to reduce the amount
of property and services accepted for payment in future periods, although we may
not be successful in this regard.
 
     Prior to 1999, our sponsorships were primarily short-term and associated
with single events. Revenues from these short-term sponsorships associated with
the Whitbread and Around Alone races were recognized over the term of the
sponsored event based upon the ratio of current period impressions to projected
total ultimate impressions, based on a determination that no significant
obligations remained and collection of the resulting receivable was probable.
When we were obligated to provide a minimum number of impressions, we recorded a
pro rata portion of amounts received as deferred revenue until we satisfied
these obligations. Sponsorship revenues connected with the Around Alone race
continue to be recognized in this manner through the end of the race in May
1999.
 
     In 1999, we began to configure our sponsorships as multi-year, multi-event
and multi-benefit sponsorships. These new sponsorships, which we call digital
entertainment sponsorships, may include a variety of benefits such as category
exclusivity, embedded product placement in our programming, traditional sports
sponsorship benefits and sales and marketing assistance. We plan to sell digital
                                       25
<PAGE>   27
 
entertainment sponsorships to technology and communications companies as well as
consumer retail goods and services companies. These multi-year sponsorship
agreements are expected to provide for periodic sponsorship fees that we intend
to recognize ratably over the corresponding period during the term of the
contract, provided that no significant obligations remain and collection of the
resulting receivable is probable.
 
     As a direct result of having only one live program at a time, revenues from
sponsorships, advertising and electronic commerce have varied on both a
quarterly and annual basis during the short operating history of this line of
business. Revenues may fluctuate from period to period in the future depending
upon our ability to attract digital entertainment sponsorships, the number of
live events that are being produced and distributed simultaneously during any
one period, our ability to maintain a continuous programming calendar, our
ability to attract a worldwide audience for our sporting events, our ability to
acquire long-term digital and other intellectual property rights to global
sporting events and our ability to develop and produce sports programming which
will attract a global audience.
 
     We also generate revenues by providing Web site design and consulting
services to those entities that could become future strategic business partners.
Revenues from studio services are recognized in the period the service is
provided. We intend to continue to offer studio services, however, we expect
studio services to decline substantially as a percentage of overall revenues in
future periods.
 
     We have incurred significant net losses and negative cash flows from
operations, and as of March 31, 1999, we had an accumulated deficit of $23.9
million. This accumulated deficit resulted from the production costs of our
network programming, the costs of developing new and enhancing existing tools
and techniques that enhance our Quokka Sports Platform, the costs of expanding
our sales and business development efforts and other costs related to ongoing
research and design. Due to the planned expansion of our digital sports
entertainment programming, we expect to incur significant operating losses for
the foreseeable future. Although we have experienced revenue growth in recent
periods, such growth may not be sustainable and, therefore, these recent periods
should not be considered indicative of future performance. We may never achieve
significant revenues or profitability; or if we achieve significant revenues,
they may not be sustained.
 
RESULTS OF OPERATIONS
 
  Years Ended December 31, 1996, 1997 and 1998
 
        Revenues.  Revenues increased from $39,000 in 1996 to $4.0 million in
1997 to $8.6 million in 1998. In 1997, we generated revenues from the sale of
sponsorships for the first time. Revenues increased from 1996 to 1997 primarily
as a result of 1997 sponsorship sales totaling $2.7 million. The increase in
revenues from 1997 to 1998 is primarily attributable to a $4.3 million increase
in sponsorship revenues. Included in total sponsorship revenue for 1996, 1997
and 1998 were revenues relating to products and services accepted as payment of
$0, $1.7 million and $4.4 million. Revenues attributable to these products and
services are also shown as a corresponding production expense for all periods
presented. The balance of the increase in revenues was primarily attributable to
increases in revenues from studio services from $39,000 in 1996 to $1.2 million
in 1997 to $1.6 million in 1998.
 
        Production Costs.  Total production costs increased from $611,000 in
1996 to $5.1 million in 1997 to $7.8 million in 1998. Production costs include
costs of personnel and consultants, computer hardware and software, travel,
satellite transmission costs, field gear, cameras, satellite phones, marketing
and an allocation of general and administrative expenses. The $4.5 million
increase in production costs from 1996 to 1997 is due to the launch of our first
digital sports entertainment program, the Whitbread race, during 1997. The $2.7
million increase from 1997 to 1998 is attributable to an increase in the number
of months of live programming.
 
        Research and Engineering.  Research and engineering expenses increased
from $423,000 in 1996 to $1.0 million in 1997 to $4.5 million in 1998. Research
and engineering expenses include personnel cost, costs associated with network
operations and expenses incurred to improve and develop our Quokka Sports
 
                                       26
<PAGE>   28
 
Platform and broadband applications. The increase in research and engineering
expenses from year to year is attributable to an increase in the number of
development projects. Research and engineering costs are expensed as incurred.
 
     During 1998, we entered into a software license and development agreement.
In connection with this agreement, we issued warrants to purchase 635,650 shares
of our preferred stock and recognized a non-cash charge of $853,000 during 1998.
 
        Sales and Marketing.  Sales and marketing expenses increased from
$53,000 in 1996 to $816,000 in 1997 to $2.5 million in 1998. Sales and marketing
expenses include personnel costs, consultants and advertising. These expenses
increased primarily due to increases in the number of sales and marketing
personnel and consultants. During 1998, we spent $554,000 for advertising and we
expect to significantly increase our advertising expenses in future periods as
we build the Quokka brand and awareness of our programming.
 
        Depreciation and Amortization.  Depreciation and amortization expenses
increased from $0 in 1996 to $68,000 in 1997 to $530,000 in 1998. Depreciation
and amortization expenses consist of depreciation of computers,
telecommunications equipment, software, and furniture and fixtures associated
with our operational infrastructure. Amortization expense relates to leasehold
improvements of our facilities in San Francisco. The increase in depreciation
and amortization expenses was primarily due to increased facilities, equipment
and related costs associated with an increase in personnel in all areas.
 
        General and Administrative.  General and administrative expenses
increased from $508,000 in 1996 to $1.8 million in 1997 to $3.2 million in 1998.
General and administrative expenses include management, business and legal
affairs, finance and accounting, facilities, management information systems and
human resources. The increase in general and administrative expenses is due to
increased personnel in all areas to support and grow our business including
increased facilities and related costs.
 
        Interest Income and Expense, Net.  Net interest expense was $4,000 in
1996 and $71,000 in 1997. Net interest income was $320,000 in 1998. Interest
expense incurred during these periods relate to our financing obligations for
various equipment purchases. Interest income recorded during these periods
includes interest income earned on cash and cash equivalents. The increase from
1997 to 1998 was primarily due to a higher investment balance throughout 1998
due to the issuance of preferred stock. Interest income in 1998 was partially
offset by increased interest expense due to borrowings under a line of credit.
 
  Three Months Ended March 31, 1998 and 1999
 
        Revenues.  Revenues declined from $4.9 million for the three months
ended March 31, 1998 to $897,000 for the three months ended March 31, 1999.
Revenues for the first quarter of 1998 were primarily derived from sponsorship
revenues associated with our coverage of the Whitbread Round The World Race, our
sole event during the period. Revenues for the first quarter of 1999 were
primarily derived from sponsorship revenues associated with our coverage of the
Around Alone race, our sole event during the period. The Whitbread is a better
known event than Around Alone and, accordingly, attracted larger sponsorship
revenues.
 
        Production Costs.  Production costs decreased from $3.4 million for the
three months ended March 31, 1998 to $2.7 million for the three months ended
March 31, 1999. The $713,000 decrease reflects significantly lower costs
associated with our coverage of the Around Alone race as compared to the
Whitbread race, which were offset by increased expenses related to the
production activities for upcoming events.
 
        Research and Engineering.  Research and engineering expenses increased
from $586,000 for the three months ended March 31, 1998 to $2.1 million for the
three months ended March 31, 1999. This increase represents the cost of
additional personnel and related expenses associated with our continuing
development of our Quokka Sports Platform, broadband applications and network
operations.
 
                                       27
<PAGE>   29
 
        Sales and Marketing.  Sales and marketing expenses increased from
$358,000 for the three months ended March 31, 1998 to $1.4 million for the three
months ended March 31, 1999. The $1.0 million increase is attributable to
increases in the number of sales and marketing personnel and expenses related to
creating a brand, developing audience awareness of our programming and launching
www.quokka.com.
 
        General and Administrative.  General and administrative expenses
increased from $870,000 for the three months ended March 31, 1998 to $1.8
million for the three months ended March 31, 1999. This increase was
attributable to increased personnel and related facilities and other third-party
expenses associated with building our operational infrastructure. During the
first quarter of 1999, we leased additional office space in San Francisco and
new office space in London.
 
        Depreciation and Amortization. Depreciation and amortization expenses
increased from $44,000 for the three months ended March 31, 1998 to $430,000 for
the three months ended March 31, 1999. The $386,000 increase was primarily due
to increased facilities, equipment and related costs associated with an increase
in personnel in all areas.
 
        Interest Income and Expense, Net. Net interest income was $32,000 for
the three months ended March 31, 1998 and $169,000 for the three months ended
March 31, 1999. The $137,000 net increase reflects a higher investment balance
during the three months ended March 31, 1999 due to the issuance of preferred
stock during prior periods.
 
        Equity and Losses of Associated Venture. We incurred net losses of
$452,000 in our joint venture with Forsythe Racing, Inc. for the period from the
inception of CART Digital Media Enterprises, LLC in January 1999 through March
31, 1999. We have accounted for our 50% interest in this joint venture under the
equity method of accounting. Expenses incurred during the period related
primarily to pre-production expenses for CART programming.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Since August 1996, we have financed our operations primarily through
private sales of our equity securities. Aggregate net proceeds from sales our
equity securities since August 1996 totaled approximately $41.0 million through
December 31, 1998 and $41.1 million through March 31, 1999.
 
     In addition to funding ongoing operations and capital expenditures, our
principal commitments consist of various obligations under operating and capital
leases. On July 24, 1997, we entered into a capital lease for the use of certain
computer and telecommunications equipment with a purchase price of approximately
$120,000. This capital lease requires monthly payments of $4,200 through
November 2000. On October 7, 1998, we entered into a financing arrangement with
a bank to borrow $750,000 for the purchase of equipment. Our obligations under
this financing arrangement are secured by the underlying equipment. Terms of
this agreement require monthly repayment over 36 months commencing November 25,
1998 in the amount of approximately $21,000 per month plus interest at a rate
equal to 0.75% over the prime rate quoted by the bank. At March 31, 1999, the
prime rate quoted by the bank was 7.75% and accordingly the interest rate was
8.50%. Total rent expense for outstanding leases is approximately $90,000 per
month.
 
     On February 9, 1999, we established NBC/Quokka Ventures, LLC, a joint
venture with NBC Olympics, Inc. Terms of the operating agreement for the venture
require us to make quarterly capital contributions and contribute the first $15
million in cash to be used by the venture, plus any additional cash required by
the venture as determined by the board of directors of the venture. This joint
venture has been consolidated in our financial statements.
 
     On February 12, 1999, we completed a subordinated debt agreement. Terms of
this agreement call for maximum borrowings of $10 million. Repayment is due in
36 monthly installments commencing in February 2000 and is subject to
acceleration under certain conditions including the completion of an initial
public offering. No amounts were outstanding on this facility as of March 31,
1999. In connection with this agreement, we issued warrants for the purchase of
215,384 shares of preferred stock. The imputed value of these warrants is
$552,000 and has been treated as a loan commitment fee. This fee is being
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<PAGE>   30
 
amortized over the term of the six-month draw down period as no further services
are required to earn the warrants and they are fully vested, and $140,000 of
this amount was amortized in the three months ended March 31, 1999.
 
     At March 31, 1999, we had approximately $15.3 million in cash and cash
equivalents. Net cash used in operating activities was $3.8 million and $10.9
million for 1997 and 1998. Net cash used in operating activities were $1.3
million and $6.4 million for the three months ended March 31, 1998 and 1999. Net
cash used in operating activities resulted from our net operating losses,
adjusted for certain non-cash items including compensation expense related to
the issuance of warrants to attract certain key vendors and business partners.
Non-cash charges related to the issuance of these warrants were $382,000 and
$953,000 for the three months ended March 31, 1998 and 1999 and $62,000 and
$450,000 for the years ended December 31, 1997 and 1998. Non-cash charges
relating to depreciation expense for the three months ended March 31, 1998 and
1999 was $44,000 and $430,000 and was $68,000 and $530,000 for the years ended
December 31, 1997 and 1998.
 
     Net cash used in investing activities was $295,000 and $2.7 million for
1997 and 1998. Net cash used in investing activities was $246,000 and $2.6
million for the three months ended March 31, 1998 and 1999. Net cash used in
investing activities resulted primarily from capital expenditures related to
purchases of computer equipment.
 
     Net cash provided by financing activities was $8.1 million and $33.5
million for the years ending December 31, 1997 and 1998. Net cash used in
financing activities during the three months ended March 31, 1998 was $11,000
and net cash provided by financing activities during the three months ended
March 31, 1999 quarter was $279,000. Net cash provided by financing activities
for these periods included the issuance of preferred stock, common stock and
warrants.
 
     No provision for federal or state income taxes has been recorded as we
incurred net operating losses for the three months ended March 31, 1998 and 1999
and for the three annual periods ending December 31, 1998. However, we have paid
state franchise taxes during 1997 and 1998 as well as foreign corporation tax
during 1998. At December 31, 1998, we had approximately $12.0 million of federal
net operating loss carryforwards available to offset future taxable income; such
carryforwards expire in years 2011 through 2017. In addition, we have
carryforwards of approximately $10.0 million as of December 31, 1998 for
California franchise tax purposes, commencing in 2001. As a result of various
equity transactions during 1996 and 1997, we believe our company has undergone
an "ownership change" as defined by Section 382 of the Internal Revenue Code.
Accordingly, the use of a portion of the net operating loss carryforward may be
limited. Due to this limitation, and the uncertainty regarding the ultimate use
of the net operating loss carryforward, no tax benefit for losses has been
recorded by us and a valuation allowance has been recorded for the entire amount
of the net deferred tax asset. In addition, certain events, including any sales
by us of shares of our stock, including sales pursuant to this offering, and/or
transfers of a substantial number of shares of common stock by the current
stockholders, may partially restrict our ability to use our net operating loss
carryforwards.
 
     We believe that the net proceeds from this offering, combined with current
cash and cash equivalent balances will be sufficient to fund our operating
requirements for working capital and capital expenditures for at least the next
twelve months. Thereafter, we will need to raise additional funds. To the extent
that we encounter unanticipated opportunities, we may need to raise additional
funds sooner, in which case we may sell additional equity or debt securities or
borrow funds from banks. Sales of additional equity or convertible debt
securities would result in additional dilution of our stockholders.
 
YEAR 2000 COMPLIANCE
 
     Computer systems, software packages and microprocessor-based equipment may
cease to function or generate erroneous data when the year 2000 arrives. The
problem affects those systems or products that are programmed to accept a
two-digit code in the date fields. To correctly identify the year 2000, a four-
digit date code field will be required to be what is commonly termed "year 2000
compliant." Our business operations will suffer if not year 2000 compliant. The
potential areas of exposure include electronic data
                                       29
<PAGE>   31
 
exchange systems operated by third parties with which we transact business and
computers, software, telephone systems and other equipment used internally. To
minimize the potential adverse affects of the year 2000 problem, we established
a year 2000 compliance program. A project team developed detailed plans for
making our systems year 2000 compliant. This team conducted a three-phase
process of identifying internal systems (both information technology and
non-information technology systems) that are not year 2000 compliant,
determining their significance in the operation of our company and developing
plans to resolve the issues where necessary. We have also been communicating
with all of our hardware and software vendors, suppliers and others to
coordinate our year 2000 readiness. The responses we have received to date have
indicated that steps are currently being undertaken to address this concern.
However, if these third parties are not able to make all systems year 2000
compliant, our operations may be negatively affected.
 
     Because much of our infrastructure is new, we believe that we have few
systems that will be affected by these date change problems. Our initial review
of our principal systems, hardware and software through which all of our
sporting events are produced and distributed indicates that we are year 2000
compliant, and we do not anticipate any material adverse operational issues to
arise. We intend to complete our compliance assessment by June 30, 1999 and
implement necessary corrective solutions before September 30, 1999. Because the
majority of our infrastructure is new, costs attributable to this project to
date have not been material. Based upon procedures performed to date, we further
anticipate that future costs related to this project will also not be material;
however, future costs are difficult to estimate and may differ materially from
those currently projected. The anticipated costs associated with our year 2000
compliance program do not include time and costs that may be incurred as a
result of any potential failure of third parties to become year 2000 compliant
or costs to implement our future contingency plans. If systems important to our
operations have not been made year 2000 compliant, or if third parties fail to
make their systems year 2000 compliant in a timely manner, the year 2000 issue
could negatively affect our business.
 
                                       30
<PAGE>   32
 
                                    BUSINESS
 
     The following description of our business should be read in conjunction
with the information included elsewhere in this prospectus. The description
contains certain forward-looking statements that involve risks and
uncertainties. When used in this prospectus, the words "intend," "anticipate,"
"believe," "estimate," "plan" and "expect" and similar expressions as they
relate to us are included to identify forward-looking statements. Our actual
results could differ materially from the results discussed in the
forward-looking statements as a result of certain of the risk factors set forth
below and elsewhere in this prospectus.
 
OVERVIEW
 
     Quokka Sports has pioneered a unique new genre of global sports programming
that uses the digital information sharing and communications power of the
Internet and other interactive distribution systems to immerse our global
audience in a compelling sports entertainment experience. Our programming is
designed to engage viewers, give them control of the action sequence and let
them experience and view sports from a variety of perspectives. Our coverage of
sporting events incorporates a wide range of digital assets, which might
include: video, text, audio, images, athlete biometrics, telemetry,
environmental date, e-mails, results and timing. Our programming can be accessed
over the Internet at www.quokka.com and may be available through other
interactive distribution systems in the future. With unique, rich content that
leverages technology's potential for merging entertainment and information, we
are positioned to become a leading provider of digital sports entertainment
addressing the entertainment passions of a global community of sports
enthusiasts.
 
     We are creating an interactive digital sports network that offers a variety
of engaging sports entertainment programming. In developing our programming
calendar, we currently target sports events that are generally rich in digital
assets and long in duration, have a global audience and involve continuous
action with multiple simultaneous activities. We have selected the Olympics,
motor racing, sailing and adventure sports as the first four channels of our
network.
 
     We generate revenues primarily through the sale of sponsorships. Sponsors
secure an exclusive sponsorship category and the opportunity to embed and
promote their products in our rich digital programming. Our technology and
communication sponsors also have the opportunity to showcase the technological
capabilities of their products and services in the production of our immersive
programming. Additionally, we deliver a global audience having demographic
qualities desired by sponsors and advertisers.
 
     Our first digital sports program was the 1997-98 Whitbread Round The World
Race, a 32,000 nautical mile, around-the-world sailing race featuring an
international field of competitors. Our coverage attracted more than 1.8 million
unique users from 177 countries, more than half of whom accessed our Whitbread
Web site from outside the United States. Sports fans visiting the Whitbread site
were primarily between 25 and 34 years old and had an average annual household
income of $75,000, while 64% were college educated and 63% held professional,
executive or technical positions, providing an attractive, targeted audience for
sponsors and advertisers. These users spent an average of approximately 9.9
minutes per visit at the site. This compares favorably to an average of 5.8
minutes per visit according to our estimates based on Media Metrix statistics,
at other leading sports-related Web sites. We generated $9.4 million of revenues
from sponsorships related to this event.
 
     In February 1999, we established a joint venture with NBC Olympics, Inc. to
develop interactive digital coverage of the Olympics through August 2004. In
March 1999, through a joint venture with Forsythe Racing, Inc., we acquired
digital rights to cover the Championship Auto Racing Teams events through 2003.
Additionally, in March 1999, we acquired digital rights to cover FIM 500cc Road
Racing World Championship motorcycle races through 2003. We covered the 7th
Whitbread Round The World Race from September 1997 to May 1998 and began
coverage of the nine-month Around Alone sailing race in September 1998. We
covered the 14th Marathon des Sables desert footrace and are also covering a
variety of Quokka-created adventure sports events as part of our adventure
sports channel. We plan to add programming to each of our four existing channels
and may create additional channels in the future.
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<PAGE>   33
 
INDUSTRY BACKGROUND
 
  The Evolution of the Internet as a Powerful New Medium
 
     The Internet has quickly become a global medium for worldwide
communication, instant access to information and electronic commerce.
International Data Corporation estimates that the number of Web users worldwide
will increase from approximately 142 million at the end of 1998 to more than 502
million by the end of 2003 and that more than 56% of Web users in 1998 accessed
the Internet from outside the United States. We believe such rapid growth is
attributable mainly to the increasing number of personal computers in homes and
offices, the decreasing cost of personal computers, technological innovations
providing easier, faster and cheaper access to the Internet and the
proliferation of content and services available on the Internet.
 
     The technological advances associated with today's Internet and other
emerging interactive distribution systems provide advertisers with a level of
targetability, interactivity and measurability not available in traditional
media. Accordingly, Forrester Research estimates that the amount of Web
advertising worldwide will grow from $1.5 billion in 1998 to over $15.3 billion
by the year 2003. Additionally, as online merchants take advantage of these
technological improvements to deliver a guided selling experience, integrating
one-click buying, intelligent product recommendations and real-time customer
services, more consumers are expected to engage in electronic commerce.
International Data Corporation estimates that the number of consumers making
purchases on the Internet will grow from 30.8 million in 1998 to 182.6 million
in 2003 and that the total value of consumer goods and services purchased over
the Internet will increase from $14.9 billion to $177.7 billion over the same
five-year period. The combination of the growth in online advertising and
electronic commerce enhances the Internet's value as a commerce medium.
 
     As new higher-bandwidth interactive distribution systems, including DSL,
cable and satellite, continue to become more widely adopted, we believe the
Internet will continue to transform from an information-based medium to one that
enables dynamic entertainment-based content. Technology companies are developing
these broadband networks to accommodate the increased bandwidth requirements for
interactive content, faster access and portability of media over multiple
delivery devices. According to Forrester Research, broadband access provides
consumers with high-speed, always-on connections and multiple services like
telephone and Internet on a single line at a price-performance ratio that is 5
to 25 times better than conventional dial-up connections. As a result, Forrester
Research estimates that approximately 15.8 million households in the United
States will have high-speed personal computer connections to the Internet by
2002.
 
  The Global Sports Industry
 
     Participatory and spectator sports are among the leading passions in
developed nations around the globe as evidenced by the popularity of sports
media and the amount of money consumers spend on sports events, products and
related services. The ESPN Chilton Sports Poll estimates that 86.6% of the
general population 12 years of age or older in the United States are sports
fans. Further, according to Nielsen Media Research, sports television
programming in the United States consistently draws large audiences, with sports
broadcasts comprising seven of the top ten most widely viewed telecasts during
the 1997-98 television season.
 
     The business opportunities associated with sports are large and diverse.
Today, sporting events generate revenues from the sale of broadcast rights,
sponsorships, advertising, merchandising, publishing and venue access, and these
revenue opportunities continue to evolve. The Georgia Institute of Technology
estimated that revenue streams derived from spectator sports, sporting goods and
sporting publications in the United States in 1995 exceeded $130 billion.
Sponsorships frequently integrate the sponsoring company's products, logos and
trademarks with the sporting event. Based on research conducted by Sponsorship
Research International, an independent research organization that measures
global sponsorship opportunities, we estimate that in 1998 $13.2 billion was
invested globally in sports through the sponsorship of events, federations,
teams, individuals and stadiums.
 
                                       32
<PAGE>   34
 
     Sponsorship Research International has identified the following events as
some of the leading global sports sponsorship opportunities:
 
<TABLE>
<CAPTION>
                                                            NUMBER OF     CUMULATIVE GLOBAL
SPORTING EVENT(1)                               DURATION    COUNTRIES   TELEVISION AUDIENCE(2)
- -----------------                              ----------   ---------   ----------------------
<S>                                            <C>          <C>         <C>
World Cup Soccer (1994)......................  52 games        188           32.1 billion
Olympics: Summer (1996)......................  16 days         214           20.0 billion
Olympics: Winter (1994)......................  16 days         100           10.7 billion
European Championship Soccer (1996)..........  31 games        192            6.7 billion
Formula 1 Grand Prix Season (1997)...........  17 races        133            5.4 billion
World Championship Athletics (1997)..........  9 days          154            3.8 billion
World Cup Rugby (1995).......................  32 matches      100            2.7 billion
Whitbread Round The World Race (1993-94).....  9 months        177            2.6 billion
Wimbledon Tennis Tournament (1996)...........  15 days         167            1.6 billion
CART World Series (1997).....................  17 races        182            1.2 billion
Super Bowl (1996)............................  1 game          187            0.1 billion
</TABLE>
 
- ---------------
(1) Information for each event is as of the year indicated and is the most
    recently available data from Sponsorship Research International.
 
(2) For purposes of this column, a person who watches multiple games or multiple
    days of coverage of an event would be counted multiple times. For example, a
    person who watches 15 World Cup Soccer matches would be counted 15 times.
 
     Advertising and merchandise sales also generate substantial revenues in the
sports industry. Paul Kagan Associates, Inc. estimates that advertisers in the
United States will increase their sports-related television advertising from
$4.8 billion in 1998 to $6.6 billion in 2003. The Sporting Goods Manufacturers
Association estimates that expenditures by sports fans in the United States on
sports-related goods and services reached $45.6 billion in 1998.
 
     The growth of the Internet presents a unique means of reaching
geographically dispersed sports audiences. Because of the low incremental cost
of distributing information and entertainment over the Internet, producing
global sporting events for a geographically dispersed fan base is now
economically feasible. Additionally, as the Internet has evolved, sports fans
have increasingly turned to the Internet for sports information, making
sports-related Web sites some of the most popular online destinations. The ESPN
Chilton Sports Poll estimates that 36 million people in the United States
accessed sports information on the Internet in 1998, an increase of 40% over
1997. In addition, using Media Metrix data, we estimate that sports fans spend
approximately 20% more time per usage session on sports-related Web sites than
the average user does at the average Web site and revisit these sports-related
Web sites approximately 28% more often. Cyberdialogue/findsvp also found that on
average, sports fans spend more time per week online, have higher household
incomes and make more online purchases than the average online adult.
 
  Limitations of Current Sports Coverage
 
     Because of the tremendous popularity of sports worldwide, numerous
traditional and online information sources such as newspapers, magazines,
broadcasters and specialized sports-related Web sites have attempted to address
sports fans' demand for up-to-date information and entertaining coverage of
their favorite events. However, no current sports information source has been
able to reproduce the experience of participating in an event. Although print
media, such as newspapers and magazines, are adequate for communicating basic
information such as scores and statistics or reporting on the outcome of an
event, they are limited by content that is static, without the benefits of video
animation or audio stimulation. Further, although these media have the ability
to produce in-depth analysis of athletes and events, the timeliness of this
content is often limited because of inherent delays in production and
distribution.
                                       33
<PAGE>   35
 
     Although radio and television broadcasters are able to provide real-time
coverage in an entertaining fashion, all viewers and listeners of a given
program receive a single presentation of the content. Broadcast coverage is
generally regional in nature, leaving significant global audiences untapped as
broadcasters seek to meet the demands of the largest audiences in their specific
coverage regions. Additionally, broadcast media are constrained by the rigidity
of their schedules, the limited ability of the audience to interact with the
programming on a real-time basis and the relatively small number of available
frequencies or channels. Further, due to basic infrastructure costs and other
significant technological challenges, traditional broadcast media are not well
suited to cover sporting events with long durations, large or discontinuous
venues, multiple simultaneous activities and continuous action for a global
audience. For example, traditional broadcasters were limited in their ability to
provide continuous coverage of the action during the Whitbread Round The World
Race, which was primarily conducted across the most remote sections of the
world's oceans for approximately nine months.
 
     While Web sites that include sports information as part of their offerings
have proliferated, these sites are typically more informational than engaging.
In general, these sites deploy traditional styles of sports coverage by
providing access to the same type of content available through traditional media
channels, except on a real-time and interactive basis. These traditional styles
of presenting content generally fail to produce the engaging, high-quality
experience and entertaining coverage that can be provided through in-depth event
coverage using interactive distribution systems.
 
THE QUOKKA SOLUTION
 
     We have pioneered a unique new genre of global sports programming that uses
the digital information sharing and communications power of the Internet and
other interactive distribution systems. Our programming engages viewers, by
giving them control of the action sequence and transforming them from passive
spectators to active participants. By leveraging our rights to digital assets
such as athlete biometrics, telemetry, environmental data, e-mails, video, text,
audio, images, results and timing, we are able to capitalize on the advantages
of interactive distribution systems to immerse our global audience in a
compelling sports entertainment experience. Through our unique approach to
covering sports we intend to capitalize on the market opportunities created by
the emergence of the Internet as a communications and commerce medium, the
worldwide popularity of sports and the appealing demographics of sports fans.
Further, because we use interactive distribution systems to distribute our
programming to geographically dispersed audiences, we are able to reach
significant global markets on a cost-effective basis. The primary advantages of
our solution are as follows:
 
  Brings the Sports Fan Closer to the Athlete's Experience Through Immersive
Programming
 
     Our programming is designed to transform the audience from spectator to
participant by removing barriers between the athlete and the audience and
enabling fans to experience the sport from the athlete's perspective. We strive
to accomplish this transformation through our unique approach to covering
sports, which we call Quokka Sports Immersion. As telemetry, biometrics and
other performance data about the athletes and their equipment are captured
during competitions, we create graphic visualizations, simulations and extensive
performance analyses that, together with e-mail from the athletes themselves,
tell the rich story behind a given athletic endeavor to fans who want to look
deeper into the action. For example, when covering the Whitbread and Around
Alone races, we presented the data that drove each skipper's tactical decisions,
including each boat's position as well as forecasts of wind speed, currents and
water temperature. Additionally, our programming includes virtual competitions
that parallel the actual event, allowing fans to put themselves directly in the
competition. The Quokka Sports Immersion experience is controlled by each user
in an immersive, interactive environment that traditional media cannot capture,
enabling our audience to become participants in the coverage as well as virtual
participants in the competition.
 
                                       34
<PAGE>   36
 
  Establishes a Network Offering Unique Sports Programming and Content
 
     We are creating an interactive digital sports network that offers a broad
range of engaging sports entertainment programming. Our programming can be
accessed over the Internet at www.quokka.com and related event Web sites and may
be available through other interactive distribution systems in the future. Our
selection of sports events is central to the experience we create for our
audience. In developing our programming calendar, we are currently targeting
sports events that are particularly well-suited to our immersive style of
coverage, such as the Olympics, motor racing, sailing and adventure sports.
These sporting events typically have long durations, large or discontinuous
venues, multiple simultaneous activities or continuous action. We believe that
Quokka Sports Immersion has the potential to change the way sports such as these
are experienced.
 
  Provides Compelling Opportunities for Sponsors and Advertisers
 
     We provide our sponsors with value beyond a simple media buy over the
Internet or other interactive distribution systems. Sponsors secure an exclusive
sponsorship category and the opportunity to embed and promote their products in
our rich digital programming. Our technology and communication sponsors also
have the opportunity to showcase their technological capabilities using our
Quokka Sports Immersion programming. Additionally, we deliver a global audience
of loyal users with demographics desired by sponsors and advertisers. For
example, our first digital sports program, the 1997-98 Whitbread Round The World
Race, attracted more than 1.8 million unique users from 177 countries, more than
half of whom accessed the site outside the United States. These users spent an
average of approximately 9.9 minutes per visit at the site. This compares
favorably to an average of 5.8 minutes per visit at other leading sports-
related Web sites, according to our estimates based on Media Metrix statistics.
Visitors to the Whitbread site were primarily between 25 and 34 years old and
had an average annual household income of $75,000, while 64% were college
educated and 63% held professional, executive or technical positions, providing
an attractive, targeted audience for sponsors and advertisers.
 
STRATEGY
 
     Our objective is to be the leading branded interactive network for digital
sports entertainment. Our strategy includes the following key elements:
 
  Establish Key Relationships Centered Around Global Sporting Events
 
     We intend to establish additional key relationships to complement our
existing relationships with global sports organizations and their media partners
in order to expand our programming. Through relationships with a variety of
sports leaders, including NBC Olympics, Inc. and Forsythe Racing, Inc., we and
our joint ventures have secured rights to provide digital coverage of major
sports events such as the Olympics and CART auto racing. We intend to expand our
programming schedule as we establish additional relationships. We also expect to
capitalize on the exposure we receive from our distinctive coverage of our
existing events to gain access to digital rights to additional sporting events
in the future. As we seek to expand our programming, we will target events that
attract a global audience and are well-suited to our immersive style of
programming.
 
  Build Brand Recognition
 
     We intend to build traffic and brand recognition by aggressively marketing
www.quokka.com as the first interactive network that offers immersive sports
experiences. We believe building brand awareness of www.quokka.com and the
Quokka Sports Immersion experience will lead users to associate our style of
programming with a distinctive experience that inspires lengthy repeat visits
and strong audience loyalty. We plan to market www.quokka.com through an
extensive traditional media campaign employing advertising through television,
print publications, outdoor signage and radio. We also plan to have a
simultaneous online advertising campaign and to gain increased exposure through
our co-branded
 
                                       35
<PAGE>   37
 
initiatives. For example, we expect to receive significant exposure on the CART
Radio Network during its broadcast of CART FedEx Championship Series races.
 
  Establish Global Communities by Bringing Together Geographically Dispersed
Audiences
 
     We intend to use the global nature of the Internet to provide our immersive
sports programming to large, geographically dispersed audiences. Through our
programming, we plan to create global online communities of viewers with similar
interests that come together to experience international sporting events that
take place continents or oceans away. For example, we plan to establish
membership-based online communities centered around each of our major channels.
These communities will provide geographically dispersed sports fans with the
opportunity to participate in virtual competitions, chat rooms and electronic
commerce. We believe these online communities will inspire sports enthusiasts to
visit our network repeatedly and will help establish www.quokka.com as the
leading destination site for global sports enthusiasts.
 
  Generate Multiple Revenue Opportunities
 
     We intend to leverage our immersive programming, dispersed global
communities and interactive content library to create multiple revenue streams.
In addition to generating revenue by selling valuable digital entertainment
sponsorships and advertising, we intend to offer subscription services that
provide access to premium content and pay-per-view events. We are also pursuing
electronic commerce opportunities to sell merchandise targeted to the audience
of each sporting event we cover as well as certain derivative products generated
from our content, such as books, games and screen savers. We also plan to expand
our library of archived content from our sports programming that we believe may
generate additional revenues through syndication.
 
  Enhance Our Innovative Approach to Immersive Sports Programming
 
     We plan to continue to dedicate ourselves to combining leading-edge digital
technology with traditional sports broadcasts to provide a fully immersive
experience for our audience. To improve and expand our immersive programming, we
intend to continue developing our technological expertise and our content
library as well as our strategic relationships with leading technology
companies. We believe that our innovative approach to sports programming
positions us as the first interactive sports network and gives us a competitive
advantage in the emerging digital broadcast industry. We intend to leverage the
experience we gain from covering each event across all of our programming to
enhance the overall experience for our audiences and encourage them to visit our
network for longer periods of time.
 
  Capitalize on Evolving Broadband Opportunities
 
     We plan to capitalize on opportunities created by the evolution of
broadband technologies. We intend to build our programming on a component by
component basis. We expect that this programming structure will enable us to
optimize the richness of our programming for the bandwidth available across a
range of interactive distribution systems, including the Internet, cable modems,
satellite systems and other emerging broadband technologies. We believe this
approach will enable users to enjoy our programming at all connection speeds.
 
OUR SPORTS ENTERTAINMENT PROGRAMMING
 
     Our selection of sporting events is the foundation for the experience we
create for our audience. In developing our programming calendar, we currently
target sporting events that are generally rich in digital assets, long in
duration, have a global audience and involve continuous action and multiple
simultaneous activities. We believe that as we expand our programming and
develop new methods of providing immersive sports coverage, we will be able to
enhance the overall experience for our future audiences and encourage them to
visit our network for longer periods of time. In developing our immersive
coverage of each event, we strive to create an experience through which our
audience can connect with our content as
 
                                       36
<PAGE>   38
 
a member of a community with shared interests. Our goal is to enable our
audience to understand the event with the intensity of participating athletes,
get to know the athletes so the audience will empathize with them and interact
with the experience we create.
 
  Whitbread Round The World Race: Our Inaugural Event
 
     Our digital coverage of the 7th Whitbread Round The World Race, a 32,000
nautical mile around-the-world sailing competition, provides an excellent
example of the enhanced programming that we are able to create by using Quokka
Sports Immersion. We chose this event as the first test of our distinctive
programming approach because we believed it exemplified the type of global,
long-duration, large-venue, continuous and multi-focus sporting event that
traditional media has failed to cover adequately and because it fit well with
our distinctive style of programming. By exploiting the unique technological
opportunities afforded by interactive distribution systems, we created coverage
not possible through traditional media. Team profiles and ongoing stories, such
as icebergs in the Southern Ocean eliminating a leader from the competition,
made the athletes more than simply names on a screen but people to be cheered
on, empathized with and cared about. The Whitbread site attracted more than 1.8
million unique users from 177 countries during the nine-month race, with over
half the audience coming from outside the United States.
 
     When the ten Whitbread yachts left Southampton, England on September 21,
1997 to begin their nine-month race, we had each boat fully equipped to transmit
digital assets. Satellite transceivers on each boat sent digital video, still
images, audio clips, e-mails and telemetry data to our production studios in San
Francisco. We then combined that data with wind, weather and water current
information forecasts to offer immersive coverage on the www.whitbread.org site.
The site presented the drama surrounding each boat's voyage, using the crew's
own words and pictures. In addition, the site gave fans the ability to follow
the race action on our proprietary Quokka Race Viewer, a fully interactive
navigation quality map that gave fans a bird's eye view of each boat's location,
maneuvers and tactical challenges 24 hours a day, seven days a week, allowing
fans to drill down deeply into the event and understand it from the sailor's
perspective.
 
     The telemetry data provided by the boats as well as the wind, weather and
water current forecasts also fed our proprietary Virtual Race game engine,
allowing fans to sail their own virtual yachts, competing against other virtual
racers as well as the actual competitors. More than 11,000 virtual boats raced
side-by-side with the real boats on our Quokka Race Viewer, bringing virtual
competitors into the heart of the action. With access to the same information on
wind speed, current and weather as the actual competitors, the virtual racers
could make real-time strategy and tactics decisions regarding sail selection and
course headings in an effort to complete the course first.
 
  Current and Upcoming Programming
 
     We have selected the Olympics, motor racing, sailing and adventure sports
as the first four channels of our network, and we plan to develop additional
channels in the future. The calendar below identifies our and our joint
ventures' programming, including pre- and post-event coverage.
 
                                       37
<PAGE>   39
[GRAPH OF PROGRAMMING CALENDAR DEPICTING APPROXIMATE START AND END DATES OF THE
FOLLOWING EVENTS: (1) OLYMPICS (OLYMPICS); (2) CART (MOTOR RACING); (3) FIM
GRAND PRIX MOTORCYCLES (MOTOR RACING); (4) AROUND ALONE (SAILING); (5) FIRST
ASCENT (ADVENTURE); (6) MARATHON DES SABLES (ADVENTURE) AND ; NORTH AMERICAN
ADVENTURE TOUR (ADVENTURE).]                   
 
  Olympics
 
     The International Olympic Committee expects more than 10,000 athletes from
an estimated 200 countries to compete in the 2000 Olympic Games in Sydney,
Australia. According to the International Olympic Committee, the 1996 Olympic
Games in Atlanta generated a cumulative television audience in the United States
of 2.3 billion. Additionally, the International Olympic Committee estimates that
Olympic marketing, which is composed of broadcast rights fees, sponsorships,
supplierships, license fees, ticket revenue and related merchandise sales, is
projected to exceed $3.5 billion for the 1997-2000 Olympic quadrennium.
 
     Our joint venture with NBC Olympics, Inc. has the rights to provide
interactive digital coverage in the United States of the Summer Games in Sydney
in 2000, the Winter Games in Salt Lake City in 2002, the Summer Games in Athens
in 2004 and certain related pre-Games and United States Olympic qualifying
events. Additionally, the joint venture has secured rights to incorporate
limited highlights of NBC video into its digital interactive coverage for a
United States audience. See "-- Joint Ventures and Rights Agreements."
 
     The joint venture is scheduled to launch its Web site in August 1999 in
advance of the 2000 Olympic Games. The site will build awareness for broadcast
and digital interactive coverage of the Games by covering pre-Olympic events,
such as the United States Gymnastics Championship and United States Olympic Team
Trials. In addition, covering the pre-Olympic events also has certain production
advantages. For example, the events will enable us to tune our production
infrastructure in advance of the 2000 Olympic Games. Likewise, in covering
pre-Olympic events, the joint venture will collect numerous digital assets, such
as athletes' backgrounds, that can also be used in the digital coverage of the
Olympic Games.
 
     The joint venture is currently preparing for its coverage of the 2000
Olympic Games in Sydney and the United States trials leading up to these Games.
These development and pre-production activities include hiring key personnel,
integrating the respective expertise of NBC and Quokka, selecting the emphasis
for the coverage, gathering background information on athletes, building
templates for the joint venture's coverage and establishing the infrastructure
necessary to create the coverage and support anticipated visits to the joint
venture's Web site.
 
                                       38
<PAGE>   40
 
  Motor Racing
 
     Motor racing attracts a global audience with races held around the world.
Based on information compiled by Sponsorship Research International across 14
countries including the United States, the United Kingdom, Brazil and Russia, we
estimate that there were approximately 340 million people who watched televised
motor racing events and approximately 350 million people who watched televised
motor cycling events in 1998. Additionally, we believe that auto racing is one
of the most popular spectator sports in North America. According to the 1998
Goodyear Racing Attendance Report, race attendance for the 12 North American
racing series that the Goodyear Rubber & Tire Company monitored in 1998 was
approximately 17.1 million people.
 
     We believe motor racing is well-suited to our distinctive style of
programming due to its continuous, multi-focus action. Although it is exciting
to follow the current leader, motor races are often won or lost by action
occurring elsewhere in the race. A contender threatening to overtake the lead
may lose critical time during an inefficient pit-stop or a dark-horse may
suddenly pull into the lead because of a particularly adept cornering maneuver.
Additionally, motor racing fans tend to be interested in following one or two of
their favorite racers, who, unless in the lead, may rarely be shown on-air by
traditional broadcasters.
 
     Our immersive coverage of a motor racing event will generally include:
 
     - a proprietary Quokka Race Viewer providing an up-to-the-minute lap
       position graphic, lap time and time-behind-leader updates;
 
     - track audio feeds;
 
     - graphical representations of the course;
 
     - a chronicle allowing fans to follow their favorite drivers and teams;
 
     - in-depth profiles on drivers, teams and manufacturers with interactive
       photo galleries;
 
     - interactive global event map and detailed race schedules, including
       United States and foreign television coverage schedules;
 
     - a virtual competition, where fans play the role of team owners; and
 
     - community and electronic commerce areas.
 
        CART.  We have acquired, through a joint venture with Forsythe Racing,
Inc., the exclusive worldwide interactive media rights for all Championship Auto
Racing Team (otherwise known as CART) events through December 31, 2003. CART
competitors drive open-wheel champ cars with engines generating 900 or more
horsepower at speeds up to 240 miles per hour. In 1999, the CART FedEx
Championship Series consists of 20 races held on large and small oval tracks,
permanent road courses and temporary street circuits in Japan, Brazil, Canada,
the United States and Australia. See "-- Joint Ventures and Rights Agreements."
 
     In Motegi, Japan, the joint venture's digital coverage of CART captured the
drama that sometimes occurs in motor racing. Near the end of the race, live
in-car audio feeds from drivers Adrian Fernandez and Greg Moore gave our
audience a unique insight into the closing laps of Fernandez's victory at
Motegi. Fernandez and his crew gambled on having enough gas to complete the race
and stayed out of the pit, knowing that the entire race could be lost by running
out of gas on the last lap. Meanwhile, Moore spun with less than two laps to go,
bringing out a caution flag that enabled Fernandez to conserve fuel and win the
race. With live in-car audio feeds from both these drivers, our digital coverage
brought our audience inside the drama as it was developing.
 
     We plan to provide coverage of the annual CART FedEx Championship Series
racing season, which runs from February to November, and to extend the coverage
to include pre-and post-season developments. We may elect to cover additional
CART events in the future.
 
                                       39
<PAGE>   41
 
        FIM Motorcycle Racing.  We have acquired the exclusive, worldwide
interactive media rights for all Federation Internacionale de Motocyclisme
(otherwise known as FIM) 500cc Road Racing World Championship Grand Prix events
from January 1, 2000 through December 31, 2003. Racing prototype motorcycles,
competitors in FIM Grand Prix races compete at speeds in excess of 170 miles per
hour on fixed course tracks. Races are held throughout the world several times a
month during the racing season. The season runs from mid-April through October,
with 16 races held in such varied locations as Brazil, Germany, South Africa,
Italy, Holland, Spain, Japan and Malaysia. Beginning in 2000, we plan to provide
coverage of the annual FIM Grand Prix motorcycle racing season and to extend
this coverage to include pre- and post-season developments. See "-- Joint
Ventures and Rights Agreements."
 
  Sailing
 
     Sailing attracts a significant worldwide audience, with events like the
Whitbread Round The World Race generating a cumulative global television
audience of approximately 2.6 billion according to Sponsorship Research
International. Based on information compiled by Sponsorship Research
International across 14 countries including the United States, the United
Kingdom, Brazil and Russia, we estimate that there are approximately 270 million
people who watched televised sailing events in 1998. As evidenced by our
successful coverage of the Whitbread race, sailing is well-suited to our
distinctive style of programming.
 
     Our immersive coverage of a sailing event will generally include:
 
     - a proprietary Quokka Race Viewer depicting each boat's position as well
       as wind, water current and other weather data on navigation-quality
       charts 24 hours a day, seven days a week;
 
     - substantial coverage by the competitors themselves through e-mail, moving
       video, still video and audio transmissions;
 
     - a chronicle allowing fans to follow their favorite skippers and crews;
 
     - behind-the-scenes, in-depth coverage of the crews and boats, with
       interactive photo galleries;
 
     - a virtual competition, where fans can race head-to-head against the
       actual competitors and other virtual competitors and where both actual
       and virtual boats are tracked on our proprietary Quokka Race Viewer; and
 
     - community and electronic commerce areas.
 
        Around Alone.  We have acquired the exclusive, worldwide interactive
media rights for the Around Alone race through December 31, 2001 with the option
to extend the term for two additional four-year periods.
 
     Held every four years, the Around Alone race is a 27,000 nautical mile solo
sailing race around the world through some of the earth's most treacherous
waters. The race challenges the nautical skills, endurance, resourcefulness,
innovation and fortitude of competitors who circumnavigate the globe making only
four stops. Sixteen competitors entered the 5th Around Alone race that began in
September 1998 and will end in May 1999. This year's race had stops in Cape
Town, South Africa; Auckland, New Zealand; Punta del Este, Uruguay; and
Charleston, South Carolina. Our coverage of the 5th Around Alone race began in
September 1998, and by mid-April 1999, we had attracted more than 300,000 unique
viewers.
 
     Because we had equipped the boats with instruments to capture real-time
information about the competitors, we were able to provide live coverage of
significant events during the race -- events that previously would have been
covered only after the sailors had reached port and the action had long-since
passed. For example, fans were able to follow the exciting rescue of Isabelle
Autissier whose boat capsized in the middle of the Southern Ocean. With
Autissier too far from land for any national rescue services to reach her, a
fellow competitor undertook the rescue effort. Our audience tracked Giovanni
Soldini as he turned back and began a 24-hour, 200-mile battle against
gale-force winds and 30-foot waves to search for and eventually rescue
Autissier. Additionally, the race garnered significant media attention in the
United
 
                                       40
<PAGE>   42
 
States when traditional media companies became aware of the story we were
covering live. Traditional media, including the New York Times, National Public
Radio and Dateline NBC, picked up the story of Viktor Yazykov, a Russian
competitor who performed surgery on his own arm in the middle of the Atlantic
Ocean by following a doctor's e-mail instructions. We posted the e-mails as they
were received and were the first media company with pictures of Yazykov during
and following the surgery. We supplied video clips, still photographs and other
assets to traditional media companies seeking to cover the story.
 
  Adventure Sports
 
     Adventure sports such as climbing expeditions, wilderness challenges and
similar events are particularly well-suited to our style of programming. By
collecting digital assets from these remote events, we are able to create unique
experiences that help to transform these events into spectator sports. As an
emerging category of spectator sports there are few established branded
adventure sports events. Accordingly, our programming for adventure sports will
cover Quokka-created events as well as currently existing events such as the
Marathon des Sables.
 
     Our immersive coverage of an adventure sports event will generally include:
 
     - graphical displays depicting the athletes' positions, whether climbing up
       a mountain or running across a desert, on a 24 hours a day, seven days a
       week basis;
 
     - biometric data, such as heart-rates, from selected athletes;
 
     - substantial coverage by the competitors themselves through e-mail, video,
       still images and audio transmissions;
 
     - a chronicle allowing fans to follow their favorite adventure athletes and
       teams;
 
     - behind-the-scenes coverage of the rigors and challenges presented by the
       event as well as the event location; and
 
     - community and electronic commerce areas.
 
        Marathon des Sables.  We provided exclusive interactive coverage of the
14th Marathon des Sables in April 1999. The Marathon des Sables is a grueling
seven-day footrace that stretches approximately 140 miles through Morocco's
Sahara Desert. During the 14th race, rest stations were available to the
athletes at predetermined locations that ranged from six to 44 miles apart. Each
of the 590 competitors had to carry his or her own backpack containing food,
sleeping gear and anti-venom kits. Water was provided, but was typically limited
to a ration of nine liters a day.
 
        First Ascent: The Expedition to China's Karakoram Range.  From mid-April
through June 1999, we will provide immersive coverage of a Quokka-sponsored crew
of seven climbers traveling by truck and camel across the ancient Silk Route
from Beijing to Kashgar. This 3,000 mile expedition will be heading to the
mountains in the Karakoram range in the Chinese Himalayas and is scheduled to
include several first ascents by our company-selected team of world-class
climbers. The team will also be searching for a route up Hidden Peak, the
world's 11th tallest mountain. If a route is found, we plan to schedule an
attempt to scale Hidden Peak in 2000.
 
AUDIENCE GENERATION
 
     We are planning to employ a variety of methods to promote www.quokka.com
and to build and retain our audience.
 
                                       41
<PAGE>   43
 
  Building Our Audience
 
     We plan to build our audience by:
 
     - launching an aggressive media campaign, utilizing print, outdoor signage,
       radio, television and Internet advertisements to build our brand and
       promote awareness of www.quokka.com and our programming offerings;
 
     - capitalizing on exposure to a national audience through guaranteed
       promotion by NBC of the Web site developed by the joint venture we formed
       with NBC Olympics, Inc.;
 
     - expanding our programming offerings;
 
     - capitalizing on our association with, and promotion of our coverage
       provided by, governing bodies and rights holders of the sports events we
       cover; and
 
     - exploiting appropriate syndication opportunities by distributing portions
       of our programming to other Internet sites and traditional media
       companies in exchange for advertisements or other promotional
       consideration designed to direct audience to www.quokka.com.
 
  Retaining Our Audience
 
     We plan to retain our audience by:
 
     - continuing to deliver immersive and engaging content;
 
     - maximizing audience loyalty through community-building activities such as
       virtual competitions, chat rooms, online forums and online transactions;
       and
 
     - migrating our audience to different channels on our network.
 
     We believe an important metric for measuring the quality of our audience is
the duration of an average visit to our Web sites. Based on Media Metrix data,
we estimate that users spend an average of approximately 5.8 minutes per visit
on other leading sports-related Web sites. To date, our event programming has
generated average visit durations significantly greater than this 5.8-minute
average.
 
<TABLE>
<CAPTION>
                                                                    AVERAGE
EVENT                                       CHANNEL            VISIT DURATION(1)
- -----                                       -------            -----------------
<S>                                    <C>                 <C>
Whitbread Round The World Race.......  Sailing                    9.9 minutes
Around Alone race....................  Sailing                   14.8 minutes
CART auto races......................  Motor Sports              12.8 minutes
Marathon des Sables..................  Adventure                 19.8 minutes
</TABLE>
 
- ---------------
(1) Our internal statistics regarding our coverage of the Whitbread and Around
    Alone races have been audited by Internet Profiles Corporation. Our internal
    statistics regarding our coverage of the Marathon des Sables and CART races
    are based on unaudited reports from Internet Profiles Corporation. The
    Around Alone race, CART races and Marathon des Sables coverage is ongoing
    and final results may differ.
 
  Marketing and Advertising
 
     As of March 31, 1999, we had 15 full-time employees on our marketing team.
In addition to being responsible for brand marketing, program marketing,
audience research and the coordination of our external public relations efforts,
members of our marketing team also serve as product managers for our media and
derivative products. In 1998, we spent $554,000 on advertising. In 1999, we
expect to raise our advertising expenditures and launch an aggressive media
campaign. We also plan to increase our marketing staff to support our brand
building, electronic commerce and derivative product strategies.
 
                                       42
<PAGE>   44
 
LEVERAGING OUR AUDIENCE AND CONTENT: GENERATING MULTIPLE REVENUE STREAMS
 
     We plan to leverage our diverse, global audience and suite of content
offerings to create multiple revenue streams. We believe we can generate revenue
from a variety of sources, including sponsors, advertising, electronic commerce,
derivative product sales, subscription and pay-per-view opportunities and studio
services.
 
  Digital Entertainment Sponsorships
 
     We plan to offer multi-year digital entertainment sponsorships to
technology, communications, consumer retail and consumer services companies. We
currently sell sponsorships to certain companies whose products can be
integrated into our technical infrastructure. These companies will form the
Quokka Performance Team. Although the benefits associated with Team membership
will be custom-designed, we envision providing members of the Quokka Performance
Team with benefits such as the following:
 
     - exclusive exposure in their category as part of our digital media
       coverage, including embedded product placement in our programming that
       identifies our sponsor as an enabler of the Quokka Sports Immersion
       experience;
 
     - traditional sports sponsorship benefits in connection with Quokka-owned
       events, including venue signage, licenses to use event designations in
       their own marketing efforts and access to hospitality suites; and
 
     - sales and marketing assistance, including targeted lead generation, trade
       show presence, in-store demonstrations using our digital content and
       sales presentations demonstrating the Team member's contribution to the
       Quokka Sports Immersion experience.
 
     In addition to the Quokka Performance Team, we plan to create additional
"Teams" with similar custom-designed sponsor benefits in order to build
sponsorship revenues. For example, consumer retail goods and services companies
could become part of an Athlete's Team, covering equipment, sports clothing and
similar items of interest to athletes of all abilities. We developed our Team
model for digital entertainment sponsorships as we identified the various ways
we provided value to sponsors of our early Web sites, such as Tandem (which has
since been acquired by Compaq Computer Corporation), which accounted for
approximately 52% of our revenues in 1998, and CompuServe, which accounted for
approximately 16% of our revenues in 1998. We plan to continually evolve our
Team model in order to better meet sponsors' needs.
 
     Because sponsorship is already part of the sports industry, many sports
governing bodies or other rights holders for the events we cover will have
pre-existing sponsorship relationships. We believe these pre-existing
sponsorships will provide us with ready-made sales opportunities. In certain
circumstances, however, pre-existing sponsorships associated with specific
events may limit the pool of prospective companies we can approach regarding
sponsorship sales in connection with such events.
 
  Advertising Opportunities
 
     We plan to generate additional revenues from banner advertisements that are
prominently displayed throughout our digital sports entertainment network. In
selling banner advertisements, we plan to target companies seeking to reach a
global sports audience. Our experience with the Whitbread race demonstrated that
our distinctive coverage can attract a significant loyal and global audience
representing a demographic base sought by Internet advertisers and sponsors from
the consumer-products industry. We believe that by delivering an audience that
returns to our site frequently and stays for an extended period of time, we can
provide additional value to our sponsors and advertisers and generate
advertising revenues on a per user basis in excess of that currently achieved
elsewhere in the Internet industry.
 
                                       43
<PAGE>   45
 
  Electronic Commerce Opportunities
 
     We plan to develop electronic commerce opportunities on our Web sites to
generate additional revenues, as well as enhance our user experience. As
electronic commerce continues to grow, we expect that sports fans will
increasingly seek sports merchandise, event gear and other equipment over the
Internet and other digital distribution systems. We believe audiences of each of
our channels provide a receptive market for goods relating to sailing, motor
sports, the Olympics and adventure sports as well as general sports merchandise.
In the future, we plan to offer event-branded gear, event-related gear, Quokka-
branded products and our derivative products. In addition, we hope to offer
products produced by our digital entertainment sponsors that we use in creating
and producing the Quokka Sports experience. We will seek to make the electronic
shopping experience as immersive as possible so that it complements the overall
look and feel of our digital media programming. Additionally, by providing
access to high-quality sporting and events-related products through our site or
other digital distribution systems, we believe that we will be expanding the
overall Quokka experience for our audience.
 
  Derivative Products: Leveraging Digital Assets
 
     We plan to repurpose our digital content for distribution through
derivative products, such as books, magazines, other publications, videos and
screen savers. We believe that our audience will be a receptive market for such
derivative products and that such products will also appeal to people who are
not yet part of our audience. One of our initial derivative products is a book
containing page views from the Whitbread race that tells the inside story of the
race from beginning to end and maps each competitor's progress throughout the
race. Additionally, we believe that derivative products will provide additional
value to our digital entertainment sponsors and can be used to gather important
information regarding our audience. For example, we created a screen saver that
embedded our sponsors' logos within digital media from the Whitbread
competition. Approximately 40,000 users downloaded the screen saver for free in
exchange for providing valuable, in-depth demographic information.
 
  Subscription and Pay-Per-View Opportunities
 
     As broadband and other interactive distribution systems proliferate and
users are able to access greater volumes of streaming video and audio in
interactive settings, we believe we may be able to distribute our immersive
sports content through subscription services and that certain sports events or
coverage depths may be appropriate for distribution on a pay-per-view basis.
 
  Studio Services
 
     We believe our studio services, which have included designing the official
Web site for the International Olympic Committee, have provided opportunities to
build strategic relationships with key players in the sports and sports media
industries. Our studio services have been primarily strategic in nature, and we
believe that revenues from studio services are likely to decrease as a
percentage of total revenues in the future.
 
        International Olympic Committee.  We produced www.olympic.org, the
official site of the International Olympic Committee and have advised the
International Olympic Committee on interactive rights and branding on the
Internet. Creation of the www.olympic.org site was a multi-phase project aimed
at establishing a significant online presence for the Olympic movement. This
Olympic site provides a store of information on Olympic history, tradition and
current events. Our work for the International Olympic Committee accounted for
more than 12% of our revenues in 1998.
 
  Our Sales Team
 
     As of March 31, 1999, our sales team consisted of thirteen full-time
employees, twelve of whom focus on selling sponsorships. Because of the
strategic and customized nature of our sponsorship sales, we plan to add
additional members to our sponsorship sales force. In connection with NBC/Quokka
Ventures' coverage of the Olympics, Quokka and NBC Olympics, Inc. will jointly
sell sponsorships for the
                                       44
<PAGE>   46
 
joint venture's Olympic Web site. Additionally, we plan to expand our sales
force significantly in order to grow advertising sales and develop our media and
derivative products sales. We may also use third party vendors to sell banner
ads on our site.
 
THE QUOKKA SPORTS PLATFORM
 
     The Quokka Sports Platform is a set of processes and facilitating
technologies that enables us to collect digital assets from sports events and
produce and deliver immersive programming. This set of processes and
technologies provides a robust and efficient method that facilitates real-time
production of our sports entertainment programming and maximizes the long-term
value of the digital assets that Quokka collects and produces. Our current
programming is produced using the Quokka Sports Platform, which is continuously
being enhanced and improved to accommodate our expanding requirements.
 
  Dataflow Segments of the Quokka Sports Platform
 
     At the highest level, the Quokka Sports Platform is organized into six
segments:
[GRAPHIC TITLED "QUOKKA SPORTS PLATFORM" AND DEPICTING
DATA FLOW THROUGH THE FOLLOWING SIX STAGES OF THE QUOKKA SPORTS
PLATFORM: (1) COLLECTION; (2) TRANSMISSION; (3) PRODUCTION;
(4) DISTRIBUTION; (5) DELIVERY; AND (6) CLIENT.]
                                      

        Collection.  Collection is the process of capturing data at event
venues. Collection is the point at which the Quokka Sports Platform begins and
the raw data from venues become digital media assets, the fundamental building
blocks of the Quokka Sports Platform. Digital media assets consist of individual
units of digital content, such as photographic images, video streams or e-mails
from an athlete as well as information about the assets, such as author or
physical storage location.
 
     Devices capturing wide-ranging data are already a part of many sports. For
example, a world-class yacht is equipped with over 40 sensors that track
multiple variables such as rig tension, rudder position and wind speed. Over 80
attributes of a CART car's performance are measured, including fuel level,
engine temperature and engine RPMs. Athletes use this feedback to hone their
skills and track their performance. We seek access to relevant portions of this
data either directly by connecting to the sensors monitoring the actual
information or indirectly through our contractual relationships with the
governing body of an event, such as CART. We also seek access to data by
securing voluntary cooperation from athletes.
 
                                       45
<PAGE>   47
 
        Remote Production and Transmission.  Collected digital assets are
prepared for transmission and then transmitted to our production studio. In our
remote production process, we define event-specific data tags that indicate the
type of data included in a transmission in much the same way desktop icons
indicate whether a file is a word processing document or electronic spreadsheet.
Remote production teams also control which assets are captured, formatted and
transmitted from the event and manage physical resources necessary to accomplish
this task. Tagged data is then transmitted to our production studio over
Internet Protocol networks, using satellite data communications, high-bandwidth
wide-area networks or other communications technologies.
 
        Production.  Transmissions are stored at our production studio in San
Francisco on receipt. Our event producers, directors and their multi-disciplined
teams use these transmitted digital assets to create multiple visual and audio
presentations. Aided by automation technologies, digital assets received from
the sports venue are combined with previously stored assets or original material
created by our staff of designers, writers, audio specialists and photographers.
In advance of each event, these teams have developed story-telling templates
that enable the action to be experienced from the athlete's perspective and
drive the audience to explore the site further.
 
        Distribution and Delivery.  Distribution is the process of transporting
our immersive content from our production studio through high-speed interactive
systems to delivery head-ends, while delivery is the process of ultimately
reaching the end user. We currently distribute our Quokka Sports Immersion
programming through www.quokka.com over the Internet. Accordingly, delivery is
accomplished primarily through Internet service providers who provide end-users
with access to the Internet through their computers. We are also designing our
programming to exploit the technological opportunities presented by other
interactive distribution systems, such as DSL, cable modem and satellite. If we
ultimately employ these distribution methods, our future delivery partners are
likely to include the providers of DSL service, interactive cable services, or
satellite providers. End-users accessing our programming through these systems
in the future may use computers or ultimately other interactive viewing devices
such as interactive televisions. We have also distributed our content to
traditional broadcast and print media. We believe these traditional media may
serve as additional distribution outlets for our rich digital programming.
 
JOINT VENTURES AND RIGHTS AGREEMENTS
 
     We plan to secure rights to cover sporting events through a variety of
methods, including direct acquisition and the formation of joint ventures with
rights holders or other entities having established relationships with rights
holders. We have experience with both methods. To date, we have acquired the
rights to events such as FIM Motorcycle racing directly from the rights holders
and we have entered into a joint venture with NBC Olympics, Inc. in connection
with the Olympic Games and a joint venture with Forsythe Racing, Inc. in
connection with CART.
 
        Joint Venture with NBC.  In February 1999, we formed NBC/Quokka
Ventures, LLC with NBC Olympics, Inc., a wholly-owned subsidiary of National
Broadcasting Company, Inc. In connection with the formation of the joint
venture, we contracted with the joint venture to provide the services necessary
for the joint venture to provide interactive digital coverage. Consequently, we
expect that the joint venture's interactive digital coverage of the Olympics on
its Web site will showcase Quokka's distinctive style of programming and will
complement NBC's television coverage.
 
     NBC Olympics, Inc. granted the joint venture the following interactive
media rights, subject to limitations, in connection with the Olympic Games and
certain United States qualifying events through 2004: (1) United States
interactive rights to incorporate limited highlights of NBC video into its
coverage for a audience; (2) an exclusive license to produce the official NBC
interactive media coverage of the Games; (3) a license to incorporate still
photographs and sequential still photographs taken from all video produced from
the Games by NBC Olympics into the joint venture's coverage; (4) a license to
incorporate into the joint venture's coverage historical Games footage,
non-competition video and all research and other materials, whether text, audio,
video, still footage, written or fixed in any other medium relating to the Games
produced by NBC Olympics; (5) the right to distribute the joint venture's
 
                                       46
<PAGE>   48
 
coverage in interactive media throughout the United States; and (6) a license to
use the composite NBC/ Olympic logo on the joint venture's Web site in
connection with the production, operation, promotion, marketing and distribution
of the joint venture's coverage of the Games.
 
     In order to protect its broadcast rights and brand, however, NBC Olympics,
Inc. can restrict the joint venture's use of any of the foregoing interactive
media rights if: (1) NBC lacks the ability to grant such rights to the joint
venture as a result of contractual limitations or restrictions imposed by, or
conflicts with any legal rights held by the International Olympic Committee or
any other person or entity possessing intellectual property or other rights in
the still photographs, sequential still photographs or video, whether Games,
non-competition or historical; (2) a use conflicts with NBC's current sponsors
or advertisers or the sponsors or advertisers of the International Olympic
Committee, United States Olympic Committee, Sydney Organizing Committee of the
Olympic Games, Salt Lake Olympic Organizing Committee or the 2004 Games
Organizing Committee; (3) the digital assets are involved in any transaction by
us or the joint venture with any NBC Competitor, as defined below; (4) a use
competes with NBC's broadcast, cable or direct broadcast satellite coverage of
the Games; or (5) a use violates NBC's, NBC Sports', the International Olympic
Committee's, the United States Olympic Committee's or other Olympic
organizations' editorial policies and practices.
 
     NBC/Quokka Ventures, LLC is owned 51% by us and 49% by NBC Olympics, Inc.
and management is vested in a board of directors, three of whom are currently
appointed by us and two of whom are currently appointed by NBC Olympics, Inc. We
have committed to meeting the capital needs of the joint venture in such amounts
as may be necessary to fund the joint venture's operations on an on-going basis
in accordance with its long-term strategic plans and annual operating plan. In
connection with this obligation, we have committed to contributing at least $15
million in capital to the joint venture.
 
     NBC Olympics, Inc. has the right to terminate the joint venture in the
event an NBC Competitor: (1) merges or otherwise consolidates with us in a
transaction where we are not the surviving entity; (2) becomes the beneficial
owner of 15% or more of our outstanding equity securities; (3) becomes entitled
to elect, appoint or replace a member or members of our board of directors
unless NBC Olympics, Inc. is also granted the same right; or (4) acquires all or
substantially all our assets. For these purposes, an "NBC Competitor" includes
any media company that is significantly engaged in any of the primary businesses
of NBC Olympics, Inc., National Broadcasting Company, Inc. or its subsidiaries
or any telecommunications, Internet or similar company that is significantly
engaged in any of the primary businesses of NBC Olympics, Inc., National
Broadcasting Company, Inc., its subsidiaries or Snap! LLC or successor entities.
However, an NBC Competitor shall not include any entity identified by Quokka in
writing to NBC Olympics, Inc. that NBC Olympics, Inc. does not designate as an
NBC Competitor in writing to Quokka within thirty days of our written notice.
 
        Joint Venture with Forsythe Racing, Inc.  In January 1999, we formed
CART Digital Media Enterprises, LLC with Forsythe Racing, Inc. Forsythe owns two
of the teams that compete as part of the Championship Auto Racing Teams circuit
and brings to the joint venture racing expertise as well as long-standing
relationships with suppliers, teams and event promoters in the auto racing
world.
 
     CART Digital Media Enterprises, LLC is owned 50% by us and 50% by Forsythe
Racing, Inc. and management is vested in a Board of Managers, two of whom are
appointed by us and two of whom are appointed by Forsythe Racing, Inc. Capital
contributions will be made to the joint venture on a 50/50 basis by us and
Forsythe Racing, Inc. We expect to make capital contributions of approximately
$3 million in 1999 in order to meet the venture's needs for operating capital.
 
     In March 1999, the joint venture secured the exclusive worldwide
interactive media rights for all CART events through December 31, 2003 with a
right of first negotiation. In connection with this digital coverage, the joint
venture also secured certain exclusive worldwide rights to: use CART's marks as
well as in connection with any derivative products, use data and content from
the events, syndicate content and sell commercial partnerships, advertising,
official merchandise, electronic commerce products and services, official
photographs and derivative products. The right to sell advertising and
commercial partnerships is subject to certain obligations to approach current
CART sponsors and the right to sell derivative products
                                       47
<PAGE>   49
 
and syndicate content is subject to CART's reasonable approval. The right to
sell official merchandise, official photographs and other electronic commerce
products and services is subject to receiving approval of certain other third
parties. CART has the ability to terminate the agreement if: (1) the joint
venture fails to pay the guarantee set forth in the agreement or such additional
sums as may be owed; (2) the joint venture fails to maintain state of the art
quality and technological enhancements, subject to notice and an opportunity to
cure; (3) the Web site fails to achieve certain minimum levels of traffic,
subject to notice and an opportunity to cure; (4) if the joint venture or we
provide similar services to an open wheel professional auto racing sanctioning
body, league or series currently domiciled in the United States that promotes
products or services competitive with those of CART; or (5) if more than 49% of
the ownership or beneficial interest in the joint venture or in Quokka is
transferred, sold or assigned to an entity whose products or services are
competitive to or in conflict with those of CART.
 
  FIM Motorcycle Racing
 
     We have acquired from Dorna Promocion del Deporte, S.A. the exclusive,
worldwide interactive media rights for all FIM Road Racing World Championship
Grand Prix events from January 1, 2000 through December 31, 2003. In connection
with our coverage rights, we have secured the exclusive worldwide rights to: (1)
use FIM Motorcycling World Championships' trademarks as part of our coverage as
well as in connection with any derivative products; (2) use data and content
from the events; (3) syndicate content; and (4) sell sponsorships, advertising,
official merchandise, electronic commerce products and services and derivative
products. Our right to sell advertising and sponsorships is subject to certain
obligations to approach current FIM Motorcycling World Championships sponsors
and our right to sell derivative products is subject to Dorna's reasonable
approval. Our right to syndicate content is subject to a restriction that
certain assets may not be syndicated alone without Dorna's consent. Our right to
sell official merchandise and other electronic commerce products and services is
subject to receiving approval of certain other third parties. Dorna has the
ability to terminate the agreement if we fail to pay the required rights fee.
 
  Around Alone
 
     We have acquired from Great Adventures, Ltd. the exclusive, worldwide
interactive media rights for the Around Alone race through December 31, 2001
with the option to extend the term for two additional four-year periods. In
connection with our coverage rights, we also have secured worldwide rights to:
(1) use Around Alone's trademarks in our coverage as well as in connection with
any derivative products; (2) use data and content from the events; and (3) sell
sponsorships, advertising, official merchandise, certain electronic commerce
products and services, official photographs, video and audio and derivative
products. Our right to sell advertising and sponsorships is subject to certain
obligations to approach current Around Alone sponsors. Our right to sell
official merchandise, official photographs, video and audio and certain
electronic commerce products and services is subject to receiving approval of
certain other third parties. Great Adventures has the ability to terminate the
agreement if we fail to pay any revenue sharing earned.
 
COMPETITION
 
     The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990's, the number of Web sites on the Internet competing for consumers'
attention and spending has proliferated. We expect that competition will
continue to intensify.
 
     We compete, directly and indirectly, for sponsors, rights and the attention
of sports viewers with the following categories of companies:
 
     - Web sites targeted to sports enthusiasts generally, such as
       www.cbs.sportsline.com, www.cnnsi.com and www.espnsportszone.com, many of
       which have been established by traditional media
 
                                       48
<PAGE>   50
 
       companies, and Web sites targeted to enthusiasts of particular sports,
       such as www.majorleaguebaseball.com, www.nascar.com, www.nba.com,
       www.nfl.com and www.nhl.com;
 
     - publishers and distributors of traditional media targeted to sports
       enthusiasts such as the ESPN networks, the FoxSports network and Sports
       Illustrated;
 
     - online services such as America Online and the Microsoft Network, which
       provide access to sports-related content and services;
 
     - vendors of sports information, merchandise, products and services
       distributed through other means, including retail stores, mail, facsimile
       and private bulletin board services; and
 
     - Web search and retrieval services, such as Excite, Infoseek, Lycos and
       Yahoo! and other high-traffic Web sites, such as those operated by cYnet
       and Netscape.
 
     We believe that our programming does not compete directly with traditional
media, primarily because traditional media frequently do not provide substantial
coverage of the sports that we cover and because we believe our programming can
substantially enhance coverage provided by traditional media.
 
     We expect that the number of our direct and indirect competitors will
increase in the future. We anticipate that, as the Internet and other
interactive distribution systems converge with traditional television
broadcasting and cable, significant competition may come from the cable arena,
including such sports-oriented cable networks as the ESPN networks.
 
     We believe that the principal competitive factors in attracting and
retaining audience are the ability to offer compelling and entertaining sports
programming, the depth, breadth and timeliness of coverage and brand
recognition. We believe that the principal competitive factors in securing and
retaining long-term digital rights to cover sporting events include the ability
to do the following:
 
     - offer high-quality coverage;
 
     - establish and maintain relationships with rights holders;
 
     - deliver an attractive audience demographics;
 
     - maintain credibility as a leading and enduring company; and
 
     - pay substantial rights fees.
 
We may be unable to compete successfully with respect to one or all of these
factors.
 
     Many of our current and potential competitors for sponsors, rights and the
attention of sports viewers have longer operating histories, significantly
greater financial, technical and marketing resources, significantly greater name
recognition and substantially larger user or membership bases than us and,
therefore, may have a significantly greater ability to attract advertisers and
users. In addition, many of these competitors may be able to respond more
quickly than we can to new or emerging technologies and changes in Internet user
requirements and to devote greater resources than we can to the development,
promotion and sale of their services. Our current or potential competitors may
develop products and services comparable or superior to those developed by us or
adapt more quickly than we can to new technologies, evolving industry trends or
changing Internet user references. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which would harm our
business. In addition, as we expand internationally, we may face new
competition. We may be unable to compete successfully against current and future
competitors and competitive pressures may harm our business.
 
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
 
     The www.quokka.com site is hosted at Frontier GlobalCenter in Sunnyvale,
California. All of our network operations are controlled from our headquarters
in San Francisco, California. We provide multiple Web servers that run the
Microsoft Internet Information Server on the Microsoft Windows NT Server
 
                                       49
<PAGE>   51
 
operating system and Compaq server hardware. Internet access is maintained
through Frontier GlobalCenter.
 
     The network infrastructure is composed of Cisco Systems, Inc. products in
redundant configurations. The computer and networking equipment used to operate
our Web sites is configured with multiple power supplies. Frontier GlobalCenter
provides a generator with up to two weeks of backup power.
 
     Our operations depend upon our ability to protect systems against damage
from fire, earthquakes, power loss, telecommunications failure, break-ins,
computer viruses, hacker attacks and other events beyond our control. A disaster
or malfunction that disables either our San Francisco production facility or
Frontier Global Center could interrupt our programming completely, limit the
quantity or timeliness of updates to our productions or limit the speed at which
our audience can access our content. Although we do not currently have a
documented disaster recovery plan, we intend to create one.
 
     The market for digital media is characterized by rapid growth, rapidly
changing technology, evolving industry standards and frequent announcements of
new developments. To be successful, we must adapt to our rapidly changing
environment by continually improving the performance, features and reliability
of our services as well as adapting to new technologies. We may also incur
substantial costs if we need to modify our programming or distribution processes
to adapt to these changes. Our business could be adversely affected if we incur
significant costs without adequate results or cannot adapt to these changes.
 
INTELLECTUAL PROPERTY
 
     We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our success. We rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to protect our proprietary rights in products and
services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors and nondisclosure agreements with
parties with which we conduct significant business to limit access to and
disclosure of our proprietary information. These contractual arrangements and
the other measures taken by us to protect our intellectual property may not
prevent misappropriation of our technology or deter independent third-party
development of similar technologies. In addition, we may need to engage in
litigation in order to enforce our intellectual property rights in the future or
to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of management and
other resources, either of which could harm our business.
 
     We pursue the registration of our trademarks and service marks in the
United States and internationally. Effective trademark, service mark, copyright
and trade secret protection may not be available in every country in which our
programming is accessible online. We have licensed in the past, and expect to
license in the future, certain of our proprietary rights, such as trademarks or
copyrighted material, to third parties. These licensees may take actions that
might adversely affect the value of our proprietary rights or reputation, which
could adversely affect our business. We also rely on certain off-the-shelf
technologies that we license from third parties. These third-party licenses may
not continue to be available to us on commercially reasonable terms or at all.
The inability to use licensed technology important to our business could require
us to obtain substitute technology of lower quality or performance standards or
at greater cost, which could harm our business. In the future, we may seek to
license additional technology or content in order to enhance our current
programming or to introduce new content. We cannot be certain that any such
licenses will be available on commercially reasonable terms or at all. The loss
of or inability to obtain or maintain any of these technology licenses could
result in delays in providing our programming until equivalent technology, if
available, is identified, licensed and integrated. Such delays could harm our
business.
 
     Because we license some data and content from third parties, our exposure
to copyright infringement actions may increase because we must rely upon these
third parties for information as to the origin and ownership of the licensed
content. We generally obtain representations as to the origins and ownership of
licensed content and obtain indemnification to cover any breach of any
representations. However, we
 
                                       50
<PAGE>   52
 
cannot be certain that these representations are accurate or that any
indemnification amounts will be sufficient to provide adequate compensation for
any breach of representations.
 
     We cannot guarantee that infringement or other claims will not be asserted
or prosecuted against us in the future whether resulting from our internally
developed intellectual property or licenses or content from third parties. Any
future assertions or prosecutions could harm our business. Any claims, with or
without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel or require us to introduce new
content or trademarks, develop non-infringing technology or enter into royalty
or licensing agreements. These royalty or licensing agreements, if required, may
not be available on acceptable terms, if at all. Our business will suffer if a
successful claim of infringement is brought against us and we are unable to
introduce new content or trademarks, develop non-infringing technology or
license the infringed or similar technology on a timely basis.
 
GOVERNMENT REGULATION
 
     We are subject to the same federal, state and local laws as other
businesses on the Internet. Today there are relatively few laws directed towards
online services. However, due to the increasing popularity and use of the
Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online
services. These laws and regulations could cover issues such as user privacy,
freedom of expression, pricing, fraud, content and quality of products and
services, taxation, advertising, intellectual property rights and information
security. Applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Those laws that do reference the
Internet, such as the recently passed Digital Millennium Copyright Act, have not
yet been interpreted by the courts and their applicability and reach are
therefore uncertain.
 
     Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could directly affect the way
we do business or could create uncertainty in the marketplace. This could reduce
demand for our services or increase the cost of doing business as a result of
litigation costs or increased service delivery costs, or could in some other
manner have a negative effect on our business, results of operations and
financial condition. In addition, because our services are accessible worldwide
and cover events of global interest, other jurisdictions may claim that we are
required to comply with their laws or qualify to do business as a foreign
corporation in a particular state or foreign country.
 
     We are qualified to do business in six states in the United States, and
failure by us to comply with foreign laws or to qualify as a foreign corporation
in a jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in the inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could have a negative effect on our business.
 
EMPLOYEES
 
     As of March 31, 1999, we had 186 employees, including 84 in production and
programming, 41 in engineering, software development and network operations, 15
in marketing, 13 in sales and 33 in administration, which includes rights
acquisition and other business services. We consider our relations with our
employees to be good. We believe that our future success will depend in part on
our continued ability to attract, integrate, retain and motivate highly
qualified technical and managerial personnel and upon the continued service of
our senior management and key creative personnel, none of whom is bound
 
                                       51
<PAGE>   53
 
by an employment agreement. Our growth has required us to continually hire,
train and manage new employees at a rapid rate, although competition for
qualified personnel in our industry and geographical location is intense. There
can be no assurance that we will be successful in attracting, integrating,
retaining and motivating a sufficient number of qualified personnel to conduct
our business in the future.
 
FACILITIES
 
     Our principal administrative, marketing, production and research and
engineering facilities are located in approximately 19,000 square feet of office
space in San Francisco, California under a lease that expires in March 2002.
Additionally, we have entered into a long-term lease covering approximately
11,000 square feet of office space at an additional site in San Francisco,
California in order to accommodate additional production personnel. We have a
168 square-foot office in Troy, Michigan for local sales activities. Finally, we
have entered into a long-term lease covering approximately 5,000 square feet of
office space in London, England which will serve as the center for our
international operations and have sub-leased approximately 400 square feet of
office space near Lausanne, Switzerland. We are actively seeking additional
space.
 
                                       52
<PAGE>   54
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
     The following table sets forth certain information regarding our directors,
executive officers and certain other key employees as of March 31, 1999:
 
<TABLE>
<CAPTION>
NAME                                AGE                        POSITION
- ----                                ---                        --------
<S>                                 <C>  <C>
Alan S. Ramadan...................  41   President, Chief Executive Officer and Director
Richard H. Williams(1)............  55   Chairman of the Board of Directors
John Bertrand A.M.................  52   Vice Chairman of the Board of Directors
Alvaro J. Saralegui...............  42   Chief Operating Officer
Les Schmidt.......................  44   Executive Vice President, Chief Financial Officer and
                                           Secretary
Michael W. Gough..................  43   Chief Creative Officer and Executive Producer
Judith M. Griggs..................  40   Senior Vice President, Motor Racing
L. Steve Nelson...................  40   Senior Vice President, Olympics
Thomas P. Newell..................  41   Senior Vice President, Business and Legal Affairs
David A. Riemer...................  41   Senior Vice President, Marketing
Marc P. Erzberger.................  31   Vice President, Motor Racing and General Manager
G. Michael Novelly................  34   Vice President Finance and Controller
M. Elizabeth Sandell..............  43   Vice President, Organizational Design and Development
Gerardo Seeliger..................  52   Managing Director, Europe
Brian J. Terkelsen................  35   Vice President, Programming and Production
Walter W. Bregman(1)(2)...........  65   Director
Roel Pieper.......................  43   Director
James G. Shennan, Jr.(1)(2)(3)....  57   Director
Barry M. Weinman(2)(3)............  60   Director
</TABLE>
 
- ---------------
(1) Member of the Nominating Committee.
 
(2) Member of the Compensation Committee.
 
(3) Member of the Audit Committee.
 
        Alan S. Ramadan has served as our President and Chief Executive Officer
and as a director since August 1996, when we incorporated in Delaware under the
name Quokka Productions, Inc. Additionally, Mr. Ramadan served as Managing
Director of our Company from 1990 to August 1996, during which period we were
known as Ozware Developments Unit Trust and operated in Australia. In January
1993, Mr. Ramadan joined Fluid Thinking, Pty. Ltd. in Melbourne, Australia as
that company's Chief Executive Officer until June 1995. As Chief Executive
Officer of Fluid Thinking, Pty. Ltd., Mr. Ramadan was responsible for drawing
together a team of specialists that, together with the Technology Foundation,
developed key technology utilized by oneAustralia in the America's Cup
challenge. Mr. Ramadan also founded Best Knowledge Systems, a consulting
company, and worked as a research scientist at BHP Steel and as a computer
scientist at Monash University in Melbourne, Australia. Mr. Ramadan holds a
B.Sc. in Computer Science and Applied Mathematics from Monash University and is
a 1995 graduate of the Stanford Business School's Executive Program for Growing
Companies.
 
        Richard H. Williams has served as a director since August 1996, when we
incorporated in Delaware under the name Quokka Productions, Inc. Since April
1997, Mr. Williams has served as our Chairman of the Board. From December 1993
to February 1996, Mr. Williams was President and Chief Executive Officer of
Illustra Information Technologies, Inc. In February 1996, Illustra Information
Technologies, Inc. was acquired by Informix Software, Inc., where Mr. Williams
served as Senior Vice President until August 1996. From October 1991 to May
1992, Mr. Williams was Executive Vice
 
                                       53
<PAGE>   55
 
President of Sales for Novell, Inc., and General Manager of that company's
Digital Research Systems Group. Prior to that time, Mr. Williams served as
President and Chief Executive Officer of Digital Research, Inc. Before joining
Digital Research, Inc., Mr. Williams was employed by IBM for twenty two years,
where he served as Vice President of Plans, Controls and Product Management for
the General Products Division from May 1984 to December 1986. Mr. Williams holds
a B.S. in Mathematics from the University of North Dakota and conducted graduate
studies at the University of Minnesota in numerical analysis and statistics.
 
        John Bertrand A.M. has served as a director since August 1996 when we
incorporated in Delaware under the name Quokka Productions, Inc. Since April
1997, Mr. Bertrand has served as our Vice Chairman of the Board. From September
1992 to June 1995, Mr. Bertrand was the Chairman of the Board of Fluid Thinking,
Pty. Ltd. and the skipper of oneAustralia, the 1995 America's Cup Challenge team
that received technological support from Fluid Thinking, Pty. Ltd. From
September 1995 to October 1998, Mr. Bertrand was Chairman of the Australian
Government's Industry Research and Development Board. From June 1993 to the
present, Mr. Bertrand has been the Chairman of the Southern Cross Foundation, an
Australian scholarship foundation for engineering and applied science students.
Mr. Bertrand holds a B.S. in Mechanical Engineering from Monash University and a
M.S. in Naval Architecture from M.I.T. During his twenty-nine year international
sailing career, from 1970 to the present, Mr. Bertrand has represented Australia
in five America's Cups and two Olympic Games. Mr. Bertrand won the America's Cup
for Australia in September 1983 and is a life member of the Australia's Sports
Hall of Fame as well as the International America's Cup Hall of Fame.
 
        Alvaro J. Saralegui joined Quokka in April 1999 as our Chief Operating
Officer. From March 1998 to April 1999, Mr. Saralegui was employed by the People
Magazine Group where he initially served as Vice President of People Weekly
until he was promoted to Group Publisher in January 1999. From September 1983 to
March 1998, Mr. Saralegui was employed at Sports Illustrated, Inc, where he
served as General Manager from November 1992 to March 1998. During his fifteen
years at Sports Illustrated, Inc., Mr. Saralegui also served as that company's
Business manager, Director of Marketing and Sales Development and Advertising
Sales Director. Mr. Saralegui holds a B.A. in History and Economics from
Dartmouth and an M.B.A. from Columbia University.
 
        Les Schmidt joined Quokka in February 1998 as our Senior Vice President,
Quokka Productions, Chief Financial Officer and Secretary and was promoted to
Executive Vice President, Chief Financial Officer and Secretary in February
1999. From September 1996 to June 1997, Mr. Schmidt served as the Chief
Executive Officer of MECON, a healthcare benchmarking company. Mr. Schmidt
joined The Learning Company in 1987 and served as that company's Chief Financial
Officer until September 1994 when he was promoted to Chief Operating Officer. He
served as Chief Operating Officer of The Learning Company and its successor, The
Learning Company, Inc., a publicly traded developer and publisher of
educational, foreign language and home office productivity software, until
September 1996. Prior to that, Mr. Schmidt served as the Controller for Applied
ImmuneSciences, Inc., a venture-backed biotech start-up. Before joining Applied
ImmuneSciences, Inc., Mr. Schmidt was employed by Coopers & Lybrand, an
accounting firm, during which time he became a CPA. Mr. Schmidt holds a B.A. in
Political Economics from Antioch College and a M.S. in Taxation from Golden Gate
University.
 
        Michael W. Gough joined Quokka in July 1997 as our Vice President,
Design and Creative Director and was promoted to Chief Creative Officer and
Executive Producer in September 1998. In August 1995, Mr. Gough co-founded
Construct Internet Design, a digital media design firm, where he served as
Creative Director until July 1997. Prior to that, Mr. Gough co-founded Jones,
Partners: Architecture, a design-focused architecture firm, where he served as
Managing Partner from December 1994 to August 1995. Earlier in his career, Mr.
Gough was an architect for Holt Hinshaw Pfau Jones and, before that, an
architect for the San Jose Redevelopment Agency. Mr. Gough studied Architecture
at California Polytechnic State University.
 
        Judith M. Griggs joined Quokka in March 1999 as our Senior Vice
President, Motor Racing. From August 1998 to the present, Ms. Griggs has served
as Advisor and New Business Development
 
                                       54
<PAGE>   56
 
Manager for Allsport Management SA. From April 1994 to April 1998, Ms. Griggs
served as Chief Executive Officer for Australian Grand Prix Corporation. From
January 1990 to March 1994, Ms. Griggs served as in-house counsel for Formula
One Promotions and Administration, Ltd. Ms. Griggs matriculated at Wilderness
Ladies College, Adelaide, Australia, she holds a Bachelor of Laws from the
University of Adelaide, Australia, and she has completed the Advanced Management
Program at the Harvard Graduate School of Business Administration.
 
        L. Steve Nelson joined Quokka in December 1996 as our Senior Vice
President. In February 1999, Mr. Nelson became the Senior Vice President,
Olympics. From December 1995 to December 1996, Mr. Nelson served as Vice
President, America's Marketing and Sales for Informix Software, Inc. While at
Informix Software, Inc., Mr. Nelson oversaw industry sales and marketing for
telecommunications, media, financial services, retail and manufacturing. From
October 1994 to December 1996, Mr. Nelson served as Vice President of Software
Marketing for IBM. During his fourteen years at IBM, Mr. Nelson also served as
that company's Director of Marketing and General Manager of Product Marketing.
Mr. Nelson holds a B.S. in Business from Wake Forest University where he was on
the Varsity Golf Team.
 
        Thomas P. Newell joined Quokka in March 1998 as Vice President of
Business Affairs and was promoted to Senior Vice President, Business and Legal
Affairs in October 1998. From May 1994 to August 1997, Mr. Newell served as
Executive Vice President and General Counsel for GGP Productions, LP, an
independent sports television production, syndication and sports marketing
company. There, he handled the company's financial and business operations for
three and a half years until its sale to International Management Group, a
Cleveland-based sports marketing and television company. From April 1992 to
April 1994, Mr. Newell served as Vice President, Business Affairs and Operations
of CBS Enterprises for CBS, Inc. During his seven years at CBS, Inc., Mr. Newell
also served as Litigation Counsel, then as Broadcast Counsel and as Director of
Business Affairs of CBS Sports, in which capacity he conducted negotiations that
resulted in CBS Sports' opportunity to cover the 1992 Olympic Winter Games.
Prior to that, Tom worked as a civil litigator for five years at O'Melveny &
Myers, a national law firm. Mr. Newell holds a B.A. from Stanford University and
a J.D. from USC Law School.
 
        David A. Riemer joined Quokka in November 1998 as our Senior Vice
President, Marketing. Prior to joining us, Mr. Riemer spent 13 years at J.
Walter Thompson, where he served as President, JWT/West from May 1997 to
September 1998. While serving as President, JWT/West, Mr. Riemer oversaw the
JWT/Digital Unit and developed an agency specialization in telecommunications,
technology, retail and service marketing. Over the course of his career, Mr.
Riemer has written two musical comedies, two books and directed various
theatrical productions. Mr. Riemer holds a B.A. in Urban Studies and History
from Brown University and an M.B.A. from Columbia University.
 
        Marc P. Erzberger joined Quokka in August 1998 as our Vice President,
Motor Racing. From June 1991 to June 1998, Mr. Erzberger served as a consultant
for the Boston Consulting Group in London where he worked extensively in the
financial services and consumer/retail sectors. Mr. Erzberger worked on issues
of strategy and implementation in several product areas, including household
products, spirits and beverages, food, automotive and credit cards. Mr.
Erzberger holds a B.Sc. in Mathematics and Management from the University of
London, King's College, and an M.B.A. from the Harvard Graduate School of
Business Administration. Mr. Erzberger is an avid sportsman, having represented
Switzerland in the windsurfing event at the 1984 Olympic Games in Los Angeles.
 
        G. Michael Novelly joined Quokka in August 1998 as our Controller and
was promoted to Vice President, Finance and Controller in January 1999. From
March 1995 to August 1998, Mr. Novelly served as the Senior Vice President and
Chief Financial Officer of PolyGram Television, a division of the publicly
traded global music and entertainment group, PolyGram, N.V. During his years at
PolyGram, Mr. Novelly oversaw all financial and administrative aspects of the
Company's film production, acquisition and worldwide distribution of its library
of over 10,000 hours of filmed entertainment programming. Before joining
PolyGram Television, Mr. Novelly was employed by KPMG Peat Marwick LLP, an
accounting firm, where he provided auditing and consulting services to film
production and distribution companies,
 
                                       55
<PAGE>   57
 
including Metro-Goldwyn-Mayer Inc, Ticketmaster Corporation and Gramercy
Pictures. Mr. Novelly is a CPA and holds a B.S. in Accounting and Finance from
the University of Colorado at Boulder.
 
        Elizabeth M. Sandell joined Quokka in July 1998 as our Vice President,
Organizational Design & Development. From December 1996 to June 1998, Ms.
Sandell served as Vice President, Human Resources for NetChannel Inc., a
multi-media, internet service provider. In 1993, Ms. Sandell founded The Sandell
Group, a consulting firm for technology companies, where she has served as that
company's Principal from November 1993 to the present. Prior to that time, Ms.
Sandell served as Western Region Director of Human Resources for Service America
Corporation, where she was responsible for 4500 employees throughout 10 states
and Canada. Ms. Sandell began her career in Human Resources with Marriott
Corporation, holding a variety of corporate personnel management positions in
the Hotel and Lodging Division. She holds a B.A. in Psychology from Agnes Scott
College and a Masters of Divinity with emphasis in cross-cultural communication
from Alliance Theological Seminary.
 
        Gerardo Seeliger joined Quokka in August 1998 as an advisor and was
promoted to Managing Director, Europe, in April 1999. Mr. Seeliger co-founded
Seeliger & Conde, one of Spain's largest executive search firms, and served as
that company's Managing Partner from April 1990 to April 1999. Prior to that
time, Mr. Seeliger served as the General Manager of Sardan AG, the holding
company for Adidas Group, Switzerland. Before that, Mr. Seeliger served as a
Managing Director for Russell Reynolds Associates, an executive recruitment
firm, and as a General Manager for Bankers Trust, Co. Mr. Seeliger has held
several positions within the International Sailing Federation, including
Chairman, Marketing. Mr. Seeliger holds a degree in Economics and Science from
the University of Freiburg, Germany.
 
        Brian J. Terkelsen joined Quokka in June 1998 as our Vice President,
Programming and Production. In January 1993, Mr. Terkelsen co-founded
Eco-Challenge Lifestyles, Inc., an adventure racing company, where he served as
Chief Operating Officer from that company's inception to January 1998. During
that period, Mr. Terkelsen also served as Executive Producer for several
adventure racing television productions, including productions for MTV and The
Discovery Channel. From May 1985 to June 1992, Mr. Terkelsen was employed as an
investment banker for Barclay's Bank and Bankers Trust, Co. Mr. Terkelsen holds
a B.S. in Business Administration, Finance from Bryant College.
 
        Walter W. Bregman became a director of Quokka in October 1997. From
January 1988 to the present, Mr. Bregman has served as Chairman and Joint Chief
Executive Officer of S&B Enterprises, a marketing and consulting company. In
1985, Mr. Bregman co-founded Cormorant Beach Club in St. Croix USVI and served
as its Chief Executive Officer and Manager from 1985 to 1987. Prior to that
time, Mr. Bregman was President of International Playtex, Inc. a manufacturer of
intimate apparel, toiletries, pantyhose and baby nursers. Before joining
International Playtex, Inc., Mr. Bregman served as Vice President of Marketing
and Advertising for E&J Gallo Winery and as President of NCK, Inc., a worldwide
advertising agency. Mr. Bregman also serves on the boards of directors for
Symantec, Inc. and Sento, Inc. Mr. Bregman holds an A.B. in English Literature
from Harvard College.
 
        Roel Pieper became a director of Quokka in December 1997. From May 1998
to April 1999, Mr. Pieper has served as a director and an Executive Vice
President of Koninklijke Philips Electronics N.V. From August 1997 to March
1998, Mr. Pieper served as Senior Vice President, Worldwide Sales and Marketing,
of Compaq Computer Corporation. From January 1996 to August 1997, Mr. Pieper
served as the President and Chief Executive Officer of Tandem Computers, Inc.,
where he helped reposition the company for its eventual merger with Compaq
Computer Corporation. From September 1993 to December 1995, Mr. Pieper also
served as the President and Chief Executive officers of Ub Networks, Inc., a
wholly-owned subsidiary of Tandem Computers, Inc., until that subsidiary merged
with Compaq Computer Corporation. From December 1990 to August 1993, Mr. Pieper
was the President and Chief Executive Officer of AT&T's UNIX System
Laboratories. Prior to that time, Mr. Pieper spent ten years in the employ of
Software AG, where he was eventually promoted to the position of Chief
Technology Officer. Mr. Pieper also serves on the boards of directors of
Computer Associates, Inc., Veritas Software, Inc., General Magic, Inc. and
Lincoln Financial Group. Mr. Pieper holds a Doctoral Degree in Mathematics and
Computer Science from Delft Technical University and is Crown Fellow of the
Aspen Institute in the United States.
 
                                       56
<PAGE>   58
 
        James G. Shennan, Jr., became a director of Quokka in December 1997.
From June 1989 to the present, Mr. Shennan has been a General Partner of Trinity
Ventures, a venture capital firm. Mr. Shennan has over 25 years experience in
consumer products and services marketing. Mr. Shennan also serves on the boards
of directors of the Starbucks Coffee Company and P. F. Chang's China Bistro,
Inc., as well as several private consumer and e-commerce companies in which
Trinity Ventures is an investor. Mr. Shennan holds a B.A. in International
Politics from Princeton University and an M.B.A. from the Stanford Graduate
School of Business.
 
        Barry M. Weinman became a director of Quokka in November 1997. From May
1993 to the present, Mr. Weinman has been a General Partner at Media Technology
Ventures/AVI Management and has been making high tech venture capital
investments in Silicon Valley since 1980. AVI Management and its new media fund,
Media Technology Ventures, had approximately $300 million under management as of
March 31, 1999. Mr. Weinman is also on the boards of directors of Women.com
Networks (Women's Wire), Be, Inc., InfoGear, Inc. and TalkCity, Inc. Mr. Weinman
holds a B.S. in Industrial Engineering from Clarkson College of Technology and
an M.A. in International Relations from the London School of
Economics/University of Southern California.
 
BOARD COMPOSITION
 
     Upon the completion of this offering, Quokka will have authorized seven
directors. In accordance with the terms of our certificate of incorporation and
bylaws, each of which will become effective upon the completion of this
offering, the board of directors will be divided into three classes, Class I,
Class II and Class III, with each class serving staggered three-year terms. Upon
the completion of this offering, the members of the classes will be divided as
follows:
 
     - Class I: Messrs. Bertrand, Pieper and Ramadan;
 
     - Class II: Messrs. Bregman and Shennan; and
 
     - Class III: Messrs. Weinman and Williams.
 
     The Class I directors will stand for re-election or election at the 1999
annual meeting of stockholders. The Class II directors will stand for
re-election or election at the 2000 annual meeting of stockholders and the Class
III directors will stand for re-election or election at the 2001 annual meeting
of stockholders. At each annual meeting of stockholders after the initial
classification, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following the election or special meeting held in lieu thereof.
 
     Our certificate of incorporation provides that the authorized number of
directors may be changed only by resolution of the board of directors. Any
additional directorships resulting from an increase in the number of directors
will be distributed between the three classes so that, as nearly as possible,
each class will consist of one-third of the directors. This classification of
the board of directors may have the effect of delaying or preventing changes in
the control or management of Quokka. Notwithstanding the foregoing, if Quokka is
subject to section 2115 of the California General Corporation Law, all directors
shall be designated of the same class, and such directors shall be elected by
cumulative voting if any stockholder requests cumulative voting. See
"Description of Capital Stock -- Section 2115."
 
     Directors of Quokka may be removed for cause by the affirmative vote of the
holders of a majority of our voting stock and such directors may be removed
without cause by the affirmative vote of the holders of at least two-thirds of
our voting stock. Notwithstanding the foregoing, if Quokka is subject to 2115 of
the California General Corporation Law, unless every director is removed, no
single director may be removed without cause when the votes cast against such
director's removal would be sufficient to elect that director if voted
cumulatively. See "Description of Capital Stock -- Section 2115."
 
                                       57
<PAGE>   59
 
BOARD COMMITTEES
 
     The Audit Committee of the board of directors consists of Messrs. Shennan
and Weinman. The Audit Committee reviews our financial statements and accounting
practices, makes recommendations to the board of directors regarding the
selection of independent auditors and reviews the results and scope of the audit
and other services provided by our independent auditors. The Compensation
Committee of the board of directors consists of Messrs. Bregman, Shennan and
Weinman. The Compensation Committee makes recommendations to the board of
directors concerning salaries and incentive compensation for our officers and
employees and administers our employee benefit plans. The Nominating Committee
of the board of directors consists of Messrs. Bregman, Shennan and Williams. The
Nominating Committee makes recommendations to the board of directors concerning
the nomination of new directors.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     None of the members of the Compensation Committee of the board of directors
is an officer or employee of Quokka. None of our executive officers serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving on our board of directors or
Compensation Committee.
 
DIRECTOR COMPENSATION
 
     Except for Mr. Bregman, we have not provided cash compensation to
non-employee directors for their services as directors. Following the completion
of this offering, all directors will be eligible to participate in our 1999
Equity Incentive Plan, employee directors will be eligible to participate in our
1999 Employee Stock Purchase Plan and non-employee directors will be eligible to
participate in our 1999 Non-Employee Directors' Stock Option Plan. See
"-- Employee Benefit Plans."
 
     In October 1997, we entered into an agreement with Mr. Bregman, under which
Mr. Bregman had been paid, as of March 31, 1999, an aggregate of $43,000. Prior
to the completion of this offering, Mr. Bregman was compensated under the
agreement at a rate of $2,000 for every board meeting attended and $500 for
every committee meeting attended, if the committee meeting was held in
conjunction with a board meeting. For each committee meeting not held in
conjunction with a board meeting, Mr. Bregman received $1,500. Additionally,
under the agreement, Mr. Bregman received an initial option grant as well as
option grants in the amount of 16,000 shares each year. As of March 31, 1999,
Mr. Bregman had been granted an aggregate of 112,000 shares of our stock outside
of the 1997 Equity Incentive Plan with a weighted average exercise price of
$0.80 per share. See "-- Employment and Consulting Agreements."
 
EXECUTIVE COMPENSATION
 
     The following table shows compensation earned during fiscal 1998 by
Quokka's chief executive officer and our only other executive officer who earned
more than $100,000 in 1998. These people are referred to as the named executive
officers. Titles shown in the table are titles held as of March 31, 1999. The
information in the table includes salaries, bonuses, stock options granted and
other miscellaneous compensation. We have not granted stock appreciation rights
or restricted stock awards and provide no long-term compensation benefits other
than stock options.
 
                                       58
<PAGE>   60
 
                        SUMMARY COMPENSATION TABLE(1)(2)
 
<TABLE>
<CAPTION>
                                                                                       LONG-TERM AND
                                                   ANNUAL COMPENSATION FOR 1998      OTHER COMPENSATION
                                                  -------------------------------   --------------------
                                                                     OTHER ANNUAL   NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITIONS                       SALARY    BONUS   COMPENSATION    UNDERLYING OPTIONS
- ----------------------------                      --------   -----   ------------   --------------------
<S>                                               <C>        <C>     <C>            <C>
Alan Ramadan....................................  $214,583    --         --                    --
  President, Chief Executive Officer and
  Director
Les Schmidt.....................................  $172,051    --         --               200,000
  Executive Vice President, Chief Financial
  Officer and Secretary
</TABLE>
 
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission the
    compensation described in this table does not include medical, group life
    insurance or other benefits received by the named executive officers that
    are available generally to all of our salaried employees and certain
    perquisites and other personal benefits received by the named executive
    officers, which do not exceed the lesser of $50,000 or 10% of any such
    officer's salary and bonus disclosed in this table.
 
(2) Messrs. Riemer and Williams did not serve as employees of Quokka for all of
    1998. If these officers' base salaries were annualized for all of fiscal
    1998, their compensation would have required disclosure on this table. For
    1998, Mr. Riemer's base salary on an annualized basis was $200,000. For
    1998, Mr. William's base salary on an annualized basis was $200,000.
    Additionally, if Mr. Saralegui, who was not hired by Quokka until April
    1999, had been employed with Quokka during 1998 pursuant to the same
    compensation arrangement that he has with us during 1999, his compensation
    would have required disclosure in this table. For 1999, Mr. Saralegui's base
    salary is $275,000.
 
                           OPTION GRANTS DURING 1998
 
     The following table sets forth each grant of stock options made during 1998
to each of the named executive officers.
 
<TABLE>
<CAPTION>
                                                                                  POTENTIAL REALIZABLE
                                                                                        VALUE AT
                                                                                  ASSUMED ANNUAL RATES
                           NUMBER OF    PERCENTAGE OF                                OF STOCK PRICE
                           SECURITIES   TOTAL OPTIONS    EXERCISE                   APPRECIATION FOR
                           UNDERLYING     GRANTED TO      PRICE                      OPTION TERM(4)
                            OPTIONS       EMPLOYEES        PER      EXPIRATION   ----------------------
NAME                       GRANTED(1)   DURING 1998(2)   SHARE(3)      DATE         5%           10%
- ----                       ----------   --------------   --------   ----------   --------      --------
<S>                        <C>          <C>              <C>        <C>          <C>           <C>
Alan Ramadan(5)..........        --           --             --           --
Les Schmidt(6)...........   200,000          8.8%         $0.50      2/16/08
</TABLE>
 
- ---------------
(1) Options granted in 1998 to the named executive officers were granted under
    the 1997 Equity Incentive Plan. All options granted to the named executive
    officers are immediately exercisable, incentive stock options, to the extent
    permissible under applicable IRS regulations. Generally, initial option
    grants vest as to 20% of the shares subject to the option one year from the
    date of hire and one-forty-eighth of the remaining shares subject to the
    option vest on each monthly anniversary thereafter. Bonus or promotion
    options vest according to the same schedule as the initial option grants
    except that the one year waiting period typically commences on the date the
    bonus is awarded or on the date of promotion. Other options vest according
    to the same schedule as the initial option grants except that the one year
    waiting period is reduced to ten months and the waiting period commenced on
    January 1, 1999. Upon certain changes in control of Quokka, this vesting
    schedule will accelerate as to all shares that are then unvested. Unvested
    shares are subject to Quokka's right of repurchase upon termination of
    employment. Options expire ten years from the date of grant.
 
(2) Based on an aggregate of 2,273,000 shares subject to options granted to
    employees of Quokka in 1998, including named executive officers.
 
                                       59
<PAGE>   61
 
(3) The exercise price per share of each option granted was equal to the fair
    market value of the common stock as determined by the board of directors on
    the date of the grant. In determining the fair market value of the stock
    granted on the grant date, the board of directors considered, among other
    things, Quokka's absolute and relative levels of revenues and other
    operating results and the state of Quokka's strategic relationships.
 
(4) Potential realizable values are computed by (a) multiplying the number of
    shares of common stock subject to a given option by an assumed initial
    public offering price of $     per share, (b) assuming that the aggregate
    stock value derived from that calculation compounds at the annual 5% or 10%
    rate shown in the table for the entire ten-year term of the option and (c)
    subtracting from that result the aggregate option exercise price. The 5% and
    10% assumed annual rates of stock price appreciation are mandated by the
    rules of the SEC and do not represent Quokka's estimate or projection of
    future common stock prices.
 
(5) Excludes 300,000 shares subject to options granted in March 1999. Such
    options are subject to the same provisions regarding vesting as described in
    footnote (1) above, expire on March 15, 2009 and were granted at an exercise
    price of $8.00 per share.
 
(6) Excludes 250,000 shares subject to options granted in February 1999. Such
    options are subject to the same provisions regarding vesting as described in
    footnote (1) above, expire on February 25, 2009 and were granted at an
    exercise price of $7.00 per share.
 
 AGGREGATE OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES AT DECEMBER 31,
                                      1998
 
     The following table sets forth the number of shares of common stock
acquired and the value realized upon exercise of stock options during 1998 and
the number of shares of common stock subject to exercisable and unexercisable
stock options held as of December 31, 1998 by each of the named executive
officers. Value at fiscal year end is measured as the difference between the
exercise price and the fair market value on December 31, 1998.
 
<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES                VALUE OF
                                                            UNDERLYING UNEXERCISED              UNEXERCISED
                               NUMBER OF                          OPTIONS AT              IN-THE-MONEY OPTIONS AT
                                SHARES                       DECEMBER 31, 1998(3)          DECEMBER 31, 1998(4)
                              ACQUIRED ON      VALUE      ---------------------------   ---------------------------
NAME                          EXERCISE(1)   REALIZED(2)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- ----                          -----------   -----------   -----------   -------------   -----------   -------------
<S>                           <C>           <C>           <C>           <C>             <C>           <C>
Alan Ramadan................     --             --               --          --             --             --
Les Schmidt.................   32,000           --           168,000(5)        --
</TABLE>
 
- ---------------
(1) Represents shares which were vested on the date of exercise.
 
(2) Based on an assumed initial public offering price per share of $     , minus
    the per share exercise price, multiplied by the number of shares issued upon
    exercise of the option.
 
(3) Options granted to named executive officers may be exercised immediately
    (i.e. prior to vesting) pursuant to early exercise provisions contained in
    option agreements. Any unvested shares issued pursuant to any such early
    exercise are subject to a repurchase option in favor of Quokka at the
    original exercise price paid per share upon the optionee's cessation of
    service as an employee, director or consultant prior to the vesting of such
    shares. Such repurchase option lapses at a rate reflecting the vesting
    schedule of the underlying option. Accordingly, such repurchase option
    generally lapses at a rate of 2.083% per month.
 
(4) Based on the difference between the assumed initial public offering price
    per share of $     and the exercise price.
 
(5) If exercised in full within 60 days of March 31, 1999, 150,000 of these
    shares would be subject to a right of repurchase in favor of Quokka.
 
                                       60
<PAGE>   62
 
EMPLOYEE BENEFIT PLANS
 
  1997 Equity Incentive Plan
 
        General.  In February 1997, the board of directors adopted, and the
stockholders approved, the 1997 Equity Incentive Plan (the "Incentive Plan").
The Incentive Plan was amended in September 1998 and March 1999 and amended and
restated in April 1999. As of April 5, 1999, options to purchase a total of
7,767,025 shares of Quokka's common stock were held by all participants under
the Incentive Plan and options to purchase 5,336,401 remained available for
grant. The Incentive Plan provides for the grant of incentive stock options, as
defined under the Internal Revenue Code of 1986, as amended, to employees
(including officers). The Incentive Plan also provides for the grant of
nonstatutory stock options, restricted stock purchase awards and stock bonuses
to employees (including officers), directors and consultants.
 
        Administration.  The Incentive Plan is administered by the board of
directors, which determines recipients and types of options to be granted,
including the exercise price, number of shares subject to the option vesting,
and the exercisability thereof. The board of directors may delegate authority to
administer the Incentive Plan to the Compensation Committee.
 
     The board of directors determines the exercise price of options granted
under the Incentive Plan. The exercise price for an incentive stock option
cannot be less than 100% of the fair market value of the common stock on the
date of grant. The exercise price for a nonstatutory stock option cannot be less
than 85% of the fair market value of the common stock on the date of grant.
Options granted under the Incentive Plan vest at the rate specified in the
option agreement.
 
     In general, the term of stock options granted under the Incentive Plan may
not exceed 10 years. Unless the terms of an optionee's stock option agreement
provide for earlier termination, in the event an optionee's service relationship
with us, or any affiliate of ours, ceases due to disability or death, the
optionee (or his beneficiary) may exercise any vested options up to twelve
months (eighteen months in the event of death) after the date such service
relationship ends. If an optionee's relationship with us, or any affiliate of
ours, ceases for any reason other than disability or death, the optionee may
(unless the terms of the stock option agreement provide for earlier termination)
exercise any vested options up to three months from cessation of service.
 
     Generally, an optionee may not transfer a stock option other than by will
or the laws of descent or distribution unless the optionee holds a nonstatutory
stock option that provides otherwise. However, an optionee may designate a
beneficiary who may exercise the option following the optionee's death.
 
        Option Grants.  Incentive stock options may be granted only to our
employees. No incentive stock option (and prior to our stock being publicly
traded, no nonstatutory stock option) may be granted to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than 10% of
the total combined voting power of Quokka or any of its affiliates unless the
option exercise price is at least 110% of the fair market value of the stock
subject to the option on the date of grant. Additionally, the term of any
incentive stock option award granted to a 10% owner may not exceed five years
from the date of grant. Further, the aggregate fair market value, determined at
the time of grant, of shares of Quokka common stock with respect to which
incentive stock options are exercisable for the first time by an optionee during
any calendar year (under the Incentive Plan and all other stock plans of Quokka
and its affiliates) may not exceed $100,000.
 
     When we become subject to Section 162(m) of the Internal Revenue Code of
1986 (which denies a deduction to publicly held corporations for certain
compensation paid to specified employees in a taxable year to the extent that
the compensation exceeds $1.0 million), no person may be granted options under
the Incentive Plan covering more than 2,000,000 shares of common stock in any
calendar year. Shares subject to stock options that have expired or otherwise
terminated without having been exercised in full again become available for the
grant of awards under the Incentive Plan. Under its general authority to grant
options, the board of directors has the implicit authority to reprice
outstanding options or to offer optionees the opportunity to replace outstanding
options with new options for the same or a different number of shares. Both the
original and new options will count toward the Section 162(m) limitation.
 
                                       61
<PAGE>   63
 
        Restricted Stock and Stock Bonus Awards.  Prior to our stock being
publicly traded, the purchase price for each restricted stock award granted must
be at least 100% of the fair market value of the stock subject to the option on
the date of the award or at the time the purchase is consummated. For restricted
stock awards made on or after the date that our stock is publicly traded, the
purchase price for such awards must be at least 85% of the fair market value of
the stock subject to the option on the date of the award or at the time the
purchase is consummated. Rights to acquire shares under a stock bonus or
restricted stock bonus agreement may not be transferred other than by will or by
the laws of descent and distribution and are exercisable during the life of the
optionee only by the optionee. Certain restricted stock awards made following
the completion of this offering may be otherwise transferable if the stock bonus
agreement so provides.
 
        Changes in Control.  In the event of certain changes in control, all
outstanding options under the Incentive Plan either will be assumed, continued
or substituted for by any surviving entity. If the surviving entity determines
not to assume, continue or substitute for such awards, the vesting provisions of
such stock awards will be accelerated and such stock awards will be terminated
upon the change in control if not previously exercised. In the event of the
acquisition pursuant to Section 13(d) or 14(d) of the Exchange Act of 1934 of
securities representing 50% of our combined voting power, the vesting provisions
of stock awards will either be assumed continued or substituted by Quokka (or a
controlling affiliate of Quokka) or accelerated immediately upon the occurrence
of such event and such stock awards will be terminated upon such acquisition if
not previously exercised.
 
  1999 Non-Employee Directors' Stock Option Plan
 
        General.  In April 1999, the board of directors adopted, subject to
stockholder approval, the 1999 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") to provide for the automatic grant of options to purchase
shares of common stock to non-employee directors of Quokka. The aggregate number
of shares of common stock that may be issued pursuant to options granted under
the Directors' Plan is 450,000 shares.
 
        Administration.  The board of directors shall administer the Directors'
Plan unless and until the board of directors delegates administration to a
committee. The exercise price of the options granted under the Directors' Plan
will be equal to the fair market value of the common stock on the date of grant.
No option granted under the Directors' Plan may be exercised after the
expiration of 3 years from the date it was granted. Options granted under the
Directors' Plan are not transferable other than by will or by the laws of
descent and distribution and are exercisable during the life of the optionee
only by the optionee. However, an optionee may designate a beneficiary who may
exercise the option following the optionee's death. An optionee whose service
relationship with Quokka or any affiliate (whether as a non-employee director of
Quokka or subsequently as an employee, director or consultant of either Quokka
or an affiliate) ceases for any reason may exercise vested options for the term
provided in the option agreement (12 months generally, 18 months in the event of
death).
 
        Automatic Grants.  Pursuant to the terms of the Directors' Plan, upon
the completion of this offering, subject to certain exceptions, each
non-employee director will automatically be granted an option to purchase 25,000
shares of common stock (the "Initial Grant"). Any individual who becomes a non-
employee director after this offering will automatically be granted the Initial
Grant upon being elected to the board of directors. On June 1 of each year,
commencing in 2000, any person who is then a non-employee director will
automatically will be granted an option to purchase 25,000 shares of common
stock (the "Annual Grant") provided that if any such person had not served as a
non-employee director for the entire period since the preceding June 1, then the
number of shares subject to the Annual Grant shall be reduced, pro rata, for
each full quarter the person did not serve during the previous period. Initial
Grants and Annual Grants vest and become immediately exercisable upon grant.
 
  1999 Employee Stock Purchase Plan
 
        General.  In April 1999, the board of directors adopted, subject to
stockholder approval, the 1999 Employee Stock Purchase Plan (the "Purchase
Plan"), authorizing the issuance of 1,000,000 shares
                                       62
<PAGE>   64
 
of common stock pursuant to purchase rights granted to employees of Quokka or to
employees of any affiliate of Quokka. The Purchase Plan is intended to qualify
as an employee stock purchase plan within the meaning of Section 423 of the
Code. As of the date hereof, no shares of common stock had been purchased under
the Purchase Plan.
 
        Administration.  The Purchase Plan shall be administered by the board of
directors, but such administration may be delegated to the Compensation
Committee. The Purchase Plan provides a means by which employees may purchase
common stock of Quokka through payroll deductions. The Purchase Plan is
implemented by offerings of rights to eligible employees. Under the Plan, Quokka
may specify offerings with a duration of not more than 27 months, and may
specify shorter purchase periods within each offering. The first offering will
begin on the effective date of this Offering and be approximately 12 months in
duration with purchases occurring every six months. Unless otherwise determined
by the board of directors, common stock is purchased for accounts of employees
participating in the Purchase Plan at a price per share equal to the lower of
(i) 85% of the fair market value of a share of Quokka common stock on the date
of commencement of participation in this offering or (ii) 85% of the fair market
value of a share of Quokka common stock on the date of purchase. Generally, all
regular employees, including executive officers, who work at least 20 hours per
week and are customarily employed by Quokka or by an affiliate of Quokka for at
least five months per calendar year may participate in the Purchase Plan and may
authorize payroll deductions of up to 15% of their earnings for the purchase of
stock under the Purchase Plan.
 
        Limitations.  Eligible employees may be granted rights only if the
rights, together with any other rights granted under employee stock purchase
plans, do not permit such employee's rights to purchase Quokka stock to accrue
at a rate which exceeds $25,000 of the fair market value of such stock for each
calendar year in which such rights are outstanding. In addition, an employee may
purchase no more than 2,000 shares during any one offering. No employee shall be
eligible for the grant of any rights under the Purchase Plan if immediately
after such rights are granted, such employee has voting power over 5% or more of
Quokka's outstanding capital stock (measured by vote or value).
 
  401(k) Plan
 
     Quokka sponsors the Quokka Sports, Inc. 401(k) Plan, a defined contribution
plan intended to qualify under Section 401 of the Internal Revenue Code of 1986,
as amended. All employees are eligible to participate and may enter the 401(k)
plan as of the first day of any month ("Participants"). Participants may make
pre-tax contributions to the 401(k) plan of up to 15% of their eligible
earnings, subject to a statutorily prescribed annual limit. Quokka does not make
matching contributions. Each Participant's contributions, and the investment
earnings thereon, are generally not taxable to the participants until withdrawn.
Participant contributions are held in trust as required by law. Individual
Participants may direct the trustee to invest their accounts in authorized
investment alternatives.
 
EMPLOYMENT AGREEMENTS
 
     In April 1999, we entered into a Key Employee Agreement with Mr. Saralegui,
under which Mr. Saralegui is compensated at a rate of $275,000 per year, paid on
a semi-monthly basis. The agreement also provides for an stock option grant,
pursuant to Quokka's 1997 Equity Incentive Plan, for the purchase of 1,000,000
shares our common stock at an exercise price of $8.50 per share. To the extent
permissible under applicable IRS rules, such grant shall be an incentive stock
option grant. In the event Mr. Saralegui is terminated without cause, he is
entitled to receive from us an amount equal to twelve months of his base salary
as well as acceleration of a portion of his unvested options under certain
circumstances.
 
                                       63
<PAGE>   65
 
                              CERTAIN TRANSACTIONS
 
     In January 1997, Quokka issued and sold and aggregate of 3,800,000 shares
of its common stock in exchange for all of the properties, rights, interests and
other tangible and intangible assets of Ozware Developments Unit Trust, an
Australian unit trust. From March 1997 to August 1997, Quokka issued and sold an
aggregate of 5,851,566 shares of its common stock at $0.50 per share. In October
1997, Quokka issued warrants to purchase an aggregate of 212,800 shares of
common stock at an exercise price of $0.50 per share. In December 1997, Quokka
issued and sold an aggregate of 7,720,590 shares of Series A Preferred Stock at
$0.68 per share. Between March 1998 and December 1998, Quokka issued and sold
warrants to purchase up to 245,098 shares of Series A Preferred Stock at an
exercise price of $1.02 per share, 245,098 shares of Series B Preferred Stock at
an exercise price of $1.02 per share, 72,727 shares of Series B Preferred Stock
at an exercise price of $1.50 per share and 72,727 shares of Series C Preferred
Stock at an exercise price of $3.25 per share. The warrants were amended and
partially exercised in December 1998 for 145,559 shares of Series A Preferred
Stock, 145,559 shares of Series B Preferred Stock, 24,242 shares of Series B
Preferred Stock and 24,242 shares of Series C Preferred Stock. The warrants, as
amended, are currently exercisable for 99,539 shares of Series A Preferred Stock
at an exercise price of $1.02 per share, 99,539 shares of Series B Preferred
Stock at an exercise price of $1.02 per share, 48,485 shares of Series B
Preferred Stock at an exercise price of $1.50 per share and 48,485 shares of
Series C Preferred Stock at an exercise price of $3.25 per share and will expire
upon the closing of Quokka's initial public offering. From June to August 1998,
Quokka issued and sold an aggregate of 10,737,068 shares of Series B Preferred
Stock at $1.50 per share. In December 1998, Quokka issued and sold an aggregate
of 4,938,756 shares of Series C Preferred Stock at $3.25 per share. From
February 1999 to March 1999, Quokka issued and sold warrants to purchase up to
an aggregate of 2,391,750 shares of Series C Preferred Stock at a weighted
average per share price of $4.95. In April 1999, Quokka issued and sold warrants
to purchase up to an aggregate of 161,538 shares of Series C Preferred Stock at
an exercise price of $3.25 per share.
 
     The following table identifies the directors, executive officers and five
percent stockholders who have made equity investments in Quokka to purchase
shares of Quokka's preferred stock or common stock. See "Principal
Stockholders."
 
<TABLE>
<CAPTION>
                                       SHARES OF     SHARES OF SERIES A   SHARES OF SERIES B   SHARES OF SERIES C
INVESTOR                              COMMON STOCK    PREFERRED STOCK      PREFERRED STOCK      PREFERRED STOCK
- --------                              ------------   ------------------   ------------------   ------------------
<S>                                   <C>            <C>                  <C>                  <C>
Alan S. Ramadan.....................   2,090,572                --                   --                   --
Richard H. Williams(1)..............   2,500,000           208,823                   --                   --
John Bertrand A.M. .................   2,116,204                --                   --                   --
Walter W. Bregman(2)................     200,000            22,058               89,381               30,769
Roel Pieper.........................     500,000           257,353              305,523              215,679
Les Schmidt(3)......................      35,500                --              200,000               76,923
L. Steve Nelson.....................     360,967                --               33,333               15,385
David A. Riemer.....................          --                --                   --               20,000
M. Elizabeth Sandell................          --                --                   --               15,385
Media Technology Ventures, LP(4)....          --         2,941,177            1,185,524              769,231
MediaOne Interactive Services,
  Inc.(5)...........................          --                --            2,666,667            1,230,770
Intel Corporation(6)................          --         1,322,030            1,311,003            1,255,012
Accel VI LP(7)......................          --                --            3,333,333              153,846
Trinity Ventures V, LP(8)...........          --         2,205,883              884,752              153,846
Wakefield Group II LLC.(9)..........     800,000           577,942              555,791               92,308
</TABLE>
 
- ---------------
(1) Excludes warrants to purchase 56,800 shares of common stock issued to Mr.
    Williams in October 1997.
 
(2) Includes 200,000 shares of Common Stock, 22,058 shares of Series A Preferred
    Stock, 89,381 shares of Series B Preferred Stock and 30,769 shares of Series
    C Preferred Stock held in the Bregman
 
                                       64
<PAGE>   66
 
    Revocable Trust u/a/d 8/21/92, for which Mr. Bregman, a director of Quokka,
    serves as a trustee. Does not include warrants to purchase 6,000 shares of
    common stock issued to the Bregman Revocable Trust u/a/d 8/21/92 in October
    1997. Excludes options to purchase 112,000 shares of Quokka's common stock
    granted to Mr. Bregman outside of Quokka's 1997 Equity Incentive Plan.
 
(3) Includes 182,000 shares of Series B Preferred Stock and 76,923 shares of
    Series C Preferred Stock held in The Les Schmidt and Joanne P. Hattum Family
    Trust u/t/d 4/8/92, for which Mr. Schmidt, an executive officer of Quokka,
    serves as a trustee. Also includes 6,000 shares of common stock held by each
    of The Schmidt Family Irrevocable Trust, dated 12/27/95, FBO Caryn H.
    Schmidt, The Schmidt Family Irrevocable Trust, dated 12/27/95, FBO Bryan P.
    Schmidt and The Schmidt Family Irrevocable Trust, dated 12/27/95, FBO Taylor
    G. Schmidt.
 
(4) Includes 769,231 shares of Series C Preferred Stock held by Media Technology
    Equity Partners, LP, and 336,337 shares of Series A Preferred Stock and
    135,570 shares of Series B Preferred Stock held by Media Technology Ventures
    Entrepreneurs Fund, L.P. Mr. Weinman, a director of Quokka, is affiliated
    with the Media Technology entities.
 
(5) Excludes warrants to purchase 153,846 shares of Series C Preferred Stock
    issued to MediaOne Interactive Services, Inc. in April 1999.
 
(6) Excludes warrants to purchase 99,539 shares of Series A Preferred Stock,
    warrants to purchase 148,024 shares of Series B Preferred Stock and warrants
    to purchase 48,485 shares of Series C Preferred Stock issued to Intel
    Corporation in December 1998. These warrants represent the balance of
    warrants issued upon the amendment and partial exercise of the original
    warrants issued between March 1998 and December 1998.
 
(7) Includes 346,667 shares of Series B Preferred Stock and 16,000 shares of
    Series C Preferred Stock held by Accel Internet Fund II LP, 230,000 shares
    of Series B Preferred Stock and 10,615 shares of Series C Preferred Stock
    held by Accel Investors '98 LP, and 43,333 shares of Series B Preferred
    Stock and 2,000 shares of Series C Preferred Stock held by Accel Keiretsu VI
    LP.
 
(8) Includes 121,791 shares of Series A Preferred Stock, 48,849 shares of Series
    B Preferred Stock and 7,692 shares of Series C Preferred Stock held by
    Trinity V, side-by-side fund, LP. Mr. Shennan, a director of Quokka, is
    affiliated with Trinity Ventures V, LP and Trinity V, Side-by-Side Fund, LP.
 
(9) Excludes warrants to purchase 100,000 shares of common stock issued to
    Wakefield Group LLC in October 1997.
 
     Pursuant to an Investors' Rights Agreement dated December 23, 1998 between
Quokka and certain of the holders of Quokka's stock and warrants (the
"Investors"), the Investors have certain registration rights for the shares of
common stock held by them, or subject to acquisition upon exercise of certain
warrants. See "Description of Capital Stock -- Registration Rights."
 
     In March 1998, we entered into a Software License & Development agreement
with Intel Corporation, a holder of more than five percent of our outstanding
capital stock. Under this agreement, Intel is developing transport level
software that will allow end users to view multiple video streams which are
delivered over a satellite network. In connection with this agreement, we issued
warrants to Intel to purchase 635,650 shares of our preferred stock at prices
ranging from $1.02 to $3.25 per share. Intel has exercised warrants to purchase
339,602 shares of our preferred. The remaining outstanding warrants will expire
upon this offering if not earlier exercised.
 
     Since February 1, 1999, in connection with Mr. Bertrand's relocation to
London, England, Quokka has been paying, and will continue to pay, Mr. Bertrand
an amount equal to $3,000 per month, in order to secure Mr. Bertrand's residence
in San Francisco, California as short-term corporate housing for various persons
associated with Quokka.
 
                                       65
<PAGE>   67
 
                             PRINCIPAL STOCKHOLDERS
 
     The following table sets forth certain information known to Quokka with
respect to beneficial ownership of Quokka's common stock as of March 31, 1999 by
(1) each stockholder known by Quokka to be the beneficial owner of more than 5%
of Quokka's Common Stock, (2) each director of Quokka, (3) the named executive
officers and (4) all executive officers and directors as a group. Unless
otherwise noted, the address for the individuals listed below is: c/o Quokka
Sports, 525 Brannan Street, San Francisco, California 94107.
 
<TABLE>
<CAPTION>
                                                                            PERCENTAGE OWNED(1)
                                                       NUMBER OF     ---------------------------------
NAME OF BENEFICIAL OWNER                                 SHARES      BEFORE OFFERING    AFTER OFFERING
- ------------------------                               ----------    ---------------    --------------
<S>                                                    <C>           <C>                <C>
Entities associated with Media Technology
  Ventures(2)........................................   4,895,932         14.3%
  One First Street, Suite 2
  Los Altos, CA 94022
Intel Corporation....................................   4,184,093         12.3%
  2200 Mission College Blvd.
  Santa Clara, CA 95052
MediaOne Interactive Services, Inc.(3)...............   4,051,283         11.8%
  9000 E. Nichols Avenue, Suite 100
  Englewood, CO 80112
Entities associated with Accel VI LP(4)..............   3,487,179         10.2%
  428 University Avenue
  Palo Alto, CA 94301
Entities associated with Trinity Ventures(5).........   3,244,481          9.5%
  3000 Sand Hill Road
  Building 1, Suite 240
  Menlo Park, CA 94025
Wakefield Group II LLC(6)............................   2,126,041          6.2%
  1110 East Morehead
  Charlotte, NC 28204
Alan Ramadan(7)......................................   2,390,572          6.9%
Richard H. Williams(8)...............................   2,915,623          8.5%
  P.O. Box 4281
  Incline Village, NV 89450
John Bertrand(9).....................................   2,266,204          6.6%
  c/o Quokka Sports
  133 Long Acre
  London, WC2E98D
Walter Bregman(10)...................................     377,807          1.1%
Roel Pieper(11)......................................   1,278,555          3.7%
James G. Shennan, Jr.(12)............................   3,244,481          9.5%
  c/o Trinity Ventures V, L.P.
  3000 Sand Hill Road
  Building 1, Suite 240
  Menlo Park, CA 94025
</TABLE>
 
                                       66
<PAGE>   68
 
<TABLE>
<CAPTION>
                                                                            PERCENTAGE OWNED(1)
                                                       NUMBER OF     ---------------------------------
NAME OF BENEFICIAL OWNER                                 SHARES      BEFORE OFFERING    AFTER OFFERING
- ------------------------                               ----------    ---------------    --------------
<S>                                                    <C>           <C>                <C>
Barry M. Weinman(13).................................   4,895,932         14.3%
  c/o Media Technology Ventures
  One First Street, Suite 12
  Los Altos, CA 94022
Les Schmidt(14)......................................     708,923          2.1%
All directors and executive officers as a group (8
  persons)(15).......................................  18,078,097         51.4%
</TABLE>
 
- ---------------
 (1) Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and generally includes voting or
     investment power with respect to securities. Unless otherwise indicated
     below, the persons and entities named in the table have sole voting and
     sole investment power with respect to all shares beneficially owned,
     subject to community property laws where applicable. Shares of common stock
     subject to options that are currently exercisable or exercisable within 60
     days of March 31, 1999 are deemed to be outstanding and to be beneficially
     owned by the person holding such options for the purpose of computing the
     percentage ownership of such person but are not treated as outstanding for
     the purpose of computing the percentage ownership of any other person.
 
 (2) Includes 3,654,794 shares held by Media Technology Ventures, LP, 769,231
     shares held by Media Technology Equity Partners, LP, and 471,907 shares
     held by Media Technology Ventures Entrepreneurs Fund, LP (collectively, the
     "MT Funds"). Mr. Weinman, a director of Quokka, is a general partner of
     each of the MT Funds and, as such, may be deemed to have an indirect
     pecuniary interest (within the meaning of Rule 16a-1 under the Securities
     Exchange Act of 1934) in an indeterminate portion of the shares
     beneficially owned by the MT Funds. Mr. Weinman disclaims beneficial
     ownership of these shares within the meaning of Rule 13d-3 under the
     Securities Exchange Act of 1934.
 
 (3) Includes warrants to purchase 153,846 shares that are currently
     exercisable.
 
 (4) Includes 2,838,564 shares held by Accel VI LP, 362,667 shares held by Accel
     Internet Fund II LP, 240,615 shares held by Accel Investors '98 LP, and
     45,333 shares held by Accel Keiretsu VI LP (collectively, the "Accel
     Funds").
 
 (5) Includes 3,066,149 shares held by Trinity Ventures V, LP and 178,332 shares
     held by Trinity V, Side-by-Side Fund, LP. Mr. Shennan, a director of
     Quokka, is a general partner of Trinity Ventures V, LP and Trinity V,
     side-by-side fund, LP. As such, Mr. Shennan may be deemed to have an
     indirect pecuniary interest (within the meaning of Rule 16a-1 under the
     Securities Exchange Act of 1934) in an indeterminate portion of the shares
     beneficially owned by Trinity Ventures V, LP and Trinity V, side-by-side
     fund, LP. Mr. Shennan disclaims beneficial ownership of these shares within
     the meaning of Rule 13d-3 under the Securities Exchange Act of 1934.
 
 (6) Includes warrants to purchase 100,000 shares that expire if not exercised
     prior to the completion of this offering.
 
 (7) Includes 300,000 shares underlying currently exercisable stock options. If
     exercised in full within 60 days of the date of this table, all of the
     shares subject to the option would be subject to a repurchase right in
     favor of Quokka.
 
 (8) Includes warrants to purchase 56,800 shares that expire if not exercised
     prior to the completion of this offering. Includes 150,000 shares
     underlying currently exercisable stock options. If exercised in full within
     60 days of the date of this table, all of the shares subject to the option
     would be subject to a repurchase right in favor of Quokka.
 
 (9) Includes 150,000 shares underlying currently exercisable stock options. If
     exercised in full within 60 days of the date of this table, all of the
     shares subject to the option would be subject to a repurchase right in
     favor of Quokka.
 
                                       67
<PAGE>   69
 
(10) Includes 342,208 shares held in the Bregman Revocable Trust u/a/d 8/21/92,
     for which Mr. Bregman, a director of Quokka, serves as a trustee. Mr.
     Bregman disclaims beneficial ownership of these shares within the meaning
     of Rule 13d-3 under the Securities Exchange Act of 1934. Includes warrants
     to purchase 6,000 shares that expire if not exercised prior to the
     completion of this offering. Includes 29,599 shares underlying currently
     exercisable stock options granted to Mr. Bregman outside Quokka's 1997
     Equity Incentive Plan.
 
(11) All shares are held outright by Mr. Pieper.
 
(12) Includes 3,066,149 shares held by Trinity Ventures V, LP and 178,332 shares
     held by Trinity V, Side-by-Side Fund, LP See footnote (5) above regarding
     Mr. Shennan's indirect pecuniary interest in these shares.
 
(13) Includes 4,895,932 shares held by MT Funds. See footnote (2) above
     regarding Mr. Weinman's indirect pecuniary interest in these shares.
 
(14) Includes 258,923 shares held in The Les Schmidt and Joanne P. Hattum Family
     Trust u/t/d 4/8/92, for which Mr. Schmidt, an executive officer of Quokka,
     serves as a trustee. Mr. Schmidt disclaims beneficial ownership of these
     shares within the meaning of Rule 13d-3 under the Securities Exchange Act
     of 1934. Includes 414,500 shares underlying currently exercisable stock
     options. If exercised in full within 60 days of the date of this table,
     400,000 shares would be subject to a right of repurchase in favor of
     Quokka.
 
(15) See footnotes (1) through (14) above, as applicable.
 
                                       68
<PAGE>   70
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The following description of the capital stock of Quokka and certain
provisions of Quokka's certificate of incorporation and bylaws, which will
become effective upon the completion of this offering, is a summary only and is
qualified in its entirety by the complete provisions of the certificate of
incorporation and bylaws, which have been filed as exhibits to Quokka's
registration statement, of which this prospectus is a part.
 
     Upon the closing of this offering, the authorized capital stock of Quokka
will consist of 110,000,000 shares of common stock, $0.0001 par value per share
and 10,000,000 shares of preferred stock, $0.0001 par value per share.
 
COMMON STOCK
 
     Upon the closing of this offering, each outstanding share of non-voting
common stock will be automatically converted to voting common stock and, at such
time, no share of common stock, whether previously designated as non-voting
common stock or voting common stock, will be subject to any further conversion
right. The common stock is not entitled to preemptive rights and is not subject
to redemption.
 
     Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the board of directors may from time to time
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Unless Section
2115 of the California Corporations Code is applicable to Quokka, holders of
common stock are not entitled to cumulative voting rights with respect to the
election of directors and, as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone. Upon a liquidation,
dissolution or winding-up of Quokka, the assets legally available for
distribution to stockholders are distributable ratably among the holders of the
common stock and any participating preferred stock outstanding at that time
after payment of liquidation preferences, if any, on any outstanding preferred
stock and payment of other claims of creditors. Each outstanding share of common
stock is, and all shares of common stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
 
PREFERRED STOCK
 
     Upon the closing of this offering, all outstanding shares of Series A,
Series B and Series C Preferred Stock will be converted into 23,736,016 shares
of common stock. Following the conversion, the shares converted will be retired
from the number of authorized shares of preferred stock.
 
     Upon the closing of this offering, the board of directors will have the
authority, without further action by the stockholders, to issue up to 10,000,000
shares of preferred stock in one or more series, to establish from time to time
the number of shares to be included in each such series, to fix the rights,
preferences and privileges of the shares of each wholly unissued series and any
qualifications, limitations or restrictions thereon, and to increase or decrease
the number of shares of any such series (but not below the number of shares of
such series then outstanding). The board of directors may authorize the issuance
of preferred stock with voting or conversion rights that could adversely affect
the voting power or other rights of the holders of the common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of
Quokka and may adversely affect the market price of the common stock and the
voting and other rights of the holders of common stock.
 
WARRANTS
 
     In October 1997, Quokka issued warrants to purchase an aggregate of 212,800
shares of common stock at an exercise price of $0.50 per share to four investors
(the "Common Stock Warrants"). Each of the Common Stock Warrants will expire
upon the closing of this offering.
 
                                       69
<PAGE>   71
 
     Between March 1998 and December 1998, Quokka issued and sold warrants to
purchase up to 245,098 shares of Series A Preferred Stock at an exercise price
of $1.02 per share, 245,098 shares of Series B Preferred Stock at an exercise
price of $1.02 per share, 72,727 shares of Series B Preferred Stock at an
exercise price of $1.50 per share and 72,727 shares of Series C Preferred Stock
at an exercise price of $3.25 per share to Intel Corporation (the "Intel
Warrants"). The Intel Warrants were amended in December 1998 and partially
exercised by Intel in December 1998 for 145,559 shares of Series A Preferred
Stock, 145,559 shares of Series B Preferred Stock, 24,242 shares of Series B
Preferred Stock and 24,242 shares of Series C Preferred Stock. The Intel
Warrants, as amended, are currently exercisable for 99,539 shares of Series A
Preferred Stock at an exercise price of $1.02 per share, 99,539 shares of Series
B Preferred Stock at an exercise price of $1.02 per share, 48,485 shares of
Series B Preferred Stock at an exercise price of $1.50 per share and 48,485
shares of Series C Preferred Stock at an exercise price of $3.25 per share. Each
of the Intel Warrants will expire upon completion of this offering, unless
earlier exercised.
 
     From February 1999 to April 1999, Quokka issued and sold warrants to
purchase up to an aggregate of 2,553,288 shares of Series C Preferred Stock at a
weighted average per share price of $5.24 to four investors. On February 8,
2009, 2,100,000 of these warrant shares will expire. On March 19, 2004, 76,366
of these warrant shares will expire. On January 22, 2009, 153,846 of these
warrant shares will expire. The remaining 223,076 of these warrant shares will
expire three years from the effective date of this offering.
 
     Each of the aforementioned warrants are subject to the provisions of the
Investors' Rights Agreement dated December 23, 1998, between Quokka and certain
of the holders of Quokka's stock and warrants. See "-- Registration Rights."
 
REGISTRATION RIGHTS
 
     Pursuant to an Investors' Rights Agreement dated December 23, 1998 (the
"Rights Agreement"), between Quokka and certain of the holders of Quokka's stock
and warrants (the "Investors"), the Investors have certain registration rights
for the 33,896,430 shares of common stock held by them, or subject to
acquisition upon exercise of certain warrants (the "Registrable Securities").
Under the Rights Agreement, the Investors may demand, by written request from
holders of more than 50% of the then outstanding Investors' Registrable
Securities, that Quokka file a registration statement under the Securities Act
covering all or a portion of the Investors' Registrable Securities, provided
that, in the case of a registration on a form other than a Form S-3, there is a
reasonably anticipated aggregate offering price to the public of at least $10.0
million, or in the case of a registration of Form S-3, there is a reasonably
anticipated aggregate offering price to the public of at least $1.0 million.
These registration rights are subject to Quokka's right to delay the filing of a
registration statement, in the case of a registration on a form other than a
Form S-3, for a period not to exceed 60 days, and, in the case of a registration
on a Form S-3, for a period not to exceed 90 days. In the case of a registration
on a form other than a Form S-3, Quokka cannot delay more than twice in a
12-month period after receiving the registration demand. In the case of a
registration on a Form S-3, Quokka cannot delay more than once in a 12-month
period after receiving the registration demand. In the case of a registration on
a form other than a Form S-3, the managing underwriter, if any, of any such
offering has certain rights to limit the number of the Registrable Securities
proposed to be included in such registration.
 
     In addition, the Investors have certain "piggyback" registration rights. If
Quokka proposes to register any of its securities under the Securities Act
(other than pursuant to the Investors' demand registration rights noted above),
the Investors may require Quokka to include all or a portion of their
Registrable Securities in such registration. The managing underwriter, if any,
of any such offering will have the right to limit the number of the Registrable
Securities to no less than 25% of the total number of securities proposed to be
included in such registration.
 
                                       70
<PAGE>   72
 
     All registration expenses incurred in connection with the above
registrations would be borne by Quokka. Each selling Investor would pay all
underwriting discounts and selling commissions applicable to the sale of his or
its Registrable Securities.
 
     All registration rights described above will terminate ten years after the
date of Quokka's initial public offering. Following the closing of this
offering, the rights of each Investor holding less than 1% of Quokka's
outstanding common stock under the Rights Agreement will terminate when such
Investor may sell all of its or his shares under Rule 144(k) of the Securities
Act or during any ninety-day period under Rule 144 of the Securities Act.
 
SECTION 2115
 
     Quokka is currently subject to Section 2115 of the California General
Corporation Law. Section 2115 provides that, regardless of a company's legal
domicile, certain provisions of California corporate law will apply to that
company if the company meets certain requirements. We will not be subject to
section 2115 if:
 
     - we are qualified for trading as a national market security on the Nasdaq
       National Market, and we have at least 800 stockholders of record as of
       the record date of our most recent annual meeting, or
 
     - less than 50% of our outstanding voting securities are held of record by
       persons having addresses in California.
 
     The following table sets forth some of the effects on our corporate
governance of Section 2115:
 
<TABLE>
<CAPTION>
                                 SECTION 2115                       NON-SECTION 2115
                                 ------------                       ----------------
<S>                   <C>                                  <C>
Election of           Cumulative voting is allowed which   No cumulative voting is allowed;
  Directors           allows each shareholder to vote the  accordingly a holder of 50% or more
                      number of votes equal to the number  of voting stock controls election
                      of candidates multiplied by the      of all directors.
                      number of votes to which the
                      shareholders' shares are normally
                      entitled in favor of one candidate.
                      This potentially allows minority
                      stockholders to elect some members
                      of the board of directors.
Removal of Directors  Removal with or without cause by     If the board of directors is
                      the affirmative vote of the holders  classified, removal is only allowed
                      of a majority of outstanding voting  for cause upon the affirmative vote
                      stock is allowed.                    of a majority of the outstanding
                                                           voting stock entitled to vote in
                                                           the election of directors.
Supermajority Vote    In order to institute a              Simple majority may adopt amendment
  Requirement         supermajority provision, the         providing for supermajority.
                      amendment must be approved by at
                      least as large a proportion as
                      would be required under the
                      amendment.
Dividend              Dividends are only payable (a) out   Dividends are payable out of either
  Distribution        of the surplus of retained earnings  the surplus of retained earnings or
                      and (b) if, immediately after the    out of its net profits for the year
                      distribution, a company's assets     the distribution takes place, or
                      are at least equal to its            the preceding year.
                      liabilities.
</TABLE>
 
                                       71
<PAGE>   73
 
<TABLE>
<CAPTION>
                                 SECTION 2115                       NON-SECTION 2115
                                 ------------                       ----------------
<S>                   <C>                                  <C>
Dissenters' Rights    Generally available in any type of   Generally only available in a
                      reorganization, including a merger,  merger. No rights so long as our
                      sale of assets or sale/exchange of   common stock is quoted on the
                      shares. If the shares are listed on  Nasdaq National Market or traded on
                      an exchange, 5% of the stockholders  an exchange.
                      must assert their right for any
                      stockholder to have these rights.
</TABLE>
 
In addition to these differences, Section 2115 also provides for information
rights and required filings in the event a company effects a sale of assets or
completes a merger.
 
     Quokka expects that it will no longer be subject to Section 2115 by the
record date of its 2000 annual meeting of stockholders. See "-- Common Stock"
and "Management -- Board Composition."
 
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
 
  Delaware Law
 
     We are subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. Section 203, subject to exceptions, prohibits a
Delaware corporation from engaging in any "business combination" with any
"interested stockholder" for a period of three years following the date that the
stockholder became an interested stockholder unless:
 
     - prior to the date, the board of directors of the corporation approved
       either the business combination or the transaction that resulted in the
       stockholder becoming an interested stockholder;
 
     - upon consummation of the transaction that resulted in the stockholder
       becoming an interested stockholder, the interested stockholder owned at
       least 85% of the voting stock of the corporation outstanding at the time
       the transaction commenced, excluding those shares owned by persons who
       are directors and also officers, and employee stock plans in which
       employee participants do not have the right to determine confidentially
       whether shares held subject to the plan will be tendered in a tender or
       exchange offer; or
 
     - on or subsequent to the date, the business combination is approved by the
       board of directors and authorized at an annual or special meeting of
       stockholders, and not by written consent, by the affirmative vote of at
       least two-thirds of the outstanding voting stock that is not owned by the
       interested stockholder.
 
     Section 203 defines business combination to include:
 
     - any merger or consolidation involving the corporation and the interested
       stockholder;
 
     - any sale, transfer, pledge or other disposition involving the interested
       stockholder of 10% or more of the assets of the corporation;
 
     - subject to exceptions, any transaction that results in the issuance or
       transfer by the corporation of any stock of the corporation to the
       interested stockholder; or
 
     - the receipt by the interested stockholder of the benefit of any loans,
       advances, guarantees, pledges or other financial benefits provided by or
       through the corporation.
 
     Section 203 defines an "interested stockholder" as:
 
     - any entity or person beneficially owning 15% or more of the outstanding
       voting stock of the corporation; and
 
     - any entity or person affiliated with or controlling or controlled by the
       entity or person.
 
     A Delaware corporation may "opt out" of the Anti-Takeover Law with an
express provision in its original certificate of incorporation or an express
provision in its certificate or incorporation or bylaws
 
                                       72
<PAGE>   74
 
resulting from a stockholders' amendment approved by at least a majority of the
outstanding voting shares. Quokka has not "opted out" of the provisions of the
Anti-Takeover Law. The statute could prohibit or delay mergers or other takeover
or change-in-control attempts with respect to Quokka and, accordingly, may
discourage attempts to acquire Quokka.
 
  Charter Provisions
 
     Quokka's bylaws divide the board of directors into three classes as nearly
equal in size as possible with staggered three-year terms. The classification of
the board of directors could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, control
of Quokka. In addition, the bylaws provide that any action required or permitted
to be taken by the stockholders of Quokka at an annual meeting or a special
meeting of the stockholders may be taken only if it is properly brought before
such meeting and may not be taken by written action in lieu of a meeting. The
bylaws also provide that special meetings of the stockholders of Quokka may be
called only by the board of directors, the chairman of the board, the chief
executive officer or the holders of 50% or more of Quokka's outstanding stock.
See "Management -- Board Composition."
 
     Quokka's certificate of incorporation and its bylaws provide that Quokka
will indemnify officers and directors against losses that they may incur in
investigations and legal proceedings resulting from their services to Quokka,
which may include services in connection with takeover defense measures. Such
provisions may have the effect of preventing changes in the management of
Quokka. See "-- Limitation of Liability and Indemnification."
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
     Our certificate of incorporation, which will become effective upon the
closing of this offering, contains provisions permitted under Delaware law
relating to the liability of directors. These provisions eliminate a director's
personal liability for monetary damages resulting from a breach of fiduciary
duty, except in circumstances involving wrongful acts, such as:
 
     - any breach of the director's duty of loyalty;
 
     - acts or omissions which involve a lack of good faith, intentional
       misconduct or a knowing violation of the law;
 
     - payment of dividends or approval of stock repurchases or redemptions that
       are unlawful under Delaware law; or
 
     - any transaction from which the director derives an improper personal
       benefit.
 
     These provisions do not limit or eliminate our rights or any stockholder's
rights to seek non-monetary relief, such as an injunction or rescission, in the
event of a breach of director's fiduciary duty. These provisions will not alter
a director's liability under federal securities laws.
 
     Our bylaws, which will become effective upon the closing of this offering,
require us to indemnify our directors and executive officers to the fullest
extent not prohibited by the Delaware law. We may limit the extent of such
indemnification by individual contracts with our directors and executive
officers. Further, we may decline to indemnify any director or executive officer
in connection with any proceeding initiated by such person or any proceeding by
such person against Quokka or its directors, officers, employees or other
agents, unless such indemnification is expressly required to be made by law or
the proceeding was authorized by our board of directors.
 
     We have entered into indemnity agreements with each of our current
directors and certain of our executive officers to give such directors and
officers additional contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of Quokka for
which indemnification is sought, nor are we aware of any threatened litigation
that may result in claims for indemnification.
                                       73
<PAGE>   75
 
     We have the power to indemnify our other officers, employees and other
agents, as permitted by Delaware law, but we are not required to do so.
 
     Quokka plans to obtain directors' and officers' liability insurance.
 
TRANSFER AGENT AND REGISTRAR
 
     The Transfer Agent and Registrar for Quokka's common stock is BankBoston
N.A.
 
                                       74
<PAGE>   76
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Upon completion of this offering, Quokka will have outstanding
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, the
shares sold in this offering will be freely tradable without restriction under
the Securities Act unless purchased by "affiliates" of Quokka as that term is
defined in Rule 144 under the Securities Act. Of the remaining shares, all of
the shares held by existing stockholders are subject to lock-up agreements
generally providing that, with certain limited exceptions, the stockholder will
not (1) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of or otherwise dispose of or transfer any shares of common
stock or securities convertible into or exchangeable or exercisable for or
repayable with Common Stock, or (2) enter into any swap or other agreement that
transfers, in whole or in part, the economic consequence of ownership of the
common stock whether any such swap or transaction is to be settled by delivery
of common stock or other securities, in cash or otherwise, without the prior
written consent of Merrill Lynch on behalf of the underwriters for a period of
180 days after the date of this prospectus. As a result of these lock-up
agreements, notwithstanding possible earlier eligibility for sale under the
provisions of Rules 144, 144(k) and 701, none of these shares can be sold until
181 days after the date of the final prospectus. Beginning 181 days after the
date of the final prospectus, 33,602,781 of these shares will be eligible for
sale in the public market, although a portion of such shares will be subject to
certain volume limitations pursuant to Rule 144. The remaining Restricted Shares
will become eligible for sale from time to time thereafter upon expiration of
applicable holding periods under Rule 144 under the Securities Act and Quokka's
right to repurchase unvested shares. Holders of options to purchase common stock
of Quokka are also subject to 180-day lock-up agreements.
 
     In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year (including the holding period of any prior owner except an
affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (1) 1% of the number of shares of
common stock then outstanding (which will equal approximately           shares
immediately after this offering) or (2) the average weekly trading volume of the
common stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about Quokka. Under Rule 144(k), a person who is not
deemed to have been an affiliate of Quokka at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years (including the holding period of any prior owner except
an affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule 144.
 
     Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirement,
of Rule 144. Any employee, officer or director of or consultant to Quokka who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the holding period, public information, volume limitation or notice
provisions of Rule 144.
 
     Certain holders of shares of common stock are also entitled to certain
rights with respect to registration of such shares of common stock for offer and
sale to the public. See "Description of Capital Stock -- Registration Rights."
 
     There can be no assurance that an active public market for the common stock
will continue after this offering. Future sales of substantial amounts of common
stock (including shares issued upon exercise of outstanding options) in the
public market after this offering could adversely affect market prices
prevailing from time to time and could impair Quokka's ability to raise capital
through the sale of its equity securities. As described below, only a limited
number of shares will be available for sale immediately after this offering due
to certain contractual restrictions on resale. Sales of substantial amounts of
common stock of Quokka in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of Quokka to raise
equity capital in the future.
 
                                       75
<PAGE>   77
 
                                  UNDERWRITING
 
     Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Lehman Brothers Inc. and BancBoston Robertson Stephens Inc. are acting as
representatives (the "Representatives") of each of the underwriters named below.
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among Quokka and the underwriters, Quokka has agreed to
sell to the underwriters, and each of the underwriters severally and not jointly
has agreed to purchase from Quokka, the number of shares of common stock set
forth opposite its name below.
 
<TABLE>
<CAPTION>
                                                                 NUMBER
UNDERWRITER                                                     OF SHARES
- -----------                                                     ---------
<S>                                                             <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Lehman Brothers Inc. .......................................
BancBoston Robertson Stephens Inc. .........................
             Total..........................................
</TABLE>
 
     In the Purchase Agreement, the several underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the shares of
common stock being sold pursuant to each such agreement if any of the shares of
common stock being sold pursuant to such agreement are purchased. In the event
of a default by an underwriter, the Purchase Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting underwriters may be
increased or the Purchase Agreement may be terminated. The closing with respect
to the sale of shares of common stock to be purchased by the underwriters are
conditioned upon one another.
 
     The Representatives have advised Quokka that the underwriters propose
initially to offer the shares of common stock to the public at the initial
public offering price set forth on the cover page of this prospectus, and to
certain dealers at such price less a concession not in excess of $     per share
of common stock. The underwriters may allow, and such dealers may reallow, a
discount not in excess of $     per share of common stock to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may change.
 
     Quokka has granted options to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the public offering price set forth on the
cover page of this prospectus, less the underwriting discount. The underwriters
may exercise these options solely to cover over-allotments, if any, made on the
sale of the common stock offered hereby. To the extent that the underwriters
exercise these options, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares of common stock
proportionate to such underwriters initial amount reflected in the foregoing
table.
 
     The following table shows the per share and total public offering price,
underwriting discount to be paid by Quokka to the underwriters, and the proceeds
before expenses to Quokka. This information is presented assuming either no
exercise or full exercise by the underwriters of their over-allotment options.
 
<TABLE>
<CAPTION>
                                                 PER SHARE    WITHOUT OPTION    WITH OPTION
                                                 ---------    --------------    -----------
<S>                                              <C>          <C>               <C>
Public Offering Price..........................    $              $                $
Underwriting Discount..........................    $              $                $
Proceeds, before expenses, to Quokka...........    $              $                $
</TABLE>
 
     The expenses of the offerings (exclusive of the underwriting discount and
commissions) are estimated at $          and are payable by Quokka.
 
     The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
 
                                       76
<PAGE>   78
 
     At the request of Quokka, the underwriters have reserved for sale, at the
initial public offering price, up to                of the shares offered hereby
to be sold to certain directors, officers, employees, distributors, dealers,
business associates and related persons of Quokka. The number of shares of
common stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which are
not orally confirmed for purchase within one day of the pricing of this offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered in this prospectus.
 
     Quokka and its executive officers and directors and certain stockholders
beneficially owning in the aggregate 34,092,719 shares of common stock have
agreed, subject to certain exceptions, not to directly or indirectly (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of or otherwise dispose of or transfer any shares of common stock or
securities convertible into or exchangeable or exercisable for or repayable with
common stock, whether now owned or thereafter acquired by the person executing
the agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition, or file a registration statement
under the Securities Act with respect to the foregoing; (2) enter into any swap
or other agreement that transfers, in whole or in part, the economic consequence
of ownership of the common stock whether any such swap or transaction is to be
settled by delivery of common stock or other securities, in cash or otherwise;
or (3) make any demand for, or exercise any right with respect to, the
registration of any share of common stock or any securities convertible into or
exchangeable for common stock, without the prior written consent of Merrill
Lynch on behalf of the underwriters for a period of 180 days after the date of
this prospectus.
 
     Prior to this offering, there has been no public market for the common
stock of Quokka. The initial public offering price will be determined through
negotiations between Quokka and the Representatives. The factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, are expected to be price-revenue and discounted
price-earnings ratios of publicly traded companies that the Representatives
believe to be comparable to Quokka, certain financial information of Quokka, the
history of, and the prospects for, Quokka and the industry in which it competes,
and an assessment of Quokka's management, its past and present operations, the
prospects for, and timing of, future revenues of Quokka, and the present state
of Quokka's development. There can be no assurance that an active trading market
will develop for the common stock or that the common stock will trade in the
public market subsequent to this offering at or above the initial public
offering price.
 
     The underwriters do not expect sales of the common stock to be made to any
accounts over which they exercise discretionary authority to exceed 5% of the
number of shares being offered hereby.
 
     The underwriters do not intend to confirm sales of the common stock offered
hereby to any accounts over which they exercise discretionary authority.
 
     Quokka has agreed to indemnify the underwriters against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in respect of
this offering.
 
     Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase the common stock. As an
exception to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the common stock.
 
     If the underwriters create a short position in the common stock in
connection with the offering contemplated hereby, i.e., if they sell more shares
of common stock than are set forth on the cover page of this prospectus, the
Representatives may reduce that short position by purchasing common stock in the
open market. The Representatives may also elect to reduce any short position by
exercising all or part of the overallotment options described above.
 
                                       77
<PAGE>   79
 
     The Representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that if the Representatives purchase
shares of common stock in the open market to reduce the underwriters' short
position or to stabilize the price of the common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares.
 
     In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of the common stock to the extent that it
discourages resales of the common stock.
 
     Neither Quokka nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
Quokka nor any of the underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued.
 
                                 LEGAL MATTERS
 
     The validity of the shares of common stock offered hereby will be passed
upon for Quokka by Cooley Godward LLP, San Francisco, California ("Cooley
Godward"). Certain legal matters will be passed upon for the underwriters by
Wilson Sonsini Goodrich & Rosati, Professional Corporation. An investment
partnership affiliated with Cooley Godward owns 127,887 shares of Quokka's
preferred stock which will convert into 127,887 shares of Quokka's common stock
upon the closing of this offering.
 
                                    EXPERTS
 
     The financial statements included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants. The companies and periods
covered by these audits are indicated in the individual reports of
PricewaterhouseCoopers LLP. Such financial statements have been so included in
reliance on the reports of PricewaterhouseCoopers LLP given on the authority of
said firm as experts in auditing and accounting.
 
                        CHANGE IN PRINCIPAL ACCOUNTANTS
 
     In March 1998, KPMG LLP ("KPMG") was dismissed and PricewaterhouseCoopers
LLP replaced KPMG as our independent accountants. The selection of
PricewaterhouseCoopers LLP as our independent accountants was ratified by our
board of directors in April 1998. During fiscal 1997 and fiscal 1998, we had no
disagreement with our former accountants, KPMG, on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with their opinion to the subject
matter of the disagreement. KPMG did not issue a report on our financial
statements with respect to the years ended December 31, 1997 or 1998.
 
                             ADDITIONAL INFORMATION
 
     A registration statement on Form S-1 relating to the common stock offered
hereby has been filed by Quokka with the Securities and Exchange, Washington,
D.C. This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference. For further information with respect to Quokka and the common
stock offered
 
                                       78
<PAGE>   80
 
hereby, reference is made to such registration statement, exhibits and
schedules. A copy of the registration statement may be inspected by anyone
without charge at the SEC's principal office at the public reference facility
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of all or any part thereof may be obtained
from the SEC's at 450 Fifth Street, N.W., Washington, D.C. 20549, upon the
payment of certain fees prescribed by the SEC. The SEC maintains a Web site that
contains reports, proxy statements and other information regarding registrants,
including Quokka. The address of the SEC's Web site is www.sec.gov.
 
     As a result of this Offering, Quokka will be subject to the information
requirements of the Securities Exchange Act of 1934, as amended. So long as
Quokka is subject to periodic reporting requirements of the Exchange Act, it
will continue to furnish the reports and other information required thereby to
the SEC. Quokka intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports containing unaudited financial information.
 
                                       79
<PAGE>   81
 
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................   F-2
Consolidated Balance Sheets.................................   F-3
Consolidated Statements of Operations.......................   F-4
Consolidated Statements of Stockholders' Equity.............   F-5
Consolidated Statements of Cash Flows.......................   F-6
Notes to Consolidated Financial Statements..................   F-7
</TABLE>
 
                                       F-1
<PAGE>   82
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders of
  Quokka Sports, Inc.
 
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Quokka Sports, Inc. and subsidiaries at December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
PricewaterhouseCoopers LLP
San Francisco, California
January 22, 1999, except as to Note 12
  for which the date is February 9, 1999 and April 22, 1999
 
                                       F-2
<PAGE>   83
 
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                                        PRO FORMA
                                                          DECEMBER 31,   DECEMBER 31,    MARCH 31,      MARCH 31,
                                                              1997           1998           1999           1999
                                                          ------------   ------------   ------------   ------------
                                                                                        (UNAUDITED)    (UNAUDITED)
<S>                                                       <C>            <C>            <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................  $ 4,026,610    $ 23,994,355   $ 15,262,901
  Accounts receivable...................................       76,151       1,150,603        819,800
  Prepaid expenses and other............................      246,328         331,108      1,413,683
                                                          -----------    ------------   ------------
         Total current assets...........................    4,349,089      25,476,066     17,496,384
Property and equipment, net.............................      301,944       2,736,298      5,357,025
                                                          -----------    ------------   ------------
         Total assets...................................  $ 4,651,033    $ 28,212,364   $ 22,853,409
                                                          ===========    ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable......................................  $   480,577    $    289,050   $  2,220,288
  Accrued expenses......................................       81,990       1,199,357        726,819
  Current portion of long-term debt and capitalized
    lease obligations...................................       37,112         290,188        347,132
  Deferred revenues.....................................    2,305,613         479,735        248,985
                                                          -----------    ------------   ------------
         Total current liabilities......................    2,905,292       2,258,330      3,543,224
                                                          -----------    ------------   ------------
Long term debt and capitalized lease obligations, net of
  current portion.......................................       82,572         500,710        698,523
Commitments (Note 5)
Stockholders' equity:
Preferred stock, $0.0001 par value; authorized:
  8,500,000 at December 31, 1997 and 27,600,000 at
  December 31, 1998 and March 31, 1999 (unaudited);
  issued and outstanding: 7,720,590 at December 31, 1997
  and 23,736,016 at December 31, 1998 and March 31, 1999
  and pro forma shares (unaudited); liquidation value:
  $37,839,029 at December 31, 1998 and March 31, 1999
  (unaudited)...........................................          772           2,374          2,374   $         --
Common stock:
  Voting stock, $0.0001 par value; authorized:
    20,500,000 at December 31, 1997 and 45,400,000 at
    December 31, 1998 and March 31, 1999 (unaudited);
    issued and outstanding: 9,351,566 at December 31,
    1997 and 9,400,365 at December 31, 1998; and
    9,589,342 and March 31, 1999 (unaudited) and
    33,834,206 pro forma shares.........................          935             940            959          3,383
  Non-voting stock, $0.0001 par value; authorized:
    300,000 at December 31, 1997 and 1998 and March 31
    1999 (unaudited); issued and outstanding: 300,000 at
    December 31, 1997 and 1998 and March 31, 1999
    (unaudited) and no pro forma shares.................           30              30             30             30
Additional paid-in capital..............................    8,107,295      41,018,912     41,086,953     41,626,666
Warrants and other......................................       61,860         477,115      1,414,993      1,414,993
Accumulated deficit.....................................   (6,507,723)    (16,046,047)   (23,893,647)   (23,893,647)
                                                          -----------    ------------   ------------   ------------
         Total stockholders' equity.....................    1,663,169      25,453,324     18,611,662   $ 19,151,425
                                                          -----------    ------------   ------------   ============
         Total liabilities and stockholders' equity.....  $ 4,651,033    $ 28,212,364   $ 22,853,409
                                                          ===========    ============   ============
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-3
<PAGE>   84
 
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                         YEARS ENDED DECEMBER 31,                   MARCH 31,
                                  ---------------------------------------   -------------------------
                                     1996          1997          1998          1998          1999
                                  -----------   -----------   -----------   -----------   -----------
                                                                            (UNAUDITED)   (UNAUDITED)
<S>                               <C>           <C>           <C>           <C>           <C>
Revenues........................  $    38,906   $ 3,999,781   $ 8,635,099   $ 4,867,218   $   896,566
Costs and expenses
  Production costs..............      610,867     5,130,130     7,779,593     3,430,803     2,717,704
  Research and engineering......      423,303     1,029,539     4,480,224       585,500     2,132,284
  Sales and marketing...........       53,165       815,540     2,519,418       358,491     1,389,967
  General and administrative....      507,770     1,827,380     3,184,372       870,704     1,790,681
  Depreciation and
     amortization...............           --        68,247       530,261        43,789       430,406
                                  -----------   -----------   -----------   -----------   -----------
     Total costs and expenses...    1,595,105     8,870,836    18,493,868     5,289,287     8,461,042
                                  -----------   -----------   -----------   -----------   -----------
       Loss from operations.....   (1,556,199)   (4,871,055)   (9,858,769)     (422,069)   (7,564,476)
Equity and losses of associated
  venture.......................           --            --            --            --      (452,275)
Interest income/(expense),
  net...........................       (3,580)      (70,785)      320,445        32,428       169,151
                                  -----------   -----------   -----------   -----------   -----------
       Net loss.................  $(1,559,779)  $(4,941,840)  $(9,538,324)  $  (389,641)  $(7,847,600)
                                  ===========   ===========   ===========   ===========   ===========
Historical net loss per share:
  Basic and diluted.............  $     (0.41)  $     (0.73)  $     (0.99)  $     (0.04)  $     (0.80)
  Number of shares used in
     calculation of historical
     net loss per share -- basic
     and diluted................    3,800,000     6,791,534     9,654,835     9,651,566     9,756,059
Pro forma net loss per share
  (unaudited):
  Basic and diluted.............                              $     (0.40)                $     (0.23)
  Shares used in computing pro
     forma net loss per share --
     basic and diluted..........                               23,914,934                  34,000,923
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-4
<PAGE>   85
 
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                  SERIES A             SERIES B              SERIES C              VOTING
                                              PREFERRED STOCK       PREFERRED STOCK      PREFERRED STOCK        COMMON STOCK
                                             ------------------   -------------------   ------------------   ------------------
                                              SHARES     AMOUNT     SHARES     AMOUNT    SHARES     AMOUNT    SHARES     AMOUNT
                                             ---------   ------   ----------   ------   ---------   ------   ---------   ------
<S>                                          <C>         <C>      <C>          <C>      <C>         <C>      <C>         <C>
Balance, January 1, 1996...................         --    $ --            --   $  --           --    $ --    3,800,000    $380
Net loss...................................         --      --            --      --           --      --           --      --
                                             ---------    ----    ----------   ------   ---------    ----    ---------    ----
Balance, December 31, 1996.................         --      --            --      --           --      --    3,800,000     380
Issuance of common stock to founder for
 cash (January 1997).......................         --      --            --      --           --      --           --      --
Issuance of common stock to founder for
 cash net of issuance costs of $31,401
 (January 1997)............................         --      --            --      --           --      --    1,900,000     190
Issuance of common stock for cash at $0.50
 per share of issuance costs of $17,591
 (August 1997).............................         --      --            --      --           --      --    3,651,566     365
Issuance of warrants in connection with
 promissory notes (October 1997)...........         --      --            --      --           --      --           --      --
Issuance of Series A Preferred Stock for
 cash of $0.68 per share, net of issuance
 costs of $18,141 (December 1997)..........  7,720,590     772            --      --           --      --           --      --
Net loss...................................         --      --            --      --           --      --           --      --
                                             ---------    ----    ----------   ------   ---------    ----    ---------    ----
Balance, December 31, 1997.................  7,720,590     772            --      --           --      --    9,351,566     935
Issuance of Series B Preferred Stock for
 cash of $1.50 per share, net of issuance
 costs of $75,543 (June and August 1998)...         --      --    10,737,068   1,074           --      --           --      --
Issuance of warrants (August 1998).........         --      --            --      --           --      --           --      --
Issuance of options for services rendered
 (August 1998).............................         --      --            --      --           --      --           --      --
Issuance of options for services rendered
 (September 1998)..........................         --      --            --      --           --      --           --      --
Exercise of voting common stock options to
 employees for cash of $0.50 per share
 (August -- December 1998).................         --      --            --      --           --      --       48,799       5
Issuance of Series C Preferred stock for
 cash of $3.25 per share, net of issuance
 costs of $36,031 (December 1998)..........         --      --            --      --    4,938,756     494           --      --
Issuance of warrants under joint
 development agreement (December 1998).....         --      --            --      --           --      --           --      --
Exercise of warrants (December 1998).......    145,559      15       169,801      17       24,242       2           --      --
Cumulative translation adjustment..........         --      --            --      --           --      --           --      --
Net loss...................................         --      --            --      --           --      --           --      --
                                             ---------    ----    ----------   ------   ---------    ----    ---------    ----
Balance as of December 31, 1998............  7,866,149     787    10,906,869   1,091    4,962,998     496    9,400,365     940
Exercise of voting common stock options to
 employees for cash of $0.50 to $3.25 per
 share (January -- March 1999).............         --      --            --      --           --      --      197,775      20
Repurchase of common stock (11,875 shares
 at $8.00 per share).......................         --      --            --      --           --      --      (11,875)     (1)
Issuance of common stock for services
 rendered..................................         --      --            --      --           --      --        3,077      --
Issuance of warrants for subordinated-debt
 agreement (March 1999)....................         --      --            --      --           --      --           --      --
Issuance of warrants for CART rights
 agreement (March 1999)....................         --      --            --      --           --      --           --      --
Issuance of options for services
 rendered..................................         --      --            --      --           --      --           --      --
Cumulative translation adjustment..........         --      --            --      --           --      --           --      --
Net loss...................................         --      --            --      --           --      --           --      --
                                             ---------    ----    ----------   ------   ---------    ----    ---------    ----
Balance as of March 31, 1999 (unaudited)...  7,866,149    $787    10,906,869   $1,091   4,962,998    $496    9,589,342    $959
                                             =========    ====    ==========   ======   =========    ====    =========    ====
 
<CAPTION>
                                                NON-VOTING
                                               COMMON STOCK     ADDITIONAL                                     TOTAL
                                             ----------------     PAID-IN      WARRANTS    ACCUMULATED     STOCKHOLDERS'
                                             SHARES    AMOUNT     CAPITAL     AND OTHER      DEFICIT      EQUITY/(DEFICIT)
                                             -------   ------   -----------   ----------   ------------   ----------------
<S>                                          <C>       <C>      <C>           <C>          <C>            <C>
Balance, January 1, 1996...................       --    $--     $        --   $       --   $     (6,104)    $    (5,724)
Net loss...................................       --     --              --           --     (1,559,779)     (1,559,779)
                                             -------    ---     -----------   ----------   ------------     -----------
Balance, December 31, 1996.................       --     --              --           --     (1,565,883)     (1,565,503)
Issuance of common stock to founder for
 cash (January 1997).......................  200,000     20          99,980           --             --         100,000
Issuance of common stock to founder for
 cash net of issuance costs of $31,401
 (January 1997)............................  100,000     10         968,399           --             --         968,599
Issuance of common stock for cash at $0.50
 per share of issuance costs of $17,591
 (August 1997).............................       --     --       1,807,828           --             --       1,808,193
Issuance of warrants in connection with
 promissory notes (October 1997)...........       --     --              --       61,860             --          61,860
Issuance of Series A Preferred Stock for
 cash of $0.68 per share, net of issuance
 costs of $18,141 (December 1997)..........       --     --       5,231,088           --             --       5,231,860
Net loss...................................       --     --              --           --     (4,941,840)     (4,941,840)
                                             -------    ---     -----------   ----------   ------------     -----------
Balance, December 31, 1997.................  300,000     30       8,107,295       61,860     (6,507,723)      1,663,169
Issuance of Series B Preferred Stock for
 cash of $1.50 per share, net of issuance
 costs of $75,543 (June and August 1998)...       --     --      15,988,310           --             --      15,989,384
Issuance of warrants (August 1998).........       --     --              --      588,734             --         588,734
Issuance of options for services rendered
 (August 1998).............................       --     --           5,293           --             --           5,293
Issuance of options for services rendered
 (September 1998)..........................       --     --          29,495           --             --          29,495
Exercise of voting common stock options to
 employees for cash of $0.50 per share
 (August -- December 1998).................       --     --          24,395           --             --          24,400
Issuance of Series C Preferred stock for
 cash of $3.25 per share, net of issuance
 costs of $36,031 (December 1998)..........       --     --      16,014,432           --             --      16,014,926
Issuance of warrants under joint
 development agreement (December 1998).....       --     --              --      263,996             --         263,996
Exercise of warrants (December 1998).......       --     --         849,692     (437,636)            --         412,090
Cumulative translation adjustment..........       --     --              --          161             --             161
Net loss...................................       --     --              --           --     (9,538,324)     (9,538,324)
                                             -------    ---     -----------   ----------   ------------     -----------
Balance as of December 31, 1998............  300,000     30      41,018,912      477,115    (16,046,047)     25,453,324
Exercise of voting common stock options to
 employees for cash of $0.50 to $3.25 per
 share (January -- March 1999).............       --     --         135,118           --             --         135,138
Repurchase of common stock (11,875 shares
 at $8.00 per share).......................       --     --         (94,999)          --             --         (95,000)
Issuance of common stock for services
 rendered..................................       --     --          10,000           --             --          10,000
Issuance of warrants for subordinated-debt
 agreement (March 1999)....................       --     --              --      552,486             --         552,486
Issuance of warrants for CART rights
 agreement (March 1999)....................       --     --              --      400,841             --         400,841
Issuance of options for services
 rendered..................................       --     --          17,922           --             --          17,922
Cumulative translation adjustment..........       --     --              --      (15,449)            --         (15,449)
Net loss...................................       --     --              --           --     (7,847,600)     (7,847,600)
                                             -------    ---     -----------   ----------   ------------     -----------
Balance as of March 31, 1999 (unaudited)...  300,000    $30     $41,086,953   $1,414,993   $(23,893,647)    $18,611,662
                                             =======    ===     ===========   ==========   ============     ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-5
<PAGE>   86
 
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                        THREE MONTHS ENDED
                                                  YEARS ENDED DECEMBER 31,                   MARCH 31,
                                          ----------------------------------------   -------------------------
                                             1996          1997           1998          1998          1999
                                          -----------   -----------   ------------   -----------   -----------
                                                                                     (UNAUDITED)   (UNAUDITED)
<S>                                       <C>           <C>           <C>            <C>           <C>
Cash flows from operating activities:
  Net loss..............................  $(1,559,779)  $(4,941,840)  $ (9,538,324)  $  (389,641)  $(7,847,600)
  Adjustments to reconcile net loss to
     net cash provided by (used in)
     operating activities:
  Depreciation and amortization of
     property and equipment.............           --        68,247        530,261        43,789       430,406
  Non-cash compensation-related charges
     and other..........................           --        61,860        450,044       381,948       981,249
  Non-cash charges for equipment........           --        44,220             --            --            --
  Changes in operating assets and
     liabilities:
     Accounts receivable................           --       (76,151)    (1,074,452)        3,081       330,803
     Prepaid expenses and other.........      (47,500)     (198,828)       (84,780)     (113,590)   (1,082,575)
     Accounts payable...................       70,144       410,433       (433,336)       (1,008)    1,447,292
     Accrued expenses...................       77,258        (1,293)     1,117,367       621,774      (472,538)
     Deferred revenues..................    1,525,051       780,562     (1,825,878)   (1,888,699)     (230,750)
                                          -----------   -----------   ------------   -----------   -----------
       Net cash provided by (used in)
          operating activities..........       65,174    (3,852,790)   (10,859,098)   (1,342,346)   (6,443,713)
                                          -----------   -----------   ------------   -----------   -----------
Cash flows from investing activities:
  Purchase of property and equipment....           --      (294,727)    (2,722,807)     (245,712)   (2,567,187)
                                          -----------   -----------   ------------   -----------   -----------
       Net cash used in investing
          activities....................           --      (294,727)    (2,722,807)     (245,712)   (2,567,187)
                                          -----------   -----------   ------------   -----------   -----------
Cash flows from financing activities:
  Proceeds from borrowing...............           --            --        750,000            --       331,069
  Proceeds from bridge loan.............           --       532,000             --            --            --
  Payments on notes and long-term
     capital leases.....................           --            --        (78,786)      (11,067)      (76,312)
  Proceeds from the issuance of common
     stock, net of issuance cost........           --     2,876,792         24,400            --       119,689
  Repurchase of common stock............           --            --             --            --       (95,000)
  Proceeds from the issuance of Series A
     Preferred Stock, net of issuance
     cost...............................           --     4,699,860             --            --            --
  Proceeds from the issuance of Series B
     Preferred Stock, net of issuance
     cost...............................           --            --     15,989,384            --            --
  Proceeds from the issuance of Series C
     Preferred Stock, net of issuance
     cost...............................           --            --     16,014,926            --            --
  Proceeds from issuance and exercise of
     warrants...........................           --            --        849,726            --            --
                                          -----------   -----------   ------------   -----------   -----------
       Net cash provided by (used in)
          financing activities..........           --     8,108,652     33,549,650       (11,067)      279,446
                                          -----------   -----------   ------------   -----------   -----------
          Increase (decrease) in cash...       65,174     3,961,135     19,967,745    (1,599,125)   (8,731,454)
Cash, beginning of period...............          301        65,475      4,026,610     4,026,610    23,994,355
                                          -----------   -----------   ------------   -----------   -----------
Cash, end of period.....................  $    65,475   $ 4,026,610   $ 23,994,355   $ 2,427,485   $15,262,901
                                          ===========   ===========   ============   ===========   ===========
</TABLE>
 
                                       F-6
<PAGE>   87
 
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:
 
  Organization
 
     Prior to August 1996, Quokka Sports, Inc. operated as an Australian
software development and consulting company known as Ozware Developments Unit
Trust. In August 1996, Quokka adopted its current business model, incorporated
in Delaware under the name Quokka Productions, Inc. and relocated its
headquarters to San Francisco. In September 1996, Quokka Productions, Inc.
changed its name to Quokka Sports, Inc.
 
     Quokka is an independent digital sports network providing real-time
coverage of sporting events for worldwide audiences. Utilizing digital assets
generated at a sports venue that are under-utilized by traditional media, Quokka
is building a digital sports network by creating digital programming content
that is specifically designed for interactive distribution systems.
 
     Revenues are generated from digital entertainment sponsorships,
advertising, electronic commerce and studio services. The majority of revenues
are derived from the sale of sponsorship packages to corporations. Digital
entertainment sponsors may embed their products in Quokka's productions, site
branding, access to development projects, the use of trademarks and logos and
participation in various print and media campaigns.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  Foreign Currency Translation
 
     The functional currency of Quokka's subsidiaries is the local currency.
Accordingly, Quokka applies the current rate method to translate the
subsidiaries' financial statements into United States dollars. Translation
adjustments are included as a separate component of stockholders' equity in the
accompanying financial statements.
 
  Basis of Presentation
 
     The consolidated financial statements include the accounts of Quokka, and
all of its wholly and majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in the consolidated financial
statements. Investments in and advances to our joint venture in which we have a
50% ownership interest are accounted for by the equity method.
 
  Cash and Cash Equivalents
 
     Quokka includes in cash and cash equivalents all highly liquid investments
that mature within three months of their purchase date. Cash equivalents consist
primarily of money market funds.
 
  Property and Equipment
 
     Property and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives of the related assets that
range from three to five years. Leased assets are amortized on a straight-line
basis over the lesser of the estimated useful life or the lease term.
Maintenance and repairs are charged to
                                       F-7
<PAGE>   88
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
operations as incurred. When assets are retired or otherwise disposed of, the
cost and accumulated depreciation are removed from the accounts, and any
resulting gain or loss is reflected in operations in the period realized.
 
  Income Taxes
 
     Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statements and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
 
  Net loss per share and pro forma net loss per share
 
     Quokka computes net loss per share in accordance with SFAS No. 128,
Earnings per Share, and SEC Staff Accounting Bulletin ("SAB") No. 98. Under the
provisions of SFAS No. 128 and SAB No. 98, basic net loss per share is computed
by dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of vested common and common equivalent shares
outstanding during the period. However, as Quokka generated net losses in all
periods presented, common equivalent shares, composed of incremental common
shares issuable upon the exercise of stock options and warrants and upon
conversion of preferred stock, are not included in diluted net loss per share
because such shares are anti-dilutive.
 
     Pro forma net loss per share in 1998 and the period ended March 31, 1999 is
computed using the weighted average number of common shares outstanding,
including the pro forma effects of the automatic conversion of Quokka's
preferred stock and exercise of warrants to purchase 508,848 shares into shares
of Quokka's common stock effective upon the closing of Quokka's initial public
offering as if such conversion and exercise occurred on January 1, 1998 or at
the date of original issuance, if later. The resulting pro forma adjustments
result in an increase in the weighted average shares used to compute basic and
diluted net loss per share in 1998 and for the three months ended March 31,
1999. Pro forma common equivalent shares, composed of unvested restricted common
stock and incremental common shares issuable upon the exercise of stock options
and warrants, are not included in pro forma diluted net loss per share because
they would be anti-dilutive. Unaudited pro forma stockholders' equity at March
31, 1999, as adjusted for the conversion of preferred stock and exercise of
warrants are disclosed on the balance sheet.
 
                                       F-8
<PAGE>   89
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table sets forth the computation of historical and pro forma
basic and diluted net loss per share for the periods indicated.
 
<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                         YEARS ENDED DECEMBER 31,                   MARCH 31,
                                  ---------------------------------------   -------------------------
                                     1996          1997          1998          1998          1999
                                  -----------   -----------   -----------   -----------   -----------
                                                                            (UNAUDITED)   (UNAUDITED)
<S>                               <C>           <C>           <C>           <C>           <C>
Numerator:
  Net loss available to common
     stockholders...............  $(1,559,779)  $(4,941,840)  $(9,538,324)  $  (389,641)  $(7,847,600)
Denominator:
  Weighted average shares.......    3,800,000     6,791,534     9,656,857     9,651,566     9,772,933
  Weighted average unvested
     common shares subject to
     repurchase agreements......           --            --        (2,022)           --       (16,874)
                                  -----------   -----------   -----------   -----------   -----------
  Denominator for basic and
     diluted calculation........    3,800,000     6,791,534     9,654,835     9,651,566     9,756,059
                                  ===========   ===========   ===========   ===========   ===========
Net loss per share:
  Basic and diluted.............  $     (0.41)  $     (0.73)  $     (0.99)  $     (0.04)  $     (0.80)
Anti-dilutive securities
  including options, warrants
  and preferred stock not
  included in historical net
  loss per share calculations...            0     1,643,306    17,755,299     9,373,525    31,389,889
PRO FORMA NET LOSS PER SHARE:
Net loss........................                              $(9,538,324)                $(7,847,600)
Shares used in computing net
  loss per share,
  basic and diluted.............                                9,654,835                   9,756,059
Adjustment to reflect assumed
  conversion of preferred stock
  and exercise of warrants......                               14,260,099                  24,244,864
                                                              -----------                 -----------
Shares used in computing pro
  forma net loss per share,
  basic and diluted.............                               23,914,934                  34,000,923
                                                              ===========                 ===========
Pro forma net loss per share,
  basic and diluted
  (unaudited)...................                              $     (0.40)                $     (0.23)
</TABLE>
 
  Recently Issued Accounting Pronouncements:
 
     In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
130, Reporting Comprehensive Income. SFAS 130 establishes standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from nonowner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains/losses on
available-for-sale securities. The difference between net loss, as reported, and
comprehensive income relates solely to the change in the cumulative translation
adjustment for the respective periods which were not material to these financial
statements.
 
     During June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" SFAS No. 131 replaces SFAS No. 14,
"Financial Reporting for Segments of a Business
 
                                       F-9
<PAGE>   90
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Enterprise" and changes the way public companies report segment information.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and
has been adopted by Quokka for the year ended December 31, 1998. Quokka operates
in one business segment.
 
     In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position No. 98-1, "Software for Internal Use" which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. Statement of Position No. 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998. Quokka
does not expect that the adoption of Statement of Position No. 98-1 will have a
material impact on its financial statements.
 
     In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." This standard requires companies to expense
the costs of start-up activities and organization costs as incurred. In general,
Statement of Position 98-5 is effective for fiscal years beginning after
December 15, 1998. Quokka believes the adoption of Statement of Position 98-5
will not have a material impact on its results of operations.
 
  Fair Value of Financial Instruments
 
     Carrying amounts of certain of Quokka's financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and other liabilities, approximate fair value due to their short
maturities. Based upon borrowing rates currently available for Quokka for loans
with similar terms, the carrying value of capital lease obligations approximates
fair value.
 
  Business Risk and Concentration of Credit Risk
 
     Quokka operates in the Internet industry, which are rapidly evolving and
intensely competitive. Quokka potentially competes with other Internet
companies, large, established media companies and sports marketing
organizations.
 
     Financial instruments that potentially subject Quokka to concentrations of
credit risk consist primarily of one money market account placed with one
financial institution which exceeds federally insured limits.
 
     Quokka performs ongoing credit evaluations, does not require collateral and
does not currently maintain any reserves for potential credit losses. For the
year ended December 31, 1998, three customers accounted for 53%, 16% and 12%,
respectively, of all revenues generated by Quokka. For the quarter ended March
31, 1998, three customers accounted for 63%, 18% and 10% of all revenues
generated by Quokka. For the quarter ended March 31, 1999, three customers
accounted for 48%, 25% and 18% of all revenues generated by Quokka. At December
31, 1998, 23% of the outstanding accounts receivable was attributable to the
smallest of the three largest customers. One additional customer accounted for
another 65% of total outstanding accounts receivable. The remaining accounts
receivable balance at December 31, 1998 was attributable to three additional
customers. At March 31, 1999, 100% of the outstanding accounts receivable was
attributable to three customers.
 
     For the year ended December 31, 1997, three customers accounted for 52%,
21% and 15% of all revenues generated by Quokka. At December 31, 1997, there
were no receivables from these customers. For the year ended December 31, 1996,
one customer accounted for all the revenues generated.
 
REVENUE RECOGNITION
 
     Quokka generates revenues from digital entertainment sponsorships,
advertising, electronic commerce and studio services. Sponsorship revenues are
recognized over the term of the sponsored event based on the ratio of current
period impressions to projected total ultimate impressions based on a
determination that no significant obligations remained and collection of the
resulting receivable was probable. When Quokka was
                                      F-10
<PAGE>   91
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
obligated to provide a minimum number of impressions, a pro rata portion of
amounts received was recorded as deferred revenue until these obligations were
satisfied. Revenues from studio services are recognized in the period the
service is provided. Advertising and electronic commerce revenues, which have
not been material to date, are recognized when the commitment is met or product
is shipped and payment is assured. Quokka has accepted property and services as
payment for sponsorship. Property and services received as payment are valued at
fair market value based on the amounts normally charged to third parties for
similar property and services.
 
     Total property and services received as payment were $0 in 1996, $1,738,298
in 1997 and $4,320,622 in 1998. Total property and services received as payment
were $2,773,874 and $244,763 for the three months ended March 31, 1998 and 1999.
 
RESEARCH AND ENGINEERING
 
     Research and engineering expenses include personnel costs, costs incurred
to improve and develop the "Quokka Sports Platform," broadband applications and
costs associated with network operations. Research and engineering costs are
expensed as incurred.
 
ADVERTISING
 
     Advertising is expensed as incurred. Advertising expenses were $4,000 in
1996, $62,000 in 1997 and $554,000 in 1998.
 
STOCK-BASED COMPENSATION
 
     In 1997, Quokka adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-based Compensation." Quokka has elected to continue
accounting for stock-based compensation issued to the employees using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and,
accordingly, pro forma disclosures required under SFAS No. 123 have been
presented (See Note 8). Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant, between the fair value of Quokka's
common stock and the exercise price. Additionally, pursuant to SFAS No. 123,
stock issued to non-employees is accounted for at the fair value of the equity
instruments issued, or at the fair value of the consideration received,
whichever is more reliably measurable.
 
RECLASSIFICATION
 
     Quokka has reclassified the presentation of certain prior year information
to conform to the current year presentation. These changes had no effect on
previously reported financial position or results of operations.
 
                                      F-11
<PAGE>   92
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  PROPERTY AND EQUIPMENT
 
     Property and equipment consists of:
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                                 ----------------------      MARCH 31,
                                                   1997         1998           1999
                                                 --------    ----------    -------------
                                                                            (UNAUDITED)
<S>                                              <C>         <C>           <C>
Computer, telecommunications equipment and
  software.....................................  $ 61,595    $2,241,644     $4,156,456
Leasehold improvements.........................   227,394       567,680        780,147
Furniture and fixtures.........................     5,738       356,068        611,346
Production equipment...........................        --        93,951        431,383
Leased equipment...............................    75,464        75,464        406,533
                                                 --------    ----------     ----------
                                                  370,191     3,334,807      6,385,865
Less accumulated depreciation and
  amortization.................................   (68,247)     (598,509)    (1,028,840)
                                                 --------    ----------     ----------
     Property and equipment, net...............  $301,944    $2,736,298     $5,357,025
                                                 ========    ==========     ==========
</TABLE>
 
     Accumulated amortization related to leased equipment was $12,577 at
December 31, 1997 and $37,732 at December 31, 1998. There were no asset
disposals during 1996, 1997 and 1998. Accumulated amortization related to leased
equipment was $18,866 at March 31, 1998 and $62,413 at March 31, 1999. There
were no asset disposals during the three months ended March 31, 1999.
 
3.  INCOME TAXES
 
     The provision for income taxes are summarized as follows:
 
<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                              -----------------------------------------
                                                 1996           1997           1998
                                              -----------    -----------    -----------
<S>                                           <C>            <C>            <C>
Current tax expense:
  Federal -- Foreign........................  $        --    $        --    $    12,090
  State.....................................           --            800            800
Deferred tax expense
  Federal...................................           --     (1,438,864)    (2,845,930)
  State.....................................           --       (128,098)      (486,101)
Valuation allowance for deferred tax
  assets....................................           --      1,566,962      3,332,031
                                              -----------    -----------    -----------
                                              $        --    $       800    $    12,890
                                              ===========    ===========    ===========
</TABLE>
 
     The change in the valuation allowance was $1,566,962 during the period from
August 15, 1996 (date of incorporation) to December 31, 1997 and $3,332,031 in
1998. Tax expenses, which were insignificant, were recorded in general and
administrative expenses.
 
                                      F-12
<PAGE>   93
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The primary components of the net deferred tax asset are:
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                    --------------------------
                                                       1997           1998
                                                    -----------    -----------
<S>                                                 <C>            <C>
Net operating loss carryforwards..................  $ 1,526,769    $ 4,671,438
Other.............................................       40,193        227,554
                                                    -----------    -----------
                                                      1,566,962      4,898,992
Valuation allowance...............................   (1,566,962)    (4,898,992)
                                                    -----------    -----------
Deferred tax liability............................           --             --
                                                    -----------    -----------
Net deferred tax asset............................  $        --    $        --
                                                    ===========    ===========
</TABLE>
 
     At December 31, 1998, Quokka had net operating loss carryforwards of
$12,025,228 for federal tax purposes expiring in 2011 through 2018, and
$9,987,838 for California income tax purposes which expire in 2004. The issuance
of preferred stock in December, 1997, resulted in a change of ownership under
Section 382 of the Internal Revenue Code. As a result of the change,
approximately $3.8 million in federal losses and $1.8 million in California
losses are subject to an annual limitation of $254,319. The losses incurred
while operating as Ozware Developments Unit Trust in Australia are not available
for future utilization. Therefore, no deferred income taxes were recorded in the
financial statements.
 
     The effective income tax rate differs from the federal statutory income tax
rate of 34% primarily as a result of state income taxes and the change in the
valuation allowance. The difference between Quokka's effective income tax rate
and the federal statutory rate is reconciled below:
 
<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                               ----------------------------------------
                                                  1996          1997           1998
                                               ----------    -----------    -----------
<S>                                            <C>           <C>            <C>
Provision computed at federal statutory
  rate.......................................  $       --    $(1,702,090)   $(3,242,713)
State taxes, net of federal tax benefit......          --       (291,325)      (556,411)
Change in valuation allowance................          --      1,566,962      3,332,031
Other........................................          --        427,253        479,983
                                               ----------    -----------    -----------
Net tax provision............................  $       --    $       800    $    12,890
                                               ==========    ===========    ===========
</TABLE>
 
4.  ACCRUED LIABILITIES
 
     Accrued liabilities are comprised of:
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,          MARCH 31,
                                             ---------------------    -----------
                                              1997         1998          1999
                                             -------    ----------    -----------
                                                                      (UNAUDITED)
<S>                                          <C>        <C>           <C>
Accrued compensation and related
  expenses.................................  $79,993    $  579,380      $255,817
Accrued expenses...........................    1,997       544,977       450,000
Accrued professional service fees..........       --        75,000        21,002
                                             -------    ----------      --------
          Total accrued liabilities........  $81,990    $1,199,357      $726,819
                                             =======    ==========      ========
</TABLE>
 
5.  COMMITMENTS
 
     Quokka's rental expense for office facilities was $149,839 in 1997 and
$232,799 in 1998 and $174,015 for the three months ended 1999. Quokka has the
option to terminate its facilities lease after December 2000 if the landlord is
unable to accommodate Quokka's expansion needs.
 
                                      F-13
<PAGE>   94
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Lease Obligations
 
     Quokka leases office facilities and equipment under noncancelable operating
leases. Additionally, Quokka leases certain office equipment under capital lease
agreements. Minimum future payments under capital and operating lease agreements
for the year ended December 31, are as follows:
 
<TABLE>
<CAPTION>
                                                        CAPITAL    OPERATING
                                                         LEASES      LEASES
                                                        --------   ----------
<S>                                                     <C>        <C>
1999..................................................  $ 51,017   $  438,668
2000..................................................    45,960      412,980
2001..................................................        --      381,314
2002..................................................        --       55,746
                                                        --------   ----------
                                                          96,977   $1,288,708
                                                                   ==========
Less amount representing interest.....................    14,412
                                                        --------
Present value of minimum lease payments under capital
  lease...............................................    82,565
Less current portion..................................   (40,188)
                                                        --------
          Non-current portion.........................  $ 42,377
                                                        ========
</TABLE>
 
  Long-Term Debt
 
     Quokka has an equipment financing arrangement with a bank. Under the terms
of the agreement, Quokka had the right to draw on a $750,000 line of credit
until November 23, 1998 for the purchase of equipment collateralized by the
loan. These amounts are classified as long-term debt on the accompanying
financial statements. Quokka withdrew the maximum amount available under this
line during the period. The terms of the agreement require repayment over 36
months commencing November 23, 1998. Prior to that date, Quokka was obligated to
make payments of interest only on the unpaid balance. The current rate of 8.50%
is 0.75% over the prime rate quoted by the bank (7.75% at December 31, 1998).
Principal and interest payments are made monthly to fully amortize the loan.
 
6.  STOCKHOLDERS' EQUITY
 
  Preferred Stock
 
     At December 31, 1998, Quokka had Series A, Series B and Series C preferred
stock authorized and outstanding. At December 31, 1997, Quokka was authorized to
issue 8,500,000 shares of preferred stock, all of which were designated Series A
Preferred Stock. At December 31, 1998, Quokka was authorized to issue 27,600,000
shares of preferred stock, 7,965,688 of which were designated Series A Preferred
Stock, 11,127,620 of which were designated Series B Preferred Stock and
8,500,000 of which were designated Series C Preferred Stock. The holders of
preferred stock have the following rights:
 
     Dividends
 
          The holders of all series of preferred stock outstanding are entitled
     to receive in any fiscal year, when and if declared by the Board of
     Directors, out of any funds legally available, cash dividends at the rate
     of 8.00% of the original issuance price per share. The right to dividends
     is not cumulative, and no dividends were declared through December 31,
     1998.
 
                                      F-14
<PAGE>   95
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Conversion Rights
 
          At the option of the holder, each share of Series A, Series B and
     Series C Preferred Stock is convertible, at any time, into one share of
     common stock. The conversion ratio is subject to adjustment resulting from
     future capital transactions. In addition, each share of Series A, Series B
     and Series C Preferred Stock will convert automatically into common stock:
     (i) at any time based on the affirmative vote of 75% of the outstanding
     shares of all of Series A, Series B and Series C Preferred Stock; or (ii)
     immediately prior to the closing of a firm commitment underwritten public
     offering, provided the gross cash proceeds to Quokka are at least
     $15,000,000 and the public offering price per share is at least $4.50.
 
     Liquidation Preference
 
          In the event of any liquidation, dissolution or winding up of Quokka,
     either voluntary or involuntary, the holders of the Series C Preferred
     Stock retain liquidation preference over Series A and Series B Preferred
     Stock and common stock equal to the original issuance price ($3.25 per
     share) plus declared but unpaid dividends. After the payment of the full
     liquidation preference of the Series C Preferred Stock, the holders of the
     Series B Preferred Stock retain liquidation preference over Series A
     Preferred Stock and common stock equal to the original issuance price
     ($1.50 per share) plus declared but unpaid dividends. After the payment of
     the full liquidation preference of the Series C Preferred Stock and Series
     B Preferred Stock, the holders of the Series A Preferred Stock retain
     liquidation preference over common stock equal to the original issuance
     price ($0.68 per share) plus declared but unpaid dividends. If there are
     any available funds and assets remaining after payments or distributions
     are made to the holders of Series A, Series B and Series C Preferred Stock
     of their full preferential amounts, then all remaining funds and assets
     will be distributed pro rata among the holders of the then-outstanding
     common stock and Series A, Series B and Series C Preferred Stock on a pro
     rata, as converted to common stock basis.
 
     Voting Rights
 
          The holders of all series of preferred stock and the holders of common
     stock are entitled to notice of any stockholders' meeting. Holders of
     voting common stock and Series A, Series B and Series C Preferred Stock ,
     vote as a single class upon any matter submitted to the stockholders for a
     vote, as follows: (i) each holder of Series A, Series B and Series C
     Preferred Stock, has one vote for each full share of common stock into
     which each share of preferred stock would be convertible on the record date
     for the vote and (ii) each holder of common stock has one vote per share of
     common stock. Voting as a separate class, holders of Series A Preferred
     Stock have the right to elect two directors. This right can be exercised of
     any annual meeting or at any special meeting called. Directors elected by
     holders of a majority of all outstanding shares of Series A Preferred Stock
     will serve until their successors have been elected or have been removed by
     holders of the majority of the Series A Preferred Stock.
 
7.  BRIDGE LOANS AND WARRANTS
 
     In October 1997, Quokka obtained a bridge loan and issued warrants to
purchase common stock. The loan amount was subsequently converted into Series A
Preferred Stock in connection with the Series A Preferred Stock financing in
December 1997. Quokka issued 212,800 warrants at an exercise price of $0.50 per
share expiring in November 2004. In connection with these warrants, Quokka
recorded a charge to interest expense of $61,860, representing the fair value of
the warrants issued.
 
     In 1998, Quokka issued warrants to purchase 635,650 shares of Series A, B,
and C Preferred Stock under a joint development agreement. In connection with
these warrants, Quokka recorded charges for research and
                                      F-15
<PAGE>   96
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
engineering of $852,730, representing the fair value of the warrants issued. In
December 1998, 339,602 shares of preferred stock were exercised. As of December
31, 1998, the following warrants were outstanding:
 
<TABLE>
<CAPTION>
                                  AGGREGATE
                                  EXERCISE
                       SHARES       PRICE                          EXPIRATION DATES
                       -------    ---------                        ----------------
<S>                    <C>        <C>          <C>
Common stock.........  212,800    $106,400     The earlier of November 2004 or initial public offering
Series A Preferred
  Stock..............   99,539     101,530     The earlier of August 2009 or initial public offering
Series B Preferred
  Stock..............  148,024     174,257     The earlier of August 2009 or initial public offering
Series C Preferred
  Stock..............   48,485     157,576     The earlier of August 2009 or initial public offering
</TABLE>
 
     The estimated fair value of these warrants has been determined based on the
Noreen-Wolfson fair value model with a volatility of 70%.
 
8.  STOCK OPTIONS
 
     Pursuant to the Quokka Sports, Inc. 1997 Equity Incentive Plan ("the
Plan"), employees, directors and consultants of Quokka may be granted options to
purchase shares of common stock. At December 31, 1998, 7,350,000 shares of
common stock were reserved for issuance pursuant to the Plan. Options granted
under the Plan are exercisable but subject to repurchase at cost in the event
that the individual ceases to be an employee or provide services to Quokka.
Repurchase rights generally lapse according to a vesting schedule of 60 months.
 
     A summary of the activity under the Plan together with options granted
outside of the Plan is as follows:
 
<TABLE>
<CAPTION>
                                                 EXERCISE                       WEIGHTED
                                                   PRICE       AGGREGATE        AVERAGE
                                    SHARES       PER SHARE       PRICE       EXERCISE PRICE
                                   ---------    -----------    ----------    --------------
<S>                                <C>          <C>            <C>           <C>
Outstanding at December 31,
  1996...........................         --             --            --           --
Granted..........................  1,340,000       $0.50       $  670,000        $0.50
Cancelled........................   (252,000)      $0.50         (126,000)       $0.50
                                   ---------    -----------    ----------        -----
Outstanding at December 31,
  1997...........................  1,088,000       $0.50          544,000        $0.50
Granted..........................  2,695,000    $0.50-$2.60     3,719,000        $1.34
Exercised........................    (48,799)      $0.50          (24,400)       $0.50
Cancelled........................   (239,001)   $0.50-$1.50      (176,000)       $0.74
                                   ---------    -----------    ----------        -----
Outstanding at December 31,
  1998...........................  3,495,200    $0.50-$2.60    $4,062,600        $1.12
                                   =========    ===========    ==========        =====
</TABLE>
 
     At December 31, 1998, options to purchase 819,480 shares were fully vested.
 
     The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
 
<TABLE>
<CAPTION>
                      OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
- ----------------------------------------------------------------   ----------------------------
                   NUMBER      WEIGHTED AVERAGE      WEIGHTED        NUMBER         WEIGHTED
   RANGE OF      OUTSTANDING      REMAINING          AVERAGE       EXERCISABLE      AVERAGE
EXERCISE PRICES  AT 12/31/98   CONTRACTUAL LIFE   EXERCISE PRICE    12/31/98     EXERCISE PRICE
- ---------------  -----------   ----------------   --------------   -----------   --------------
<S>              <C>           <C>                <C>              <C>           <C>
     $0.50        1,454,200          8.68             $0.50          441,429         $0.50
  $0.75-$1.25       911,000          9.65             $1.13          156,867         $1.12
  $1.50-$2.60     1,106,000          9.88             $2.08          221,184         $2.08
</TABLE>
 
                                      F-16
<PAGE>   97
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following information concerning the Plan is provided in accordance
with Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123). Quokka accounts for the Plan in accordance
with Accounting Principles Board (APB) Opinion No. 25 and related
interpretations.
 
     The fair value of each employee stock option grant has been estimated on
the date of grant using the minimum value method with the following weighted
average assumptions used for grants in 1998:
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                     ----------------------------
                                                         1997            1998
                                                     ------------    ------------
<S>                                                  <C>             <C>
Risk-free interest rates...........................      5.72%           5.25%
Expected life of options...........................         5years          5years
Expected dividends.................................        $0                  $0
</TABLE>
 
     The weighted average fair value of options granted in 1998 was $1.38. Stock
options issued to consultants were valued utilizing the Black-Scholes option
pricing model with a volatility of 71%.
 
     The following comprises the pro forma information pursuant to the provision
of SFAS No. 123:
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                      -----------------------------------------
                                         1996           1997           1998
                                      -----------    -----------    -----------
<S>                                   <C>            <C>            <C>
Net loss -- historical..............  $(1,559,779)   $(4,941,840)   $(9,538,324)
Pro forma...........................  $(1,559,779)   $(4,966,164)   $(9,694,002)
Basic and diluted net loss per share
  Historical........................       ($0.41)        ($0.73)        ($0.99)
  Pro forma.........................       ($0.41)        ($0.73)        ($1.00)
</TABLE>
 
     These pro forma amounts may not be representative of the effects on pro
forma net income (loss) for future years as options vest over several years and
additional awards are generally made each year.
 
9.  401(K) PLAN
 
     On November 5, 1997, Quokka established a 401(k) plan, which took effect on
January 1, 1998. Under the plan, eligible employees are permitted to contribute
up to 15% of gross compensation, not to exceed the annual 402(g) limitation for
any plan year. Discretionary contributions may be made by Quokka. No
contributions have been made by Quokka since the adoption of the plan.
 
                                      F-17
<PAGE>   98
                      QUOKKA SPORTS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
10.  SUPPLEMENTAL CASH FLOW INFORMATION
 
     Supplemental cash flow information and non-cash activities for 1997 and
1998, and the three months ended March 31, 1998 and 1999:
 
<TABLE>
<CAPTION>
                                                    YEARS ENDED             THREE MONTHS ENDED
                                                    DECEMBER 31,                MARCH 31,
                                                --------------------    --------------------------
                                                  1997        1998         1998           1999
                                                --------    --------    -----------    -----------
                                                                        (UNAUDITED)    (UNAUDITED)
<S>                                             <C>         <C>         <C>            <C>
Supplement disclosure of cash:
  Equipment financed through capital lease....  $119,684    $     --     $     --       $     --
  Account payable related to purchase of
     property
     and equipment............................        --     241,809           --        483,946
  Issuance of warrants for preferred stock
     under joint development agreement........    61,860     415,094      381,948             --
  Issuance of preferred warrants under license
     rights agreement.........................        --          --           --        400,841
  Issuance of preferred warrants for
     subordinated
     debt.....................................        --          --           --        552,486
  Stock options issued as compensation for
     services rendered........................        --      34,788           --         27,922
</TABLE>
 
11.  SUBSEQUENT EVENTS
 
     On February 9, 1999, Quokka established NBC/Quokka, LLC a joint venture
with NBC Olympics, Inc. NBC/Olympics, Inc. is owned 51% by Quokka and 49% by NBC
Olympics, Inc. Quokka has committed to meet the capital needs of the joint
venture in such amounts as may be necessary to fund the joint venture's
operations on an on-going basis in accordance with its long term strategic plans
and annual operating plan. In connection with this obligation, Quokka has
committed to contributing at least $15 million in capital to the joint venture.
In consideration for Quokka's share of the equity in the joint venture, Quokka
also issued 2,100,000 warrants that have a fair value of $4.9 million. This
joint venture has been consolidated in Quokka's financial statements.
 
     In January 1999, Quokka formed CART Digital Media Enterprises, LLC with
Forsythe Inc. CART Digital Media Enterprises, LLC is 50% owned by Quokka and 50%
owned by Forsythe, Inc., and both parties have an equal representation on the
Board of Managers. This joint venture will be treated as an equity investment
within the financial statements. As part of the consideration for the equity in
this joint venture, Quokka issued warrants to purchase 76,366 shares of Series C
Preferred Stock, which has a fair value of $400,841.
 
     Quokka completed a subordinated debt agreement on February 12, 1999. Terms
of this agreement call for maximum borrowings of $10 million. Repayment is due
in 36 monthly installments commencing on February 1, 2000 subject to
acceleration under certain conditions including the completion of an initial
public offering. No amounts were outstanding on this facility as of March 31,
1999. In connection with this agreement, Quokka has issued warrants for the
purchase of 215,384 shares of Series C Preferred Stock at an exercise price of
$3.25. The fair value of these warrants was $552,486 and has been treated as a
loan commitment fee and is being amortized over the term of the six-month
draw-down period as no further services are requested to earn the warrants, and
they are fully vested.
 
     The estimated fair value of the above warrants have been determined based
on the Noreen-Wolfson fair value model with a volatility of 70%.
 
                                      F-18
<PAGE>   99
                              (INSIDE BACK COVER)




                                  [to come]
<PAGE>   100
                         (INSIDE BACK COVER GATE FOLD)

LEFT SIDE OF PAGE:

FIRST ASCENT

[PICTURE OF MOUNTAINEER]

CART

[PICTURE OF CAR RACE]

MARATHON DES SABLES

[PICTURE OF RUNNER'S FOOT]

AROUND ALONE

[PICTURE OF SAILBOAT]

WHITBREAD

[PICTURE OF SAILOR]

CENTER OF PAGE: [GRAPHIC TITLED "QUOKKA SPORTS PLATFORM" AND DEPICTING DATA FLOW
THROUGH THE FOLLOWING SIX STAGES OF THE QUOKKA SPORTS PLATFORM: (1) COLLECTION;
(2) TRANSMISSION; (3) PRODUCTION; (4) DISTRIBUTION; (5) DELIVERY; AND (6)
CLIENT.]

<PAGE>   101
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     The following table sets forth the costs and expenses to be paid by Quokka
in connection with the sale of the shares of common stock being registered
hereby. All amounts are estimates except for the SEC registration fee, the NASD
filing fee and the Nasdaq National Market filing fee.
 
<TABLE>
<S>                                                           <C>
Securities and Exchange Commission registration fee.........  $ 15,985
NASD filing fee.............................................     6,250
Nasdaq National Market filing fee...........................         *
Accounting fees and expenses................................   250,000
Legal fees and expenses.....................................   350,000
Printing and engraving expenses.............................   325,000
Blue sky fees and expenses..................................    10,000
Transfer agent and registrar fees and expenses..............    15,000
Miscellaneous...............................................   150,000
                                                              --------
     Total..................................................  $      *
                                                              ========
</TABLE>
 
- ---------------
* To be provided by amendment.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     Our certificate of incorporation, which will become effective upon the
closing of this offering, contains provisions permitted under Delaware law
relating to the liability of directors. These provisions eliminate a director's
personal liability for monetary damages resulting from a breach of fiduciary
duty, except in circumstances involving wrongful acts, such as:
 
     - any breach of the director's duty of loyalty;
 
     - acts or omissions which involve a lack of good faith, intentional
       misconduct or a knowing violation of the law;
 
     - payment of dividends or approval of stock repurchases or redemptions that
       are unlawful under Delaware law; or
 
     - any transaction from which the director derives an improper personal
       benefit.
 
     These provisions do not limit or eliminate our rights or any stockholder's
rights to seek non-monetary relief, such as an injunction or rescission, in the
event of a breach of director's fiduciary duty. These provisions will not alter
a director's liability under federal securities laws.
 
     Our bylaws, which will become effective upon the closing of this offering,
require us to indemnify our directors and executive officers to the fullest
extent not prohibited by the Delaware law. We may limit the extent of such
indemnification by individual contracts with our directors and executive
officers. Further, we may decline to indemnify any director or executive officer
in connection with any proceeding initiated by such person or any proceeding by
such person against Quokka or its directors, officers, employees or other
agents, unless such indemnification is expressly required to be made by law or
the proceeding was authorized by our board of directors.
 
     We have entered into indemnity agreements with each of our current
directors and certain of our executive officers to give such directors and
officers additional contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving a director, officer or employee of Quokka for
which indemnification is sought, nor are we aware of any threatened litigation
that may result in claims for indemnification.
 
                                      II-1
<PAGE>   102
 
     We have the power to indemnify our other officers, employees and other
agents, as permitted by Delaware law, but we are not required to do so.
 
     Quokka plans to obtain directors' and officers' liability insurance.
 
     Reference is made to the following documents filed or to be filed as
exhibits to this registration statement regarding relevant indemnification
provisions described above and elsewhere herein:
 
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT                                              NUMBER
- ----------------                                              ------
<S>                                                           <C>
Form of Underwriting Agreement..............................   1.01
Amended and Restated Certificate of Incorporation...........   3.03
Amended and Restated Bylaws.................................   3.04
Investors' Rights Agreement dated December 23, 1998.........   4.02
Form of Indemnity Agreement.................................  10.01
</TABLE>
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     The following list sets forth information regarding all securities sold by
Quokka since its incorporation in Delaware on August 15, 1996:
 
      1. In January 1997, Quokka issued and sold an aggregate of 3,800,000
         shares of its common stock to one entity in exchange for all of the
         properties, rights, interests and other tangible and intangible assets
         of Ozware Developments Unit Trust, an Australian unit trust.
 
      2. From March 1997 to August 1997, Quokka issued and sold an aggregate of
         5,851,566 shares of its common stock at $0.50 per share, 3,351,076 of
         which were sold to five executive officers and/or directors (and
         related entities) of Quokka.
 
      3. In October 1997, Quokka issued warrants to purchase an aggregate of
         212,800 shares of common stock at an exercise price of $0.50 per share
         to four investors, 62,800 of which were sold to two executive officers
         and/or directors (and related entities) of Quokka.
 
      4. In December 1997, Quokka issued and sold an aggregate of 7,720,590
         shares of Series A Preferred Stock at $0.68 per share to 11 investors,
         5,635,294 of which were sold to five executive officers and/or
         directors (and related entities) of Quokka.
 
      5. Between March 1998 and December 1998, Quokka issued and sold warrants
         to purchase up to 245,098 shares of Series A Preferred Stock at an
         exercise price of $1.02 per share, 245,098 shares of Series B Preferred
         Stock at an exercise price of $1.02 per share, 72,727 shares of Series
         B Preferred Stock at an exercise price of $1.50 per share and 72,727
         shares of Series C Preferred Stock at an exercise price of $3.25 per
         share to one investor that is now a 5% stockholder of Quokka. The
         warrants were amended in December 1998 and partially exercised by the
         5% stockholder in December 1998 for 145,559 shares of Series A
         Preferred Stock, 145,559 shares of Series B Preferred Stock, 24,242
         shares of Series B Preferred Stock and 24,242 shares of Series C
         Preferred Stock. The warrants, as amended, are currently exercisable
         for 99,539 shares of Series A Preferred Stock at an exercise price of
         $1.02 per share, 99,539 shares of Series B Preferred Stock at an
         exercise price of $1.02 per share, 48,485 shares of Series B Preferred
         Stock at an exercise price of $1.50 per share and 48,485 shares of
         Series C Preferred Stock at an exercise price of $3.25 per share.
 
      6. From June to August 1998, Quokka issued and sold an aggregate of
         10,737,068 shares of Series B Preferred Stock at $1.50 per share to 21
         investors, 9,767,269 of which were sold to six investors that are now
         5% stockholders of Quokka, and 576,904 shares of which were sold to
         three executive officers and directors (and related entities) of
         Quokka.
 
      7. In December 1998, Quokka issued and sold an aggregate of 4,938,756
         shares of Series C Preferred Stock at $3.25 per share to 26 investors,
         3,630,771 of which were sold to six investors that are now 5%
                                      II-2
<PAGE>   103
 
         stockholders, and 323,371 of which were sold to three executive
         officers and directors (and related entities) of Quokka.
 
      8. From February 1999 to March 1999, Quokka issued and sold warrants to
         purchase up to an aggregate of 2,391,750 shares of Series C Preferred
         Stock at a weighted average per share price of $5.38 to three
         investors, one of which is now a 5% stockholder of Quokka.
 
      9. In April 1999, Quokka issued and sold warrants to purchase up to an
         aggregate of 161,538 shares of Series C Preferred Stock at an exercise
         price of $3.25 per share to two investors, one of which is now a 5%
         stockholder of Quokka.
 
     10. Since inception, Quokka has granted stock options under its 1997 Equity
         Incentive Plan, covering an aggregate of 7,767,025 shares of common
         stock (net of expirations and cancellations) at exercise prices ranging
         from $0.50 to $8.50 per share.
 
     11. Since inception, options to purchase an aggregate of 246,574 shares of
         common stock have been exercised for an aggregate purchase price of
         $159,537 at a weighted exercise price of $0.65 per share.
 
     12. Since inception, Quokka has granted stock options outside of its 1997
         Equity Incentive Plan, covering an aggregate of 502,000 shares of
         common stock (net of expirations and cancellations) at exercise prices
         ranging from $0.50 to $2.60 per share. To date, no options granted
         outside of the 1997 Equity Incentive Plan have been exercised.
 
     All sales of common stock made pursuant to the exercise of stock options
granted under the 1997 Equity Incentive Plan to Quokka's officers, directors,
employees and consultants were made in reliance on Rule 701 under the Securities
Act or on Section 4(2) of the Securities Act.
 
     All other sales were made in reliance on Section 4(2) of the Securities Act
and/or Regulation D promulgated under the Securities Act. These sales were made
without general solicitation or advertising. Each purchaser was a sophisticated
investor with access to all relevant information necessary to evaluate the
investment and represented to Quokka that the shares were being acquired for
investment.
 
                                      II-3
<PAGE>   104
 
ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
     (A) THE FOLLOWING EXHIBITS ARE FILED HEREWITH:
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           EXHIBIT TITLE
- -------                          -------------
<C>       <S>
  1.01*   Form of Underwriting Agreement.
  3.01    Amended and Restated Certificate of Incorporation.
  3.02    Bylaws.
  3.03    Form of Amended and Restated Certificate of Incorporation to
          be filed upon completion of this offering.
  3.04    Form of Amended and Restated Bylaws to be filed upon
          completion of this offering.
  4.01*   Form of Specimen Stock Certificate.
  4.02    Investors' Rights Agreement, dated December 23, 1998, among
          Quokka and certain investors named therein.
  5.01*   Opinion of Cooley Godward LLP regarding legality of the
          securities being registered.
 10.01    Form of Indemnity Agreement entered into by Quokka with each
          of its directors and certain executive officers.
 10.02    Amended and Restated 1997 Equity Incentive Plan.
 10.03    Form of Stock Option Agreement under the Amended and
          Restated 1997 Equity Incentive Plan.
 10.04    1999 Non-Employee Directors' Stock Option Plan.
 10.05    Form of Nonstatutory Stock Option Agreement under the 1999
          Non-Employee Directors' Stock Option Plan.
 10.06    1999 Employee Stock Purchase Plan.
 10.07    Form of 1999 Employee Stock Purchase Plan Offering.
 10.08    Key Employee Agreement, dated March 25, 1999, between Alvaro
          Saralegui and Quokka.
 10.09    Subordinated Loan and Security Agreement, dated February 12,
          1999, between Quokka and Comdisco, Inc.
 10.10+   Software License and Development Agreement, dated March 20,
          1998, as amended, between Quokka and Intel Corporation.
 10.11    Lease, dated October 1, 1996, between Brannan Street
          Partners and Quokka, as amended.
 10.12    Sublease, dated June 23, 1998, between San Francisco
          Mercantile Company, Inc. and Quokka.
 10.13    Office Lease, dated February 18, 1999, between Tiffany M.
          Gin and Stanton Lowe dba Spear Street Saphire and Quokka.
 10.14+   Master Venture Agreement, dated February 9, 1999, by and
          among Quokka, NBC Olympics, Inc. and NBC/Quokka Ventures,
          LLC.
 10.15+   Agreement, dated January 1, 1999, between Championship Auto
          Racing Teams, Inc. and CART Digital Media Enterprises, LLC.
 10.16+   Operating Agreement of NBC/Quokka Ventures, LLC, dated
          February 9, 1999, between Quokka and NBC Olympics, Inc.
 16.01    Letter from KPMG LLP regarding change in certifying
          accountant.
 21.01*   List of Subsidiaries.
 23.01*   Consent of Cooley Godward LLP (included in Exhibit 5.01).
 23.02    Consent of PricewaterhouseCoopers LLP, independent
          accountants.
</TABLE>
 
                                      II-4
<PAGE>   105
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           EXHIBIT TITLE
- -------                          -------------
<C>       <S>
 24.01    Power of Attorney. Reference is made to page II-6.
 27.01    Financial Data Schedule.
</TABLE>
 
- ---------------
* To be filed by amendment.
 
+ Confidential treatment requested.
 
     (B) FINANCIAL STATEMENT SCHEDULES.
 
     Schedule II -- Valuation and Qualifying Accounts.
 
     Schedules not listed above have been omitted because the information called
for is not required or is shown either in the consolidated financial statements
or the notes thereto.
 
ITEM 17.  UNDERTAKINGS.
 
     The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Quokka
pursuant to the provisions described under Item 14 above, or otherwise, Quokka
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Quokka of expenses incurred
or paid by a director, officer or controlling person of Quokka in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, Quokka
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
 
     The undersigned Registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities
     Act, the information omitted from the form of prospectus filed as part of
     this registration statement in reliance upon Rule 430A and contained in a
     form of prospectus filed by Quokka pursuant to Rule 424(b)(1) or (4) or
     497(h) under the Securities Act shall be deemed to be part of this
     registration statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
                                      II-5
<PAGE>   106
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended,
Quokka Sports, Inc. has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on the 23rd day of April, 1999.
 
                                          QUOKKA SPORTS, INC.
 
                                          By:      /s/ ALAN S. RAMADAN
                                            ------------------------------------
                                                      Alan S. Ramadan
                                               President and Chief Executive
                                                           Officer
 
                               POWER OF ATTORNEY
 
     Each individual whose signature appears below constitutes and appoints Alan
Ramadan and Les Schmidt, and each of them, his or her true and lawful
attorneys-in-fact and agents with full power of substitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this registration
statement, and to sign any registration statement for the same offering covered
by the registration statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his,
her or their substitute or substitutes, may lawfully do or cause to be done or
by virtue hereof.
 
     Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
 
<TABLE>
<CAPTION>
                SIGNATURES                                    TITLE                          DATE
                ----------                                    -----                          ----
<C>                                           <S>                                       <C>
           /s/ ALAN S. RAMADAN                President, Chief Executive Officer and    April 23, 1999
- ------------------------------------------      Director (Principal Executive
             Alan S. Ramadan                    Officer)
 
             /s/ LES SCHMIDT                  Executive Vice President, Chief           April 23, 1999
- ------------------------------------------      Financial Officer and Secretary
               Les Schmidt                      (Principal Financial and Accounting
                                                Officer)
 
         /s/ RICHARD H. WILLIAMS              Director (Chairman of the Board of        April 23, 1999
- ------------------------------------------      Directors)
           Richard H. Williams
 
          /s/ JOHN BERTRAND A.M.              Director (Vice-Chairman of the Board      April 23, 1999
- ------------------------------------------      of Directors)
            John Bertrand A.M.
 
          /s/ WALTER W. BREGMAN               Director                                  April 23, 1999
- ------------------------------------------
            Walter W. Bregman
</TABLE>
 
                                      II-6
<PAGE>   107
 
<TABLE>
<CAPTION>
                SIGNATURES                                    TITLE                          DATE
                ----------                                    -----                          ----
<C>                                           <S>                                       <C>
             /s/ ROEL PIEPER                  Director                                  April 23, 1999
- ------------------------------------------
               Roel Pieper
 
        /s/ JAMES G. SHENNAN, JR.             Director                                  April 23, 1999
- ------------------------------------------
           James G Shennan, Jr.
 
           /s/ BARRY M. WEINMAN               Director                                  April 23, 1999
- ------------------------------------------
             Barry M. Weinman
</TABLE>
 
                                      II-7
<PAGE>   108
 
                          INDEPENDENT AUDITORS' REPORT
 
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Stockholders of Quokka Sports, Inc.:
 
In connection with our audits of the consolidated financial statements of Quokka
Sports, Inc. as of December 31, 1997 and 1998, and for each of the three years
in the period ended December 31, 1998, which financial statements are included
in the Prospectus, we have also audited the financial statement schedule listed
in Item 16(b) herein. In our opinion, this financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
 
PricewaterhouseCoopers LLP
San Francisco, California
April 22, 1999
 
                                       S-1
<PAGE>   109
 
                                                                     SCHEDULE II
 
                              QUOKKA SPORTS, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
               FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, 1998
                   AND THE THREE MONTHS ENDED MARCH 31, 1999
 
<TABLE>
<CAPTION>
                                                    BALANCE AT        CHARGED TO
                                                BEGINNING OF PERIOD    EXPENSES    DEDUCTIONS   ADJUSTMENTS
                                                -------------------   ----------   ----------   -----------
<S>                                             <C>                   <C>          <C>          <C>
For the year ended December 31, 1996
  Allowance for doubtful accounts.............       $     --          $     --     $     --     $     --
                                                     ========          ========     ========     ========
For the year ended December 31, 1997
  Allowance for doubtful accounts.............       $     --          $     --     $     --     $     --
                                                     ========          ========     ========     ========
For the year ended December 31, 1998
  Allowance for doubtful accounts.............       $     --          $     --     $     --     $     --
                                                     ========          ========     ========     ========
For the three months ended March 31, 1999
  Allowance for doubtful accounts.............       $     --          $     --     $     --     $     --
                                                     ========          ========     ========     ========
</TABLE>
 
                                       S-2
<PAGE>   110
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
                                                                        SEQUENTIALLY
EXHIBIT                                                                   NUMBERED
NUMBER                           EXHIBIT TITLE                              PAGE
- -------                          -------------                          ------------
<C>       <S>                                                           <C>
  1.01*   Form of Underwriting Agreement..............................
  3.01    Amended and Restated Certificate of Incorporation...........
  3.02    Bylaws......................................................
  3.03    Form of Amended and Restated Certificate of Incorporation to
          be filed upon completion of this offering...................
  3.04    Form of Amended and Restated Bylaws to be filed upon
          completion of this offering.................................
  4.01*   Form of Specimen Stock Certificate..........................
  4.02    Investors' Rights Agreement, dated December 23, 1998, among
          Quokka and certain investors named therein..................
  5.01*   Opinion of Cooley Godward LLP regarding legality of the
          securities being registered.................................
 10.01    Form of Indemnity Agreement entered into by Quokka with each
          of its directors and certain executive officers.............
 10.02    Amended and Restated 1997 Equity Incentive Plan.
 10.03    Form of Stock Option Agreement under the Amended and
          Restated 1997 Equity Incentive Plan.........................
 10.04    1999 Non-Employee Directors' Stock Option Plan..............
 10.05    Form of Nonstatutory Stock Option Agreement under the 1999
          Non-Employee Directors' Stock Option Plan...................
 10.06    1999 Employee Stock Purchase Plan...........................
 10.07    Form of 1999 Employee Stock Purchase Plan Offering..........
 10.08    Key Employee Agreement, dated March 25, 1999, between Alvaro
          Saralegui and Quokka........................................
 10.09    Subordinated Loan and Security Agreement, dated February 12,
          1999, between Quokka and Comdisco, Inc......................
 10.10+   Software License and Development Agreement, dated March 20,
          1998, as amended, between Quokka and Intel Corporation......
 10.11    Lease, dated October 1, 1996, between Brannan Street
          Partners and Quokka, as amended.............................
 10.12    Sublease, dated June 23, 1998, between San Francisco
          Mercantile Company, Inc. and Quokka.........................
 10.13    Office Lease, dated February 18, 1999, between Tiffany M.
          Gin and Stanton Lowe dba Spear Street Saphire and Quokka....
 10.14+   Master Venture Agreement, dated February 9, 1999, by and
          among Quokka, NBC Olympics, Inc. and NBC/Quokka Ventures,
          LLC.........................................................
 10.15+   Agreement, dated January 1, 1999, between Championship Auto
          Racing Teams, Inc. and CART Digital Media Enterprises,
          LLC.........................................................
 10.16+   Operating Agreement of NBC/Quokka Ventures, LLC, dated
          February 9, 1999, between Quokka and NBC Olympics, Inc......
 16.01    Letter from KPMG LLP regarding change in certifying
          accountant..................................................
 21.01*   List of Subsidiaries........................................
 23.01*   Consent of Cooley Godward LLP (included in Exhibit 5.01)....
 23.02    Consent of PricewaterhouseCoopers LLP, independent
          accountants.................................................
 24.01    Power of Attorney. Reference is made to page II-6...........
 27.01    Financial Data Schedule.....................................
</TABLE>
 
- ---------------
* To be filed by amendment.
 
+ Confidential treatment requested.

<PAGE>   1
                                                                    EXHIBIT 3.01

               AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                               QUOKKA SPORTS, INC.


        Alan Ramadan and Les Schmidt hereby certify that:

        1. The name of this corporation is Quokka Sports, Inc.

        2. The Certificate of Incorporation of this corporation was filed by the
Secretary of State of the State of Delaware on August 15, 1996, in the name of
Quokka Productions, Inc. The corporation's name was changed to Quokka Sports,
Inc. in an Amended and Restated Certificate of Incorporation filed by the
Secretary of State on September 16, 1996.

        3. They are the duly elected and acting President and Secretary,
respectively, of Quokka Sports, Inc., a Delaware corporation.

        4. The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:


                                    ARTICLE I
                                      NAME

        The name of this corporation is Quokka Sports, Inc. (the "Corporation"
or the "Company").

                                   ARTICLE II
                                     ADDRESS

        The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington
19801, County of Newcastle; and the name of the registered agent of the
Corporation in the State of Delaware at such address is The Corporation Trust
Company.

                                   ARTICLE III
                                     PURPOSE

        The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.

                                   ARTICLE IV
                                      STOCK

        This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."


                                       1.
<PAGE>   2







        1. AUTHORIZED COMMON STOCK. The total number of shares of Common Stock
which the Corporation is authorized to issue is Forty Five Million Seven Hundred
Thousand (45,700,000) shares, each having a par value of One One-Hundredth of
One Cent ($0.0001) per share. The Common Stock shall be issued in two series,
Voting Common Stock and Nonvoting Common Stock. Forty Five Million Four Hundred
Thousand (45,400,000) shares shall be Voting Common Stock. Three Hundred
Thousand (300,000) shares shall be Nonvoting Common Stock.

        2. RIGHTS, PREFERENCES AND PRIVILEGES OF COMMON STOCK. The rights,
preferences, privileges, restrictions and other matters relating to the Voting
Common Stock and Nonvoting Common Stock shall be in all respects identical,
except as otherwise required by law or expressly provided in this Section 2.

               (a) VOTING RIGHTS. Except as provided by Delaware General
Corporation Law, the holders of Nonvoting Common Stock shall not be entitled to
vote their shares on any matter which the holders of Common Stock shall
otherwise be entitled to vote their shares.

               (b) CONVERSION RIGHTS. The holders of the Nonvoting Common Stock
shall have the following rights with respect to the conversion of the Nonvoting
Common Stock into shares of Voting Common Stock:

                        (1) OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 2, any shares of Nonvoting Common Stock may,
after March 1, 1999, at the option of the holder, be converted at any time into
fully-paid and nonassessable shares of Voting Common Stock. The number of shares
of Voting Common Stock to which a holder of Nonvoting Common Stock shall be
entitled upon conversion shall be the product obtained by multiplying the
"Nonvoting Conversion Rate" then in effect (determined as provided in Section
2(b)(2)) of Article IV by the number of shares of Nonvoting Common Stock being
converted. The "Nonvoting Original Issue Price" is $0.50 per share.

                        (2) CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Nonvoting Common Stock (the "Nonvoting Conversion
Rate") shall be the quotient obtained by dividing the Nonvoting Original Issue
Price by the "Nonvoting Conversion Price" as defined in Section 2(b)(3) of
Article IV.

                        (3) CONVERSION PRICE. The conversion price for the
Nonvoting Common Stock shall initially be the Nonvoting Original Issue Price
(the "Nonvoting Conversion Price"). Such initial Nonvoting Conversion Price
shall be adjusted from time to time in accordance with this Section 2(b). All
references to the Nonvoting Conversion Price herein shall mean the Nonvoting
Conversion Price as so adjusted.

                        (4) MECHANICS OF CONVERSION. Each holder of Nonvoting
Common Stock who desires to convert the same into shares of Voting Common Stock
pursuant to this Section 2(b) shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Nonvoting Common Stock, and shall give written notice to the Corporation
at such office that such holder elects to convert the same. Such notice shall
state the number of shares of Nonvoting Common Stock being converted. Thereupon,
the


                                       2.
<PAGE>   3





Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Voting Common Stock to
which such holder is entitled and shall promptly pay in cash or, to the extent
sufficient funds are not then legally available therefor, in Voting Common Stock
(at the Voting Common Stock's fair market value determined by the Board of
Directors as of the date of such conversion), any declared and unpaid dividends
on the shares of Nonvoting Common Stock being converted. Such conversion shall
be deemed to have been made at the close of business on the date of such
surrender of the certificates representing the shares of Nonvoting Common Stock
to be converted, and the person entitled to receive the shares of Voting Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Voting Common Stock on such date. If such
conversion is in connection with a dissolution or liquidation of the Corporation
or a Sale or Merger, the holder may condition such conversion upon the
consummation of such Sale or Merger transaction or the effectiveness of such
dissolution or liquidation.

                        (5) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date that the first
share of Nonvoting Common Stock is issued (the "Nonvoting Original Issue Date")
effect a subdivision of the outstanding Voting Common Stock, the Nonvoting
Conversion Price in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall at any time or
from time to time after the Nonvoting Original Issue Date combine the
outstanding shares of Voting Common Stock into a smaller number of shares, the
Nonvoting Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 2(b)(5) of Article
IV shall become effective at the close of business on the date the subdivision
or combination becomes effective.

                        (6) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Nonvoting Original
Issue Date, the Voting Common Stock issuable upon the conversion of the
Nonvoting Common Stock is changed into the same or a different number of shares
of any class or classes of stock, whether by recapitalization, reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section 2(b)), in any such event each holder of Nonvoting
Common Stock shall have the right thereafter to convert such stock into the kind
and amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Voting Common Stock into which such shares of Nonvoting
Common Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.

                        (7) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Nonvoting Original Issue
Date, there is a capital reorganization of the Voting Common Stock (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 2(b)), as a part
of such capital reorganization, provision shall be made so that the holders of
the Nonvoting Common Stock shall thereafter be entitled to receive upon
conversion of the Nonvoting Common Stock the number of shares of stock or other
securities or property of the Corporation to which a holder of the number of
shares of Voting Common Stock deliverable


                                       3.
<PAGE>   4


upon conversion would have been entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 2(b) with respect to the rights of the holders of
Nonvoting Common Stock after the capital reorganization to the end that the
provisions of this Section 2(b) (including adjustment of the Nonvoting
Conversion Price then in effect and the number of shares issuable upon
conversion of the Nonvoting Common Stock) shall be applicable after that event
and be as nearly equivalent as practicable.

                        (8) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class or series of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other corporation, or any transfer of all or substantially all the assets of the
Corporation to any other person, or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each
holder of Nonvoting Common Stock at least twenty (20) days prior to the record
date specified therein a notice specifying (1) the date on which any such record
is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (3) the date, if
any, that is to be fixed as to when the holders of record of Voting Common Stock
(or other securities) shall be entitled to exchange their shares of Voting
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.

                        (9) AUTOMATIC CONVERSION.

                                (i) Each share of Nonvoting Common Stock shall
automatically be converted into shares of Voting Common Stock, based on the
then-effective Nonvoting Common Stock Price, immediately upon the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation. Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 2(b)(4).

                                (ii) Upon the occurrence of the event specified
in paragraph (i) above, the outstanding shares of Nonvoting Common Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Voting Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Nonvoting Common Stock are either
delivered to the Corporation or its transfer agent as provided below, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon the occurrence of such automatic
conversion of the Nonvoting Common Stock, the holders of Nonvoting Common Stock
shall surrender the certificates representing such


                                       4.
<PAGE>   5

shares at the office of the Corporation or any transfer agent for the Nonvoting
Common Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Voting Common Stock into which the shares of Nonvoting Common Stock surrendered
were convertible on the date on which such automatic conversion occurred, and
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 2(b)(4) of Article IV.

                        (10) FRACTIONAL SHARES. No fractional shares of Voting
Common Stock shall be issued upon conversion of Nonvoting Common Stock. All
shares of Voting Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Nonvoting Common Stock by a holder thereof
shall be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of any fractional
share, the Corporation shall, in lieu of issuing any fractional share, pay cash
equal to the product of such fraction multiplied by the Voting Common Stock's
fair market value (as determined by the Board) on the date of conversion.

                        (11) PAYMENT OF TAXES. The Corporation will pay all
taxes (other than taxes based upon income) and other governmental charges that
may be imposed with respect to the issue or delivery of shares of Voting Common
Stock upon conversion of shares of Nonvoting Common Stock, excluding any tax or
other charge imposed in connection with any transfer involved in the issue and
delivery of shares of Voting Common Stock in a name other than that in which the
shares of Nonvoting Common Stock so converted were registered.

                        (12) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Voting Common Stock, solely for the purpose of effecting
the conversion of the shares of the Nonvoting Common Stock, such number of its
shares of Voting Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Nonvoting Common Stock. If at
any time the number of authorized but unissued shares of Voting Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Nonvoting Common Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Voting Common Stock to such number of shares as shall be
sufficient for such purpose.

        3. AUTHORIZED PREFERRED STOCK. The total number of shares of Preferred
Stock which the Corporation is presently authorized to issue is Twenty Seven
Million Six Hundred Thousand (27,600,000) shares, each having a par value of One
One-Hundredth of One Cent ($0.0001).

        4. BLANK CHECK PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby authorized,
within the limitations and restrictions stated in this Amended and Restated
Certificate of Incorporation, to provide for the issue of all or any of the
shares of Preferred Stock in one or more series, and to fix the number of shares
and to determine or alter for each such series, such voting powers, full or
limited, or no voting powers, and such designations, preferences, and relative,
participating,


                                       5.
<PAGE>   6


optional, or other rights and such qualifications, limitations, or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issue of such shares and as
may be permitted by the General Corporation Law of the State of Delaware. The
Board of Directors is also authorized to increase or decrease the number of
shares of any series other than the Series A Preferred and the Series B
Preferred (each as defined below) subsequent to the issue of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.

        5. RIGHTS, PREFERENCES AND PRIVILEGES OF PREFERRED STOCK. Seven Million
Nine Hundred Sixty Five Thousand Six Hundred Eighty Eight (7,965,688) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" ("Series A Preferred"). Eleven Million One Hundred Twenty Seven Thousand
Six Hundred Twenty (11,127,620) of the authorized shares of Preferred Stock are
hereby designated "Series B Preferred Stock" ("Series B Preferred"). Eight
Million Five Hundred Thousand (8,500,000) of the authorized shares of Preferred
Stock are hereby designated "Series C Preferred Stock" ("Series C Preferred").
The rights, preferences, privileges, restrictions and other matters relating to
the Series A Preferred, Series B Preferred and Series C Preferred are as
follows:

               (a) DIVIDEND RIGHTS.

                        (1) The holders of Series C Preferred, Series B
Preferred and Series A Preferred, prior to and in preference to the holders of
any other stock of the Company ("Junior Stock"), shall be entitled to receive
dividends at the rate of 8% of the respective Original Issue Price (as defined
in Section 5(c)(1)) per annum on each outstanding share of Series C Preferred,
Series B Preferred and Series A Preferred (as adjusted for any stock dividends,
combinations or splits with respect to such shares), payable out of funds
legally available therefor. Such dividends shall be payable only when, as, and
if declared by the Board of Directors and shall be noncumulative from the
Original Issue Date (as defined in Section 5(d)(6) below).

                        (2) No dividend, whether cash or property, shall be paid
or declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to any agreement which permits the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 5(a)(1) above) on the Series C Preferred,
Series B Preferred and Series A Preferred shall have been paid or declared and
set apart. No dividends will be paid on any share of Junior Stock unless (i) a
dividend equal to at least 8% of the Original Issue Price applicable to such
series of Preferred Stock has been paid on the Series C Preferred, Series B
Preferred and Series A Preferred for the prior 12 months pursuant to the above
provisions of this Section 5(a) and (ii) a dividend (including the amount of any
dividends paid pursuant to the above provisions of this Section 5(a)) is paid
with respect to all outstanding shares of Series C Preferred, Series B Preferred
and Series A Preferred in an amount for each share of Series C Preferred, Series
B Preferred and Series A Preferred equal to or greater than the aggregate amount
of such dividends for all shares of the Company's Voting Common Stock (which for
the purposes of this Section 5


                                       6.
<PAGE>   7




of Article IV will be referred to as "Common Stock") into which each such share
of Series C Preferred, Series B Preferred and Series A Preferred could then be
converted. The provisions of this Section 5(a)(2) shall not apply to (i) a
dividend payable in Common Stock, (ii) the acquisition of shares of any Junior
Stock in exchange for shares of any other Junior Stock, or (iii) any repurchase
of any outstanding securities of the Company that is approved by the Company's
Board of Directors.

               (b) VOTING RIGHTS. Except as otherwise provided herein, including
Section 5(e) or as required by law, the shares of Series C Preferred, Series B
Preferred and Series A Preferred shall be entitled to vote with the shares of
the Common Stock, and not as a separate class, at any annual or special meeting
of stockholders, and may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Series
C Preferred, Series B Preferred and Series A Preferred shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
shares of Series C Preferred, Series B Preferred and Series A Preferred could be
converted immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.

                        (1) Until the Company has had a firmly-underwritten
public offering that meets the provisions of Section 5d(2)(i) below, the holders
of Series A Preferred, voting as a separate class, shall have the right to elect
two directors. Such right can be exercised, from time to time, at any annual
meeting or at any special meeting called for such purpose, or any adjournment
thereof, or by the written consent, delivered to the Secretary of the Company,
of the holders of a majority of all outstanding shares of Series A Preferred.
Upon the written request of the holders of record of a majority of the
outstanding Series A Preferred, the Secretary of the Company will call a special
meeting of the holders of such shares for the election of such two directors.
Such meeting must be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the Bylaws
for the holding of meetings of Stockholders, or at a place and time designated
in the foregoing written request. Directors elected by the Series A Preferred
will serve until their successors have been elected, or their removal, by the
holders of the Series A Preferred. If any vacancy occurs among the directors
elected by the holders of the Series A Preferred as a class, the remaining
director who has been so elected can appoint a successor to hold office for the
expired term of the director whose place is vacant. If both directors elected by
the Series A Preferred cease to serve as directors before their terms expire,
the holders of the Series A Preferred then outstanding and entitled to vote for
such directors can, by written consent, at a special meeting of such holders as
provided above, or at the next annual meeting, elect successors to hold office
for the unexpired terms of the directors whose places become vacant.

                        (2) Until the Company has had a firmly-underwritten
public offering that meets the provisions of Section 5d(2)(i) below, any
amendment to the Bylaws of the Company to increase the number of directors above
eight (8) members shall require the approval of the holders of record of a
majority of all outstanding shares of Series C Preferred, Series B Preferred and
Series A Preferred, voting together as a separate class.

               (c) LIQUIDATION RIGHTS.


                                       7.
<PAGE>   8

                        (1) Upon any liquidation (as defined below), dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of Series C Preferred shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation to the
holders of Series B Preferred, Series A Preferred or Junior Stock by reason of
their ownership thereof, the sum of (A) Three Dollars and Twenty-Five Cents
($3.25) (the "Series C Original Issue Price") plus (B) any declared and unpaid
dividends from the Original Issue Date (as defined in Section 5(d)(6) below)
until the date of payment (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) for each
share of Series C Preferred held by them. If the assets of the Corporation are
insufficient to make payment in full to all holders of Series C Preferred
pursuant to this Section 5(c)(1), then such assets shall be distributed among
the holders of Series C Preferred at the time outstanding ratably in proportion
to the full amounts to which they would otherwise be entitled under this Section
5(c)(1).

                        (2) After the payment of the full liquidation preference
of the Series C Preferred as set forth above in Section 5(c)(1), upon any
liquidation (as defined below), dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of Series B Preferred shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Series A Preferred
or Junior Stock by reason of their ownership thereof, the sum of (A) One Dollar
Fifty Cents ($1.50) (the "Series B Original Issue Price") plus (B) any declared
and unpaid dividends from the Original Issue Date (as defined in Section 5(d)(6)
below) until the date of payment (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Series B Preferred held by them. If the assets of the
Corporation are insufficient to make payment in full to all holders of Series B
Preferred pursuant to this Section 5(c)(2), then such assets shall be
distributed among the holders of Series B Preferred at the time outstanding
ratably in proportion to the full amounts to which they would otherwise be
entitled under this Section 5(c)(2).

                        (3) After the payment of the full liquidation preference
of the Series C Preferred as set forth above in Section 5(c)(1) and the Series B
Preferred as set forth above in Section 5(c)(2), upon any liquidation (as
defined below), dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of Series A Preferred shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of Junior Stock by reason of their
ownership thereof, the sum of (A) Sixty Eight Cents ($0.68) (the "Series A
Original Issue Price") plus (B) any declared and unpaid dividends from the
Original Issue Date (as defined in Section 5(d)(6) below) until the date of
payment (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series A Preferred held by them. If the remaining assets of the Corporation
after payment of the full liquidation preference of the Series C Preferred and
Series B Preferred in accordance with Sections 5(c)(1) and 5(c)(2) above are
insufficient to make payment in full to all holders of Series A Preferred
pursuant to this Section 5(c)(3), then such assets shall be distributed among
the holders of the Series A Preferred at the time outstanding ratably in
proportion to the full amounts to which they would otherwise be entitled under
this Section 5(c)(3).



                                       8.
<PAGE>   9

                        (4) After payment of the full liquidation preference of
the Series C Preferred, Series B Preferred and Series A Preferred as set forth
above in Sections 5(c)(1), 5(c)(2) and 5(c)(3), upon any liquidation (as defined
below), dissolution or winding up of the Corporation, whether voluntary or
involuntary:

                                (i) where the amount payable on account thereof
per share of Voting Common Stock (assuming all Non-Voting Common Stock, Series A
Preferred, Series B Preferred and Series C Preferred are deemed converted into
Voting Common Stock at the then applicable conversion rates immediately prior to
such liquidation, dissolution or winding up of the Corporation) is less than
Three Dollars ($3.00), the holders of the Series B Preferred, the holders of the
Series A Preferred and the holders of the Common Stock shall receive the
remaining assets on a pro rata, as-converted basis.

                                (ii) where the amount payable on account thereof
per share of Voting Common Stock (assuming all Non-Voting Common Stock, Series A
Preferred, Series B Preferred and Series C Preferred are deemed converted into
Voting Common Stock at the then applicable conversion rates immediately prior to
such liquidation, dissolution or winding up of the Corporation) is equal to or
greater than Three Dollars ($3.00) and less than Four Dollars Fifty Cents
($4.50), the holders of the Series B Preferred and the holders of the Common
Stock shall receive the remaining assets on a pro rata, as-converted basis.

                                (iii) where the amount payable on account
thereof per share of Voting Common Stock (assuming all Non-Voting Common Stock,
Series A Preferred, Series B Preferred and Series C Preferred are deemed
converted into Voting Common Stock at the then applicable conversion rates
immediately prior to such liquidation, dissolution or winding up of the
Corporation) is equal to or greater than Four Dollars Fifty Cents ($4.50), the
holders of the Common Stock shall receive the remaining assets on a pro-rata
basis.

                        (5) Notwithstanding anything in Sections 5(c)(1),
5(c)(2), 5(c)(3) or 5(c)(4) above to the contrary, in the event of a
liquidation:

                                (i) the holders of Series A Preferred shall be
entitled to participate in distributions to holders of the Common Stock such
that, after giving effect to all distributions as set forth therein, the holders
of Series A Preferred receive aggregate distributions equal to the greater of
the amounts payable to the Series A Preferred pursuant to Sections 5(c)(3) and
5(c)(4)(i) above and the amounts that such holders would have received if the
Series A Preferred had been converted into Common Stock immediately prior to
such liquidation of the Corporation;

                                (ii) the holders of Series B Preferred shall be
entitled to participate in distributions to holders of the Common Stock such
that, after giving effect to all distributions as set forth therein, the holders
of Series B Preferred receive aggregate distributions equal to the greater of
the amounts payable to Series B Preferred pursuant to Sections 5(c)(2) and
5(c)(4)(ii) above and the amounts that such holders would have received if the
Series B Preferred had been converted into Common Stock immediately prior to
such liquidation of the Corporation; and


                                       9.
<PAGE>   10






                                (iii) the holders of Series C Preferred shall be
entitled to participate in distributions to holders of the Common Stock such
that, after giving effect to all distributions as set forth therein, the holders
of Series C Preferred receive aggregate distributions equal to the greater of
the amounts payable to the Series C Preferred pursuant to Sections 5(c)(1) above
and the amounts that such holders would have received if the Series C Preferred
had been converted into Common Stock immediately prior to such liquidation of
the Corporation.

                        (6) The following events shall be considered a
liquidation under this Section:

                                (i) any consolidation or merger of the Company
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of the Company's voting power immediately after such
consolidation, merger or reorganization, or any transaction or series of related
transactions in which in excess of fifty percent (50%) of the Company's voting
power is transferred (an "Acquisition"); or

                                (ii) a sale, lease, or other disposition of all
or substantially all of the assets of the Company (an "Asset Transfer").

               (d) CONVERSION RIGHTS. The holders of the Series C Preferred,
Series B Preferred and Series A Preferred shall have the following rights with
respect to the conversion of the Series C Preferred, Series B Preferred and
Series A Preferred into shares of Common Stock (the "Conversion Rights"):

                        (1) OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 5(d), any shares of Series C Preferred,
Series B Preferred and Series A Preferred may, at the option of the holder, be
converted at any time into fully-paid and nonassessable shares of Common Stock.
The number of shares of Common Stock to which a holder of Series C Preferred
will be entitled upon conversion will be the product obtained by multiplying the
"Series C Conversion Rate" then in effect (determined as provided in Section
5(d)(3)) by the number of shares of Series C Preferred being converted. The
number of shares of Common Stock to which a holder of Series B Preferred will be
entitled upon conversion will be the product obtained by multiplying the "Series
B Conversion Rate" then in effect (determined as provided in Section 5(d)(3)) by
the number of shares of Series B Preferred being converted. The number of shares
of Common Stock to which a holder of Series A Preferred will be entitled upon
conversion will be the product obtained by multiplying the "Series A Conversion
Rate" then in effect (determined as provided in Section 5(d)(3)) by the number
of shares of Series A Preferred being converted.

                        (2) AUTOMATIC CONVERSION.

                                (i) Each share of Series C Preferred, Series B
Preferred and Series A Preferred shall automatically be converted into shares of
Common Stock, based on the then-effective Series C Conversion Price, Series B
Conversion Price or Series A Conversion Price (as defined in Section 5(d)(4)),
respectively, at any time upon (i) the affirmative vote of the


                                      10.
<PAGE>   11





holders of at least seventy-five percent (75%) of the Preferred Stock then
outstanding, or (ii) immediately upon the closing of a firmly-underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation (at a per share price not less than Four
Dollars ($4.50) per share), in which the gross cash proceeds to the Corporation
(before underwriting discounts, commissions and fees) are at least $15,000,000.
Upon such automatic conversion, any declared and unpaid dividends shall be paid
in accordance with the provisions of Section 5(d)(5).

                                (ii) PAY TO PLAY PROVISION. (A) For purposes of
this Section 5(d)(2)(ii), the following definitions apply:

                                        i) "INVESTOR" shall mean the holders of
the Company's outstanding Series A Preferred and Series B Preferred; provided,
however, that affiliated entities shall be aggregated together and considered a
single "Investor" for purposes of determining whether such Investor has
purchased its full Pro Rata Share.

                                        ii) "NEW SECURITIES" shall mean any
capital stock (including Common Stock) of the Company now or hereafter
authorized, and rights, options or warrants to purchase capital stock, and
securities of any type whatsoever, that are, or may become, convertible into
capital stock, issued by the Company after the Original Issue Date (as defined
in Section 5(d)(6)) and designated by the Company's Board of Directors and the
holders of a majority of the then outstanding shares of Series A Preferred and
Series B Preferred as "New Securities" for purposes of this Section 5(d)(2)(ii).
Such a designation of New Securities by the Company's Board of Directors and the
holders of the majority of the then outstanding shares of Series A Preferred and
Series B Preferred shall be considered a cash call by the Company triggering the
"pay to play" provisions of this Section 5(d)(2)(ii).

                                        iii) "PURCHASE PRICE" shall mean the
price per share of the New Securities.

                                        iv) "CLOSING" shall mean the original
issuance date of the New Securities.

                                        v) "PRO RATA SHARE" with respect to an
Investor shall mean (i) the dollar investment determined by the Purchase Price
multiplied by the number of shares of the New Securities multiplied by (ii) a
fraction, the numerator of which is the number of shares of Voting Common Stock
into which the shares of Series A Preferred and Series B Preferred then held by
that Investor are convertible, and the denominator of which is the total number
of shares of Voting Common Stock into which all outstanding shares of Preferred
Stock are convertible.

                                        vi) "PARTICIPATING INVESTOR" shall mean
any Investor that agrees to purchase at least its Pro Rata Share of New
Securities pursuant to Section 5(d)(2)(ii)(B) hereof.

                                        vii) "NON-PARTICIPATING INVESTOR" shall
mean any Investor that does not purchase at least its full Pro Rata Share of the
New Securities.


                                      11.
<PAGE>   12
                                        viii) "NON-PARTICIPATING SHARES" shall
be calculated separately with respect to each Non-participating Investor and
shall mean for each of the Series A Preferred and Series B Preferred the number
of shares of either such series of Preferred Stock (including options, warrants
and other rights to acquire shares of such series of Preferred Stock) held by
such Non-participating Investor multiplied by such Non-participating Investor's
Non-participating Percentage.

                                        ix) "NON-PARTICIPATING PERCENTAGE" shall
mean the percentage obtained pursuant to the following formula:

               1 - (Participating Consideration / Pro Rata Share)

                                        x) "PARTICIPATING CONSIDERATION" shall
mean the consideration paid by an Investor to the Company for the purchase of
the New Securities; provided that if such Investor does not purchase any New
Securities, the Non-Participating Percentage will be 100%.

                                (B) In the event the Board of Directors and the
holders of a majority of the then outstanding shares of Series A Preferred and
Series B Preferred approve the issuance of New Securities, the Company shall
give each Investor a written notice (the "Issuance Notice") of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Investor shall, within
fifteen (15) days from the date of the Issuance Notice, provide written notice
to the Company that (i) such Investor agrees to become a Participating Investor
for the price and upon the terms specified in the Issuance Notice or (ii) such
Investor shall be a Non-participating Investor and specifying the portion, if
any, of its Pro Rata Share it will be purchasing. Any Investor who shall fail to
provide such written notice within such fifteen (15) day period shall be deemed
to be a Non-participating Investor who has elected not to purchase any New
Securities.

                                (C) Each and every Non-participating Share of
Series B Preferred held by each and every Non-participating Investor shall be
automatically converted immediately prior to the Closing into such number of
shares of Voting Common Stock (or options, warrants or other rights to acquire
such number of shares of Voting Common Stock as applicable), as is determined by
dividing the Series B Original Issue Price by the then applicable Series B
Conversion Price. Each and every Non-participating Share of Series A Preferred
held by each and every Non-participating Investor shall be automatically
converted immediately prior to the Closing into such number of shares of Voting
Common Stock, options, warrants or other rights to acquire such number of shares
of Voting Common Stock (as applicable), as is determined by dividing the Series
A Original Issue Price by the then applicable Series A Conversion Price. As of
immediately prior to the Closing, shares of Series B Preferred and Series A
Preferred converted pursuant to this Section 5(d)(2)(ii) shall no longer be
outstanding on the books of the Company and the Non-participating Investors
shall be treated for all purposes as the record holder of the shares of Voting
Common Stock issued upon conversion thereof on the date of the Closing.



                                      12.
<PAGE>   13

        In no event shall any share of any series of Preferred Stock be
automatically converted into a share of Voting Common Stock pursuant to this
Section 5(d)(2)(ii) unless it constitutes a Non-participating Share as defined
in Section 5(d)(2)(ii)(A)(viii) hereof.

                                (iii) Upon the occurrence of either event
specified in paragraph (i) or, with respect to the Series A Preferred and Series
B Preferred, the event specified in paragraph (ii) above, the outstanding shares
of Series C Preferred, Series B Preferred and Series A Preferred shall be
converted automatically as of the date of such occurrence, pursuant to paragraph
(i) or as of the date of Closing pursuant to paragraph (ii), without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such conversion
unless the certificates evidencing such shares of Series C Preferred, Series B
Preferred and Series A Preferred are either delivered to the Corporation or its
transfer agent as provided below, or the holder notifies the Corporation or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Upon the occurrence of such automatic conversion of the Series C Preferred,
Series B Preferred and Series A Preferred, the holders of Series C Preferred,
Series B Preferred and/or Series A Preferred shall surrender the certificates
representing such shares at the office of the Corporation or any transfer agent
for the Series C Preferred, Series B Preferred or Series A Preferred. Thereupon,
there shall be issued and delivered to such holder promptly at such office and
in its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Series C Preferred, Series B Preferred and Series A Preferred
surrendered were convertible on the date on which such automatic conversion
occurred, and the Corporation shall promptly pay in cash or, at the option of
the Corporation, Common Stock (at the Common Stock's fair market value
determined by the Board as of the date of such conversion), or, at the option of
the Corporation, both, all declared and unpaid dividends on the shares of Series
C Preferred, Series B Preferred and Series A Preferred being converted, up to
and including the date of such conversion.

                        (3) CONVERSION RATE. The Conversion Rate in effect at
any time for conversion of the Series C Preferred (the "Series C Conversion
Rate"), the Series B Preferred (the "Series B Conversion Rate") and the Series A
Preferred (the "Series A Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price applicable to such series by the Conversion
Price applicable to such series, calculated as provided in Section 5(d)(4)
below.

                        (4) CONVERSION PRICE. The Conversion Price for the
Series C Preferred shall initially be the Series C Original Issue Price (the
"Series C Conversion Price"). The Conversion Price for the Series B Preferred
shall initially be the Series B Original Issue Price (the "Series B Conversion
Price"). The conversion price for the Series A Preferred shall initially be the
Series A Original Issue Price (the "Series A Conversion Price"). Such initial
Series C Conversion Price, Series B Conversion Price and Series A Conversion
Price shall be adjusted from time to time in accordance with this Section 5(d).
All references to the Series C Conversion Price, Series B Conversion Price and
the Series A Conversion Price herein shall mean the Series C Conversion Price,
Series B Conversion Price and Series A Conversion Price, respectively, as so
adjusted.


                                      13.
<PAGE>   14







                        (5) MECHANICS OF CONVERSION. Each holder of Series C
Preferred, Series B Preferred or Series A Preferred who desires to convert the
same into shares of Common Stock pursuant to this Section 5(d)(5) shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or any transfer agent for the Series C Preferred, Series B
Preferred or Series A Preferred and shall give written notice to the Corporation
at such office that such holder elects to convert the same. Such notice shall
state the number of shares of Series C Preferred, Series B Preferred or Series A
Preferred being converted. Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series C Preferred, Series B
Preferred or Series A Preferred being converted. Such conversion shall be deemed
to have been made at the close of business on the date of such surrender of the
certificates representing the shares of the Series C Preferred, Series B
Preferred or Series A Preferred to be converted, and the person entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock on
such date.

                        (6) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation at any time or from time to time after the date that the first share
of Series C Preferred is issued (the "Original Issue Date") effects a
subdivision of the outstanding Common Stock, the Conversion Price of each series
of Preferred Stock in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation at any time or from
time to time after the Original Issue Date combines the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price of each
series of Preferred Stock in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(d)(6) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

                        (7) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS. If the Corporation at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Conversion
Price of each series of Preferred Stock that is then in effect shall be
decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying such
Conversion Price then in effect by a fraction (A) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(B) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, such Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter such Conversion Price shall be adjusted pursuant to this Section
5(d)(7) to reflect the actual payment of such dividend or distribution.


                                      14.
<PAGE>   15


                        (8) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS.
If the Corporation at any time or from time to time after the Original Issue
Date makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, in each such
event provision shall be made so that the holders of the Series C Preferred,
Series B Preferred and Series A Preferred shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Corporation which they would have received had
their Series C Preferred, Series B Preferred or Series A Preferred been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 5(d) with respect to the rights of the holders of the Series C
Preferred, Series B Preferred and Series A Preferred or with respect to such
other securities by their terms.

                        (9) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date
the Common Stock issuable upon the conversion of the Series C Preferred, Series
B Preferred and Series A Preferred is changed into the same or a different
number of shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section 5(d)), in any such event each holder of
Series C Preferred, Series B Preferred and Series A Preferred shall have the
right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series C Preferred, Series B Preferred
and Series A Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.

                        (10) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES
OF ASSETS. If at any time or from time to time after the Original Issue Date
there is a capital reorganization, merger, consolidation or sale of all or
substantially all of the Corporation's assets (a "Capital Reorganization") of
the Common Stock (other than a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5(d)), as a part of such Capital Reorganization, provision shall be
made so that the holders of the Series C Preferred, Series B Preferred and
Series A Preferred shall thereafter be entitled to receive upon conversion of
the Series C Preferred, Series B Preferred and Series A Preferred the number of
shares of stock or other securities or property of the Corporation to which a
holder of the number of shares of Common Stock deliverable upon conversion would
have been entitled on such Capital Reorganization, subject to adjustment in
respect of such stock or securities by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5(d)(10) with respect to the rights of the holders of Series C
Preferred, Series B Preferred and Series A Preferred after the Capital
Reorganization to the end that the provisions of this Section 5(d)(10)
(including adjustment of the Conversion Price applicable to such series then in
effect and the number of shares issuable upon conversion of the


                                      15.
<PAGE>   16


Series C Preferred, Series B Preferred and Series A Preferred) shall be
applicable after that event and be as nearly equivalent as practicable.

                        (11) SALE OF SHARES BELOW CONVERSION PRICE.

                                (i) If at any time or from time to time after
the Original Issue Date, the Company issues or sells, or is deemed by the
express provisions of this subsection (11) to have issued or sold, Additional
Shares of Common Stock (as defined in subsection (11)(iv) below), other than as
a dividend or other distribution on any class of stock as provided in Section
5(d)(7) above, and other than a subdivision or combination of shares of Common
Stock as provided in Section 5(d)(6) above, for an Effective Price (as defined
in subsection (11)(iv) below) less than the then effective Conversion Price with
respect to any series of Preferred Stock, then and in each such case the then
existing Conversion Price for such series of Preferred Stock shall be
automatically reduced, as of the opening of business on the date of such issue
or sale, to a price determined by multiplying such Conversion Price by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock outstanding (as defined below) immediately prior to such issuance or sale,
plus (B) the number of shares of Common stock which the aggregate consideration
received (as defined in subsection (11)(ii)) by the Company for the total number
of Additional Shares of Common Stock so issued would purchase at such Conversion
Price, and (ii) the denominator of which shall be (C) the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale, plus (D) the total number of Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed outstanding as of a given date shall be the sum of (A) the
number of shares of Common Stock actually outstanding, and (B) the number of
shares of Common Stock into which the then outstanding shares of Series C
Preferred, Series B Preferred and Series A Preferred could be converted if fully
converted on the date immediately preceding the given date.

                                (ii) For the purpose of making any adjustment
required under this subsection (11), the consideration received by the Company
for any issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the net amount of cash received by the Company after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
deduction of any expenses payable by the Company; (B) to the extent it consists
of property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale, but without deduction of
any expenses payable by the Company; or (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (11)(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.

                                (iii) For the purpose of the adjustment required
under this subsection (11), if the Company issues or sells any rights or options
for the purchase of, or stock


                                      16.
<PAGE>   17


or other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as "Convertible
Securities") and if the Effective Price of such Additional Shares of Common
Stock is less than the Conversion Price with respect to any series of Preferred
Stock, in each case the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities,
plus, in the case of such rights or options, the minimum amount of
consideration, if any, payable to the Company upon the exercise of such rights
or options, plus, in the case of Convertible Securities, the minimum amount of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion thereof; provided that if in the case of Convertible Securities the
minimum amount of such consideration cannot be ascertained, but is a function of
antidilution or similar protective clauses, the Company shall be deemed to have
received the minimum amount of consideration without reference to such clauses;
provided further that if the minimum amounts of consideration payable to the
Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options, or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.

               No further adjustment of the Conversion Price with respect to any
series of Preferred Stock, as adjusted upon the issuance of such rights, options
or Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, such Conversion Price as
adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to such Conversion Price which would have been in effect had
an adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series C Preferred, Series B Preferred and Series A Preferred.


                                      17.
<PAGE>   18




                                (iv) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this subsection (11), whether or not subsequently reacquired or
retired by the Company, other than (1) shares of Common Stock issued upon
conversion of the Series C Preferred, Series B Preferred and Series A Preferred;
(2) shares of Common Stock and/or options, warrants or other rights (as adjusted
for any stock dividends, combinations, splits, recapitalization and the like)
after the Original Issue Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board; (3) shares of Preferred or Common Stock, or any warrant therefor or other
convertible security, issued in conjunction with equipment lease financing
arrangements; (4) shares issued after repurchase pursuant to any restricted
stock purchase agreement following a termination; and (5) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants or
convertible securities (including, without limitation, the Nonvoting Common
Stock) outstanding as of the Original Issue Date.

        The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this subsection (11), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this
subsection (11), for such Additional Shares of Common Stock.

                                (v) Notwithstanding anything to the contrary in
this subsection (11), the Conversion Price of Series C Preferred, Series B
Preferred and Series A Preferred automatically converted into shares of Voting
Common Stock in connection with Section 5(d)(2)(ii) shall not be reduced by this
subsection (11) with respect to the issuance of New Securities that triggers the
automatic conversion pursuant to Section 5(d)(2)(ii).

                        (12) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Price with respect to any series of
Preferred Stock or the number of shares of Common Stock or other securities
issuable upon conversion of the Series C Preferred, Series B Preferred or Series
A Preferred, the Corporation, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series C
Preferred, Series B Preferred or Series A Preferred at the holder's address as
shown in the Corporation's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (A) the Conversion
Price with respect to such series at the time in effect, and (B) the type and
amount, if any, of other property that at the time would be received upon
conversion of the Series C Preferred, Series B Preferred or Series A Preferred.

                        (13) NOTICES OF RECORD DATE. Upon (A) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (B) any capital reorganization of the
corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any Acquisition (as defined in Section 5(c)(3)(i)), or any
Asset Transfer (as defined in Section 5(c)(3)(ii)), or any voluntary or
involuntary dissolution, liquidation or winding


                                      18.
<PAGE>   19





up of the Corporation, the Corporation shall mail to each holder of Series C
Preferred, Series B Preferred and Series A Preferred, at least 20 days prior to
the record date specified therein, a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, Acquisition, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reorganization, reclassification, Acquisition, Asset Transfer, dissolution,
liquidation or winding up.

               (14) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series C Preferred, Series B Preferred or
Series A Preferred. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series C Preferred, Series B
Preferred or Series A Preferred by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation shall, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by the Common Stock's per share fair market value (as
determined in good faith by the Board of Directors) on the date of conversion.

               (15) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred, Series B Preferred and
Series A Preferred, such number of its shares of Common Stock as will from time
to time be sufficient to effect the conversion of all outstanding shares of the
Series C Preferred, Series B Preferred and Series A Preferred. If at any time
the number of authorized but unissued shares of Common Stock is not sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred, Series B Preferred and Series A Preferred, the Corporation shall take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as will be sufficient for such purpose.

               (16) NOTICES. Any notice required by the provisions of this
Section 5(d) to be given to the holders of shares of the Series C Preferred,
Series B Preferred and Series A Preferred shall be deemed given upon the earlier
of actual receipt or 15 days after the same has been deposited in the United
States mail, by certified or registered mail, return receipt requested, postage
prepaid, and addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.

               (17) PAYMENT OF TAXES. The Corporation shall pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Series C Preferred, Series B Preferred or Series A Preferred,
excluding any tax or other charge imposed in connection with any transfer
involved in the issuance and delivery of shares of Common Stock in a name other
than that in which the shares of Series C Preferred, Series B Preferred or
Series A Preferred so converted were registered.



                                      19.
<PAGE>   20








               (e) PROTECTIVE PROVISIONS.

                        (1) So long as any shares of Series C Preferred are
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least a majority of the shares of the Series C Preferred,
voting together as a single class, alter or change the rights, preferences or
privileges of the shares of the Series C Preferred so as to affect adversely the
shares of the Series C Preferred, [; provided, however, that an increase in the
authorized number of shares of Series C Preferred shall not require such a vote
or written consent] [or] [including increasing the authorized number of shares
of Series C Preferred]. So long as any shares of Series B Preferred are
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least a majority of the shares of the Series B Preferred,
voting together as a single class, alter or change the rights, preferences or
privileges of the shares of the Series B Preferred so as to affect adversely the
shares of the Series B Preferred, including increasing the authorized number of
shares of Series B Preferred. So long as any shares of Series A Preferred are
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least a majority of the shares of the Series A Preferred,
voting together as a single class, alter or change the rights, preferences or
privileges of the shares of the Series A Preferred so as to affect adversely the
shares of the Series A Preferred, including increasing the authorized number of
shares of Series A Preferred.

                        (2) So long as at least Five Hundred Thousand (500,000)
shares of Preferred Stock (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) remain
issued and outstanding, the Corporation shall not, without the vote or written
consent of the holders of at least a majority of the shares of Preferred Stock,
voting together as a single class:

                                (i) authorize or issue any class of security
senior to the Series C Preferred, Series B Preferred or Series A Preferred;
provided, however, that any security with a dividend or liquidation preference
that is greater than that of the Series C Preferred, Series B Preferred or
Series A Preferred solely as a result of, or in connection with, a higher per
share initial purchase price of such security shall not be deemed senior for
purposes hereof;

                                (ii) authorize an Asset Transfer, Acquisition,
or any other merger, consolidation or reorganization of the Company; or

                                (iii) effect a repurchase or other acquisition
of the Company's own shares from Alan Ramadan, John Bertrand or Quokka Sports
Pty. Ltd. as Trustee for Ozware Developments Unit Trust.

                                    ARTICLE V
                                   MANAGEMENT

        For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:


                                      20.
<PAGE>   21







        1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
that will constitute the whole Board of Directors shall be fixed by the Board of
Directors in the manner provided in the Bylaws.

        2. The Board of Directors may from time to time make, amend, supplement
or repeal the Bylaws; provided, however, that the stockholders may change or
repeal any Bylaws adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation; and, provided, further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.

        3. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.

        4. At any time at which the requirements of Section 2115(b) of the
California Corporations Code are applicable to this Corporation (but not
otherwise), the following shall apply:

               (a) Every stockholder entitled to vote in any election of
directors of this Corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit;

               (b) No stockholder, however, may cumulate such stockholder's
votes for one or more candidates unless (i) the names of such candidates have
been properly placed in nomination, in accordance with the Bylaws of the
Corporation, prior to the voting, (ii) the stockholder has given advance notice
to the Corporation of the intention to cumulate votes pursuant to the Bylaws,
and (iii) the stockholder has given proper notice to the other stockholders at
the meeting, prior to voting, of such stockholder's intention to cumulate such
stockholder's votes; and

               (c) If any stockholder has given proper notice, all stockholders
may cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected.

                                   ARTICLE VI
                             LIABILITY OF DIRECTORS

        A. A director of the Corporation shall, to the fullest extent permitted
by the Delaware General Corporation Law as it now exists or as it may hereafter
be amended, not be personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty as a director, except for
liability (a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the Delaware 



                                      21.
<PAGE>   22

General Corporation Law, or (d) for any transaction from which the director
derived an improper personal benefit. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.

        B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.

                                   ARTICLE VII
                                    AMENDMENT

        The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon the stockholders herein are granted subject to this reservation."

                                    * * * * *

        5. This Amended and Restated Certificate has been duly adopted by the
Corporation's Board of Directors and stockholders in accordance with Sections
228, 242 and 245 of the Delaware General Corporation Law and written notice of
such was given by the Corporation in accordance with said Section 228.






                      [This Space Intentionally Left Blank]



                                      22.
<PAGE>   23






        IN WITNESS WHEREOF, this Certificate has been subscribed this 22nd day
of December, 1998 by the undersigned, who affirms that the statements made
herein are true and correct.


                                     QUOKKA SPORTS, INC.



                                     By: /s/ ALAN RAMADAN
                                         ----------------------------------
                                            Alan Ramadan
                                            President


ATTEST:



By: /s/ LES SCHMIDT                                        
   ---------------------------------
        Les Schmidt
        Secretary





<PAGE>   1
                                                                    EXHIBIT 3.02

                                     BYLAWS

                                       OF

                               QUOKKA SPORTS, INC.
                            (A DELAWARE CORPORATION)

                       (as amended through June 12, 1998)

<PAGE>   2

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                           PAGE
<S>                                                                                         <C>
ARTICLE I         OFFICES....................................................................1

        Section 1.    Registered Office......................................................1

        Section 2.    Other Offices..........................................................1

ARTICLE II        CORPORATE SEAL.............................................................1

        Section 3.    Corporate Seal.........................................................1

ARTICLE III       STOCKHOLDERS' MEETINGS.....................................................1

        Section 4.    Place of Meetings......................................................1

        Section 5.    Annual Meeting.........................................................1

        Section 6.    Special Meetings.......................................................3

        Section 7.    Notice of Meetings.....................................................3

        Section 8.    Quorum.................................................................4

        Section 9.    Adjournment and Notice of Adjourned Meetings...........................4

        Section 10.   Voting Rights..........................................................4

        Section 11.   Beneficial Owners of Stock.............................................5

        Section 12.   List of Stockholders...................................................5

        Section 13.   Action without Meeting.................................................6

        Section 14.   Organization...........................................................6

ARTICLE IV        DIRECTORS..................................................................7

        Section 15.   Number and Term of Office..............................................7

        Section 16.   Powers.................................................................7

        Section 17.   Vacancies..............................................................7

        Section 18.   Resignation............................................................7

        Section 19.   Removal................................................................8

        Section 20.   Meetings...............................................................8

               (a)    Annual Meetings........................................................8

               (b)    Regular Meetings.......................................................8

               (c)    Special Meetings.......................................................8

               (d)    Telephone Meetings.....................................................8

               (e)    Notice of Meetings.....................................................8

               (f)    Waiver of Notice.......................................................8
</TABLE>



                                       i.
<PAGE>   3

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                           PAGE
<S>                                                                                         <C>
        Section 21.   Quorum and Voting......................................................9

        Section 22.   Action without Meeting.................................................9

        Section 23.   Fees and Compensation..................................................9

        Section 24.   Committees.............................................................9

               (a)    Executive Committee....................................................9

               (b)    Other Committees......................................................10

               (c)    Term..................................................................10

               (d)    Meetings..............................................................10

        Section 25.   Organization..........................................................11

        Section 26.   Officers Designated...................................................11

        Section 27.   Tenure and Duties of Officers.........................................11

               (a)    General...............................................................11

               (b)    Duties of Chairman of the Board of Directors..........................11

               (c)    Duties of President...................................................12

               (d)    Duties of Vice Presidents.............................................12

               (e)    Duties of Secretary...................................................12

               (f)    Duties of Chief Financial Officer or Treasurer........................12

        Section 28.   Delegation of Authority...............................................12

        Section 29.   Resignations..........................................................13

        Section 30.   Removal...............................................................13

Voting Of Securities Owned By The Corporation...............................................13

        Section 31.   Execution of Corporate Instruments....................................13

        Section 32.   Voting of Securities Owned by the Corporation.........................14

ARTICLE VII       SHARES OF STOCK...........................................................14

        Section 33.   Form and Execution of Certificates....................................14

        Section 34.   Lost Certificates.....................................................14

        Section 35.   Transfers.............................................................14

        Section 36.   Fixing Record Dates...................................................15

        Section 37.   Registered Stockholders...............................................16

ARTICLE VIII      OTHER SECURITIES OF THE CORPORATION.......................................16
</TABLE>



                                      ii.
<PAGE>   4

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                           PAGE
<S>                                                                                         <C>
        Section 38.   Execution of Other Securities.........................................16

ARTICLE IX        DIVIDENDS.................................................................16

        Section 39.   Declaration of Dividends..............................................16

        Section 40.   Dividend Reserve......................................................16

ARTICLE X         FISCAL YEAR...............................................................17

        Section 41.   Fiscal Year...........................................................17

ARTICLE XI        INDEMNIFICATION...........................................................17

        Section 42.   Indemnification of Directors, Officers, Employees and Other
                      Agents................................................................17

               (a)    Directors and Executive Officers......................................17

               (b)    Other Officers, Employees and Other Agents............................17

               (c)    Good Faith............................................................17

               (d)    Expenses..............................................................18

               (e)    Enforcement...........................................................18

               (f)    Non-Exclusivity of Rights.............................................19

               (g)    Survival of Rights....................................................19

               (h)    Insurance.............................................................19

               (i)    Amendments............................................................19

               (j)    Saving Clause.........................................................19

               (k)    Certain Definitions...................................................19

ARTICLE XII       NOTICES...................................................................20

        Section 43.   Notices...............................................................20

               (a)    Notice to Stockholders................................................20

               (b)    Notice to Directors...................................................20

               (c)    Address Unknown.......................................................20

               (d)    Affidavit of Mailing..................................................21

               (e)    Time Notices Deemed Given.............................................21

               (f)    Methods of Notice.....................................................21

               (g)    Failure to Receive Notice.............................................21

               (h)    Notice to Person with Whom Communication Is Unlawful..................21
</TABLE>



                                      iii.
<PAGE>   5

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                           PAGE
<S>                                                                                         <C>
               (i)    Notice to Person with Undeliverable Address...........................21

ARTICLE XIII      AMENDMENTS................................................................22

        Section 44.   Amendments............................................................22

ARTICLE XIV       RIGHT OF FIRST REFUSAL....................................................22

        Section 45.   Right of First Refusal................................................22

ARTICLE XV        LOANS TO OFFICERS.........................................................25

        Section 46.   Loans to Officers.....................................................25

ARTICLE XVI       MISCELLANEOUS.............................................................25

        Section 47.   Annual Report.........................................................25
</TABLE>



                                      iv.
<PAGE>   6

                                     BYLAWS

                                       OF

                               QUOKKA SPORTS, INC.
                            (A DELAWARE CORPORATION)

                                    ARTICLE I

                                     OFFICES

        SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent. (Del.
Code Ann., tit. 8, Section 131)

        SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require. (Del. Code Ann., tit.
8, Section 122(8))

                                   ARTICLE II

                                 CORPORATE SEAL

        SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8,
Section 122(3))

                                   ARTICLE III

                             STOCKHOLDERS' MEETINGS

        SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, Section
211(a))

        SECTION 5. ANNUAL MEETING.

                (a) The annual meeting of the stockholders of the corporation,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors (Del. Code Ann., tit. 8,
Section 211(b))


                                       1.
<PAGE>   7

                (b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date of the corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
form of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Securities and Exchange Act of
1934, as amended. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted. (Del. Code Ann., tit. 8, Section 211(b))

                (c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person,



                                       2.
<PAGE>   8

(C) the class and number of shares of the corporation which are beneficially
owned by such person, (D) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nominations are to be made by the
stockholder, and (E) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a Director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 5. At the request of the Board of Directors, any
person nominated by a stockholder for election as a Director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a Director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting
and the defective nomination shall be disregarded. (Del. Code Ann., tit. 8,
Sections 212, 214)

        SECTION 6. SPECIAL MEETINGS.

                (a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board, (ii)
the President, (iii) the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption)or (iv) by the holders of
shares entitled to cast not less than ten percent (10%) of the votes at the
meeting, and shall be held at such place, on such date, and at such time as they
or he shall fix.

                (b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the time of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the Chairman of the Board, the
President, any Vice President, or the Secretary of the corporation. No business
may be transacted at such special meeting otherwise than specified in such
notice. The officer receiving the request shall cause notice to be promptly
given to the stockholders entitled to vote, in accordance with the provisions of
Section 7 of these Bylaws, that a meeting will be held not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after the receipt of the request,
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.

        SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each


                                       3.
<PAGE>   9

stockholder entitled to vote at such meeting, such notice to specify the place,
date and hour and purpose or purposes of the meeting. Notice of the time, place
and purpose of any meeting of stockholders may be waived in writing, signed by
the person entitled to notice thereof, either before or after such meeting, and
will be waived by any stockholder by his attendance thereat in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given. (Del. Code
Ann., tit. 8, Sections 222, 229)

        SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting, shall not be counted to determine a quorum at
such meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting at which a
quorum is present shall be valid and binding upon the corporation; provided,
however, that Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of Directors. Where a separate vote by a class or classes
is required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled to
take action with respect to that vote on that matter and the affirmative vote of
the majority (plurality, in the case of the election of Directors) of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class. (Del. Code Ann., tit. 8, Section 216)

        SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
Section 222(c))

        SECTION 10. VOTING RIGHTS.



                                       4.
<PAGE>   10

                (a) For the purpose of determining those stockholders entitled
to vote at any meeting of the stockholders, except as otherwise provided by law,
only persons in whose names shares stand on the stock records of the corporation
on the record date, as provided in Section 12 of these Bylaws, shall be entitled
to vote at any meeting of stockholders. Except as may be otherwise provided in
the Certificate of Incorporation or these Bylaws, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder.
Every person entitled to vote or execute consents shall have the right to do so
either in person or by an agent or agents authorized by a written proxy executed
by such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after three (3)
years from its date of creation unless the proxy provides for a longer period.
All elections of Directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation. (Del. Code Ann., tit. 8, Sections 211(e),
212(b))

        SECTION 11. BENEFICIAL OWNERS OF STOCK.

                (a) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members of
a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this subsection
(c) shall be a majority or even-split in interest. (Del. Code Ann., tit. 8,
Section 217(b))

                (b) Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent such stock and vote thereon.
(Del. Code Ann., tit. 8, Section 217(a))

        SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present. (Del. Code
Ann., tit. 8, Section 219(a))



                                       5.
<PAGE>   11

        SECTION 13. ACTION WITHOUT MEETING.

                (a) Any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.

                (b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the Corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. (Del. Code Ann., tit. 8, Section 228)

                (c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.

        SECTION 14. ORGANIZATION.

                (a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.

                (b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and



                                       6.
<PAGE>   12

constituted proxies, and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless, and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.

                                   ARTICLE IV

                                    DIRECTORS

        SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of between five and eight members, the number thereof to be determined
from time to time by resolution of the Board of Directors. The number of
authorized Directors may be modified from time to time by amendment of this
Section 15 in accordance with the provisions of Section 44 hereof. Except as
provided in Section 17, the Directors shall be elected by the stockholders in
accordance with the Certificate of Incorporation at their annual meeting in each
year and shall hold office until the next annual meeting and until their
successors shall be duly elected and qualified. Directors need not be
stockholders unless so required by the Certificate of Incorporation. If for any
cause, the Directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
(Del. Code Ann., tit. 8, Sections 141(b), 211(b), (c))

        SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation. (Del. Code Ann., tit. 8, Section 141(a))

        SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Section 17 in the case of
the death, removal or resignation of any Director, or if the stockholders fail
at any meeting of stockholders at which Directors are to be elected (including
any meeting referred to in Section 19 below) to elect the number of Directors
then constituting the whole Board of Directors. (Del. Code Ann., tit. 8, Section
223(a), (b))

        SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the



                                       7.
<PAGE>   13

unexpired portion of the term of the Director whose place shall be vacated and
until his successor shall have been duly elected and qualified. (Del. Code Ann.,
tit. 8, Sections 141(b), 223(d))

        SECTION 19. REMOVAL. At a special meeting of stockholders called for the
purpose in the manner hereinabove provided, subject to any limitations imposed
by law or the Certificate of Incorporation, the Board of Directors, or any
individual Director, may be removed from office, with or without cause, and a
new Director or Directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of Directors. (Del.
Code Ann., tit. 8, Section 141(k))

        SECTION 20. MEETINGS.

                (a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.

                (b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been determined by the Board of Directors. (Del. Code
Ann., tit. 8, Section 141(g))

                (c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the President or a majority of the Directors. (Del. Code Ann., tit. 8,
Section 141(g))

                (d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting. (Del. Code
Ann., tit. 8, Section 141(i))

                (e) NOTICE OF MEETINGS. Written notice of the time and place of
all special meetings of the Board of Directors shall be given at least one (1)
day before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. (Del. Code Ann., tit. 8, Section 229)

                (f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be



                                       8.
<PAGE>   14

present and if, either before or after the meeting, each of the Directors not
present shall sign a written waiver of notice, or a consent to holding such
meeting, or an approval of the minutes thereof. [Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in any written waiver of notice or consent unless
so required by the Certificate of Incorporation or these Bylaws. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting. (Del. Code Ann., tit. 8, Section 229)

        SECTION 21. QUORUM AND VOTING.

                (a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
Directors fixed from time to time in accordance with Section 15 hereof, but not
less than one (1), a quorum of the Board of Directors shall consist of the
greater of three (3) Directors or a majority of the exact number of Directors
fixed from time to time in accordance with Section 15 of these Bylaws; provided,
however, at any meeting whether a quorum be present or otherwise, a majority of
the Directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting. (Del. Code Ann., tit. 8, Section 141(b))

                (b) At each meeting of the Board of Directors at which a quorum
is present all questions and business shall be determined by a vote of a
majority of the Directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
Section 141(b))

        SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. (Del. Code Ann., tit. 8, Section 141(f))

        SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, Section 141(h))

        SECTION 24. COMMITTEES.

                (a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
specifically granted by the Board of Directors, shall have and may exercise when
the Board of Directors is not in session all powers of the Board of Directors in
the



                                       9.
<PAGE>   15

management of the business and affairs of the corporation, including, without
limitation, the power and authority to declare a dividend or to authorize the
issuance of stock, except such committee shall not have the power or authority
to amend the Certificate of Incorporation, to adopt an agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, to recommend
to the stockholders of the corporation a dissolution of the corporation or a
revocation of a dissolution or to amend these Bylaws. (Del. Code Ann., tit. 8,
Section 141(c))

                (b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors, and shall have such powers and perform such duties as
may be prescribed by the resolution or resolutions creating such committees, but
in no event shall such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, Section 141(c))

                (c) TERM. The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board of Directors, subject to
the provisions of subsections (a) or (b) of this Section 24, may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall terminate
on the date of his death or voluntary resignation from the committee or from the
Board of Directors. The Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. (Del. Code Ann., tit. 8, Section 141(c))

                (d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any Director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any Director by attendance thereat, except when the Director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or



                                      10.
<PAGE>   16

convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee. (Del. Code Ann., tit. 8, Sections 141(c), 229)

        SECTION 25. ORGANIZATION. At every meeting of the Directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.

                                    ARTICLE V

                                    OFFICERS

        SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
be the Chairman of the Board of Directors, the President, one or more Vice
Presidents, the Secretary and the Chief Financial Officer or Treasurer, all of
whom shall be elected at the annual organizational meeting of the Board of
Directors. The order of the seniority of the Vice Presidents shall be in the
order of their nomination, unless otherwise determined by the Board of
Directors. The Board of Directors may also appoint one or more Assistant
Secretaries, Assistant Treasurers, and such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may assign
such additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the corporation at
any one time unless specifically prohibited therefrom by law. The salaries and
other compensation of the officers of the corporation shall be fixed by or in
the manner designated by the Board of Directors. (Del. Code Ann., tit. 8,
Sections 122(5), 142(a), (b))

        SECTION 27. TENURE AND DUTIES OF OFFICERS.

                (a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors. (Del. Code Ann., tit. 8, Section 141(b), (e))

                (b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 27. (Del. Code Ann., tit. 8, Section 142(a))



                                      11.
<PAGE>   17


                (c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
The President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. (Del. Code Ann., tit. 8, Section
142(a))

                (d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the order
of their seniority, may assume and perform the duties of the President in the
absence or disability of the President or whenever the office of President is
vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(Del. Code Ann., tit. 8, Section 142(a))

                (e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders,
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))

                (f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the President. The Chief Financial
Officer or Treasurer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))

        SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.



                                      12.
<PAGE>   18

        SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, Section 142(b))

        SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.

                                   ARTICLE VI

                     EXECUTION OF CORPORATE INSTRUMENTS AND
                  VOTING OF SECURITIES OWNED BY THE CORPORATION

        SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)

        Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)

        All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

        Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)



                                      13.
<PAGE>   19

        SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the President, or any Vice President.
(Del. Code Ann., tit. 8, Section 123)

                                   ARTICLE VII

                                 SHARES OF STOCK

        SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Where such certificate is countersigned by a transfer agent
other than the corporation or its employee, or by a registrar other than the
corporation or its employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the designations,
preferences, limitations, restrictions on transfer and relative rights of the
shares authorized to be issued. (Del. Code Ann., tit. 8, Section 158)

        SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
(Del. Code Ann., tit. 8, Section 167)

        SECTION 35. TRANSFERS.

                (a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. (Del. Code Ann., tit.
8, Section 201, tit. 6, Section 8-401(1))

                (b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such



                                      14.
<PAGE>   20

stockholders in any manner not prohibited by the General Corporation Law of
Delaware. (Del. Code Ann., tit. 8, Section 160 (a))

        SECTION 36. FIXING RECORD DATES.

                (a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

                (b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.

                (c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. (Del. Code Ann., tit. 8, Section 213)



                                      15.
<PAGE>   21

        SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
(Del. Code Ann., tit. 8, Sections 213(a), 219)

                                  ARTICLE VIII

                       OTHER SECURITIES OF THE CORPORATION

        SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.

                                   ARTICLE IX

                                    DIVIDENDS

        SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation. (Del. Code Ann., tit. 8, Sections 170, 173)

        SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property



                                      16.
<PAGE>   22

of the corporation, or for such other purpose as the Board of Directors shall
think conducive to the interests of the corporation, and the Board of Directors
may modify or abolish any such reserve in the manner in which it was created.
(Del. Code Ann., tit. 8, Section 171)

                                    ARTICLE X

                                   FISCAL YEAR

        SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

                                   ARTICLE XI

                                 INDEMNIFICATION

        SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.

                (a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law; provided, however, that the
corporation may limit the extent of such indemnification by individual contracts
with its Directors and executive officers; and, provided, further, that the
corporation shall not be required to indemnify any Director or executive officer
in connection with any proceeding (or part thereof) initiated by such person or
any proceeding by such person against the corporation or its Directors,
officers, employees or other agents unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation or (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law.

                (b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.

                (c) GOOD FAITH

                        (1) For purposes of any determination under this Bylaw,
a Director or executive officer shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe that his conduct was unlawful, if his
action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:

                                (i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;



                                      17.
<PAGE>   23


                                (ii) counsel, independent accountants or other
persons as to matters which the Director or executive officer believed to be
within such person's professional competence; and

                                (iii) with respect to a Director, a committee of
the Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to merit
confidence; so long as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.

                        (2) The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal proceeding, that he had reasonable cause to believe that his conduct
was unlawful.

                        (3) The provisions of this paragraph (c) shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth by
the Delaware General Corporation Law.

                (d) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.

                Notwithstanding the foregoing, unless otherwise determined
pursuant to paragraph (e) of this Bylaw, no advance shall be made by the
corporation if a determination is reasonably and promptly made (1) by the Board
of Directors by a majority vote of a quorum consisting of Directors who were not
parties to the proceeding, or (2) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, that the facts known to the decision making party
at the time such determination is made demonstrate clearly and convincingly that
such person acted in bad faith or in a manner that such person did not believe
to be in or not opposed to the best interests of the corporation.

                (e) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for



                                      18.
<PAGE>   24

the amount claimed. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.

                (f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.

                (g) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

                (h) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.

                (i) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.

                (j) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.

                (k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:

                        (1) The term "PROCEEDING" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

                        (2) The term "EXPENSES" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or



                                      19.
<PAGE>   25

judgment and any other costs and expenses of any nature or kind incurred in
connection with any proceeding.

                        (3) The term the "CORPORATION" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.(4) References to a "DIRECTOR," "OFFICER,"
"EMPLOYEE," or "AGENT" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.(5) References to "OTHER
ENTERPRISES" shall include employee benefit plans; references to "FINES" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "SERVING AT THE REQUEST OF THE CORPORATION"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "NOT OPPOSED TO THE BEST INTERESTS OF THE CORPORATION" as referred to in
this Bylaw.

                                   ARTICLE XII

                                     NOTICES

        SECTION 43. NOTICES.

                (a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent. (Del. Code Ann., tit. 8,
Section 222)

                (b) NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director.

                (c) ADDRESS UNKNOWN. If no address of a stockholder or Director
be known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.



                                      20.
<PAGE>   26

                (d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained. (Del. Code Ann., tit. 8, Section 222)

                (e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by facsimile, telex or telegram shall be deemed to have been
given as of the sending time recorded at time of transmission.

                (f) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.

                (g) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.

                (h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.

                (i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address,



                                      21.
<PAGE>   27

the requirement that notice be given to such person shall be reinstated. In the
event that the action taken by the corporation is such as to require the filing
of a certificate under any provision of the Delaware General Corporation Law,
the certificate need not state that notice was not given to persons to whom
notice was not required to be given pursuant to this paragraph. (Del. Code Ann,
tit. 8, Section 230)

                                  ARTICLE XIII

                                   AMENDMENTS

        SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the stockholders entitled to vote. The Board of Directors
shall also have the power, if such power is conferred upon the Board of
Directors by the Certificate of Incorporation, to adopt, amend or repeal Bylaws
(including, without limitation, the amendment of any Bylaw setting forth the
number of Directors who shall constitute the whole Board of Directors). (Del.
Code Ann., tit. 8, Sections 109(a), 122(6))

                                   ARTICLE XIV

                             RIGHT OF FIRST REFUSAL

        SECTION 45. RIGHT OF FIRST REFUSAL. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this Bylaw:

                (a) If the stockholder receives from anyone a bona fide offer
acceptable to the stockholder to purchase any of his shares of stock, then the
stockholder shall first give written notice thereof to the corporation. The
notice shall name the proposed transferee and state the number of shares to be
transferred, the price per share and all other terms and conditions of the
offer.

                (b) For fifteen (15) days following receipt of such notice, the
corporation shall have the option to purchase all or any lesser part of the
shares specified in the notice at the price and upon the terms set forth in such
bona fide offer. In the event the corporation elects to purchase all the shares,
it shall give written notice to the selling stockholder of its election and
settlement for said shares shall be made as provided below in paragraph (d).

                (c) In the event the corporation does not elect to acquire all
of the shares specified in the selling stockholder's notice, the Secretary of
the corporation shall, within fifteen (15) days of receipt of said selling
stockholder's notice, give written notice thereof to the stockholders of the
corporation other than the selling stockholder. Said written notice shall state
the number of shares that the corporation has elected to purchase and the number
of shares remaining available for purchase (which shall be the same as the
number contained in said selling stockholder's notice, less any such shares that
the corporation has elected to purchase). Each of the other stockholders shall
have the option to purchase that proportion of the shares




                                      22.
<PAGE>   28

available for purchase as the number of shares owned by each of said other
stockholders bears to the total issued and outstanding shares of the
corporation, excepting those shares owned by the selling stockholder. A
stockholder electing to exercise such option shall, within ten (10) days after
mailing of the corporation's notice, give notice to the corporation specifying
the number of shares such stockholder will purchase. Within such ten-day period,
each of said other stockholders shall give written notice stating how many
additional shares such stockholder will purchase if additional shares are made
available. Failure to respond in writing within said ten- day period to the
notice given by the Secretary of the corporation shall be deemed a rejection of
such stockholder's right to acquire a proportionate part of the shares of the
selling stockholder. In the event one or more stockholders do not elect to
acquire the shares available to them, said shares shall be allocated on a pro
rata basis to the stockholders who requested shares in addition to their pro
rata allotment.

                (d) In the event the corporation and/or stockholders, other than
the selling stockholder, elect to acquire any of the shares of the selling
stockholder as specified in said selling stockholder's notice, the Secretary of
the corporation shall so notify the selling stockholder and settlement thereof
shall be made in cash within thirty (30) days after the Secretary of the
corporation receives said selling stockholder's notice; provided that if the
terms of payment set forth in said selling stockholder's notice were other than
cash against delivery, the corporation and/or its other stockholders shall pay
for said shares on the same terms and conditions set forth in said selling
stockholder's notice.

                (e) In the event the corporation and/or its other stockholders
do not elect to acquire all of the shares specified in the selling stockholder's
notice, said selling stockholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and other
stockholders herein, sell elsewhere the shares specified in said selling
stockholder's notice which were not acquired by the corporation and/or its other
stockholders, in accordance with the provisions of paragraph (d) of this bylaw,
provided that said sale shall not be on terms and conditions more favorable to
the purchaser than those contained in the bona fide offer set forth in said
selling stockholder's notice. All shares so sold by said selling stockholder
shall continue to be subject to the provisions of this Bylaw in the same manner
as before said transfer.

                (f) Anything to the contrary contained herein notwithstanding,
the following transactions shall be exempt from the provisions of this Bylaw:

                        (1) A stockholder's transfer of any or all shares held
either during such stockholder's lifetime or on death by will or intestacy to
such stockholder's immediate family. "Immediate family" as used herein shall
mean spouse, lineal descendant, father, mother, brother, or sister of the
stockholder making such transfer and shall include any trust established
primarily for the benefit of the stockholder or his immediate family.

                        (2) A stockholder's bona fide pledge or mortgage of any
shares with a commercial lending institution, provided that any subsequent
transfer of said shares by said institution shall be conducted in the manner set
forth in this Section 45.



                                      23.
<PAGE>   29

                        (3) A stockholder's transfer of any or all of such
stockholder's shares to the corporation or to any other stockholder of the
corporation.

                        (4) A stockholder's transfer of any or all of such
stockholder's shares to a person who, at the time of such transfer, is an
officer or director of the corporation.

                        (5) A corporate stockholder's transfer of any or all of
its shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.

                        (6) A corporate stockholder's transfer of any or all of
its shares to any or all of its stockholders.

                        (7) A transfer by a stockholder which is a limited or
general partnership to any or all of its partners.

                        (8) A transfer by a stockholder which is a limited
liability company to any or all of its members.

        In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this Bylaw, and there
shall be no further transfer of such stock except in accordance with this Bylaw.

                (g) The provisions of this Section 45 may be waived with respect
to any transfer either by the corporation, upon duly authorized action of its
Board of Directors, or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation (excluding the
votes represented by those shares to be sold by the selling stockholder). This
Section 45 may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express vote or written
consent of the owners of a majority of the voting power of the corporation.

                (h) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this Bylaw are strictly observed and followed.

                (i) The foregoing right of first refusal shall terminate on
either of the following dates, whichever shall first occur:

                        (1) On August 15, 2006; or

                        (2) Upon the date securities of the corporation are
first offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.

                (j) The certificates representing shares of stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:



                                      24.
<PAGE>   30

                "The shares represented by this certificate are subject to a
        right of first refusal option in favor of the corporation and its other
        stockholders, as provided in the bylaws of the corporation."

(Del. Code Ann., tit. 8, Section 160(a))

                                   ARTICLE XV

                                LOANS TO OFFICERS

        SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this Section 46 shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute. (Del. Code Ann., tit. 8, Section 143)

                                   ARTICLE XVI

                                  MISCELLANEOUS

        SECTION 47. ANNUAL REPORT.

                (a) Subject to the provisions of Section 47(b) below, the Board
of Directors shall cause an annual report to be sent to each stockholder of the
corporation not later than one hundred twenty (120) days after the close of the
corporation's fiscal year. Such report shall include a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501(b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the United States Securities Exchange Act of
1934, that Act shall take precedence. Such report shall be sent to stockholders
at least fifteen (15) days prior to the next annual meeting of stockholders
after the end of the fiscal year to which it relates.

                (b) If and so long as there are fewer than 100 holders of record
of the corporation's shares, the requirement of sending of an annual report to
the stockholders of the corporation is hereby expressly waived.



                                      25.

<PAGE>   1
                                                                    EXHIBIT 3.03

                              AMENDED AND RESTATED
                         CERTIFICATE OF INCORPORATION OF
                               QUOKKA SPORTS, INC.


        ALAN RAMADAN hereby certifies that:

        1. The name of this corporation is Quokka Sports, Inc.

        2. The Certificate of Incorporation of this corporation was filed by the
Secretary of State of the State of Delaware on August 15, 1996, in the name of
Quokka Productions, Inc. The corporation's name was changed to Quokka Sports,
Inc. in an Amended and Restated Certificate of Incorporation filed by the
Secretary of State on September 16, 1996.

        3. He is the duly elected and acting President and Chief Executive
Officer of this corporation.

        4. The Amended and Restated Certificate of Incorporation of this
corporation is hereby amended and restated to read as follows:

"

                                       I.

                                      NAME

        The name of this corporation is Quokka Sports, Inc. (the "Company").

                                       II.

                                     ADDRESS

        The address of the registered office of the Company in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington
19801, County of Newcastle, and the name of the registered agent of the Company
in the State of Delaware at such address is The Corporation Trust Company.

                                      III.

                                     PURPOSE

        The purpose of the Company is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.





                                       1.
<PAGE>   2







                                       IV.

                                      STOCK

        A. The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Company is authorized to issue is One Hundred Twenty Million
(120,000,000). One Hundred Ten Million (110,000,000) shares shall be Common
Stock, each having a par value of one-hundredth of one cent ($0.0001). Ten
Million (10,000,000) shares shall be Preferred Stock, each having a par value of
one-hundredth of one cent ($0.0001).

        B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized by filing a certificate
pursuant to the Delaware General Corporation Law, to fix or alter from time to
time the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.

                                       V.

                                   MANAGEMENT

        For the management of the business and for the conduct of the affairs of
the Company, and in further definition, limitation and regulation of the powers
of the Company, of its directors and of its stockholders or any class thereof,
as the case may be, it is further provided that:

               1. The management of the business and the conduct of the affairs
of the Company shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.

               2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of an initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes, designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the


                                       2.
<PAGE>   3



Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.

        Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

               3.       a. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.

                        b. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.

               4. In the event that Section 2115(a) of the California
Corporations Code is applicable to this corporation, then the following shall
apply:

                        a. Every stockholder entitled to vote in any election of
directors of this corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit;

                        b. No stockholder, however, may cumulate such
stockholder's votes for one or more candidates unless (i) the names of such
candidates have been properly placed in nomination, in accordance with the
Bylaws of the corporation, prior to the voting, (ii) the stockholder has given
advance notice to the corporation of the intention to cumulative votes pursuant
to the Bylaws, and (iii) the stockholder has given proper notice to the other
stockholders at the meeting, prior to voting, of such stockholder's intention to
cumulate such stockholder's votes; and


                                       3.
<PAGE>   4




                        c. If any stockholder has given proper notice, all
=stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. The candidates receiving the highest number of votes of
the shares entitled to be voted for them up to the number of directors to be
elected by such shares shall be declared elected.

               5. Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the Voting Stock of
all of the then-outstanding shares of the voting stock of the Company entitled
to vote. The Board of Directors shall also have the power to adopt, amend, or
repeal Bylaws.

               6. The directors of the Company need not be elected by written
ballot unless the Bylaws so provide.

               7. No action shall be taken by the stockholders of the Company
except at an annual or special meeting of stockholders called in accordance with
the Bylaws, and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.

               8. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Company shall be given in the manner provided in the
Bylaws of the Company.

                                       VI.

                             LIABILITY OF DIRECTORS

        A. A director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the Company or its stockholders, (2) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law (3) under Section 174 of the Delaware General Corporation Law, or (4) for
any transaction from which the director derived an improper personal benefit. If
the Delaware General Corporation Law is amended after approval by the
stockholders of this Article VI to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.

        B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.

                                      VII.

                                    AMENDMENT

        A. The Company reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by


                                       4.
<PAGE>   5

statute, except as provided in paragraph B. of this Article VII, and all rights
conferred upon the stockholders herein are granted subject to this reservation.

        B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock of the Company required by law,
this Certificate of Incorporation or any certificate of designation of Preferred
Stock, the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the Voting Stock of all of the then-outstanding shares of
the voting stock, voting together as a single class, shall be required to alter,
amend or repeal Articles V, VI, and VII."

                                      * * *




                                       5.
<PAGE>   6





4. This Amended and Restated Certificate of Incorporation has been duly approved
by the Board of Directors of this corporation.

5. This Amended and Restated Certificate of Incorporation has been duly adopted
in accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the stockholders of this
corporation.


        IN WITNESS WHEREOF, Quokka Sports, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by its President and Chief
Executive Officer and attested by the Secretary in San Francisco, California
this ____ day of ________, 1999.


                               QUOKKA SPORTS, INC.



                               By: 
                                   ----------------------------------------
                                    ALAN RAMADAN
                                    President and Chief Executive Officer





ATTEST:


- ---------------------------------
LES SCHMIDT
Secretary

                                       6.




<PAGE>   1
                                                                    EXHIBIT 3.04


                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                               QUOKKA SPORTS, INC.
                            (A DELAWARE CORPORATION)



<PAGE>   2


                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                         <C>
ARTICLE I         Offices....................................................................1

        Section 1.    Registered Office......................................................1

        Section 2.    Other Offices..........................................................1

ARTICLE II        Corporate Seal.............................................................1

        Section 3.    Corporate Seal.........................................................1

ARTICLE III       Stockholders' Meetings.....................................................1

        Section 4.    Place of Meetings......................................................1

        Section 5.    Annual Meeting.........................................................1

        Section 6.    Special Meetings.......................................................3

        Section 7.    Notice of Meetings.....................................................3

        Section 8.    Quorum.................................................................4

        Section 9.    Adjournment and Notice of Adjourned Meetings...........................4

        Section 10.   Voting Rights..........................................................4

        Section 11.   Beneficial Owners of Stock.............................................5

        Section 12.   List of Stockholders...................................................5

        Section 13.   Action without Meeting.................................................5

        Section 14.   Organization...........................................................6

ARTICLE IV        Directors..................................................................6

        Section 15.   Number and Term of Office.  Classes of Directors.......................6

        Section 16.   Powers.................................................................7

        Section 17.   Vacancies..............................................................7

        Section 18.   Resignation............................................................7

        Section 19.   Removal................................................................7

        Section 20.   Meetings...............................................................7

               (a)    Annual Meetings........................................................7

               (b)    Regular Meetings.......................................................8

               (c)    Special Meetings.......................................................8

               (d)    Telephone Meetings.....................................................8

               (e)    Notice of Meetings.....................................................8

               (f)    Waiver of Notice.......................................................8
</TABLE>



                                       i.
<PAGE>   3

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<S>                                                                                         <C>
        Section 21.   Quorum and Voting......................................................8

        Section 22.   Action without Meeting.................................................9

        Section 23.   Fees and Compensation..................................................9

        Section 24.   Committees.............................................................9

               (a)    Executive Committee....................................................9

               (b)    Other Committees.......................................................9

               (c)    Term..................................................................10

               (d)    Meetings..............................................................10

        Section 25.   Organization..........................................................10

ARTICLE V         Officers..................................................................10

        Section 26.   Officers Designated...................................................10

        Section 27.   Tenure and Duties of Officers.........................................11

               (a)    General...............................................................11

               (b)    Duties of Chairman of the Board of Directors..........................11

               (c)    Duties of President...................................................11

               (d)    Duties of Vice Presidents.............................................11

               (e)    Duties of Secretary...................................................11

               (f)    Duties of Chief Financial Officer or Treasurer........................12

        Section 28.   Delegation of Authority...............................................12

        Section 29.   Resignations..........................................................12

        Section 30.   Removal...............................................................12

ARTICLE VI        Execution Of Corporate Instruments And Voting Of Securities Owned By
                  The Corporation...........................................................12

        Section 31.   Execution of Corporate Instruments....................................12

        Section 32.   Voting of Securities Owned by the Corporation.........................13

ARTICLE VII       Shares Of Stock...........................................................13

        Section 33.   Form and Execution of Certificates....................................13

        Section 34.   Lost Certificates.....................................................14

        Section 35.   Transfers.............................................................14

        Section 36.   Fixing Record Dates...................................................14
</TABLE>



                                      ii.
<PAGE>   4

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<S>                                                                                        <C>
        Section 37.   Registered Stockholders...............................................15

ARTICLE VIII      Other Securities Of The Corporation.......................................15

        Section 38.   Execution of Other Securities.........................................15

ARTICLE IX        Dividends.................................................................15

        Section 39.   Declaration of Dividends..............................................15

        Section 40.   Dividend Reserve......................................................16

ARTICLE X         Fiscal Year...............................................................16

        Section 41.   Fiscal Year...........................................................16

ARTICLE XI        Indemnification...........................................................16

        Section 42.   Indemnification of Directors, Officers, Employees and Other Agents....16

               (a)    Directors and Executive Officers......................................16

               (b)    Other Officers, Employees and Other Agents............................16

               (c)    Good Faith............................................................16

               (d)    Expenses..............................................................17

               (e)    Enforcement...........................................................17

               (f)    Non-Exclusivity of Rights.............................................18

               (g)    Survival of Rights....................................................18

               (h)    Insurance.............................................................18

               (i)    Amendments............................................................18

               (j)    Saving Clause.........................................................18

               (k)    Certain Definitions...................................................18

ARTICLE XII       Notices...................................................................19

        Section 43.   Notices...............................................................19

               (a)    Notice to Stockholders................................................19

               (b)    Notice to Directors...................................................19

               (c)    Address Unknown.......................................................20

               (d)    Affidavit of Mailing..................................................20

               (e)    Time Notices Deemed Given.............................................20

               (f)    Methods of Notice.....................................................20
</TABLE>



                                      iii.
<PAGE>   5

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<S>                                                                                        <C>
               (g)    Failure to Receive Notice.............................................20

               (h)    Notice to Person with Whom Communication Is Unlawful..................20

               (i)    Notice to Person with Undeliverable Address...........................20

ARTICLE XIII      Amendments................................................................21

        Section 44.   Amendments............................................................21

ARTICLE XIV       Loans To Officers.........................................................21

        Section 45.   Loans to Officers.....................................................21
</TABLE>



                                      iv.
<PAGE>   6

                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                               QUOKKA SPORTS, INC.
                            (A DELAWARE CORPORATION)

                                    ARTICLE I

                                     OFFICES

        SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent. (Del.
Code Ann., tit. 8, Section 131)

        SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require. (Del. Code Ann., tit.
8, Section 122(8))

                                   ARTICLE II

                                 CORPORATE SEAL

        SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8,
Section 122(3))

                                   ARTICLE III

                             STOCKHOLDERS' MEETINGS

        SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, Section
211(a))

        SECTION 5. ANNUAL MEETING.

                (a) The annual meeting of the stockholders of the corporation,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors (Del. Code Ann., tit. 8,
Section 211(b))



                                       1.
<PAGE>   7

                (b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date of the corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted. (Del. Code Ann., tit. 8, Section 211(b))

                (c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to



                                       2.
<PAGE>   8

which the nominations are to be made by the stockholder, and (E) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a Director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a Director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a Director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting
and the defective nomination shall be disregarded. (Del. Code Ann., tit. 8,
Sections 212, 214)

                (d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.

        SECTION 6. SPECIAL MEETINGS.

                (a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board, (ii)
the President, (iii) the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption) or (iv) the holders of 50% or
more of the Company's outstanding voting stock, and shall be held at such place,
on such date, and at such time as they or he shall fix.

                (b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the time of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the Chairman of the Board, the
President, any Vice President, or the Secretary of the corporation. No business
may be transacted at such special meeting otherwise than specified in such
notice. The officer receiving the request shall cause notice to be promptly
given to the stockholders entitled to vote, in accordance with the provisions of
Section 7 of these Bylaws, that a meeting will be held not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after the receipt of the request,
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.

        SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and


                                       3.
<PAGE>   9

purpose or purposes of the meeting. Notice of the time, place and purpose of any
meeting of stockholders may be waived in writing, signed by the person entitled
to notice thereof, either before or after such meeting, and will be waived by
any stockholder by his attendance thereat in person or by proxy, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given. (Del. Code Ann., tit. 8, Sections 222,
229)

        SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting, shall not be counted to determine a quorum at
such meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting at which a
quorum is present shall be valid and binding upon the corporation; provided,
however, that Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of Directors. Where a separate vote by a class or classes
is required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled to
take action with respect to that vote on that matter and the affirmative vote of
the majority (plurality, in the case of the election of Directors) of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class. (Del. Code Ann., tit. 8, Section 216)

        SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
Section 222(c))

        SECTION 10. VOTING RIGHTS.

                (a) For the purpose of determining those stockholders entitled
to vote at any meeting of the stockholders, except as otherwise provided by law,
only persons in whose names shares stand on the stock records of the corporation
on the record date, as provided in Section 12 of these Bylaws, shall be entitled
to vote at any meeting of stockholders. Except as may be



                                       4.
<PAGE>   10

otherwise provided in the Certificate of Incorporation or these Bylaws, each
stockholder shall be entitled to one vote for each share of capital stock held
by such stockholder. Every person entitled to vote shall have the right to do so
either in person or by an agent or agents authorized by a written proxy executed
by such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after three (3)
years from its date of creation unless the proxy provides for a longer period.
All elections of Directors shall be by written ballot, unless otherwise provided
in the Certificate of Incorporation. (Del. Code Ann., tit. 8, Sections 211(e),
212(b))

        SECTION 11. BENEFICIAL OWNERS OF STOCK.

                (a) If shares or other securities having voting power stand of
record in the names of two (2) or more persons, whether fiduciaries, members of
a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this subsection
(c) shall be a majority or even-split in interest. (Del. Code Ann., tit. 8,
Section 217(b))

                (b) Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent such stock and vote thereon.
(Del. Code Ann., tit. 8, Section 217(a))

        SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present. (Del. Code
Ann., tit. 8, Section 219(a))

        SECTION 13. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.


                                       5.
<PAGE>   11


        SECTION 14. ORGANIZATION.

                (a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.

                (b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless, and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.

                                   ARTICLE IV

                                    DIRECTORS

        SECTION 15. NUMBER AND TERM OF OFFICE. CLASSES OF DIRECTORS. The
authorized number of directors of the corporation shall be determined from time
to time by resolution of the Board of Directors. Directors need not be
stockholders unless so required by the Certificate of Incorporation. If for any
cause, the Directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
(Del. Code Ann., tit. 8, Sections 141(b), 211(b), (c))

        Subject to the rights of the holders of any series of Preferred Stock to
elect additional directors under specified circumstances, following the closing
of the Initial Public Offering, the directors shall be divided into three
classes designated as Class I, Class II and Class III, respectively. Directors
shall be assigned to each class in accordance with a resolution or resolutions
adopted by the Board of Directors. At the first annual meeting of stockholders
following the Closing of the Initial Public Offering, the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three years. At the second annual meeting of stockholders following the
Closing of the Initial Public Offering, the term of office of the Class II
directors shall expired and Class II directors shall be elected for a full term
of three years. At the third annual meeting of stockholders following the
Closing of the Initial Public Offering, the term of office of the Class III
directors shall expired and Class III directors


                                       6.
<PAGE>   12

shall be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of three
years to succeed the directors of the class whose terms expired at such annual
meeting.

        Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

        SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation. (Del. Code Ann., tit. 8, Section 141(a))

        SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Section 17 in the case of
the death, removal or resignation of any Director, or if the stockholders fail
at any meeting of stockholders at which Directors are to be elected (including
any meeting referred to in Section 19 below) to elect the number of Directors
then constituting the whole Board of Directors. (Del. Code Ann., tit. 8, Section
223(a), (b))

        SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified. (Del. Code Ann., tit. 8,
Sections 141(b), 223(d))

        SECTION 19. REMOVAL. At a special meeting of stockholders called for the
purpose in the manner hereinabove provided, subject to any limitations imposed
by law or the Certificate of Incorporation, the Board of Directors, or any
individual Director, may be removed from office, (i) with cause by the
affirmative vote of the holders of a majority of the voting power of all the
then-outstanding shares of voting stock of the corporation entitled to vote at
an election of directors (the "Voting Stock") or (ii) without cause by the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all the then-outstanding shares of the Voting
Stock. (Del. Code Ann., tit. 8, Section 141(k))

        SECTION 20. MEETINGS.

                (a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such


                                       7.
<PAGE>   13

meeting shall be held for the purpose of electing officers and transacting such
other business as may lawfully come before it.

                (b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been determined by the Board of Directors. (Del. Code
Ann., tit. 8, Section 141(g))

                (c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the President or a majority of the Directors. (Del. Code Ann., tit. 8,
Section 141(g))

                (d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting. (Del. Code
Ann., tit. 8, Section 141(i))

                (e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be given orally or in writing,
by telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least one (1) day before the date of the meeting, or sent in writing to each
director by first class mail, postage prepaid, at least three (3) days before
the date of the meeting. Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any Director by
attendance thereat, except when the Director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. (Del. Code
Ann., tit. 8, Section 229)

                (f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the Directors not present shall sign a written
waiver of notice, or a consent to holding such meeting, or an approval of the
minutes thereof. [Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
any written waiver of notice or consent unless so required by the Certificate of
Incorporation or these Bylaws. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
(Del. Code Ann., tit. 8, Section 229)

        SECTION 21. QUORUM AND VOTING.

                (a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
Directors fixed from time to time in accordance with Section 15 hereof, but not
less than one (1), a quorum of the Board of Directors shall consist


                                       8.
<PAGE>   14

of the greater of three (3) Directors or a majority of the exact number of
Directors fixed from time to time in accordance with Section 15 of these Bylaws;
provided, however, at any meeting whether a quorum be present or otherwise, a
majority of the Directors present may adjourn from time to time until the time
fixed for the next regular meeting of the Board of Directors, without notice
other than by announcement at the meeting. (Del. Code Ann., tit. 8, Section
141(b))

                (b) At each meeting of the Board of Directors at which a quorum
is present all questions and business shall be determined by a vote of a
majority of the Directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
Section 141(b))

        SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. (Del. Code Ann., tit. 8, Section 141(f))

        SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, Section 141(h))

        SECTION 24. COMMITTEES.

                (a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation and may authorize the seal of the corporation to
be affixed to all papers which may require it; provided, however, that, absent
express authorization by the Board of Directors, no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or mater expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation. (Del. Code
Ann., tit. 8, Section 141(c))

                (b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors, and shall have such powers and perform such duties as
may be prescribed by the resolution or resolutions creating such committees, but
in no event shall such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, Section 141(c))


                                       9.
<PAGE>   15

                (c) TERM. The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board of Directors, subject to
the provisions of subsections (a) or (b) of this Section 24, may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall terminate
on the date of his death or voluntary resignation from the committee or from the
Board of Directors. The Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. (Del. Code Ann., tit. 8, Section 141(c))

                (d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any Director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any Director by attendance thereat, except when the Director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8,
Sections 141(c), 229)

        SECTION 25. ORGANIZATION. At every meeting of the Directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.

                                    ARTICLE V

                                    OFFICERS

        SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
be the Chairman of the Board of Directors, the President, one or more Vice
Presidents, the Secretary


                                      10.
<PAGE>   16

and the Chief Financial Officer or Treasurer, all of whom shall be elected at
the annual organizational meeting of the Board of Directors. The order of the
seniority of the Vice Presidents shall be in the order of their nomination,
unless otherwise determined by the Board of Directors. The Board of Directors
may also appoint one or more Assistant Secretaries, Assistant Treasurers, and
such other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors. (Del. Code Ann., tit. 8, Sections 122(5), 142(a), (b))

        SECTION 27. TENURE AND DUTIES OF OFFICERS.

                (a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors. (Del. Code Ann., tit. 8, Section 141(b), (e))

                (b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 27. (Del. Code Ann., tit. 8, Section 142(a))

                (c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
The President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. (Del. Code Ann., tit. 8, Section
142(a))

                (d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the order
of their seniority, may assume and perform the duties of the President in the
absence or disability of the President or whenever the office of President is
vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(Del. Code Ann., tit. 8, Section 142(a))

                (e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders,
and of all meetings of the Board of Directors and any


                                      11.
<PAGE>   17

committee thereof requiring notice. The Secretary shall perform all other duties
given him in these Bylaws and other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time. (Del. Code Ann., tit. 8, Section
142(a))

                (f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief
Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the President. The Chief Financial
Officer or Treasurer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))

        SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.

        SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, Section 142(b))

        SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.

                                   ARTICLE VI

                     EXECUTION OF CORPORATE INSTRUMENTS AND
                  VOTING OF SECURITIES OWNED BY THE CORPORATION

        SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other



                                      12.
<PAGE>   18

person or persons, to execute on behalf of the corporation any corporate
instrument or document, or to sign on behalf of the corporation the corporate
name without limitation, or to enter into contracts on behalf of the
corporation, except where otherwise provided by law or these Bylaws, and such
execution or signature shall be binding upon the corporation. (Del. Code Ann.,
tit. 8, Sections 103(a), 142(a), 158)

        Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)

        All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

        Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)

        SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the President, or any Vice President.
(Del. Code Ann., tit. 8, Section 123)

                                   ARTICLE VII

                                 SHARES OF STOCK

        SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Where such certificate is countersigned by a transfer agent
other than the corporation or its employee, or by a registrar other than the
corporation or its employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall


                                      13.
<PAGE>   19

state upon the face or back thereof, in full or in summary, all of the
designations, preferences, limitations, restrictions on transfer and relative
rights of the shares authorized to be issued. (Del. Code Ann., tit. 8, Section
158)

        SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
(Del. Code Ann., tit. 8, Section 167)

        SECTION 35. TRANSFERS.

                (a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. (Del. Code Ann., tit.
8, Section 201, tit. 6, Section 8-401(1))

                (b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware. (Del. Code Ann., tit.
8, Section 160 (a))

        SECTION 36. FIXING RECORD DATES.

                (a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

                (b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty (60) days prior to such action. If no record date has
been fixed by the Board of Directors,


                                      14.
<PAGE>   20

the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. (Del. Code Ann., tit. 8, Section 213)

        SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
(Del. Code Ann., tit. 8, Sections 213(a), 219)

                                  ARTICLE VIII

                       OTHER SECURITIES OF THE CORPORATION

        SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.

                                   ARTICLE IX

                                    DIVIDENDS

        SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation. (Del. Code Ann., tit. 8, Sections 170, 173)


                                      15.
<PAGE>   21

        SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created. (Del.
Code Ann., tit. 8, Section 171)

                                    ARTICLE X

                                   FISCAL YEAR

        SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

                                   ARTICLE XI

                                 INDEMNIFICATION

        SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.

                (a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may limit the extent of
such indemnification by individual contracts with its Directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any Director or executive officer in connection with any proceeding
(or part thereof) initiated by such person or any proceeding by such person
against the corporation or its Directors, officers, employees or other agents
unless (i) such indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the Board of Directors of the corporation or
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the Delaware
General Corporation Law.

                (b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.

                (c) GOOD FAITH.

                        (1) For purposes of any determination under this Bylaw,
a Director or executive officer shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe that his conduct was unlawful, if his
action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:

                                (i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;


                                      16.
<PAGE>   22

                                (ii) counsel, independent accountants or other
persons as to matters which the Director or executive officer believed to be
within such person's professional competence; and

                                (iii) with respect to a Director, a committee of
the Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to merit
confidence; so long as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.

                        (2) The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal proceeding, that he had reasonable cause to believe that his conduct
was unlawful.

                        (3) The provisions of this paragraph (c) shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth by
the Delaware General Corporation Law.

                (d) EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.

                        Notwithstanding the foregoing, unless otherwise
determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by
the corporation to an executive officer of the corporation (except by reason of
the fact that such executive officer is or was a director of the corporation in
which event this paragraph shall not apply) in any action, suit or proceeding,
whether civil, criminal, administrative or investigation, if a determination is
reasonably and promptly made (1) by the Board of Directors by a majority vote of
a quorum consisting of Directors who were not parties to the proceeding, or (2)
if such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, that the facts known to the decision making party at the time such
determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.

                (e) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense


                                      17.
<PAGE>   23

to any such action that the claimant has not met the standards of conduct that
make it permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.

                (f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.

                (g) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

                (h) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.

                (i) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.

                (j) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.

                (k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:

                        (1) The term "PROCEEDING" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

                        (2) The term "EXPENSES" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or


                                      18.
<PAGE>   24

judgment and any other costs and expenses of any nature or kind incurred in
connection with any proceeding.

                        (3) The term the "CORPORATION" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

                        (4) References to a "DIRECTOR," "OFFICER," "EMPLOYEE,"
or "AGENT" of the corporation shall include, without limitation, situations
where such person is serving at the request of the corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.

                        (5) References to "OTHER ENTERPRISES" shall include
employee benefit plans; references to "FINES" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"SERVING AT THE REQUEST OF THE CORPORATION" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF THE
CORPORATION" as referred to in this Bylaw.

                                   ARTICLE XII

                                     NOTICES

        SECTION 43. NOTICES.

                (a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent. (Del. Code Ann., tit. 8,
Section 222)

                (b) NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director.


                                      19.
<PAGE>   25

                (c) ADDRESS UNKNOWN. If no address of a stockholder or Director
be known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.

                (d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained. (Del. Code Ann., tit. 8, Section 222)

                (e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by facsimile, telex or telegram shall be deemed to have been
given as of the sending time recorded at time of transmission.

                (f) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.

                (g) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.

                (h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.

                (i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such


                                      20.
<PAGE>   26

person shall not be required. Any action or meeting which shall be taken or held
without notice to such person shall have the same force and effect as if such
notice had been duly given. If any such person shall deliver to the corporation
a written notice setting forth his then current address, the requirement that
notice be given to such person shall be reinstated. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph. (Del. Code Ann, tit. 8, Section 230)

                                  ARTICLE XIII

                                   AMENDMENTS

        SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the affirmative vote of at least sixty-six and two-thirds
percent (66-2/3%) of the voting power of all of the then-outstanding shares of
the Voting Stock. The Board of Directors shall also have the power, if such
power is conferred upon the Board of Directors by the Certificate of
Incorporation, to adopt, amend or repeal Bylaws (including, without limitation,
the amendment of any Bylaw setting forth the number of Directors who shall
constitute the whole Board of Directors). (Del. Code Ann., tit. 8, Sections
109(a), 122(6))

                                   ARTICLE XIV

                                LOANS TO OFFICERS

        SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this Section 46 shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute. (Del. Code Ann., tit. 8, Section 143)


                                      21.

<PAGE>   1
                                                                  Exhibit 4.02

                               QUOKKA SPORTS, INC.

                AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

                            AS OF DECEMBER 23, 1998



<PAGE>   2
<TABLE>
<CAPTION>

                                         TABLE OF CONTENTS
                                                                                           PAGE

<S>            <C>                                                                         <C>
Section 1.     GENERAL.......................................................................1

        1.1    Definitions...................................................................1

Section 2.     REGISTRATION; RESTRICTIONS ON TRANSFER........................................3

        2.1    Restrictions on Transfer......................................................3

        2.2    Demand Registration...........................................................5

        2.3    Piggyback Registrations.......................................................6

        2.4    Form S-3 Registration.........................................................7

        2.5    Expenses of Registration......................................................8

        2.6    Obligations of the Company....................................................8

        2.7    Termination of Registration Rights...........................................10

        2.8    Delay of Registration; Furnishing Information................................10

        2.9    Indemnification..............................................................10

        2.10   Assignment of Registration Rights............................................12

        2.11   Amendment of Registration Rights.............................................12

        2.12   Limitation on Subsequent Registration Rights.................................12

        2.13   "Market Stand-Off" Agreement.................................................13

        2.14   Rule 144 Reporting...........................................................13

Section 3.     COVENANTS OF THE COMPANY.....................................................14

        3.1    Basic Financial Information and Reporting....................................14

        3.2    Wakefield Observer Rights....................................................14

        3.3    Intel Observer Rights........................................................14

        3.4    Accel Partners Observer Rights...............................................15

        3.5    Media One Observer Rights....................................................15

        3.6    Reservation of Voting Common Stock...........................................15

        3.7    Termination of Covenants.....................................................15

Section 4.     AFFIRMATIVE COVENANTS OF THE INVESTORS.......................................16

        4.1    Confidential Information, etc................................................16

Section 5.     RIGHT OF FIRST REFUSAL.......................................................16

        5.1    Subsequent Offerings.........................................................16

        5.2    Exercise of Rights...........................................................16

        5.3    Issuance of Equity Securities To Other Persons...............................17

        5.4.   Termination of Rights of First Refusal. .....................................17


                                                  i


</TABLE>

<PAGE>   3





<TABLE>
<CAPTION>

                                      TABLE OF CONTENTS (CONTINUED)
                                                                                           PAGE

<S>            <C>                                                                         <C>
        5.5    Transfer of Rights of First Refusal..........................................17

        5.6    Excluded Securities..........................................................17

Section 6.     MISCELLANEOUS................................................................18

        6.1    Governing Law................................................................18

        6.2    Survival.....................................................................18

        6.3    Successors and Assigns.......................................................18

        6.4    Entire Agreement.............................................................18

        6.5    Severability.................................................................18

        6.6    Amendment and Waiver.........................................................18

        6.7    Delays or Omissions..........................................................19

        6.8    Notices......................................................................19

        6.9    Attorneys' Fees..............................................................19

        6.10   Titles and Subtitles.........................................................19

        6.11   Counterparts.................................................................20

        6.12   Protection of Confidential Information.......................................20

        6.13   Disclosure of Terms:  Press Releases.........................................20


                                                   ii
</TABLE>

<PAGE>   4





                               QUOKKA SPORTS, INC.

                AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT


        THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement")
is entered into as of the 23rd day of December, 1998, by and among QUOKKA
SPORTS, INC., a Delaware corporation (the "Company") and the holders of the
Company's Common Stock, Warrants, Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock set forth on Exhibit A hereto (the
"Investors"). This Agreement amends, restates and supersedes in its entirety
that certain Amended and Restated Investors' Rights Agreement dated June 12,
1998 (the "Original Investors' Rights Agreement").

                                    RECITALS

        WHEREAS, the Company and certain of its current stockholders and warrant
holders entered into the Original Investors' Rights Agreement; and

        WHEREAS, the Company proposes to sell and issue up to an aggregate of
Four Million Nine Hundred Thirty Eight Thousand Seven Hundred Fifty Six
(4,938,756) shares of the Company's Series C Preferred Stock (the "Series C
Preferred") pursuant to that certain Series C Preferred Stock Purchase Agreement
dated as of the date hereof (the "Purchase Agreement"); and

        WHEREAS, as a condition of entering into the Purchase Agreement, certain
Purchasers (as defined in the Purchase Agreement) have requested that the
Company extend to them registration rights, information rights and other rights
and amend the Original Investors' Rights Agreement as set forth below; and

        WHEREAS, as a condition of entering into the Purchase Agreement, the
Company has requested that the Purchasers agree to restrictions on transfer,
confidentiality provisions and other obligations as set forth below.

        NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:

SECTION 1. GENERAL

        1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:

        "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

        "FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

                                       1.
<PAGE>   5







        "HOLDER" means any person owning of record any shares of the Non-Voting
Common Stock, Shares, Warrants or Registrable Securities that have not been sold
to the public or any assignee of record of such Registrable Securities in
accordance with Section 2.9 hereof.

        "INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.

        "MAJOR INVESTOR" means each Purchaser (as such term is defined in that
certain Common Stock Purchase Agreement dated August 19, 1997), each Purchaser
(as such term is defined in that certain Series A Preferred Stock Purchase
Agreement dated December 4, 1997 with a subsequent closing on December 19,
1997), each Purchaser (as such term is defined in that certain Series B
Preferred Stock Purchase Agreement dated June 12, 1998 with a subsequent closing
on August 11, 1998) and each Purchaser (as such term is defined in the Purchase
Agreement) or any assignee of record in accordance with Section 5.5 hereof.

        "NON-VOTING COMMON STOCK" means such shares of the Company's Non-Voting
Common Stock sold pursuant to the Common Stock Purchase Agreement dated April
12, 1997 or the Common Stock Purchase Agreement dated January 31, 1997.

        "REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or documents.

        "REGISTRABLE SECURITIES" means (i) any of the Shares, if such Shares are
shares of the Company's Voting Common Stock; (ii) any shares of the Company's
Voting Common Stock issued pursuant to the conversion of the Non-Voting Common
Stock, the Series C Preferred, the Series B Preferred or the Series A Preferred;
(iii) any shares of the Company's Voting Common Stock issued pursuant to the
exercise of the Warrants; and (iv) any shares of the Company's Voting Common
Stock issued as (or issuable upon the conversion or exercise of any warrants,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities or the Non-Voting Common Stock or the Warrants. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferor's rights under Section 2
of this Agreement are not assigned.

        "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of shares
that are Registrable Securities and either (1) are then issued and outstanding
or (2) are issuable pursuant to then exercisable or convertible securities.

        "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).


                                       2.
<PAGE>   6


        "SEC" OR "COMMISSION" means the Securities and Exchange Commission.

        "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

        "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.

        "SERIES A PREFERRED" means the Company's Series A Preferred Stock.

        "SERIES B PREFERRED" means the Company's Series B Preferred Stock.

        "SERIES C PREFERRED" means the Company's Series C Preferred Stock.

        "SHARES" shall mean (i) the Company's Series C Preferred, (ii) the
Company's Series B Preferred, (iii) the Company's Series A Preferred, (iv) the
Company's Voting Common Stock issued pursuant to that certain Common Stock
Purchase Agreement dated August 19, 1997 by and among the Company and the
Purchasers set forth on Exhibit A thereto, (v) the Company's Voting Common Stock
and Non-Voting Common Stock issued pursuant to that certain Common Stock
Purchase Agreement dated April 2, 1997 by and between the Company and Richard H.
Williams and (vi) the Company's Voting Common Stock issued pursuant to that
certain Common Stock Purchase Agreement dated January 31, 1997 between the
Company and Quokka Sports Pty Ltd. as trustee for Ozware Developments Unit
Trust.

        "WARRANTS" means (i) the warrants to purchase Voting Common Stock of the
Company issued pursuant to that certain Note and Warrant Purchase Agreement
dated October 31, 1997 among the Company and the Purchasers set forth on Exhibit
A thereto and (ii) the warrants, if any, held by Intel Corporation, MediaOne
Interactive Services, Inc. ("MediaOne"), any affiliate of MediaOne to whom such
warrants have been originally issued, America's Olympic Network, LLC or its
assignees, including the National Broadcasting Corporation, Inc.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER

        2.1 RESTRICTIONS ON TRANSFER.

               (a) Each Holder agrees not to make any disposition of all or any
portion of the Non-Voting Common Stock, Shares or Registrable Securities unless
and until:

                        (i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or

                        (ii) (A) The disposition is made under Rule 144 or its
equivalent, (B) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (C) such Holder shall
have furnished the Company with an opinion of counsel that such disposition will
not require registration under the Securities Act if reasonably requested by the
Company, which request shall only be made in unusual circumstances;


                                       3.
<PAGE>   7




                        (iii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act.

                        (iv) Notwithstanding the provisions of paragraphs (i),
(ii) and (iii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership to its
partners or former partners in accordance with partnership interests, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, or to a wholly-owned subsidiary, (C) a limited liability company to
its members or former members in accordance with their interest in the limited
liability company, or (D) to the Holder's family member or trust for the benefit
of an individual Holder, provided any such transferee will be subject to the
terms of this Agreement to the same extent as if he were an original Holder
hereunder.

               (b) Each certificate representing the Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of this
Agreement) be stamped or otherwise imprinted with legends substantially similar
to the following (in addition to any legend required under applicable state
securities laws, under Section 45 the Company's Bylaws (Right of First Refusal)
or as provided elsewhere in this Agreement):

               THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
               THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
               SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
               UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
               HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
               COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

               THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY
               THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN
               THE COMPANY AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN
               INTEREST. COPIES OF SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN
               REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
               SECRETARY OF THE COMPANY.

               (c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.



                                    4.
<PAGE>   8




               (d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.

        2.2 DEMAND REGISTRATION.

               (a) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of more than fifty percent
(50%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities having an aggregate offering price to
the public in excess of $10,000,000 (a "Qualified Public Offering"), then the
Company shall, within twenty (20) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.

               (b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.3 or 2.4 and the Company
shall include such information in the written notice referred to in Section
2.4(a) or Section 2.5(a), as applicable. In such event, the right of any Holder
to include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.4, if the underwriter
advises the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities which would otherwise be underwritten pursuant hereto on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.

               (c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:

                        (i) Prior to the completion of the Company's Initial
Offering;

                        (ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective by the SEC;



                                       5.
<PAGE>   9




                        (iii) during the period starting with the date of filing
of, and ending on the date one hundred eighty (180) days following the effective
date of the registration statement relating to the Company's equity securities
pertaining to the Initial Offering; provided that the Company makes reasonable
good faith efforts to cause such registration statement to become effective; or

                        (iv) if the Company shall furnish to Holders requesting
the filing of a registration statement pursuant to this Section 2.4, a
certificate signed by the Chairman of the Board stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than sixty (60) days after receipt of
the request of the Initiating Holders; provided that such right to delay a
request shall be exercised by the Company not more than twice in any twelve (12)
month period.

        2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to, the
Initial Offering and registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to
employee benefit plans or with respect to corporate reorganizations or other
transactions under Rule 145 of the Securities Act) and will afford each such
Holder an opportunity to include in such registration statement all or part of
such Registrable Securities held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by it shall, within fifteen (15) days after the above-described notice from
the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

               (a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders
who wish to sell in such offering; and third, to any shareholder of the Company
(other than a Holder of Registrable Securities) on a pro rata basis.
Notwithstanding the immediately preceding sentence, in no event shall the amount
of securities


                                       6.
<PAGE>   10



of the selling Holders included in the registration be reduced below twenty-five
percent (25%) of the total amount of securities included in such registration,
unless such offering is the Initial Offering, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with the
immediately preceding sentence. In no event will shares of any other selling
shareholder be included in any such registration which would reduce the number
of shares which may be included by Holders without the written consent of
Holders of more than fifty percent (50%) of the Registrable Securities proposed
to be sold in the offering.

               (b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.

        2.4 FORM S-3 REGISTRATION. After the Initial Offering, in the event the
Company shall receive a written request from the Holders of more than fifty
percent (50%) of the Registrable Securities then outstanding (the "Initiating
Holders") that the Company effect a registration on Form S-3 (or any successor
to Form S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

               (a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and

               (b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Initiating
Holder's or Initiating Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified in a written
request given to the Company by any such other Holder or Holders within fifteen
(15) days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:

                        (i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or

                        (ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $1,000,000, or

                        (iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for (a) a
period of not more than sixty (60) days after receipt of the request of the
Initiating Holder or Initiating Holders


                                       7.
<PAGE>   11





under this Section 2.4; and (b) a period of not more than thirty (30) days after
the lapse of the sixty (60) day deferral referenced in Section 2.4(b)(iii)(a)
immediately above; provided, that such rights to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period, or

                        (iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected one (1) registration
on Form S-3 for the Holders pursuant to this Section 2.4,

                        (v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance,
unless the Registered Securities would not, on account of this limitation, be
available for offer and sale in at least twenty states, or

                        (vi) if the Company has, within the one hundred eighty
(180) day period preceding the date of such request, effected a Company
initiated registration (other than a registration effected solely to qualify an
employee benefit plan or to effect a business combination pursuant to Rule 145).

               (c) Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.

        2.5 EXPENSES OF REGISTRATION. Except as specifically provided in this
Section 2.5, all Registration Expenses incurred in connection with any
registration under Section 2.2, Section 2.3 or Section 2.4 herein shall be borne
by the Company. All Selling Expenses incurred in connection with any
registrations hereunder shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares sold. The Company shall
not, however, be required to pay for expenses of any registration proceeding
begun pursuant to Section 2.2, the request of which has been subsequently
withdrawn by the Initiating Holders unless (a) the withdrawal is based upon
material adverse information concerning the Company of which the Initiating
Holders were not aware at the time of such request or (b) the Holders of a
majority of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 2.2, in which event such right shall be
forfeited by all Holders). Additionally, the Company shall not be required to
pay for expenses in any registration proceeding begun pursuant to Section 2.4,
the request of which has been subsequently withdrawn by the Initiating Holders
unless (a) the withdrawal is based upon material adverse information concerning
the Company of which the Initiating Holders were not aware at the time of such
request or (b) the Holders of a majority of Registrable Securities agree that
such registration shall be deemed a completed registration for the purpose of
Section 2.4(b)(iv). If the Holders are required to pay the Registration
Expenses, such expenses shall be borne by the holders of securities (including
Registrable Securities) requesting such registration in proportion to the number
of shares for which such registration was requested.

        2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:


                                       8.
<PAGE>   12


               (a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.

               (b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.

               (c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities being registered by
them.

               (d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Registered
Securities would not, on account of this limitation, be available for offer and
sale in at least twenty states.

               (e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

               (f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

               (g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and if permitted by applicable accounting standards, to the Holders
requesting registration of Registrable Securities.


                                       9.
<PAGE>   13



        2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect ten
(10) years after the date of the Company's Initial Offering. In addition, a
Holder's registration rights shall expire if (i) the Company has completed its
Initial Offering and is subject to the provisions of the Exchange Act, (ii) such
Holder (together with its affiliates, partners and former partners) holds less
than 1% of the Company's outstanding Common Stock (treating all shares of
convertible Preferred Stock on an as converted basis) and (iii) all Registrable
Securities held by and issuable to such Holder may be sold under Rule 144(k) or
all Registrable Securities held by and issuable to such Holder may be sold under
Rule 144 during any ninety (90) day period.

        2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION

               (a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.

               (b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.

        2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 2.2, 2.3 or 2.4:

               (a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors and legal
counsel of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 2.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in


                                      10.
<PAGE>   14
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.

               (b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.

               (c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, shall not relieve such indemnifying party of
any liability to the indemnified party under this Section 2.9, except to the
extent that the indemnifying party is materially prejudiced by such delay, but
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 2.9.


                                      11.
<PAGE>   15





               (d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.

               (e) The obligations of the Company and Holders under this Section
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

        2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to any transferee or assignee of Registrable Securities which (i) any
person or entity holding Registrable Securities pursuant to a transfer permitted
by Section 2.1(a)(iii), or (ii) acquires at least fifty thousand (50,000) shares
of Registrable Securities (as adjusted for stock splits and combinations);
provided, however, (A) the transferor shall furnish to the Company written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned, it being
understood that, until such time as the Company receives such written notice,
the Company is under no obligation to treat such transferee or assignee as a
holder of registration rights, and (B) such transferee shall agree to be subject
to all restrictions set forth in this Agreement.

        2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of more than fifty percent (50%)
of the Registrable Securities then outstanding, provided that such amendment or
waiver does not differentiate among similarly situated stockholders. Any
amendment or waiver effected in accordance with this Section 2.11 shall be
binding upon each Holder and the Company. By acceptance of any benefits under
this Section 2, Holders of Registrable Securities hereby agree to be bound by
the provisions hereunder.

        2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of more than fifty percent (50%) of the Registrable Securities, enter
into any agreement with any holder or


                                      12.
<PAGE>   16





prospective holder of any securities of the Company that would grant such holder
registration rights senior to those granted to the Holders hereunder.

        2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by such Holder (other than those included
in the registration) for a period specified by the representative of the
underwriters of Common Stock (or other securities) of the Company not to exceed
one hundred eighty (180) days following the effective date of the first
registration statement of the Company filed under the Securities Act or ninety
(90) days following the effective date of subsequent registration statements,
provided that all officers and directors of the Company enter into similar
agreements and that, to the extent that any such officer or director is released
from any such agreement, the Holders shall also be released to such extent from
the restriction contained in this Section 2.13.

        Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.

        2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:

               (a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;

               (b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;

               (c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.


                                      13.
<PAGE>   17







SECTION 3. COVENANTS OF THE COMPANY.

        3.1 BASIC FINANCIAL INFORMATION AND REPORTING.

               (a) The Company will maintain true books and records of account
in which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.

               (b) As soon as practicable after the end of each fiscal year of
the Company, and in any event within ninety (90) days thereafter, the Company
will furnish each Holder holding Registrable Securities a consolidated balance
sheet of the Company, as at the end of such fiscal year, and a consolidated
statement of income and a consolidated statement of cash flows of the Company,
for such year, all prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail. Such
financial statements shall be accompanied by a report and opinion thereon by
independent public accountants of national standing selected by the Company's
Board of Directors. The Company will also furnish to each Holder, in advance, an
annual budget for each year and, within thirty (30) days after each fiscal
quarter, a report on financial and operational highlights.

               (c) As soon as practicable after the end of every month, and in
any event within thirty (30) days thereafter, the Company will furnish each
Holder holding Registrable Securities an unaudited monthly report including a
consolidated balance sheet, an unaudited consolidated statement of income and an
unaudited consolidated statement of cash flows of the Company, all prepared in
accordance with generally accepted accounting principles (other than for
accompanying notes and changes resulting from year-end audit adjustments), and
setting forth in each case in comparative form the figures for the previous
fiscal year and the projected results for the upcoming fiscal year, all in
reasonable detail.

        3.2 WAKEFIELD OBSERVER RIGHTS. So long as Wakefield Group II LLC
("Wakefield") and its affiliates continue to hold in the aggregate at least
eight hundred thousand (800,000) shares (as adjusted for stock splits and like
events) of the Company's Voting Common Stock, Wakefield shall have the right, at
Wakefield's expense, to designate a representative to attend all meetings
(including meetings to be held by telephone) of the Company's Board of Directors
in a non-voting observer capacity, and, in this respect, the Company shall give
such representative copies of all notices, minutes, consents and other materials
that it provides to directors; provided, however, that such representative shall
agree to hold in confidence and trust all information so provided. The Company
shall have the right to approve Wakefield's representative, such approval not to
be unreasonably withheld.

        3.3 INTEL OBSERVER RIGHTS. So long as Intel Corporation ("Intel") and
its affiliates continue to hold in the aggregate at least one million one
hundred seventy-six thousand four hundred seventy-one (1,176,471) shares (as
adjusted for stock splits and like events) of the Company's Series A Preferred
Stock, Intel shall have the right, at Intel's expense, to designate a
representative to attend all meetings (including meetings to be held by
telephone) of the


                                      14.
<PAGE>   18





Company's Board of Directors in a non-voting observer capacity, and, in this
respect, the Company shall give such representative copies of all notices,
minutes, consents and other materials that it provides to directors; provided,
however, that such representative shall agree to hold in confidence and trust
all information so provided. The Company shall have the right to approve Intel's
representative, such approval not to be unreasonably withheld.

        3.4 ACCEL PARTNERS OBSERVER RIGHTS. So long as Accel Partners ("Accel")
and its affiliates continue to hold in the aggregate at least two million five
hundred thousand (2,500,000) shares (as adjusted for stock splits and like
events) of the Company's Series B Preferred Stock, Accel shall have the right,
at Accel's expense, to designate a representative to attend all meetings
(including meetings to be held by telephone) of the Company's Board of Directors
in a non-voting observer capacity, and, in this respect, the Company shall give
such representative copies of all notices, minutes, consents and other materials
that it provides to directors; provided, however, that such representative shall
agree to hold in confidence and trust all information so provided. The Company
shall have the right to approve Accel's representative, such approval not to be
unreasonably withheld; provided, however, that any employee, director or partner
of Accel who has no significant relationship with any competitor of the Company
and otherwise has no conflict of interest with the Company's interests shall be
deemed acceptable to the Company.

        3.5 MEDIA ONE OBSERVER RIGHTS. So long as MediaOne and its affiliates
continue to hold in the aggregate at least two million (2,000,000) shares (as
adjusted for stock splits and like events) of the Company's Series B Preferred
Stock and Series C Preferred Stock, and at such time as MediaOne or its
affiliates do not have a representative on the Company's Board of Directors,
MediaOne shall have the right, at MediaOne's expense, to designate a
representative to attend all meetings (including meetings to be held by
telephone) of the Company's Board of Directors in a non-voting observer
capacity, and, in this respect, the Company shall give such representative
copies of all notices, minutes, consents and other materials that it provides to
directors; provided, however, that such representative shall agree to hold in
confidence and trust all information so provided. The Company shall have the
right to approve MediaOne's representative, such approval not to be unreasonably
withheld; provided, however, that any employee, director or partner of MediaOne
who has no significant relationship with any competitor of the Company and
otherwise has no conflict of interest with the Company's interests shall be
deemed acceptable to the Company.

        3.6 RESERVATION OF VOTING COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the outstanding Non-Voting Common Stock, all Voting Common Stock issuable
from time to time upon such conversion.

        3.7 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Holder on the
closing of the Initial Offering at such time as the Company is otherwise subject
to the provisions of the Securities Exchange Act of 1934, as amended.


                                      15.
<PAGE>   19


SECTION 4. AFFIRMATIVE COVENANTS OF THE INVESTORS

        4.1 CONFIDENTIAL INFORMATION, ETC. In addition to the provision set
forth in Sections 6.12 and 6.13, each Investor agrees that (a) all information
received by such Investor pursuant to Section 3 and (b) any other information,
including without limitation information relating to the Company's customers,
technology, processes or formulas, that (i) is disclosed by the Company to such
Investor and (ii) is identified by the Company as being confidential or
proprietary, shall be considered confidential information. Each Investor further
agrees that such Investor shall hold all such confidential information in
confidence and shall not disclose any such confidential information to any third
party other than such Investor's counsel or accountants nor shall such Investor
use such confidential information for any purpose other than evaluation of such
Investor's investment in the Company; provided, however, that the foregoing
obligation to hold in confidence and not to disclose confidential information
shall not apply to any such information that (1) was available to the public
prior to disclosure by the Company, (2) becomes available to the public through
no fault of such Investor, (3) is disclosed to such Investor on a
non-confidential basis by a third party, provided that the Investor determines
after reasonable inquiry that the third party has a legal right to make such
disclosure or (4) is independently developed by such Investor.

SECTION 5. RIGHT OF FIRST REFUSAL

        5.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 5.6 hereof. Each Major Investor's pro rata share is equal to
the ratio of (a) the number of shares of the Company's Voting Common Stock
(including all shares of Voting Common Stock issued or issuable upon conversion
of the Shares) which such Investor is deemed to be a holder immediately prior to
the issuance of such Equity Securities to (b) the total number of shares of the
Company's outstanding Voting Common Stock (including all shares of Voting Common
Stock issued or issuable upon conversion of the Shares or upon the exercise of
any outstanding warrants or options) immediately prior to the issuance of the
Equity Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.

        5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to the purchase of its
pro rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Investor who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.


                                      16.
<PAGE>   20






        5.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. The Company shall
have one hundred twenty (120) days after the notice provided pursuant to Section
5.2 to sell the Equity Securities in respect of which the Major Investor's
rights were not exercised, at a price and upon terms and conditions materially
no more favorable to the purchasers thereof than specified in the Company's
notice to the Major Investors pursuant to Section 5.2 hereof. If the Company has
not sold such Equity Securities within one hundred twenty (120) days of the
notice provided pursuant to Section 5.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Major Investors in the manner provided above.

        5.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 5 shall not apply to, and shall terminate upon the
closing of the Initial Offering.

        5.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Investor under this Section 5 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.

        5.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 5 shall have no application to any of the following Equity Securities:

               (a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;

               (b) stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, including options and warrants outstanding as
of the date of this Agreement, and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, provided that the rights of
first refusal established by this Section 5 applied with respect to the initial
sale or grant by the Company of such rights or agreements;

               (c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;

               (d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;

               (e) shares of Common Stock issued upon conversion of the Shares;

               (f) any Equity Securities issued in connection with any
technology licensing, corporate Partnering, equipment leasing arrangement, debt
financing or similar transaction approved by the Board of Directors; and

               (g) any Equity Securities that are issued by the Company in the
Initial Offering.


                                      17.
<PAGE>   21






SECTION 6.     MISCELLANEOUS

        6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.

        6.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.

        6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.

        6.4 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.

        6.5 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

        6.6 AMENDMENT AND WAIVER.

               (a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of more than fifty percent (50%) of the Registrable Securities, provided that
such amendment or waiver does not differentiate among similarly situated
stockholders.

               (b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of more than fifty percent (50%) of
the Registrable Securities, provided that such amendment or waiver does not
differentiate among similarly situated stockholders.

               (c) Each Holder acknowledges that by the operation of this
Section 6.6, the holders of more than fifty percent (50%) of the Registrable
Securities may have the right and power to diminish or eliminate all rights of
such Holder under this Agreement.

               (d) Notwithstanding the foregoing however, Section 3.2 may not be
amended without the written consent of Wakefield Group II LLC.


                                      18.
<PAGE>   22






               (e) Notwithstanding the foregoing however, Section 3.3 may not be
amended without the written consent of Intel Corporation.

               (f) Notwithstanding the foregoing however, Section 3.4 may not be
amended without the written consent of Accel.

               (g) Notwithstanding the foregoing however, Section 3.5 may not be
amended without the written consent of MediaOne.

               (h) Notwithstanding the foregoing however, Section 5 may not be
amended or waived without the written consent of the Major Investors holding
more than sixty-six and two thirds percent (66 2/3%) of the Registrable
Securities held by all Major Investors.

               (i) Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to include additional purchasers of
Shares as "Investors," "Holders" and parties hereto.

        6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under this Agreement
or any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.

        6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt, or (v) if earlier, upon receipt. All
communications shall be sent to the party to be notified at the address as set
forth on Exhibit A hereto or at such other address as such party may designate
by ten (10) days advance written notice to the other parties hereto.

        6.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

        6.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.


                                      19.
<PAGE>   23


        6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

        6.12 PROTECTION OF CONFIDENTIAL INFORMATION. Intel's investment in the
Company, including the specific terms thereof, shall be considered confidential
information (the "Confidential Information") and shall not be disclosed by the
Company or any other party to this Agreement to any third party, subject to
Section 6.13 below. Each party shall immediately notify the other parties of any
information that comes to its attention which might indicate that there has been
a loss of confidentiality with respect to the Confidential Information. In the
event that the Company or any other party becomes legally compelled (by statute
or regulation or by oral questions, interrogatories, request for information or
documents, subpoena, criminal or civil investigative demand or similar process,
including without limitation, in connection with any public or private offering
of the Company's capital stock) to disclose any of the Confidential Information,
such party (the "Disclosing Party") shall provide the other party (the
"Non-Disclosing Party") with prompt written notice of that fact so that the
appropriate party may seek (with the cooperation and reasonable efforts of the
other parties) a protective order, confidential treatment or other appropriate
remedy. In such event, the Disclosing Party shall furnish only that portion of
the Confidential Information which is legally required and shall exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded the Confidential Information to the extent reasonably requested by
the Non-Disclosing Party. The provisions of this Section 6.12 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by Intel and the Company with respect to any
collaboration or similar agreement.

        6.13 DISCLOSURE OF TERMS: PRESS RELEASES. Notwithstanding the provisions
of Section 6.12 above, from and after the Closing (as defined in the Purchase
Agreement) the Company may disclose the Confidential Information, (i) solely to
the Company's investors, investment bankers, lenders, accountants, legal
counsel, business partners, and bona fide prospective investors, employees,
lenders and business partners, in each case only where such persons or entities
are under appropriate nondisclosure obligations and (ii) as may be required
pursuant to the Securities Act or Exchange Act. In addition, the Company may
disclose the fact that Intel is an investor in the Company to third parties
without the requirement for nondisclosure agreements. Within sixty (60) days of
the Closing, the Company may issue a press release disclosing that Intel has
invested in the Company, provided that the release does not disclose the amount
or other specific terms of the investment and is approved in advance in writing
by Intel. Intel, at its sole discretion, may provide an executive quote or other
material regarding its investment in the Company. Except for such disclosure and
press release, no other announcement regarding Intel's investment in the Company
in a press conference, in any professional or trade publication, in any
marketing materials or otherwise to the general public may be made without the
prior written consent of Intel, which consent may be withheld at the sole
discretion of Intel. Notwithstanding the foregoing and the provisions of Section
6.12 above, from and after the Closing, Intel may disclose its investment in the
Company and the terms thereof (other than Intel's put right) to third parties or
to the public at its discretion, and the Company shall have the right to
disclose to third parties any information disclosed by Intel in a press release
or other public announcement or document. If the Company or Intel determines
that any disclosure not otherwise authorized by this Section 6.13 is required by
law or regulation, then the provisions of Section 6.12 regarding disclosure of
Confidential Information by a


                                      20.
<PAGE>   24




Disclosing Party shall govern. Notwithstanding the provisions of Section 6.12
above, from and after the Closing, any party hereunder may disclose the
Confidential Information as may be required pursuant to the Securities Act or
Exchange Act.




                                      21.
<PAGE>   25





        IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

COMPANY:                                   INVESTORS:

QUOKKA SPORTS, INC.


By: /s/ Alan Ramadan                        By:
   -------------------------------             --------------------------------
               Alan Ramadan
               President
                                            Name of Investor:
                                                               -----------------

                                            Name of Signatory:
                                                               -----------------
                                                                (if applicable)
                                            Title of Signatory:
                                                               -----------------
                                                                (if applicable)




<PAGE>   26





                                    EXHIBIT A

                                    ADDRESSES

THE COMPANY

        Quokka Sports, Inc.
        525 Brannan Street, Ground Floor
        San Francisco, CA  94107
        Attention:  Mr. Alan Ramadan
        Telephone:    415-908-3800
        Fax:          415-908-1841

INVESTORS

        Ozware Developments Unit Trust
        c/o Quokka Sports Pty Ltd, its trustee
        525 Brannan Street, Ground Floor
        San Francisco, CA  94107
        Attention:  Mr. Alan Ramadan
        Telephone:    415-908-3800
        Fax:          415-908-1841

        Mr. Richard H. Williams
        Incline Village
        625 Anderson Drive
        P.O. Box 4281
        Incline Village, NV  89450
        Telephone:    415-782-6050
        Fax:          415-292-7544

        Bayview Investors Ltd.
        c/o Robertson, Stephens & Company
        555 California Street
        23rd Floor
        San Francisco, CA  94104
        Attn:  Sy Kaufman
        Telephone:    415-676-2618
        Fax:          415-676-2650

        Wakefield Group II LLC
        1110 East Morehead
        Charlotte, NC  28204
        Attn:  Mike Elliott
        Telephone:    704-372-0355
        Fax:          704-372-8978



                                       1.
<PAGE>   27



                                    EXHIBIT A

                              ADDRESSES (CONTINUED)





        Bregman Revocable Trust u/a/d 8/21/92
        Walter W. Bregman, ttee
        Roberta F. Bregman, ttee
        4629 Vista de la Tierra
        Del Mar, CA  92014
        Telephone:    619-792-6185
        Fax:          619-792-9285

        Roel Pieper
        Koninklijke Philips Electronics
        Rembrand Tower HRT24
        Amstelplein 1
        NL-1096HA Amsterdam
        Netherlands
        Tel:  +31 (20) 59 77 162
        Fax:  +31 (20) 59 77 160

        Brannan Street Partners
        525 Brannan Street, Third Floor
        San Francisco, CA  94107
        Attn: William Laney Thornton
        Telephone:    415-957-9378 ext. 104
        Fax:          415-495-8628

        Alan Ramadan
        c/o Quokka Sports, Inc.
        Ground Floor
        525 Brannan Street
        San Francisco, CA  94107
        Telephone:    415-908-3800
        Fax:          415-908-1841

        John Bertrand
        c/o Quokka Sports, Inc.
        Ground Floor
        525 Brannan Street
        San Francisco, CA  94107
        Telephone:    415-908-3800
        Fax:          415-908-1841




                                       2.


<PAGE>   28


                                    EXHIBIT A

                              ADDRESSES (CONTINUED)




        Intel Corporation
        c/o Tamiko Hutchinson
        2200 Mission College Blvd. SC4-210
        Santa Clara, CA 95052-8119
        Tel:  (408) 765-5636
        Fax:  (408) 765-6038

        Steve Nelson
        c/o Quokka Sports, Inc.
        Ground Floor
        525 Brannan Street
        San Francisco, CA  94107
        Telephone:    415-908-3800
        Fax:          415-908-1841

        Media Technology Ventures, L.P.
        Media Technology Ventures Entrepreneurs Fund, L.P.
        Media Technology Equity Partners, L.P.
        One First Street, Suite Two
        Los Altos, CA  94022
        Attn:  Barry M. Weinman
        Telephone:    415-949-9862
        Fax:          415-949-8510

        Trinity Ventures Ltd.
        Trinity Ventures V, L.P.
        Trinity V, side-by-side fund, L.P.
        c/o Mr. James G. Shennan, Jr.
        3000 Sand Hill Road
        Bldg. 1, Suite 240
        Menlo Park, CA  94025
        Telephone:    650-854-9500
        Fax:          650-854-9501

        GC&H Investments
        c/o Cooley Godward LLP
        One Maritime Plaza, 20th Floor
        San Francisco, CA 94111-3580
        Attn: John Cardoza
        Telephone:    415-693-2000
        Fax:           415-951-3699


                                       3.
<PAGE>   29


                                  EXHIBIT A

                              ADDRESSES (CONTINUED)



        Stanford University
        Stanford Management Company
        c/o Carol Gilmer
        2770 Sand Hill Road
        Menlo Park, CA  94025
        Telephone:    650-926-0244
        Fax:          650-854-9267

        Accel VI L.P.
        Accel Internet Fund II L.P.
        Accel Keiretsu VI L.P.
        Accel Investors '98 L.P.
        428 University Avenue
        Palo Alto, CA  94301
        Attn:  Bruce Golden
        Telephone:    650-614-4800
        Fax:          650-614-4880

        (Copy to: Accel Partners
        One Palmer Square
        Princeton, NJ  08542
        Attn:  G. Carter Sednaoui
        Telephone:    (609) 683-4500
        Fax:          (609) 683-0384)

        MediaOne Interactive Services, Inc.
        9000 E. Nichols Ave., Suite 100
        Englewood, CO 80112
        Attn:  Natalie Egleston
        Telephone:    303-705-7680
        Fax:          303-705-5109

        The Karr Family 1982 Trust, dated 12/1/82, as amended
        Attn: Howard Karr
        1777 Borel Place, #408
        San Mateo, CA 94402
        Telephone:    650-574-5277
        Fax:          650-574-0310

        Outcast Communications, Inc.
        c/o Caryn Marooney
        1696B Green Street
        San Francisco, CA 94123
        Telephone:    510-596-0994
        Fax:          510-649-8895



                                    4.
<PAGE>   30



                                  EXHIBIT A

                              ADDRESSES (CONTINUED)





        The Les Schmidt and JoAnne P. Hattum Family Trust U/T/D 4/8/92
        c/o Quokka Sports, Inc.
        525 Brannan Street, Ground Floor
        San Francisco, CA  94107
        Attn: Les Schmidt
        Telephone:    415-908-3800
        Fax:          415-908-1841

        The Schmidt Family Irrevocable Trust Dtd. 12/27/95 FBO Caryn H. Schmidt
        Charles H. Parker, Trustee
        c/o Quokka Sports, Inc.
        525 Brannan Street, Ground Floor
        San Francisco, CA 94107
        Attn: Les Schmidt
        Telephone:  415-908-3800
        Fax:        415-908-1841

     
        The Schmidt Family Irrevocable Trust Dtd. 12/27/95 FBO Bryan P. Schmidt
        Charles H. Parker, Trustee
        c/o Quokka Sports, Inc.
        525 Brannan Street, Ground Floor
        San Francisco, CA 94107
        Attn: Les Schmidt
        Telephone:  415-908-3800
        Fax:        415-908-1841


        The Schmidt Family Irrevocable Trust Dtd. 12/27/95 FBO Taylor G. Schmidt
        Charles H. Parker, Trustee
        c/o Quokka Sports, Inc.
        525 Brannan Street, Ground Floor
        San Francisco, CA 94107
        Attn: Les Schmidt
        Telephone:  415-908-3800
        Fax:        415-908-1841


        The Ignite Group
        c/o Steve Payne, Venture Partner
        255 Shoreline Drive, Suite 510
        Redwood City, CA 94065
        Tel:  (650) 622-2030
        Fax:  (650) 622-2015


        Omega Ventures II, L.P.
        Omega Ventures II Cayman, L.P.
        Crossover Fund II, L.P.
        Crossover Fund IIA, L.P.
        c/o Sy Kaufman
        555 California Street, 23rd Floor
        San Francisco, CA 94104
        Tel: (415) 693-3311
        Fax: (415) 676-2556

        Michael Carter
        c/o Growth Phase Europe Ltd.
        50 Margravine Gardens
        London, England W6 8RJ

        (With a copy to:
        Growth Phase Europe
        349 Liberty Street
        San Francisco, CA 94114
        Attn: Matt Hall
        Tel:  (415) 385-5639
        Fax:  (415) 641-4297)

        Gerardo Seeliger
        12 Elystan Street
        London SW3, England
        -- Send documents DHL to:
        SeeligerY Conde
        Velazquez, 18
        28001 Madrid, Espana
        Spain
        Tel:  +34 1 577 99 77
        Fax:  +34 (1) 577 41 24




                                       5.

<PAGE>   31

                                  EXHIBIT A

                              ADDRESSES (CONTINUED)





        Riemer 1991 Revocable Trust
        David Riemer
        1611 Bonita Avenue
        Berkeley, CA 94709
        Tel:  (415) 908-3800
        Fax:  (415) 908-1841

        M. Elizabeth Sandell
        c/o Quokka Sports, Inc.
        525 Brannan Street, Ground Floor
        San Francisco, CA  94107
        Attn:  Les Schmidt
        Tel:  (415) 908-3800
        Fax:  (415) 908-1841





                                       6.




<PAGE>   1
                                                           Exhibit 10.01

                               INDEMNITY AGREEMENT


        THIS AGREEMENT is made and entered into this ___ day of ____________ by
and between QUOKKA SPORTS, INC., a Delaware corporation (the "Corporation"), and
________________ ("Agent").

                                    RECITALS

        WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a director or officer of the Corporation;

        WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware Corporation Law, as amended (the
"Code");

        WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and

        WHEREAS, in order to induce Agent to continue to serve as a director of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;

        NOW, THEREFORE, in consideration of Agent's continued service as a
director after the date hereof, the parties hereto agree as follows:

                                    AGREEMENT

        1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a
director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.

        2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).


<PAGE>   2

        3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:

                (a) against any and all expenses (including attorney's fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and

                (b) otherwise to the fullest extent as may be provided to Agent
by the Corporation under the non-exclusivity provisions of the Code and Section
42 of the Bylaws.

        4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:

                (a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;

                (b) on account of Agent's conduct that was knowingly fraudulent
or deliberately dishonest or that constituted willful misconduct;

                (c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;

                (d) for which payment is actually made to Agent under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment under
such insurance, clause, bylaw or agreement;

                (e) if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or

                (f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the 



                                       2
<PAGE>   3

proceeding was authorized by the Board of Directors of the Corporation, (iii)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.

        5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.

        6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.

        7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:

                (a) the Corporation will be entitled to participate therein at
its own expense;

               (b) except as otherwise provided below, the Corporation may, at
its option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and 



                                       3
<PAGE>   4

expenses of Agent's separate counsel shall be at the expense of the Corporation.
The Corporation shall not be entitled to assume the defense of any action, suit
or proceeding brought by or on behalf of the Corporation or as to which Agent
shall have made the conclusion provided for in clause (ii) above; and

               (c) the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.

        8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.

        9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.

        10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.

        11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.



                                       4
<PAGE>   5

        12. SURVIVAL OF RIGHTS.

                (a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.

                (b) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.

        13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.

        14. ENTIRE AGREEMENT. This Agreement and the agreements referenced
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto pertaining to the subject matters hereof are
superseded and expressly canceled.

        15. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.

        16. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.

        17. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.

        18. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

        19. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:



                                       5
<PAGE>   6

        (a) If to Agent, at the address indicated on the signature page hereof.



        (b) If to the Corporation, to

                      Quokka Sports, Inc.
                      525 Brannan Street
                      San Francisco, CA 94107

or to such other address as may have been furnished to Agent by the Corporation.






                           [INTENTIONALLY LEFT BLANK]



                                       6
<PAGE>   7

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.

                                            QUOKKA SPORTS, INC.



                                            By:
                                               Alan Ramadan
                                               President and
                                               Chief Executive Officer


                                            AGENT


                                            By:
                                               [Name]

                                               Address:


                                       7

<PAGE>   1
                                                                   Exhibit 10.02

                               QUOKKA SPORTS, INC.

                           1997 EQUITY INCENTIVE PLAN

                            ADOPTED FEBRUARY 24, 1997
                   APPROVED BY STOCKHOLDERS FEBRUARY 27, 1997
                           AMENDED SEPTEMBER 15, 1998
                    APPROVED BY STOCKHOLDERS OCTOBER 19, 1998
                             AMENDED MARCH 16, 1999
                     APPROVED BY STOCKHOLDERS APRIL __, 1999
                       AMENDED AND RESTATED APRIL 2, 1999
                 APPROVED BY STOCKHOLDERS _______________, 1999
                        TERMINATION DATE: APRIL __, 2009

This Quokka Sports, Inc. 1997 Equity Incentive Plan adopted February 24, 1997,
and amended on September 15, 1998, and March 16, 1999, is hereby amended and
restated in its entirety. All options granted under the prior plan continue to
be governed by the terms of the prior plan as such terms existed on the grant
date.

1.      PURPOSES.

        (a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

        (b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which selected Employees, Directors and Consultants may be given an
opportunity to benefit from increases in value of the Common Stock through the
granting of: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii)
stock bonuses and (iv) rights to acquire restricted stock.

        (c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of persons who are now Employees, Directors or Consultants, to
secure and retain the services of new Employees, Directors and Consultants and
to provide incentives for such persons to exert maximum efforts for the success
of the Company and its Affiliates.

2.      DEFINITIONS.

        (a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

        (b) "BOARD" means the Board of Directors of the Company.

        (c) "CODE" means the Internal Revenue Code of 1986, as amended.


                                       1
<PAGE>   2







        (d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c).

        (e) "COMMON STOCK" means the common stock of the Company.

        (f) "COMPANY" means Quokka Sports, Inc., a Delaware corporation.

        (g) "CONSULTANT" means any person, including an advisor, (1) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (2) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.

        (h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.

        (i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

        (j) "DIRECTOR" means a member of the Board.

        (k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

        (l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Neither service as a Director nor payment of a director's fee by the Company or
an Affiliate shall be sufficient to constitute "employment" by the Company or an
Affiliate.

        (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.


                                       2
<PAGE>   3







        (n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

               (i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in the WALL STREET JOURNAL or such other source as
the Board deems reliable.

               (ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

               (iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.

        (o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

        (p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

        (q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

        (r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

        (s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.



                                       3
<PAGE>   4






        (t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

        (u) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

        (v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

        (w) "OUTSIDE DIRECTOR" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

        (x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

        (y) "PLAN" means this Quokka Sports, Inc. 1997 Equity Incentive Plan, as
amended and restated.

        (z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

        (aa)   "SECURITIES ACT" means the Securities Act of 1933, as amended.

        (bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

        (cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

        (dd) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.

3. ADMINISTRATION.

        (a) ADMINISTRATION BY BOARD. The Board will administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).


                                       4
<PAGE>   5







        (b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

               (i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.

               (ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

               (iii) To amend the Plan or a Stock Award as provided in Section
12.

               (iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

        (c) DELEGATION TO COMMITTEE.

               (i) GENERAL. The Board may delegate administration of the Plan to
a Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

               (ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED.
At such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or (ii)
delegate to a committee of one or more members of the Board who are not


                                       5
<PAGE>   6



Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

4.      SHARES SUBJECT TO THE PLAN.

        (a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate Thirteen Million Three Hundred
Fifty Thousand (13,350,000) shares of Common Stock, such number to be increased
each January 31 by One Million Five Hundred Thousand (1,500,000) shares of
Common Stock.

        (b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of restricted stock), the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. If any Common Stock acquired pursuant to
the exercise of an Option shall for any reason be repurchased by the Company
under an unvested share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.

        (c) SOURCE OF SHARES. The stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.

        (d) SHARE RESERVE LIMITATION. Prior to the Listing Date, at no time
shall the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock bonus or
similar plan of the Company exceed the applicable percentage as calculated in
accordance with the conditions and exclusions of Section 260.140.45 of Title 10
of the California Code of Regulations, based on the shares of the Company which
are outstanding at the time the calculation is made.

5. ELIGIBILITY.

        (a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.

        (b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be
eligible for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.

               Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant.


                                       6
<PAGE>   7





               Prior to the Listing Date, no Ten Percent Stockholder shall be
eligible for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair Market Value
of the Common Stock at the date of grant.

        (c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options covering more than Two Million (2,000,000) shares of the
Common Stock during any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, this subsection 5(c)
shall not apply until (i) the earliest of: (1) the first material modification
of the Plan (including any increase in the number of shares reserved for
issuance under the Plan in accordance with Section 4); (2) the issuance of all
of the shares of Common Stock reserved for issuance under the Plan; (3) the
expiration of the Plan; or (4) the first meeting of stockholders at which
Directors of the Company are to be elected that occurs after the close of the
third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.

        (d) CONSULTANTS.

               (i) Prior to the Listing Date, a Consultant shall not be eligible
for the grant of a Stock Award if, at the time of grant, either the offer or the
sale of the Company's securities to such Consultant is not exempt under Rule 701
of the Securities Act ("Rule 701") because of the nature of the services that
the Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.

               (ii) From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.

               (iii) As of April 7, 1999, Rule 701 and Form S-8 generally are
available to consultants and advisors only if (i) they are natural persons; (ii)
they provide bona fide services to the issuer, its parent, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii)
the services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.


                                       7
<PAGE>   8







6. OPTION PROVISIONS.

        Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:

        (a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.

        (b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

        (c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than eighty five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

        (d) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.

In the case of any deferred payment arrangement, interest shall be compounded at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as


                                       8
<PAGE>   9




interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.

        (e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

        (f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option granted prior to the Listing Date shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during
the lifetime of the Optionholder only by the Optionholder. A Nonstatutory Stock
Option granted on or after the Listing Date shall be transferable to the extent
provided in the Option Agreement. If the Nonstatutory Stock Option does not
provide for transferability, then the Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

        (g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.

        (h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date shall
provide for vesting of the total number of shares at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment. However, in the
case of such Options granted to Officers, Directors or Consultants, the Option
may become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company; for
example, the vesting provision of the Option may provide for vesting of less
than twenty percent (20%) per year of the total number of shares subject to the
Option.

        (i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement, which, for
Options granted


                                       9
<PAGE>   10





         prior to the Listing Date, shall not be less than thirty (30) days,
unless such termination is for cause) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.

        (j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.

        (k) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

        (l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

        (m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.
Subject to the "Repurchase Limitation" in subsection 10(h), any unvested shares
so purchased may be subject to an unvested share repurchase option in favor of
the Company or to any other restriction the Board determines to be appropriate.


                                       10
<PAGE>   11







        (n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.

        (o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

        (a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:

               (i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the Company for its
benefit.

               (ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.

               (iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.

               (iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares under the stock bonus agreement shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date, rights
to acquire shares under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
stock awarded under the stock bonus agreement remains subject to the terms of
the stock bonus agreement.

        (b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The


                                       11
<PAGE>   12





terms and conditions of the restricted stock purchase agreements may change from
time to time, and the terms and conditions of separate restricted stock purchase
agreements need not be identical, but each restricted stock purchase agreement
shall include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

               (i) PURCHASE PRICE. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less than
one hundred percent (100%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated. For restricted stock
awards made on or after the Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated.

               (ii) CONSIDERATION. The purchase price of stock acquired pursuant
to the restricted stock purchase agreement shall be paid either: (i) in cash at
the time of purchase; (ii) at the discretion of the Board, according to a
deferred payment or other arrangement with the Participant; or (iii) in any
other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

               (iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.

               (iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject to
the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.

               (v) TRANSFERABILITY. For a restricted stock award made before the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock purchase agreement, as the
Board shall determine in its discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.


                                       12
<PAGE>   13







8. COVENANTS OF THE COMPANY.

        (a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

        (b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.

9. USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.

10. MISCELLANEOUS.

        (a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

        (b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

        (c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.


                                       13
<PAGE>   14







        (d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

        (e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

        (f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

        (g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.

        (h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section


                                       14
<PAGE>   15





260.140.42 of Title 10 of the California Code of Regulations, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:

               (i) FAIR MARKET VALUE. If the repurchase option gives the Company
the right to repurchase the shares upon termination of employment at not less
than the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (i) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Stock Awards after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant (for example, for purposes
of satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
become publicly traded.

               (ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives the
Company the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to repurchase at the
original purchase price shall lapse at the rate of at least twenty percent (20%)
of the shares per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding "qualified small
business stock").

11. ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) CAPITALIZATION ADJUSTMENTS TO STOCK SUBJECT TO THE PLAN. If any
change is made in the stock subject to the Plan due to a change in corporate
capitalization and without the receipt of consideration by the Company (through
reincorporation, stock dividend, stock split, reverse stock split, combination
or reclassification of shares), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a). Such adjustments shall be made by the Board, the determination
of which shall be final, binding and conclusive.

        (b) CAPITALIZATION AND TRANSACTION ADJUSTMENTS TO OUTSTANDING STOCK
AWARDS. If any change is made in the stock subject to any outstanding Stock
Award without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, separation,
stock dividend, dividend in property other than cash, stock split, reverse stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), such outstanding Stock Awards shall be
appropriately adjusted in the classes and number of securities and price per
share of stock subject to such outstanding Stock Awards.


                                       15
<PAGE>   16





Such adjustments shall be made by the Board, the determination of which shall be
final, binding and conclusive.

        (c) CAPITALIZATION AND TRANSACTION ADJUSTMENTS (SECTION 162(M)). If any
change is made in the stock subject to the Plan, or subject to any Stock Award,
without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, separation,
stock dividend, dividend in property other than cash, stock split, reverse stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
maximum number of securities subject to award to any person pursuant to
subsection 5(c). (The conversion of any convertible securities of the Company
shall not be treated as a transaction "without receipt of consideration" by the
Company.) Such adjustments shall be made by the Board, the determination of
which shall be final, binding and conclusive.

        (d) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.

        (e) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (1) a sale of substantially all of the assets of the
Company, (2) a merger or consolidation in which the Company is not the surviving
corporation or (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume or continue any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 11(d) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume or
continue such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full prior to such event, and the Stock
Awards shall terminate if not exercised (if applicable) at or prior to such
event. With respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall terminate if not exercised (if applicable) prior to such
event.

        (f) CHANGE IN CONTROL--SECURITIES ACQUISITION. After the Listing Date,
in the event of an acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the Company


                                       16
<PAGE>   17





or the entity which is a controlling affiliate of the Company within the meaning
of Rule 144(a)(1) of the Securities Act of 1933, as amend, shall (i) assume or
continue Stock Awards outstanding under the Plan or shall substitute similar
Stock Awards for those outstanding under the Plan, or (ii) in the event the
Company or a controlling affiliate of the Company refuses to assume or continue
such Stock Awards or to substitute similar Stock Awards for those outstanding
under the Plan, (A) with respect to Stock Awards held by persons then performing
services as Employees, Directors or Consultants, the vesting of such Stock
Awards and the time during which such Stock Awards may be exercised shall be
accelerated prior to such event and the Stock Awards terminated if not exercised
after such acceleration and at or prior to such event, and (B) with respect to
any other Stock Awards outstanding under the Plan, such Stock Awards shall be
terminated if not exercised prior to such event.

12. AMENDMENT OF THE PLAN AND STOCK AWARDS.

        (a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

        (b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

        (c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

        (d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

        (e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

        (a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company,


                                       17
<PAGE>   18





whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated. Notwithstanding the foregoing, all
Incentive Stock Options shall be granted, if at all, no later than the last day
preceding the tenth (10th) anniversary of the earlier of (i) the date on which
the latest increase in the maximum number of shares issuable under the Plan was
approved by the stockholders of the Company or (ii) the date such amendment was
adopted by the Board.

        (b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any Stock
Award granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.

14. EFFECTIVE DATE OF PLAN.

        The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.

15. CHOICE OF LAW.

        All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.


                                       18

<PAGE>   1
                                                                 Exhibit 10.03

                              QUOKKA SPORTS, INC.
                           1997 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT
                   (INCENTIVE AND NONSTATUTORY STOCK OPTIONS)

        Pursuant to the Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Quokka Sports, Inc. (the "Company") has granted you an
option under its 1997 Equity Incentive Plan (the "Plan") to purchase the number
of shares of the Company's Common Stock indicated in the Grant Notice at the
exercise price indicated in the Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.

        The details of your option are as follows:

        1.      VESTING. Subject to the limitations contained herein, your
option will vest as provided in the Grant Notice, provided that vesting will
cease upon the termination of your Continuous Status as an Employee, Director or
Consultant.

        2.      NUMBER OF SHARES AND EXERCISE PRICE. The number of shares
subject to your option and your exercise price per share referenced in the Grant
Notice may be adjusted from time to time for Capitalization Adjustments, as
provided in the Plan.

        3.      INCENTIVE STOCK OPTION $100,000 LIMITATION. As stated in Section
10(d) of the Plan, to the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any
calendar year (under all plans of the Company and its Affiliates) exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.

        4.      EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:

                (a)     a partial exercise of your option shall be deemed to
cover first vested shares of Common Stock and then the earliest vesting
installment of unvested shares of Common Stock;

                (b)     any shares of Common Stock so purchased from
installments that have not vested as of the date of exercise shall be subject to
the purchase option in favor of the Company as described in the Company's form
of Early Exercise Stock Purchase Agreement;



                                       1
<PAGE>   2
          (c)  you shall enter into the Company's form of Early Exercise Stock 
Purchase Agreement with a vesting schedule that will result in the same vesting 
as if no early exercise had occurred:

          (d)  this option shall not be exercisable under this paragraph 4 to 
the extent such exercise would cause the aggregate fair market value of any 
shares subject to incentive stock options granted to you by the Company or any 
Affiliate of the Company (valued as of their grant date) which would become 
exercisable for the first time during any calendar year to exceed $100,000 (the 
"ISO Exercise Limitation"); and

          (e)  Notwithstanding Section 4(d), above, the ISO Exercise Limitation 
shall terminate, and you may exercise your Incentive Stock Option with respect
to any shares of Common Stock that vest during each year in which an ISO
Exercise Limitation is imposed. Upon such termination of the ISO Exercise
Limitation, your option shall be deemed a Nonstatutory Stock Option to the
extent of the number of shares of Common Stock subject to your option that would
otherwise exceed the ISO Exercise Limitation.

     5.   METHOD OF PAYMENT. Payment of the exercise price is due in full upon 
exercise of all or any part of your option. You may elect to make payment of 
the exercise price in cash or by check or in any other manner PERMITTED BY THE 
GRANT NOTICE, which may include one or more of the following:

          (a)  In the Company's sole discretion at the time your option is 
exercised and provided that at the time of exercise the Common Stock is 
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a 
program developed under Regulation T as promulgated by the Federal Reserve 
Board which, prior to the issuance of Common Stock, results in either the 
receipt of cash (or check) by the Company or the receipt of irrevocable 
instructions to pay the aggregate exercise price to the Company from sales 
proceeds.

          (b)  Provided that at the time of exercise the Common Stock is 
publicly traded and quoted regularly in The Wall Street Journal, by delivery of 
already-owned shares of Common Stock, held for the period required to avoid a 
charge to the Company's reported earnings (generally six months) or were not 
acquired, directly or indirectly from the Company, owned free and clear of any 
liens, claims, encumbrances or security interests, and valued at its Fair 
Market Value on the date of exercise. "Delivery" for these purposes, in the 
sole discretion of the Company at the time your option is exercised, shall 
include delivery to the Company of your attestation of ownership of such shares 
of Common Stock in a form approved by the Company. Notwithstanding the 
foregoing, your option may not be exercised by tender to the Company of Common 
Stock to the extent such tender would constitute a violation of the provisions 
of any law, regulation or agreement restricting the redemption of the Company's 
stock.

     6.   WHOLE SHARES. Your option may only be exercised for whole shares.

     7.   SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary 
contained herein, your option may not be exercised unless the shares issuable 
upon exercise of 


                                       2
<PAGE>   3
your option are then registered under the Securities Act or, if such shares are 
not then so registered, the Company has determined that such exercise and 
issuance would be exempt from the registration requirements of the Securities 
Act. The exercise of your option must also comply with other applicable laws 
and regulations governing the option, and the option may not be exercised if 
the Company determines that the exercise would not be in material compliance 
with such laws and regulations.

     8.   TERMS. The term of your option commences on the Date of Grant and 
expires upon the EARLIEST of the following:

          (a)  three (3) months after the termination of your Continuous Status 
as an Employee, Director or Consultant for any reason other than your 
Disability or your death, provided that if during any part of such three (3) 
month period the option is not exercisable solely because of the condition set 
forth in paragraph 7, the option shall not expire until the earlier of the 
Expiration Date or until it shall have been exercisable for an aggregate period 
of three (3) months after the termination of your Continuous Status as an 
Employee, Director or Consultant;

          (b)  twelve (12) months after the termination of your Continuous 
Status as an Employee, Director or Consultant due to Disability;

          (c)  eighteen (18) months after your death if you die either during 
your Continuous Status as an Employee, Director or Consultant or within three 
(3) months after your Continuous Status as an Employee, Director or Consultant 
terminates,

          (d)  the Expiration Date indicated in the Grant Notice; or

          (e)  the tenth (10th) anniversary of the Date of Grant.

     If your option is an incentive stock option, note that, to obtain the 
federal income tax advantages associated with an "incentive stock option," the 
Code requires that at all times beginning on the date of grant of the option 
and ending on the day three (3) months before the date of the option's 
exercise, you must be an employee of the Company or an Affiliate, except in the 
event of your death or your Disability. The Company has provided for extended 
exercisability of your option under certain circumstances for your benefit, but 
cannot guarantee that your option will necessarily be treated as an "incentive 
stock option" if you provide services to the Company or an Affiliate as a 
Consultant or Director or if you exercise your option more than three (3) 
months after the date your employment with the Company or an Affiliate 
terminates.

     9.   EXERCISE.

          (a)  You may exercise the vested portion of your option (and the 
unvested portion of your option if the Grant Notice so permits) during its term 
by delivering a Notice of Exercise (in a form designated by the Company) 
together with the exercise price to the Secretary


                                       3
<PAGE>   4

of the Company, or to such other person as the Company may designate, during 
regular business hours, together with such additional documents as the Company 
may then require.

          (b)  By exercising your option you agree that, as a condition to any 
exercise of your option, the Company may require you to enter an arrangement 
providing for the payment by you to the Company of any tax withholding 
obligation of the Company arising by reason of (1) the exercise of your option, 
(2) the lapse of any substantial risk of forfeiture to which the shares are 
subject at the time of exercise, or (3) the disposition of shares acquired upon 
such exercise.

          (c)  If your option is an incentive stock option, by exercising your 
option you agree that you will notify the Company in writing within fifteen 
(15) days after the date of any disposition of any of the shares of the Common 
Stock issued upon exercise of your option that occurs within two (2) years 
after the date of your option grant or within one (1) year after such shares of 
Common Stock are transferred upon exercise of your option.

          (d)  By exercising your option you agree that the Company (or a 
representative of the underwriters) may, in connection with the first 
underwritten registration of the offering of any securities of the Company 
under the Securities Act, require that you not sell, dispose of, transfer, make 
any short sale of, grant any option for the purchase of, or enter into any 
hedging or similar transaction with the same economic effect as a sale, any 
shares of Common Stock or other securities of the Company held by you, for a 
period of time specified by the underwriter(s) (not to exceed one hundred 
eighty (180) days) following the effective date of the registration statement 
of the Company filed under the Securities Act. You further agree to execute and 
deliver such other agreements as may be reasonably requested by the Company 
and/or the underwriter(s) which are consistent with the foregoing or which are 
necessary to give further effect thereto. In order to enforce the foregoing 
covenant, the Company may impose stop-transfer instructions with respect to 
your Common Stock until the end of such period.

     10.  TRANSFERABILITY. Your option is not transferable, except by will or 
by the laws of descent and distribution, and is exercisable during your life 
only by you. Notwithstanding the foregoing, by delivering written notice to the 
Company, in a form satisfactory to the Company, you may designate a third party 
who, in the event of your death, shall thereafter be entitled to exercise your 
option.

     11.  RIGHT OF FIRST REFUSAL/RIGHT OF REPURCHASE. Vested shares that are 
received upon exercise of your option are subject to any right of first refusal 
that may be described in the Company's bylaws in effect at such time the 
Company elects to exercise its right. The Company's right of first refusal 
shall expire on the date of the first registration of an equity security of the 
Company under Section 12 of the Exchange Act. In addition, to the extent 
provided in the Company's bylaws, as amended from time to time, and any Early 
Exercise Stock Purchase Agreement, the Company shall have the right to 
repurchase all or any part of the shares received pursuant to the exercise of 
your option.

     12.  OPTION NOT A SERVICE CONTRACT. Your option is not an employment or 
service contract, and nothing in your option shall be deemed to create in any 
way whatsoever any obligation on your part to continue in the employ of the 
Company or an Affiliate, or of the 
<PAGE>   5
Company or an Affiliate to continue your employment. In addition, nothing in 
your option shall obligate the Company, or an Affiliate, their respective 
shareholders, Boards of Directors, Officers or Employees to continue any 
relationship that you might have as a Director or Consultant for the Company or 
an Affiliate.

     13.  WITHHOLDING OBLIGATIONS.

          (a)  At the time your option is exercised, in whole or in part, or at 
any time thereafter as requested by the Company, you hereby authorize 
withholding from payroll and any other amounts payable to you, and otherwise 
agree to make adequate provision for (including by means of a "cashless 
exercise" pursuant to a program developed under Regulation T as promulgated by 
the Federal Reserve Board to the extent permitted by the Company), any sums 
required to satisfy the federal, state, local and foreign tax withholding 
obligations of the Company or an Affiliate, if any, which arise in connection 
with your option.

          (b)  Upon your request and subject to approval by the Company, in its 
sole discretion, and compliance with any applicable conditions or restrictions 
of law, the Company may withhold from fully vested shares of Common Stock 
otherwise issuable to you upon the exercise of your option a number of whole 
shares having a Fair Market Value, determined by the Company as of the date of 
exercise, not in excess of the minimum amount of tax required to be withheld by 
law. If the date of determination of any tax withholding obligation is deferred 
to a date later than the date of exercise of your option, share withholding 
pursuant to the preceding sentence shall not be permitted unless you make a 
proper and timely election under Section 83(b) of the Code, covering the 
aggregate number of shares of Common Stock acquired upon such exercise with 
respect to which such determination is otherwise deferred, to accelerate the 
determination of such tax withholding obligation to the date of exercise of 
your option. Notwithstanding the filing of such election, shares shall be 
withheld solely from fully vested shares of Common Stock determined as of the 
date of exercise of your option that are otherwise issuable to you upon such 
exercise. Any adverse consequences to you arising in connection with such share 
withholding procedure shall be your sole responsibility.

          (c)  Your option is not exercisable unless the tax withholding 
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you 
may not be able to exercise your option when desired even though your option is 
vested, and the Company shall have no obligation to issue a certificate for 
such shares or release such shares from any escrow provided for herein.

     14.  NOTICES. Any notices provided for in your option or the Plan shall be 
given in writing and shall be deemed effectively given upon receipt or, in the 
case of notices delivered by the Company to you, five (5) days after deposit in 
the United States mail, postage prepaid, addressed to you at the last address 
you provided to the Company.

     15.  GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions 
of the Plan, the provisions of which are hereby made a part of your option, and 
is further subject to all interpretations, amendments, rules and regulations 
which may from time to time be promulgated



                                       5
<PAGE>   6
and adopted pursuant to the Plan. In the event of any conflict between the 
provisions of your option and those of the Plan, the provisions of the Plan 
shall control.




                                       6

<PAGE>   1
                                                                   Exhibit 10.04




                               QUOKKA SPORTS, INC.

                 1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                 ADOPTED BY THE BOARD OF DIRECTORS APRIL 2, 1999
                 APPROVED BY STOCKHOLDERS _______________, 1999

                      EFFECTIVE DATE: _______________, 1999
                        TERMINATION DATE: APRIL __, 2009

1.      PURPOSES.

        (a)     ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive
                Options are the Non-Employee Directors of the Company.

        (b)     AVAILABLE OPTIONS. The purpose of the Plan is to provide a means
                by which Non-Employee Directors may be given an opportunity to
                benefit from increases in value of the Common Stock through the
                granting of Nonstatutory Stock Options.

        (c)     GENERAL PURPOSE. The Company, by means of the Plan, seeks to
                retain the services of its Non-Employee Directors, to secure and
                retain the services of new Non-Employee Directors and to provide
                incentives for such persons to exert maximum efforts for the
                success of the Company and its Affiliates.

2.      DEFINITIONS.

        (a)     "AFFILIATE" means any parent corporation or subsidiary
                corporation of the Company, whether now or hereafter existing,
                as those terms are defined in Sections 424(e) and (f),
                respectively, of the Code.

        (b)     "ANNUAL GRANT" means an Option granted to a Non-Employee
                Director who meets the specified criteria pursuant to subsection
                6(b) of the Plan.

        (c)     "ANNUAL MEETING" means the annual meeting of the stockholders of
                the Company.

        (d)     "BOARD" means the Board of Directors of the Company.

        (e)     "CODE" means the Internal Revenue Code of 1986, as amended.

        (f)     "COMMON STOCK" means the common stock of the Company.

        (g)     "COMPANY" means Quokka Sports, Inc., a Delaware corporation.

        (h)     "CONSULTANT" means any person, including an advisor, (i) engaged
                by the Company or an Affiliate to render consulting or advisory
                services and who is compensated for such services or (ii) who is
                a member of the Board of Directors


                                       1.
<PAGE>   2




                of an Affiliate. However, the term "Consultant" shall not
                include either Directors of the Company who are not compensated
                by the Company for their services as Directors or Directors of
                the Company who are merely paid a director's fee by the Company
                for their services as Directors.

        (i)     "CONTINUOUS SERVICE" means that the Optionholder's service with
                the Company or an Affiliate, whether as an Employee, Director or
                Consultant, is not interrupted or terminated. The Optionholder's
                Continuous Service shall not be deemed to have terminated merely
                because of a change in the capacity in which the Optionholder
                renders service to the Company or an Affiliate as an Employee,
                Consultant or Director or a change in the entity for which the
                Optionholder renders such service, provided that there is no
                interruption or termination of the Optionholder's Continuous
                Service. For example, a change in status from a Non-Employee
                Director of the Company to a Consultant of an Affiliate or an
                Employee of the Company will not constitute an interruption of
                Continuous Service. The Board or the chief executive officer of
                the Company, in that party's sole discretion, may determine
                whether Continuous Service shall be considered interrupted in
                the case of any leave of absence approved by that party,
                including sick leave, military leave or any other personal
                leave.

        (j)     "DIRECTOR" means a member of the Board of Directors of the
                Company.

        (k)     "DISABILITY" means the inability of a person, in the opinion of
                a qualified physician acceptable to the Company, to perform the
                major duties of that person's position with the Company or an
                Affiliate of the Company because of the sickness or injury of
                the person.] [the permanent and total disability of a person
                within the meaning of Section 22(e)(3) of the Code].

        (l)     "EMPLOYEE" means any person employed by the Company or an
                Affiliate. Mere service as a Director or payment of a director's
                fee by the Company or an Affiliate shall not be sufficient to
                constitute "employment" by the Company or an Affiliate.

        (m)     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
                amended.

        (n)     "FAIR MARKET VALUE" means, as of any date, the value of the
                Common Stock determined as follows:

                      (i) If the Common Stock is listed on any established stock
                      exchange or traded on the Nasdaq National Market or the
                      Nasdaq SmallCap Market, the Fair Market Value of a share
                      of Common Stock shall be the closing sales price for such
                      stock (or the closing bid, if no sales were reported) as
                      quoted on such exchange or market (or the exchange or
                      market with the greatest volume of trading in the Common
                      Stock) on the last market trading day prior to the day of
                      determination, as reported in The Wall Street Journal or
                      such other source as the Board deems reliable.


                                       2.
<PAGE>   3







               (ii)   In the absence of such markets for the Common Stock, the
                      Fair Market Value shall be determined in good faith by the
                      Board.

        (o)    "INITIAL GRANT" means an Option granted to a Non-Employee
               Director who meets the specified criteria pursuant to subsection
               6(a) of the Plan.

        (p)    "IPO DATE" means the effective date of the initial public
               offering of the Common Stock.

        (q)    "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.

        (r)    "NONSTATUTORY STOCK OPTION" means an Option not intended to
               qualify as an incentive stock option within the meaning of
               Section 422 of the Code and the regulations promulgated
               thereunder.

        (s)    "OFFICER" means a person who is an officer of the Company within
               the meaning of Section 16 of the Exchange Act and the rules and
               regulations promulgated thereunder.

        (t)    "OPTION" means a Nonstatutory Stock Option granted pursuant to
               the Plan.

        (u)    "OPTION AGREEMENT" means a written agreement between the Company
               and an Optionholder evidencing the terms and conditions of an
               individual Option grant. Each Option Agreement shall be subject
               to the terms and conditions of the Plan.

        (v)    "OPTIONHOLDER" means a person to whom an Option is granted
               pursuant to the Plan or, if applicable, such other person who
               holds an outstanding Option.

        (w)    "PLAN" means this Quokka Sports, Inc. 1999 Non-Employee
               Directors' Stock Option Plan.

        (x)    "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act
               or any successor to Rule 16b-3, as in effect from time to time.

        (y)    "SECURITIES ACT" means the Securities Act of 1933, as amended.

3. ADMINISTRATION.

        (a)    ADMINISTRATION BY BOARD. The Board shall administer the Plan 
               unless and until the Board delegates administration of the Plan 
               to a committee.

        (b)    POWERS OF BOARD. The Board shall have the power, subject to, and
               within the limitations of, the express provisions of the Plan:

                (i)     To determine the provisions of each Option to the extent
                        not specified in the Plan.


                                       3.
<PAGE>   4






               (ii)   To construe and interpret the Plan and Options granted
                      under it, and to establish, amend and revoke rules and
                      regulations for its administration. The Board, in the
                      exercise of this power, may correct any defect, omission
                      or inconsistency in the Plan or in any Option Agreement,
                      in a manner and to the extent it shall deem necessary or
                      expedient to make the Plan fully effective.

               (iii)  To amend the Plan or an Option as provided in Section 12.

               (iv)   Generally, to exercise such powers and to perform such
                      acts as the Board deems necessary or expedient to promote
                      the best interests of the Company which are not in
                      conflict with the provisions of the Plan.

4. SHARES SUBJECT TO THE PLAN.

        (a)    SHARE RESERVE. Subject to the provisions of Section 11 relating
               to adjustments upon changes in stock, the stock that may be
               issued pursuant to Options shall not exceed in the aggregate Four
               Hundred Fifty Thousand (450,000) shares of Common Stock.

        (b)    REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for
               any reason expire or otherwise terminate, in whole or in part,
               without having been exercised in full, the stock not acquired
               under such Option shall revert to and again become available for
               issuance under the Plan.

        (c)    SOURCE OF SHARES. The stock subject to the Plan may be unissued
               shares or reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

        Nondiscretionary Options as set forth in section 6 shall be granted
under the Plan to all Non-Employee Directors.

6. NON-DISCRETIONARY GRANTS.

        (a)    INITIAL GRANTS. Without any further action of the Board, each
               Non-Employee Director shall be granted the following Options:

                (i)     On IPO Date, each person who is then a Non-Employee
                        Director automatically shall be granted an Initial Grant
                        to purchase Twenty Five Thousand (25,000) shares of
                        Common Stock on the terms and conditions set forth
                        herein.

                (ii)    After the IPO Date, each person who is elected or
                        appointed for the first time to be a Non-Employee
                        Director automatically shall, upon the date of his or
                        her initial election or appointment to be a Non-Employee
                        Director by the Board or stockholders of the Company, be
                        granted an Initial Grant


                                       4.
<PAGE>   5





                        to purchase Twenty Five Thousand (25,000) shares of
                        Common Stock on the terms and conditions set forth
                        herein.

        (b)    ANNUAL GRANTS. On June 1 of each year commencing with 
               June 1, 2000, each person who is then a Non-Employee Director
               automatically shall be granted an Annual Grant to purchase Twenty
               Five Thousand (25,000) shares of Common Stock on the terms and
               conditions set forth herein; provided however, that if the person
               has not been serving as a Non-Employee Director for the entire
               period since the preceding June 1, then the number of shares
               subject to the Annual Grant shall be reduced pro rata for each
               full quarter prior to the date of grant during which such person
               did not serve as a Non-Employee Director.

7. OPTION PROVISIONS.

        Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

        (a)    TERM. No Option shall be exercisable after the expiration of
               three (3) years from the date it was granted.

        (b)    EXERCISE PRICE. The exercise price of each Option shall be one
               hundred percent (100%) of the Fair Market Value of the stock
               subject to the Option on the date the Option is granted.
               Notwithstanding the foregoing, an Option may be granted with an
               exercise price lower than that set forth in the preceding
               sentence if such Option is granted pursuant to an assumption or
               substitution for another option in a manner satisfying the
               provisions of Section 424(a) of the Code.

        (c)    CONSIDERATION. The purchase price of stock acquired pursuant to
               an Option may be paid, to the extent permitted by applicable
               statutes and regulations, in any combination of (i) cash or
               check, (ii) delivery to the Company of other Common Stock, (ii)
               deferred payment or (iv) any other form of legal consideration
               that may be acceptable to the Board and provided in the Option
               Agreement; provided, however, that at any time that the Company
               is incorporated in Delaware, payment of the Common Stock's "par
               value," as defined in the Delaware General Corporation Law,
               shall not be made by deferred payment.

        In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.


                                       5.
<PAGE>   6







        (d)     TRANSFERABILITY. An Option shall not be transferable except by
                will or by the laws of descent and distribution and shall be
                exercisable during the lifetime of the Optionholder only by the
                Optionholder. Notwithstanding the foregoing, the Optionholder
                may, by delivering written notice to the Company, in a form
                satisfactory to the Company, designate a third party who, in the
                event of the death of the Optionholder, shall thereafter be
                entitled to exercise the Option.

        (e)     VESTING GENERALLY. Options shall vest and become exercisable
                immediately upon grant.

        (f)     TERMINATION OF CONTINUOUS SERVICE. In the event an
                Optionholder's Continuous Service terminates (other than upon
                the Optionholder's death or Disability), the Optionholder may
                exercise his or her Option (to the extent that the Optionholder
                was entitled to exercise it as of the date of termination) but
                only within such period of time ending on the earlier of (i) the
                date three (3) months following the termination of the
                Optionholder's Continuous Service, or (ii) the expiration of the
                term of the Option as set forth in the Option Agreement. If,
                after termination, the Optionholder does not exercise his or her
                Option within the time specified in the Option Agreement, the
                Option shall terminate.

        (g)     EXTENSION OF TERMINATION DATE. If the exercise of the Option
                following the termination of the Optionholder's Continuous
                Service (other than upon the Optionholder's death or Disability)
                would be prohibited at any time solely because the issuance of
                shares would violate the registration requirements under the
                Securities Act, then the Option shall terminate on the earlier
                of (i) the expiration of the term of the Option set forth in
                subsection 7(a) or (ii) the expiration of a period of three (3)
                months after the termination of the Optionholder's Continuous
                Service during which the exercise of the Option would not be in
                violation of such registration requirements.

        (h)     DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
                Continuous Service terminates as a result of the Optionholder's
                Disability, the Optionholder may exercise his or her Option (to
                the extent that the Optionholder was entitled to exercise it as
                of the date of termination), but only within such period of time
                ending on the earlier of (i) the date twelve (12) months
                following such termination or (ii) the expiration of the term of
                the Option as set forth in the Option Agreement. If, after
                termination, the Optionholder does not exercise his or her
                Option within the time specified herein, the Option shall
                terminate.

        (i)     DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
                Continuous Service terminates as a result of the Optionholder's
                death or (ii) the Optionholder dies within the three-month
                period after the termination of the Optionholder's Continuous
                Service for a reason other than death, then the Option may be
                exercised (to the extent the Optionholder was entitled to
                exercise the Option as of the date of death) by the
                Optionholder's estate, by a person who acquired the right 


                                       6.
<PAGE>   7


                to exercise the Option by bequest or inheritance or by a person
                designated to exercise the Option upon the Optionholder's death,
                but only within the period ending on the earlier of (1) the date
                eighteen (18) months following the date of death or (2) the
                expiration of the term of such Option as set forth in the Option
                Agreement. If, after death, the Option is not exercised within
                the time specified herein, the Option shall terminate.

8. COVENANTS OF THE COMPANY.

        (a)     AVAILABILITY OF SHARES. During the terms of the Options, the
                Company shall keep available at all times the number of shares
                of Common Stock required to satisfy such Options.

        (b)     SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
                each regulatory commission or agency having jurisdiction over
                the Plan such authority as may be required to grant Options and
                to issue and sell shares of Common Stock upon exercise of the
                Options; provided, however, that this undertaking shall not
                require the Company to register under the Securities Act the
                Plan, any Option or any stock issued or issuable pursuant to any
                such Option. If, after reasonable efforts, the Company is unable
                to obtain from any such regulatory commission or agency the
                authority which counsel for the Company deems necessary for the
                lawful issuance and sale of stock under the Plan, the Company
                shall be relieved from any liability for failure to issue and
                sell stock upon exercise of such Options unless and until such
                authority is obtained.

9. USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

10. MISCELLANEOUS.

        (a)     STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the
                holder of, or to have any of the rights of a holder with respect
                to, any shares subject to such Option unless and until such
                Optionholder has satisfied all requirements for exercise of the
                Option pursuant to its terms.

        (b)     NO SERVICE RIGHTS. Nothing in the Plan or any instrument
                executed or Option granted pursuant thereto shall confer upon
                any Optionholder any right to continue to serve the Company as a
                Non-Employee Director or shall affect the right of the Company
                or an Affiliate to terminate (i) the employment of an Employee
                with or without notice and with or without cause, (ii) the
                service of a Consultant pursuant to the terms of such
                Consultant's agreement with the Company or an Affiliate or (iii)
                the service of a Director pursuant to the Bylaws of the Company
                or an Affiliate, and any applicable provisions of the corporate
                law of the state in which the Company or the Affiliate is
                incorporated, as the case may be.


                                       7.
<PAGE>   8







        (c)     INVESTMENT ASSURANCES. The Company may require an Optionholder,
                as a condition of exercising or acquiring stock under any
                Option, (i) to give written assurances satisfactory to the
                Company as to the Optionholder's knowledge and experience in
                financial and business matters and/or to employ a purchaser
                representative reasonably satisfactory to the Company who is
                knowledgeable and experienced in financial and business matters
                and that he or she is capable of evaluating, alone or together
                with the purchaser representative, the merits and risks of
                exercising the Option; and (ii) to give written assurances
                satisfactory to the Company stating that the Optionholder is
                acquiring the stock subject to the Option for the Optionholder's
                own account and not with any present intention of selling or
                otherwise distributing the stock. The foregoing requirements,
                and any assurances given pursuant to such requirements, shall be
                inoperative if (iii) the issuance of the shares upon the
                exercise or acquisition of stock under the Option has been
                registered under a then currently effective registration
                statement under the Securities Act or (iv) as to any particular
                requirement, a determination is made by counsel for the Company
                that such requirement need not be met in the circumstances under
                the then applicable securities laws. The Company may, upon
                advice of counsel to the Company, place legends on stock
                certificates issued under the Plan as such counsel deems
                necessary or appropriate in order to comply with applicable
                securities laws, including, but not limited to, legends
                restricting the transfer of the stock.

        (d)     WITHHOLDING OBLIGATIONS. The Optionholder may satisfy any
                federal, state or local tax withholding obligation relating to
                the exercise or acquisition of stock under an Option by any of
                the following means (in addition to the Company's right to
                withhold from any compensation paid to the Optionholder by the
                Company) or by a combination of such means: (i) tendering a cash
                payment; (ii) authorizing the Company to withhold shares from
                the shares of the Common Stock otherwise issuable to the
                Optionholder as a result of the exercise or acquisition of stock
                under the Option; or (iii) delivering to the Company owned and
                unencumbered shares of the Common Stock.

11. ADJUSTMENTS UPON CHANGES IN STOCK.

        (a)     CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
                subject to the Plan, or subject to any Option, without the
                receipt of consideration by the Company (through merger,
                consolidation, reorganization, recapitalization,
                reincorporation, stock dividend, dividend in property other than
                cash, stock split, liquidating dividend, combination of shares,
                exchange of shares, change in corporate structure or other
                transaction not involving the receipt of consideration by the
                Company), the Plan will be appropriately adjusted in the
                class(es) and maximum number of securities subject both to the
                Plan pursuant to subsection 4(a) and to the nondiscretionary
                Options specified in Section 5, and the outstanding Options will
                be appropriately adjusted in the class(es) and number of
                securities and price per share of stock subject to such
                outstanding Options. The


                                       8.
<PAGE>   9

                Board shall make such adjustments, and its determination shall
                be final, binding and conclusive. (The conversion of any
                convertible securities of the Company shall not be treated as a
                transaction "without receipt of consideration" by the Company.)

12. AMENDMENT OF THE PLAN AND OPTIONS.

        (a)     AMENDMENT OF PLAN. The Board at any time, and from time to time,
                may amend the Plan. However, except as provided in Section 11
                relating to adjustments upon changes in stock, no amendment
                shall be effective unless approved by the stockholders of the
                Company to the extent stockholder approval is necessary to
                satisfy the requirements of Rule 16b-3 or any Nasdaq or
                securities exchange listing requirements.

        (b)     STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
                submit any other amendment to the Plan for stockholder approval.

        (c)     NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
                amendment of the Plan shall not be impaired by any amendment of
                the Plan unless (i) the Company requests the consent of the
                Optionholder and (ii) the Optionholder consents in writing.

        (d)     AMENDMENT OF OPTIONS. The Board at any time, and from time to
                time, may amend the terms of any one or more Options; provided,
                however, that the rights under any Option shall not be impaired
                by any such amendment unless (i) the Company requests the
                consent of the Optionholder and (ii) the Optionholder consents
                in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

        (a)     PLAN TERM. The Board may suspend or terminate the Plan at any
                time. Unless sooner terminated, the Plan shall terminate on the
                day before the tenth (10th) anniversary of the date the Plan is
                adopted by the Board or approved by the stockholders of the
                Company, whichever is earlier. No Options may be granted under
                the Plan while the Plan is suspended or after it is terminated.

        (b)     NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
                shall not impair rights and obligations under any Option granted
                while the Plan is in effect except with the written consent of
                the Optionholder.

14. EFFECTIVE DATE OF PLAN.

        The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.


                                       9.
<PAGE>   10






15. CHOICE OF LAW.

        All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.


                                      10.

<PAGE>   1
                                                                   Exhibit 10.05

                               QUOKKA SPORTS, INC.


                            NONSTATUTORY STOCK OPTION

                (1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)



 [NAME] , Optionholder:

        QUOKKA SPORTS, INC. (the "Company"), pursuant to its 1999 Non-Employee
Directors' Stock Option Plan (the "Plan") has on _____________, 1999 granted to
you, the optionholder named above, an option to purchase shares of the common
stock of the Company ("Common Stock"). This option is not intended to qualify
and will not be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

        The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
Non-Employee Directors (as defined in the Plan).

        The details of your option are as follows:

        1. The total number of shares of Common Stock subject to this option is
___________ (_____). Subject to the limitations contained herein, this option
shall be exercisable in accordance with the Plan.

        2. The exercise price of this option is ______________ Dollars ($______)
per share, being the Fair Market Value (as defined in the Plan) of the Common
Stock on the date of grant of this option.

        3.      (a) This option may be exercised, to the extent specified in the
Plan, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to paragraph 6 of the Plan. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.

                (b) By exercising this option you agree that the Company may
require you to enter an arrangement providing for the cash payment by you to the
Company of any tax withholding obligation of the Company arising by reason of
the exercise of this option or the lapse of any substantial risk of forfeiture
to which the shares are subject at the time of exercise.

        4. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed


                                      1.
<PAGE>   2





to you at the address specified below or at such other address as you hereafter
designate by written notice to the Company.

        5. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.

        Dated the ___ day of__________, ____.

                                           Very truly yours,

                                           QUOKKA SPORTS, INC.



                                           By:         
                                               ---------------------------------
                                                  Duly authorized on behalf
                                                  of the Board of Directors

ATTACHMENTS:

1999 Non-Employee Directors' Stock Option Plan


                                       2.
<PAGE>   3





The undersigned:

               (a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan;

               (b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionholder and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:

               NONE                                                     
                    ---------------------------------------------------
                                    (Initial)

               OTHER                                                    
                    ---------------------------------------------------

                    ---------------------------------------------------

                    ---------------------------------------------------




                                     -------------------------------------------
                                     OPTIONHOLDER


                                     ------------------------------------------
                                     Address


                                     ------------------------------------------

                                     ------------------------------------------


                                       3.

<PAGE>   1
                                                                   Exhibit 10.06
                       
                              QUOKKA SPORTS, INC.
                        1999 EMPLOYEE STOCK PURCHASE PLAN

                             ADOPTED APRIL __, 1999
                 APPROVED BY STOCKHOLDERS _______________, 1999
                               NO TERMINATION DATE


1.      PURPOSE.

        (a) The purpose of the 1999 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Quokka Sports, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase common stock of the Company.

        (b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").

        (c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

        (d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code

2.      ADMINISTRATION.

        (a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.

        (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

                (i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).

                (ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

                (iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.



                                       1.
<PAGE>   2

                (iv) To amend the Plan as provided in paragraph 13.

                (v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.

        (c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee")
constituted in accordance with the requirements of Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

3.      SHARES SUBJECT TO THE PLAN.

        (a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate One Million (1,000,000) shares
of the Company's common stock (the "Common Stock"). If any right granted under
the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.

        (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4.      GRANT OF RIGHTS; OFFERING.

        (a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 5 through 8, inclusive.

        (b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have



                                       2.
<PAGE>   3

identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.

5.      ELIGIBILITY.

        (a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.

        (b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:

                (i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;

                (ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and

                (iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.

        (c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.

        (d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's



                                       3.
<PAGE>   4

rights to purchase stock of the Company or any Affiliate to accrue at a rate
which exceeds twenty five thousand dollars ($25,000) of fair market value of
such stock (determined at the time such rights are granted) for each calendar
year in which such rights are outstanding at any time.

        (e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

6.      RIGHTS; PURCHASE PRICE.

        (a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined by the Board or the Committee in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board or the Committee determines for a particular Offering) and
ends on the date stated in the Offering, which date shall be no later than the
end of the Offering. The Board or the Committee shall establish one or more
dates during an Offering (the "Purchase Date(s)") on which rights granted under
the Plan shall be exercised and purchases of Common Stock carried out in
accordance with such Offering.

        (b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.

        (c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:

                (i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or

                (ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.

7.      PARTICIPATION; WITHDRAWAL; TERMINATION.

        (a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such



                                       4.
<PAGE>   5

employee's Earnings during the Offering (as defined by the Board or Committee in
each Offering). The payroll deductions made for each participant shall be
credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld during the
Offering.

        (b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.

        (c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee) under the Offering, without
interest.

        (d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.

8.      EXERCISE.

        (a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted


                                       5.
<PAGE>   6

rights under the Plan, as provided in paragraph 5, in which case such amount
shall be distributed to the participant after such final Purchase Date, without
interest. The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase whole shares of stock on the final Purchase Date of an
Offering shall be distributed in full to the participant after such Purchase
Date, without interest.

        (b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.

9.      COVENANTS OF THE COMPANY.

        (a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.

        (b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.

10.     USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.

11.     RIGHTS AS A STOCKHOLDER.

        A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.



                                       6.
<PAGE>   7

12.     ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")

        (b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or any
Affiliate of the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then, as
determined by the Board in its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and effect, or (iii)
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participants'
rights under the ongoing Offering terminated.

13.     AMENDMENT OF THE PLAN.

        (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 423 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.

        (b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval.

        (c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.



                                       7.
<PAGE>   8

        (d) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.

14.     DESIGNATION OF BENEFICIARY.

        (a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.

        (b) The participant may change such designation of beneficiary at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

15.     TERMINATION OR SUSPENSION OF THE PLAN.

        (a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares subject to the Plan's share reserve, as increased and/or adjusted
from time to time, have been issued under the terms of the Plan. No rights may
be granted under the Plan while the Plan is suspended or after it is terminated.

        (b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.

16.     EFFECTIVE DATE OF PLAN.

        The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.



                                       8.

<PAGE>   1
                                                                  Exhibit 10.07

                               QUOKKA SPORTS, INC.
                   1999 EMPLOYEE STOCK PURCHASE PLAN OFFERING

                   ADOPTED BY BOARD OF DIRECTORS APRIL 2, 1999


1.      GRANT; OFFERING DATE.

        (a) The Board of Directors of Quokka Sports, Inc., a Delaware
corporation (the "Company"), pursuant to the Company's 1999 Employee Stock
Purchase Plan (the "Plan"), hereby authorizes the grant of rights to purchase
shares of the common stock of the Company ("Common Stock") to all Eligible
Employees (an "Offering"). The first day of an Offering is that Offering's
"Offering Date." An Offering may consist of one (1) or more consecutive
"Purchase Periods." The last day of each Purchase Period during an Offering
shall be a "Purchase Date" for that Offering. If an Offering Date or Purchase
Date does not fall on a day during which the Company's Common Stock is actively
traded, then the Offering Date or Purchase Date, as the case may be, shall be
the next subsequent day during which the Company's Common Stock is actively
traded.

        (b) Unless otherwise specifically provided herein, the first Purchase
Period of an Offering shall begin on the Offering Date and shall end
approximately six (6) months thereafter on the next October 31 or April 30, as
the case may be. Subsequent Purchase Periods during the Offering shall begin
each May 1 and November 1 and shall end six (6) months thereafter on October 31
or April 30, as the case may be.

        (c) The first Offering shall begin on the effective date of the initial
public offering of the Company's Common Stock and end on April 30, 2000, unless
terminated sooner as herein provided (the "Initial Offering"). The Initial
Offering shall be divided into two (2) shorter Purchase Periods of approximately
six (6) months in duration. The first such Purchase Period shall begin on the
Offering Date and shall end on October 31, 1999, and the second Purchase Period
shall begin on November 1, 1999, and end on April 30, 2000. Thereafter, an
Offering shall begin on May 1st of every year and shall end twelve (12) months
later on the day prior to the next Offering Date.

        (d) Prior to the commencement of any Offering, the Board of Directors
(or the Committee described in subparagraph 2(c) of the Plan, if any) may change
any or all terms of such Offering and any subsequent Offerings. The granting of
rights pursuant to each Offering hereunder shall occur on each respective
Offering Date unless, prior to such date (a) the Board of Directors (or such
Committee) determines that such Offering shall not occur, or (b) no shares
remain available for issuance under the Plan in connection with the Offering.

        (e) Notwithstanding any other provisions of an Offering, if the terms of
an Offering as previously established by the Board of Directors of the Company
would, as a result of a change to applicable accounting standards, generate a
charge to earnings, such Offering shall 


                                      1.
<PAGE>   2


terminate effective as of the day prior to the date such change of accounting
standards would otherwise first apply to the Offering (the "Offering Termination
Date"), and such Offering Termination Date shall be the final Purchase Date of
such Offering. A subsequent Offering shall commence on such date and on such
terms as shall be provided by the Board of Directors of the Company.

2.      ELIGIBLE EMPLOYEES.

        All employees of the Company and each of its Affiliates (as defined in
the Plan) incorporated in the United States, shall be granted rights to purchase
Common Stock under each Offering on the Offering Date (an "Eligible Employee").
Notwithstanding the foregoing, the following employees shall not be Eligible
Employees or be granted rights under an Offering: (i) part-time or seasonal
employees whose customary employment is less than 20 hours per week or five
months per calendar year or (ii) 5% stockholders (including ownership through
unexercised options) described in subparagraph 5(c) of the Plan.

3.      RIGHTS.

        (a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to fifteen percent (15%) of
such Eligible Employee's Earnings paid during such Offering; provided, however,
that no employee may purchase Common Stock on a particular Purchase Date that
would result in more than fifteen percent (15%) of such employee's Earnings in
the period from the Offering Date to such Purchase Date having been applied to
purchase shares under all ongoing Offerings under the Plan and all other Company
plans intended to qualify as "employee stock purchase plans" under Section 423
of the Internal Revenue Code of 1986, as amended (the "Code").

        (b) For purposes of this Offering, "Earnings" means the total
compensation paid to an employee including all salary, wages (including amounts
elected to be deferred by the employee, that would otherwise have been paid,
under any cash or deferred arrangement established by the Company); overtime
pay, commissions, bonuses, and other remuneration paid directly to the employee,
but excluding profit sharing, the cost of employee benefits paid for by the
Company, education or tuition reimbursements, imputed income arising under any
Company group insurance or benefit program, traveling expenses, business and
moving expense reimbursements, income received in connection with stock options,
contributions made by the Company under any employee benefit plan, and similar
items of compensation.

        (c) Subject to the limitations contained herein and in the Plan, each
employee who was not eligible on the Offering Date but who first becomes an
Eligible Employee during the Offering and prior to October 23 during the
Offering shall (upon delivery of the designated enrollment form, at least ten
days before November 1, to the Company or designated Affiliate) on November 1
during that Offering, be granted the right to purchase the number of shares of
Common Stock purchasable with up to fifteen percent (15%) of such employee's
Earnings paid 




                                       2.
<PAGE>   3

during his or her participation in such Offering, which right shall be deemed to
be a part of the Offering. Such right shall have the same characteristics as any
rights originally granted under the Offering, except that (i) the date on which
such a right is granted shall be the "Offering Date" of such right for all
purposes, including determination of the exercise price of such right; and (ii)
the Offering for such right shall begin on its Offering Date and end coincident
with the end of the ongoing Offering.

        (d) The maximum number of shares of Common Stock an Eligible Employee
may purchase on any Purchase Date in an Offering shall be such number of shares
as has a fair market value (determined as of the Offering Date for such
Offering) equal to (x) $25,000 multiplied by the number of calendar years in
which the right under such Offering has been outstanding at any time, minus (y)
the fair market value of any other shares of Common Stock (determined as of the
relevant Offering Date with respect to such shares) which, for purposes of the
limitation of Section 423(b)(8) of the Code, are attributed to any of such
calendar years in which the right is outstanding. The amount in clause (y) of
the previous sentence shall be determined in accordance with regulations
applicable under Section 423(b)(8) of the Code based on (i) the number of shares
previously purchased with respect to such calendar years pursuant to such
Offering or any other Offering under the Plan, or pursuant to any other Company
plans intended to qualify as "employee stock purchase plans" under Section 423
of the Code, and (ii) the number of shares subject to other rights outstanding
on the Offering Date for such Offering pursuant to the Plan or any other such
Company plan. In any event, an Eligible Employee may purchase no more than two
thousand (2,000) shares of Common Stock on any Purchase Date in an Offering.

        (e) The maximum aggregate number of shares available to be purchased by
all Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of shares available, the Board shall make a
pro rata allocation of the shares available in a uniform and equitable manner.

4.      PURCHASE PRICE.

        The purchase price of the Common Stock under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Common Stock
on the Offering Date or eighty-five percent (85%) of the fair market value of
the Common Stock on the Purchase Date, in each case rounded up to the nearest
whole cent per share. For the Initial Offering, the fair market value of the
Common Stock at the time when the Offering commences shall be the price per
share at which shares of Common Stock are first sold to the public in the
Company's initial public offering as specified in the final prospectus with
respect to that offering.

5.      PARTICIPATION.

        (a) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering, or such later date specified in subparagraph
3(c). An Eligible 



                                       3.
<PAGE>   4

Employee shall become a participant in an Offering by delivering an agreement
authorizing payroll deductions. Such deductions must be in whole dollars or
whole percentages, with a maximum percentage of fifteen percent (15%) of
Earnings. A participant may not make additional payments into his or her
account. The agreement shall be made on such enrollment form as the Company or a
designated Affiliate provides, and must be delivered to the Company or
designated Affiliate at least ten (10) days before the Offering Date, or before
such later date specified in subparagraph 3(c), to be effective, unless a later
time for filing the enrollment form is set by the Board for all Eligible
Employees with respect to a given Offering Date. For the Initial Offering, the
time for filing an enrollment form and commencing participation for individuals
who are Eligible Employees on the Offering Date for the Initial Offering may be
after the Offering Date, as determined by the Company and communicated to such
Eligible Employees. (If the agreement authorizing payroll deductions is required
to be delivered to the Company or designated Affiliate a specified number of
days before the Offering Date to be effective, then an employee who becomes
eligible during the required delivery period shall not be considered to be an
Eligible Employee at the beginning of the Offering but may elect to participate
during the Offering as provided in subparagraph 3(c).)

        (b) A participant may increase or reduce (including to zero) his or her
participation level effective as of the November 1 following the October 31
Purchase Date during the course of an Offering. Any such change in participation
shall be made by delivering a notice to the Company or a designated Affiliate in
such form and at such time as the Company provides. In addition, a participant
may increase or decrease his or her deductions prior to the beginning of a new
Offering to be effective at the beginning of such new Offering. Except as
otherwise specifically provided herein, a participant may not increase or
decrease his or her participation level during the course of an Offering.

        (c) A participant may withdraw from an Offering and receive his or her
accumulated payroll deductions from the Offering (reduced to the extent, if any,
such deductions have been used to acquire Common Stock for the participant on
any prior Purchase Dates), without interest, at any time prior to the end of the
Offering, excluding only each ten (10) day period immediately preceding a
Purchase Date (or such shorter period of time determined by the Company and
communicated to participants) by delivering a withdrawal notice to the Company
in such form as the Company provides. A participant who has withdrawn from an
Offering shall not again participate in such Offering but may participate in
subsequent Offerings under the Plan by submitting a new participation agreement
in accordance with the terms thereof.

        (d) A participant shall automatically participate in the Offering
commencing immediately after the final Purchase Date of each Offering in which
the participant participates until such time as such participant (i) ceases to
be an Eligible Employee, (ii) withdraws from the Offering or (iii) terminates
employment. A participant who automatically participates in a subsequent
Offering is not required to file any additional enrollment form for such
subsequent Offering in order to continue participation in the Plan. However, a
participant may file an enrollment form with respect to such subsequent Offering
if the participant desires to change any of the participant's elections
contained in the participant's then effective enrollment form.

                                       4.
<PAGE>   5

6.      PURCHASES.

        Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering.

7.      NOTICES AND AGREEMENTS.

        Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.

8.      EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.

        The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code.

9.      OFFERING SUBJECT TO PLAN.

Each Offering is subject to all the provisions of the Plan, and its provisions
are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations that may from time to time be
promulgated and adopted pursuant to the Plan), the provisions of the Plan shall
control.


                                       5.








<PAGE>   1
                                                                   EXHIBIT 10.08


                              QUOKKA SPORTS, INC.

                             KEY EMPLOYEE AGREEMENT
                                      for
                                ALVARO SARALEGUI


     This Employment Agreement ("Agreement") is entered into as of the 15th day 
of March 1999, by and between Alvaro Saralegui, an individual ("Executive"), 
and Quokka Sports, Inc., a Delaware corporation (the "Company").

     WHEREAS, the Company desires to employ Executive to provide personal 
services to the Company, and wishes to provide Executive with certain 
compensation and benefits in return for his services; and

     WHEREAS, Executive wishes to be employed by the Company and provide 
personal services to the Company in return for certain compensation and 
benefits;

     NOW, THEREFORE, in consideration of the mutual promises and covenants 
contained herein, it is hereby agreed by and between the parties hereto as 
follows:

     1.  EMPLOYMENT BY THE COMPANY.

          1.1  The effective date of this Agreement shall be March 15th, 1999.

          1.2  Subject to terms set forth herein, the Company agrees to employ 
Executive in the position of Chief Operating Officer with responsibility for 
the Business, Consumer, Media/Distribution and Programming Lines of Business 
and Executive hereby accepts such employment effective as of April 5th, 1999 
(the "Employment Date"). During the term of his employment with the Company, 
Executive will devote his best efforts and substantially all of his business 
time and attention (except for vacation periods as set forth herein and 
reasonable periods of illness or other incapacities permitted by the Company's 
general employment policies) to the business of the Company.

          1.3  Executive shall serve in an executive capacity and shall perform 
such duties as are customarily associated with his then current title, 
consistent with the Bylaws of the Company and as required by the Company's 
Board of Directors (the "Board"). Executive shall report only to the Company's 
President and Chief Executive Officer. Executive's primary office location 
shall be the Company's San Francisco, California headquarters. It is understood 
that Executive's first three (3) months of employment will be a period of 
transition of three months during which Executive will be resident in New York. 
During this time, Executive will spend no fewer than four (4) days per week in 
the San Francisco office. Executive's duties shall require him to travel and to 
work at temporary off-site work locations.

          1.4  The employment relationship between the parties shall also be 
governed by the general employment policies and practices of the Company, 
including those relating to protection of confidential information and 
assignment of inventions,



                                       1.
<PAGE>   2
except that when the terms of this Agreement differ from or are in conflict 
with the Company's general employment policies or practices, this Agreement 
shall control.

     2.   COMPENSATION.

          2.1 SALARY. Executive shall receive for services to be rendered 
hereunder an annualized base salary of $275,000, paid on a semi-monthly basis 
in accordance with the Company's payroll policies and procedures.

                    (a) SALARY REVIEW PROCESS. Executive will be eligible for a 
salary increase review pursuant to the Company's general salary review process, 
which currently provides for salary reviews every twelve (12) months.

          2.2 INCENTIVE STOCK OPTION GRANT. On or about the Employment Date, 
the President and Chief Executive Officer of the Company will recommend that 
the Board grant Executive a stock option (qualified to the extent permissible 
by IRS rules and regulations) for the purchase of 1,000,000 shares of Company 
Common Stock (the "Option Grant"), at an exercise price equal to the fair 
market value of the underlying Company Common Stock on the date of the grant, 
as determined by the Board, pursuant to the Company's 1997 Stock Option Plan 
(the "Plan"). The President and Chief Executive Officer also will recommend 
that the option contain a five-year vesting period commencing on the Employment 
Date as follows: 280,000 of the option shares (i.e., 100,000 shares plus 20% of 
the remaining 900,000 shares) to vest at the end of Executive's first year of 
continuous employment with the Company, with the remaining option shares to 
vest in equal portions on a monthly basis during the second through fifth years 
following the Employment Date. The option, if approved by the Board, will be 
subject to the terms and conditions of the Plan, any amendments thereto, and 
the Company's corresponding grant to Executive. For the purpose of this 
Agreement, failure of the Board to approve the Option Grant on or before April 
30, 1999 shall be considered termination of Executive without cause at the sole 
discretion of Executive. Executive shall provide the Company written notice of 
whether he has chosen to consider such failure to be termination without cause 
within ten (10) business days after April 30, 1999. In the event Executive 
fails to provide such notice to Company prior to the end of such ten (10) 
business day period, Executive will be deemed not to have considered such 
failure termination without cause.  

          2.3 VACATION TIME. Executive will be eligible to participate in the 
Company's generally applicable vacation time policy. He will earn vacation pay 
under the terms and conditions of the Company's general vacation time policy on 
the following schedule: two weeks of paid vacation time during each of the 
first and second years of his continuous employment with the Company; three 
weeks of paid vacation time during each of the third and fourth years of his 
continuous employment with the Company; and four weeks of paid vacation time 
during his fifth and any subsequent years of continuous employment with the 
Company.

          2.4 COMPANY BENEFITS. Executive shall be entitled to all rights and 
benefits for which he is eligible under the terms and conditions of the 
standard Company benefits and compensation practices which may be in effect 
from time to time and provided by the Company to its employees generally. The 
Company reserves the right to modify the compensation and benefits of its 
employees and of Executive from time to time, as it

                                       2.
<PAGE>   3
deems necessary. In addition, Executive shall be entitled to "travel and 
entertainment" policies and benefits at least as favorable as those received by 
the Company's President.

     3.   PROPRIETARY INFORMATION OBLIGATIONS.

          3.1  AGREEMENT. Executive agrees to execute and abide by the Employee 
Proprietary Information and Inventions Agreement attached hereto as Exhibit A.

          3.2  REMEDIES. Executive's duties under the Employee Proprietary 
Information and Inventions Agreement shall survive termination of his 
employment with the Company. Executive acknowledges that a remedy at law for 
any breach or threatened breach by him of the provisions of the Employee 
Proprietary Information and Inventions Agreement would be inadequate, and he 
therefore agrees that the Company shall be entitled to injunctive relief in 
case of any such breach or threatened breach.

     4.   OUTSIDE ACTIVITIES.

          4.1  Except with the prior written consent of the Company's Board, 
Executive will not during the term of this Agreement undertake or engage in any 
other employment, occupation or business enterprise, other than ones in which 
Executive is a passive investor. Executive may engage in civic and 
not-for-profit activities so long as such activities do not materially 
interfere with the performance of his duties hereunder.

          4.2  Except as permitted by Section 4.3, Executive agrees not to 
acquire, assume or participate in, directly or indirectly, any position, 
investment or interest known by him to be adverse or antagonistic to the 
Company, its business or prospects, financial or otherwise.

          4.3  During the term of his employment by the Company, except on 
behalf of the Company, Executive will not directly or indirectly, whether as an 
officer, director, stockholder, partner, proprietor, associate, representative, 
consultant, or in any capacity whatsoever engage in, become financially 
interested in, be employed by or have any business connection with any other 
person, corporation, firm, partnership or other entity whatsoever which were 
known by him to compete directly with the Company, throughout the world, in any 
line of business engaged in (or planned to be engaged in (if such plans are in 
writing and Executive is aware of such plans)) by the Company; provided, 
however, that anything above to the contrary notwithstanding, he may own, as a 
passive investor, securities of any competitor corporation, so long as his 
direct holdings in any one such corporation shall not in the aggregate 
constitute more than 5% of the voting stock of such corporation.

     5.   TERMINATION OF EMPLOYMENT.

          5.1  TERMINATION WITHOUT CAUSE.

               (a)  The Company shall have the right to terminate Executive's 
employment with the Company at any time without cause or advance notice. Any 
material breach of this Agreement which Company has not cured within thirty 
(30) days after 



                                       3.
<PAGE>   4
written notice of such breach by Executive shall be considered termination of 
Executive without cause for the purposes of this Agreement.

               (b)  In the event Executive's employment is terminated without 
cause, the Company shall provide the following to Executive, as the only 
severance compensation and benefits: (1) an amount equal to twelve months of 
his base salary, subject to standard payroll deductions and withholdings; and 
(2)(i) if the termination without cause occurs within one (1) year of the 
Employment Date, and Executive shall receive accelerated vesting of 280,000 of 
Executive's unvested stock option shares from the Option Grant, if any, which 
shall then become exercisable; or (ii) if the termination without cause occurs 
after the first anniversary of the Employment Date, 180,000 of the Executive's 
unvested stock option shares from the Option Grant, if any, shall then become 
exercisable.

          5.2  TERMINATION FOR CAUSE.

               (a)  The Company shall have the right to terminate Executive's 
employment with the Company at any time for cause.

               (b)  "Cause" for termination shall mean only: (a) indictment or 
conviction of any felony or of any crime involving dishonesty; (b) participation
in any fraud against the Company; (c) breach by Executive of Executive's duties 
to the Company, including persistent unsatisfactory performance of his job 
duties which persistent failure Executive has failed to cure within thirty (30) 
days after receiving written notice from the Company; (d) intentional damage to 
any material property of the Company; or (e) conduct by Executive which in the 
good faith and reasonable determination of the Board demonstrates gross 
unfitness to serve.

               (c)  In the event Executive's employment is terminated at any 
time with cause, he will not be entitled to severance pay, pay in lieu of 
notice or any other such compensation or benefit.

          5.3  VOLUNTARY OR MUTUAL TERMINATION.

               (a)  Executive may voluntarily terminate his employment with the 
Company at any time, after which no further compensation will be paid to 
Executive. 

               (b)  In the event Executive voluntarily terminates his 
employment, he will not be entitled to severance pay, pay in lieu of notice or 
any other such compensation or benefit.

          5.4  CHANGE OF CONTROL. In the event of (i) a sale of all or 
substantially all of the assets of the Company; (ii) a merger or consolidation 
in which the Company is not the surviving entity; (iii) a reverse merger in 
which the Company is the surviving entity but the shares of the Company's 
common shares outstanding immediately preceding the merger are converted by 
virtue of the merger into other property, whether in the form of securities, 
cash or otherwise; or (iv) the acquisition by any person or entity of 
securities of the Company representing at least fifty percent (50%) of the 
combined voting power entitled to vote in the election of directors (in any of 
the foregoing events, a "Change of Control");



                                       4.
<PAGE>   5

               (a)  Executive agrees to continue his duties as an employee of 
the Company for a period of no less than one (1) year from the closing date of 
the Change of Control (the "Change of Control Anniversary Date") and shall 
continue on the normal vesting schedule set forth in the grant; and

               (b)  Executive shall receive accelerated vesting of 180,000 of 
Executive's unvested stock option shares from the Option Grant, if any, on the 
Change of Control Anniversary Date, which shall then become exercisable; 
provided, however, that if Executive is terminated without Cause (which for the 
purposes of this Section 5.4(b) shall include, without limitation, constructive 
termination as a result of material diminution of responsibility within the 
Company or other surviving entity) after the closing date of the Change of 
Control but prior to the Change of Control Anniversary Date, Executive shall 
receive, in addition to any severance compensation and benefits to which 
Executive may be entitled pursuant to Section 5.1(b) above, accelerated vesting 
of 180,000 of Executive's unvested stock option shares from the Option Grant, 
if any, as set forth above in this Section  5.4(b) on the effective date of 
such termination without Cause. Executive may waive receipt in his sole 
discretion of any portion of his unvested option shares, the accelerated 
vesting of which has been triggered by a Change of Control.

     6.   NONINTERFERENCE.

          While employed by the Company, and for two (2) years immediately 
following the date of termination of his employment, Executive agrees not to 
interfere with the business of the Company by soliciting, attempting to 
solicit, inducing, or otherwise causing any employee of the Company to 
terminate his or her employment in order to become an employee, consultant or 
independent contractor to or for any other entity.

     7.   GENERAL PROVISIONS.

          7.1  NOTICES. Any notices provided hereunder must be in writing and 
shall be deemed effective upon the earlier of personal delivery (including 
personal delivery by fax) or the third day after mailing by first class mail, 
to the Company at its primary office location and to Executive at his address 
as listed on the Company payroll.

          7.2  SEVERABILITY. Whenever possible, each provision of this 
Agreement will be interpreted in such manner as to be effective and valid under 
applicable law and consistent with the general intent of the parties insofar as 
possible, but if any provision of this Agreement is held to be invalid, illegal 
or unenforceable in any respect under any applicable law or rule in any 
jurisdiction, such invalidity, illegality or unenforceability will not affect 
any other provision or any jurisdiction, but this Agreement will be reformed, 
construed and enforced in such jurisdiction as if such invalid, illegal or 
unenforceable provisions had never been contained herein.

          7.3  WAIVER. If either party should waive any breach of any 
provisions of this Agreement, he or it shall not thereby be deemed to have 
waived any preceding or succeeding breach of the same or any other provision of 
this Agreement.

          7.4  COMPLETE AGREEMENT. This Agreement and its Exhibit constitute 
the entire agreement between Executive and the Company and it is the complete, 
final, and 

                                       5.
<PAGE>   6

exclusive embodiment of their agreement with regard to this subject matter. It 
is entered into without reliance on any promise or representation other than 
those expressly contained herein, and it cannot be modified or amended except 
in a writing signed by Executive and an officer of the Company, and approved by 
the Board.

          7.5  COUNTERPARTS. This Agreement may be executed in separate 
counterparts, any one of which need not contain signatures of more than one 
party, but all of which taken together will constitute one and the same 
Agreement.

          7.6  HEADINGS. The headings of the sections hereof are inserted for 
convenience only and shall not be deemed to constitute a part hereof nor to 
affect the meaning thereof.

          7.7  SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and 
inure to the benefit of and be enforceable by Executive and the Company, and 
their respective successors, assigns, heirs, executors and administrators, 
except that Executive may not assign any of his duties hereunder and he may not 
assign any of his rights hereunder without the written consent of the Company, 
which shall not be withheld unreasonably.

          7.8  ATTORNEY FEES. If either party hereto brings any action to 
enforce his or its rights hereunder, the prevailing party in any such action 
shall be entitled to recover his or its reasonable attorneys' fees and costs 
incurred in connection with such action.

          7.9  CHOICE OF LAW. All questions concerning the construction, 
validity and interpretation of this Agreement will be governed by the law of 
the State of California.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the day 
and year first above written.


                                           QUOKKA SPORTS, INC.


                                           By: /s/ ALAN RAMADAN
                                               ---------------------------------
                                               Alan Ramadan
                                               President and 
                                               Chief Executive Officer

                                           Date:  25 Mar 99
                                                  ------------------------------

Accepted and agreed this 
25th day of March, 1999.

/s/ ALVARO SARALEGUI
- -------------------------------------
Alvaro Saralegui

                                       6.
<PAGE>   7
                                                                       EXHIBIT A

                              QUOKKA SPORTS, INC.

                            PROPRIETARY INFORMATION
                            AND INVENTIONS AGREEMENT

      In consideration of my employment and continued employment by Quokka 
Productions, Inc. (the "Company"), and the compensation now and hereafter paid 
to me, I hereby agree as follows:

      1.    RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times 
during the term of my employment and thereafter, I will hold in strictest
confidence and will not disclose, use, lecture upon or publish any of the
Company's Proprietary Information (defined below), except as such disclosure,
use or publication may be required in connection with my work for the Company,
or unless an officer of the Company expressly authorizes such in writing. I
hereby assign to the Company any rights I may have or acquire in such
Proprietary Information and recognize that all Proprietary Information shall be
the sole property of the Company and its assigns and the Company and its assigns
shall be the sole owner of all trade secret rights, patent rights, copyrights,
mask work rights and all other rights throughout the world (collectively,
"Proprietary Rights") in connection therewith.

      The term "Proprietary Information" shall mean trade secrets, confidential 
knowledge, data or any other proprietary information of the Company. By way of 
illustration but not limitation, "Proprietary Information" includes (a) trade 
secrets, inventions, mask works, ideas, processes, formulas, source and object 
codes, data, programs, other works of authorship, know-how, improvements, 
discoveries, developments, designs and techniques (hereafter collectively 
referred to as "Inventions"); and (b) information regarding plans for research, 
development, new products, marketing and selling, business plans, budgets and 
unpublished financial statements, licenses, prices and costs, suppliers and 
customers; and information regarding the skills and compensation of other 
employees of the Company.

      2.    THIRD PARTY INFORMATION. I understand, in addition, that the 
Company has received and in the future will receive from third parties 
confidential or proprietary information ("Third Party Information") subject to 
a duty on the Company's part to maintain the confidentiality of such 
information and to use it only for certain limited purposes. During the term of 
my employment and thereafter, I will hold Third Party Information in the 
strictest confidence and will not disclose (to anyone other than Company 
personnel who need to know such information in connection with their work for 
the Company) or use, except in connection with my work for the Company, Third 
Party Information unless expressly authorized by an officer of the Company in 
writing.

      3.    ASSIGNMENT OF INVENTIONS.

            3.1   ASSIGNMENT. I hereby assign to the Company all my right, 
title and interest in and to any and all Inventions (and all Proprietary Rights 
with respect thereto) whether or not patentable or registrable under copyright 
or similar statutes, made or



                                       1.
<PAGE>   8
conceived or reduced to practice or learned by me, either alone or jointly with 
others, during the period of my employment with the Company. Inventions 
assigned to or as directed by the Company by this paragraph 3 are hereinafter 
referred to as "Company Inventions." I recognize that this Agreement does not 
require assignment of any invention which qualifies fully for protection under 
Section 2870 of the California Labor Code (hereinafter "Section 2870"), which 
provides as follows:

          (a)  Any provision in any employment agreement which provides that an 
     employee shall assign, or offer to assign, any of his or her rights in an
     invention to his or her employer shall not apply to an invention that the
     employee developed entirely on his or her own time without using the
     employer's equipment, supplies, facilities, or trade secret information
     except for those inventions that either:

               (1)  Relate at the time of conception or reduction to practice 
          of the invention to the employer's business, or actual or demonstrably
          anticipated research or development of the employer.

               (2)  Result from any work performed by the employee for the 
          employer.

          (b)  To the extent a provision in an employment agreement purports to 
     require an employee to assign an invention otherwise excluded from being
     required to be assigned under subdivision (i), the provision is against the
     public policy of this state and is unenforceable.

     3.2  GOVERNMENT. I also assign to or as directed by the Company all my
right, title and interest in and to any and all Inventions, full title to which
is required to be in the United States by a contract between the Company and the
United States or any of its agencies.

     3.3  WORKS FOR HIRE. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire," as
that term is defined in the United States Copyright Act (17 U.S.C., Section
101).

     4.   ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in every 
proper way to obtain and from time to time enforce United States and foreign 
Proprietary Rights relating to Company Inventions in any and all countries. To 
that end I will execute, verify and deliver such documents and perform such 
other acts (including appearances as a witness) as the Company may reasonably 
request for use in applying for, obtaining, perfecting, evidencing, sustaining 
and enforcing such Proprietary Rights and the assignment thereof. In addition, 
I will execute, verify and deliver assignments of such Proprietary Rights to 
the Company or its designee. My obligation to assist the Company with respect 
to 



                                       2.
<PAGE>   9
Proprietary Rights relating to such Company Inventions in any and all countries 
shall continue beyond the termination of my employment, but the Company shall 
compensate me at a reasonable rate after my termination for the time actually 
spent by me at the Company's request on such assistance.

     In the event the Company is unable for any reason, after reasonable 
effort, to secure my signature on any document needed on connection with the 
actions specified in the preceding paragraph, I hereby irrevocably designate 
and appoint the Company and its duly authorized officers and agents as my agent 
and attorney in fact, which appointment is coupled with an interest, to act for 
and in my behalf to execute, verify and file any such documents and to do all 
other lawfully permitted acts to further the purposes of the preceding 
paragraph with the same legal force and effect as if executed by me. I hereby 
waive and quitclaim to the Company any and all claims, of any nature 
whatsoever, which I now or may hereafter have for infringement of any 
Proprietary Rights assigned hereunder to the Company.

     5.   OBLIGATION TO KEEP COMPANY INFORMED. During the period of my 
employment and for six (6) months after termination of my employment with the 
Company, I will promptly disclose to the Company fully and in writing all 
Inventions authored, conceived or reduced to practice by me, either alone or 
jointly with others. In addition, I will promptly disclose to the Company all 
patent applications filed by me or on my behalf within a year after termination 
of employment. At the time of each such disclosure, I will advise the Company 
in writing of any Inventions that I believe fully qualify for protection under 
Section 2870; and I will at that time provide to the Company in writing all 
evidence necessary to substantiate that belief. The Company will keep in 
confidence and will not disclose to third parties without my consent any 
proprietary information disclosed in writing to the Company pursuant to this 
Agreement relating to Inventions that qualify fully for protection under the 
provisions of Section 2870. I will preserve the confidentiality of any 
Invention that does not fully qualify for protection under Section 2870.

     I agree to keep and maintain adequate and current records (in the form of 
notes, sketches, drawings and in any other form that may be required by the 
Company) of all Proprietary Information developed by me and all Inventions made 
by me during the period of my employment at the Company, which records shall be 
available to and remain the sole property of the Company at all times.

     6.   PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which I 
made prior to the commencement of my employment with the Company are excluded 
from the scope of this Agreement. To preclude any possible uncertainty, I have 
set forth on Exhibit A attached hereto a complete list of all Inventions that I 
have, alone or jointly with others, conceived, developed or reduced to 
practice prior to the commencement of my employment with the Company, that I 
consider to be my property or the property of third parties and that I wish to 
have excluded from the scope of this Agreement. If disclosure of any such 
Invention on Exhibit A would cause me to violate any prior confidentiality 
agreement, I understand that I am not to list such


                                       3.
<PAGE>   10
Inventions in Exhibit A but am to inform the Company that all such Inventions
have not been listed for that reason.

     7.   ADDITIONAL ACTIVITIES. I agree that during the period of my 
employment by the Company I will not, without the Company's express written 
consent, engage in any employment or business activity other than for the 
Company. I agree further that for the period of my employment by the Company 
and for one (1) year after the date of termination of my employment by the 
Company I will not (i) induce any employee of the Company to leave the employ 
of the Company or (ii) solicit the business of any client or customer of the 
Company (other than on behalf of the Company).

     8.   NO IMPROPER USE OF MATERIALS. During my employment by the Company I 
will not improperly use or disclose any confidential information or trade 
secrets, if any, of any former employer or any other person to whom I have an 
obligation of confidentiality, and I will not bring onto the premises of the 
Company and unpublished documents or any property belonging to any former 
employer or any other person to whom I have an obligation of confidentiality 
unless consented to in writing by that former employer or person. I will use in 
the performance of my duties only information which is generally known and used 
by persons with training and experience comparable to my own, which is common 
knowledge in the industry or otherwise legally in the public domain, or which 
is otherwise provided or developed by the Company.

     9.   NO CONFLICTING OBLIGATION. I represent that my performance of all the 
terms of this Agreement and as an employee of the Company does not and will not 
breach any agreement to keep in confidence information acquired by me in 
confidence or in trust prior to my employment by the Company. I have not 
entered into, and I agree I will not enter into, any agreement either written 
or oral in conflict herewith.

     10.  RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together will all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement for technical and management
personnel.

     11.  LEGAL AND EQUITABLE REMEDIES. Because my services are personal and 
unique and because I may have access to and become acquainted with the 
Proprietary Information of the Company, the Company shall have the right to 
enforce this Agreement and any of its provisions by injunction, specific 
performance or other equitable relief, without bond and without prejudice to 
any other rights and remedies that the Company may have for a breach of this 
Agreement.

                                       4.
<PAGE>   11
     12.  NOTICES. Any notices required or permitted hereunder shall be given to
the appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.

     13. GENERAL PROVISIONS.

          13.1 GOVERNING LAW. This Agreement will be governed by and construed
according to the laws of the State of California.

          13.2 ENTIRE AGREEMENT. This Agreement is the final, complete and
exclusive agreement of the parties with respect to the subject matter hereof and
supersedes and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing and signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement. As used in this Agreement, the
period of my employment includes any time during which I may be retained by the
Company as a consultant.

          13.3 SEVERABILITY. If one or more of the provisions in this Agreement 
are deemed unenforceable by law, then such provision will be deemed stricken 
from this Agreement and the remaining provisions will continue in full force 
and effect.

          13.4 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my 
heirs, executors, administrators and other legal representatives and will be 
for the benefit of the Company, its successors and its assigns.

          13.5 SURVIVAL. The provisions of this Agreement shall survive the 
termination of my employment and the assignment of this Agreement by the 
Company to any successor in interest or other assignee.

          13.6 EMPLOYMENT. I agree and understand that nothing in this 
Agreement shall confer any right with respect to continuation of employment by 
the Company; nor shall this Agreement interfere in any way with my right, or 
the Company's right, to terminate my employment at any time, with or without 
cause, which rights are hereby acknowledged and affirmed.

          13.7 WAIVER. No waiver by the Company of any breach of this Agreement 
shall be a waiver of any preceding or succeeding breach. No waiver by the 
Company of any right under this Agreement shall be construed as a waiver of 
any other right. The Company shall not be required to give notice to enforce 
strict adherence to all terms of this Agreement.

     This Agreement shall be effective as of the first day of my employment 
with the Company, namely:_______________, 19__.


                                       5.
<PAGE>   12
     I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE 
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.


Dated:_________________________         _____________________________________
                                        Signature


                                        _____________________________________
                                        (Printed Name)



Accepted and Agreed To:

QUOKKA SPORTS, INC.


By:____________________________        ______________________________________
                                       (Address)

Title:_________________________        ______________________________________







                                       6.
<PAGE>   13
                                   EXHIBIT A

TO:       Quokka Sports, Inc.
FROM:     
          ---------------------------
 
DATE:     ---------------------------
SUBJECT:   Previous Inventions and Improvements

          1.  The following is a complete list of all inventions or improvements
     relevant to the subject matter of my employment by Quokka Sports, Inc. (the
     "Company") that have been made or conceived or first reduced to practice by
     me alone or jointly with others prior to my engagement by the Company:

         [ ]  No inventions or improvements.

         [ ]  See below:

              
          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

         [ ]  Due to confidentiality agreements with prior employer, I cannot 
              disclose certain inventions that would otherwise be included on
              the above-described list.

         [ ]  Additional sheets attached.

          2.  I propose to bring to my employment the following devices,
     material and documents of a former employer or other person to whom I have
     an obligation of confidentiality that are not generally available to the
     public, which materials and documents may be used in my employment pursuant
     to the express written authorization of my former employer or such other
     person (a copy of which is attached hereto):

         [ ]  No Material.

         [ ]  See below:

              
          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

         [ ]  Additional sheets attached.

<PAGE>   1
                                                                   Exhibit 10.09

                    SUBORDINATED LOAN AND SECURITY AGREEMENT

        THIS AGREEMENT (the "Agreement") dated as of February 12, 1999, is
entered into by and between Quokka Sports, Inc., a Delaware corporation, with
its chief executive office, and principal place of business located at 525
Brannan Street, Ground Floor, San Francisco, CA 94107 (the "Borrower") and
Comdisco, Inc., a Delaware corporation, with its principal place of business
located at 6111 North River Road, Rosemont, Illinois 60018 (the "Lender" or
sometimes, "Comdisco"). In consideration of the mutual agreements contained
herein, the parties hereto agree as follows:

                                    RECITALS

        WHEREAS, Borrower has requested Lender to make available to Borrower a
loan in the aggregate principal amount of TEN MILLION and 00/100 DOLLARS
($10,000,000) to be available in two (2) phases as follows; FIVE MILLION and
00/100 DOLLARS ($5,000,000) available immediately upon satisfaction of the
condition set forth in Section 7 hereof ("Phase I") and FIVE MILLION DOLLARS
($5,000,000) to be made available upon approval of Lender and satisfaction of
the conditions set forth in Section 7 hereto ("Phase II"), each phase available
in installments of not less than ONE MILLION DOLLARS ($1,000,000) each (as the
same may from time to time be amended, modified, supplemented or revised, the
"Loan"), which would be evidenced by Subordinated Promissory Note(s) executed
by Borrower substantially in the form of Exhibit A hereto (as the same may from
time to time be amended, modified, supplemented or restated, the "Note(s)").

        WHEREAS, Lender is willing to make the Loan on the terms and conditions
set forth in this Agreement, and

        WHEREAS, Lender and Borrower agree any Loan hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein).

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:

SECTION 1. DEFINITIONS

        Unless otherwise defined herein, the following capitalized terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);

        1.1 "ACCOUNT" means any "account," as such term is defined in Section
9106 of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and, in any event, shall
include, without limitation, all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced 



                                      -1-
<PAGE>   2

by Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to Borrower (including, without limitation,
under any trade name, style or division thereof) whether arising out of goods
sold or services rendered by Borrower or from any other transaction, whether or
not the same involves the sale of goods or any other transaction, whether or not
the same involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Borrower under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Borrower (whether or not yet earned by performance on the
part of Borrower or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.

        1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is defined
in Section 9105(1)(a) of the UCC.

        1.3 "ADVANCE" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.

        1.4 "ADVANCE DATE" means the funding date of any Advance of the Loan.

        1.5 "ADVANCE REQUEST" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit C attached hereto, as
submitted by Borrower to Lender from time to time.

        1.6 "CHATTEL PAPER" means any "chattel paper," as such term is defined
in Section 9105(l)(b) of the UCC, now owned or hereafter acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest.

        1.7 "CLOSING DATE" means the date of this Agreement.

        1.8 "COLLATERAL" shall have the meaning assigned to such term in Section
3 of this Agreement.

        1.9 "CONTRACTS" means all contracts, undertakings, franchise agreements
or other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.

        1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, 



                                      -2-
<PAGE>   3

whether registered or unregistered, held pursuant to the laws of the United
States, any State thereof or of any other country; (ii) registrations,
applications and recordings in the United States Copyright Office or in any
similar office or agency of the United States, any state thereof or any other
country; (iii) any continuations, renewals or extensions thereof; and (iv) any
registrations to be issued in any pending applications.

        1.11 "COPYRIGHT LICENSE" means any written agreement granting any right
to use any Copyright or Copyright registration now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest.

        1.12 "DOCUMENTS" means any "documents," as such term is defined in
Section 9105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.

        1.13 "EQUIPMENT" means any "equipment," as such term is defined in
Section 9109(2), of the UCC, now or hereafter owned or acquired by Borrower or
in which Borrower now holds or hereafter acquires any interest, other than any
leasehold interest, and any and all additions, substitutions and replacements of
any of the foregoing, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto.

        1.14 "EXCLUDED AGREEMENTS" means (i) any Warrant Agreement(s) executed
hereunder, and any other warrants (including without limitation, the Warrant
Agreement dated as of February 12, 1999) to acquire, or agreements governing the
rights of the holders of, any equity security of Borrower, (ii) any stock of the
Borrower issued or purchased pursuant to the Warrant Agreement, and (iii) the
Master Lease Agreement dated as of February 12, 1999 between Borrower, as
lessee, and Lender, as lessor, including, without limitation, any Equipment
Schedules and Summary Equipment Schedules to the Master Lease Agreement executed
or delivered by Borrower pursuant thereto and any other modifications or
amendments thereof, whereby Borrower (as lessee) leases equipment, software, or
goods from Lender (as lessor) to Borrower (as lessee).

        1.15 "FACILITY FEE" means one percent (1%) of the principal amount of
each installment of the Loan due on the respective Advance Date.

        1.16 "FIXTURES" means any "fixtures," as such term is defined in Section
9313(l)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all conversions of the security
constituted thereby, immediately upon any acquisition or release thereof or any
such conversion, as the case may be.

        1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such
tennis defined in Section 9106 of the UCC, now owned or hereafter acquired by
Borrower or in which 



                                      -3-
<PAGE>   4

Borrower now holds or hereafter acquires any interest and, in any event, shall
include, without limitation, all right, title and interest which Borrower may
now or hereafter have in or under any contract, all customer lists, interests in
partnerships, joint ventures (including, but not limited to any interest of
Borrower or its subsidiaries in the joint venture with the National Broadcasting
Corporation) and other business associations, permits, goodwill (other than the
goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License), claims in or under insurance policies,
including unearned premiums, uncertificated securities, cash and other forms of
money or currency, deposit accounts (including as defined in Section 9105(e)
of the UCC), rights to receive tax refunds and other payments and rights of
indemnification.

        1.18 "INSTRUMENTS" means any "instrument," as such term is defined in
Section 9105(l)(i) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.

        1.19 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks, Patents,
rights to Intellectual Property, Licenses, trade secrets, source codes, customer
lists, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, skill, expertise, experience, processes, models,
drawings, materials and records and goodwill.

        1.20 "INVENTORY" means any "inventory," as such term is defined in
Section 9109(4) of the UCC, wherever located, now or hereafter owned or acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest,
and, in any event, shall include, without limitation, all inventory, goods and
other personal property which are held by or on behalf of Borrower for sale or
lease or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in Borrower's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all furnished goods whether or
not such inventory is listed on any schedules, assignments or reports furnished
to Lender from time to time and whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Borrower or is held
by Borrower or by others for Borrower's account, including, without limitation,
all goods covered by purchase orders and contracts with suppliers and all goods
billed and held by suppliers and all inventory which may be located on premises
of Borrower or of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents or other persons.

        1.21 "IPO" means an initial public offering of Borrower's securities.

        1.22 "LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.

        1.23 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any 



                                      -4-
<PAGE>   5

conditional sale or other title retention agreement, any lease in the nature of
a security interest, and the filing of any financing statement (other than a
precautionary financing statement with respect to a lease that is not in the
nature of a security interest) under the UCC or comparable law of any
jurisdiction.

        1.24 "LOAN DOCUMENTS" shall mean and include this Agreement, the
Note(s), and any other documents executed in connection with the Secured
Obligations or the transactions contemplated hereby, as the same may from time
to time be amended, modified, supplemented or restated, provided, that the Loan
Documents shall not include any of the Excluded Agreements.

        1.25 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon: (i)
the business, operations, properties, assets or conditions (financial or
otherwise) of Borrower; or (ii) the ability of Borrower to perform, or of Lender
to enforce, the Secured Obligations.

        1.26 "MATURITY DATE" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.

        1.27 "PATENT LICENSE" means any written agreement granting any right
with respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.

        1.28 "PATENTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) letters patents of, or rights corresponding thereto in, the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of, or rights corresponding thereto in the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all petty patents, divisionals,
and patents of addition; and (d) all patents to issue in any such applications.

        1.29 "PERMITTED LIENS" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt; (iii) liens securing the payment of taxes or other governmental charges
not yet delinquent or being contested in good faith by appropriate proceeding,
for which adequate reserves are maintained in accordance with generally
accepted accounting principles; (iv) liens securing claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
imposed without action of such parties, provided that the payment thereof is not
yet required; (v) liens incurred or deposits made in the ordinary course of
Borrower's or a subsidiary's business in connection with worker's compensation,
unemployment insurance, social security and other like laws; (vi) purchase money
security interests in personal property acquired after the date of this
Agreement, provided such are limited to the personal property so acquired and
proceeds, thereof; (vii) any liens existing as of the date hereof and
specifically disclosed by Borrower to Lender herein; (viii) leases, subleases,
licenses and sublicenses granted to others in the ordinary course of business
not interfering in any material respect with the conduct of the business of any
Borrower; (ix) liens arising from judgments, decrees or attachments to the
extent and only so long as such judgment, 



                                      -5-
<PAGE>   6

decree or attachment has not caused or resulted in an Event of Default (as
defined in Section 8.8); (x) liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xi) liens which constitute rights of set-off of
a customary nature or bankers' liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with arrangements
entered into with banks in the ordinary course of business; and (xii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described in clause (vii) above,
provided that any extension, renewal or replacement lien shall be limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinancing does not increase.

        1.30 "PROCEEDS" means "proceeds," as such term is defined in Section
9306(l) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), and (d) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.

        1.31 "RECEIVABLES" shall mean and include all of the Borrower's
Accounts, Instruments, Documents, Chattel Paper and General Intangibles whether
secured or unsecured, whether now existing or hereafter created or arising, and
whether or not specifically sold or assigned to Lender hereunder.

        1.32 "SECURED OBLIGATIONS" shall mean and include all principal,
interest, fees, costs, or other liabilities or obligations for monetary amounts
owed by Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), this Agreement or other instrument, as the same
may from time to time be amended, modified, supplemented or restated, provided,
that the Secured Obligations shall not include any indebtedness or obligations
of Borrower arising under or in connection with the Excluded Agreements.

        1.33 "SENIOR CREDITOR" means Silicon Valley Bank and/or any other bank,
insurance company, pension fund, or other institutional lender to be determined,
or a syndication of such institutional lenders that provides Senior Debt
financing to Borrower; provided, that Senior Creditor shall not include any
officer, director, shareholder, venture capital investor, or insider of
Borrower, or any affiliate of the foregoing persons, except upon the express
written consent of Lender.

        1.34 "SENIOR DEBT" means any and all indebtedness and obligations for




                                      -6-
<PAGE>   7

borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower PROVIDED, that Senior Debt shall not include debt exceeding
SEVEN MILLION DOLLARS ($7,000,000) outstanding at any one time up to the
effective date of an IPO.

        1.35 "SENIOR LOAN DOCUMENTS" means the loan agreement between Borrower
and Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.

        1.36 "SUBORDINATION AGREEMENT" means the Subordination Agreement of even
date herewith, entered into Silicon Valley Bank as Senior Creditor and Lender
and the Subordination Agreement of even date herewith between Borrower and
Lender for the benefit of Senior Creditor, other than Silicon Valley Bank.

        1.37 "TRADEMARK LICENSE" means any written agreement granting any right
to use any Trademark or Trademark registration now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest.

        1.38 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.

        1.39 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.

        1.40 "WARRANT AGREEMENT(S)" shall mean that agreement entered into in
connection with the Loan, substantially in the form attached hereto as Exhibit B
pursuant to which Borrower grants to Lender the right to purchase that number of
shares of Series C Preferred Stock of Borrower equivalent to (i) as to Phase I,
fourteen percent (14%) of the principal amount of Phase I divided by an exercise
price of $3.25 per share, provided, however, if the effective date of Borrower's
IPO occurs after November 30, 1999, the percentage for purposes of calculating
warrants shall be increased to sixteen percent (16%); and (ii) as to Phase II,
thirteen and three-quarters percent (13.75%) of the principal amount of Phase II
divided by 




                                      -7-
<PAGE>   8

an exercise price per share equivalent to the established strike price of the
most recently issued employee common stock options at the time of the
availability of Phase II.

SECTION 2. THE LOAN

        2.1   Subject to the terms and conditions set forth herein, Lender shall
lend to Borrower the aggregate original principal amount of TEN MILLION AND
00/100 Dollars ($10,000,000) with interest at the rate of twelve and one-quarter
percent (12.25%). The principal amount of each installment of the Loan shall
accrue interest at the rate of twelve and one-quarter percent (12.25%) per annum
from the Advance Date until the earlier of (i) the effective date of IPO; (ii)
the effective date of an acquisition or merger of Borrower in which more than
fifty percent (50%) of the voting power of the Borrower is transferred,
excluding any merger effected exclusively to change the domicile of the
Borrower; (iii) February 1, 2000; or (iv) the closing of the next private equity
financing of Borrower in excess of FORTY MILLION DOLLARS ($40,000,000). Upon the
occurrence of the earliest of the foregoing events, unless prepaid in accordance
with Section 2.2 below, the principal and accrued interest for each installment
of the Loan shall be payable in equal monthly installments of principal and
interest commencing upon the first day of the month immediately following such
event and continuing for a period ending thirty-six (36) months from the Advance
Date (each, a "Payment Date").

        2.2   Borrower shall have the option to prepay any installment of the
Loan, in whole or in part, by paying the principal amount thereon together with
all accrued and unpaid interest with respect to such principal amount, as of the
date of such prepayment, without premium.

        2.3   (a) Notwithstanding any provision in this Agreement, the Note(s),
or any other Loan Document, it is not the parties' intent to contract for,
charge or receive interest at a rate that is greater than the maximum rate
permissible by law which a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of Illinois shall be deemed to be the
laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Secured Obligations of Borrower
under this Agreement and the Note(s) (as said rate is calculated over a period
of time from the date of this Agreement through the end of time that any
principal is outstanding on the Note(s)), which amount of interest exceeds
interest calculated at the Maximum Rate on said principal chargeable over said
period of time, then such excess interest actually paid by Borrower shall be
applied first, to the payment of principal outstanding on the Note(s); second,
after all principal is repaid, to the payment of Lender's out of pocket costs,
expenses, and professional fees which are owed by Borrower to Lender under this
Agreement or the Loan Documents; and third, after all principal, costs,
expenses, and professional fees owed by Borrower to Lender are repaid, the
excess (if any) shall be refunded to Borrower, and the effective rate of
interest will be automatically reduced to the Maximum Rate.

              (b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at 



                                      -8-
<PAGE>   9

the rate set forth in Section 2.1.

               (c) Upon and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest, compounded
interest, and professional fees, shall bear interest at a rate per annum equal
to the rate set forth in Section 2.1. plus three percent (3%) per annum
("Default Rate").

        2.4 If the Borrower has not repaid the outstanding principal amount
under the Loan in its entirety within 30 days of the Maturity Date (as defined
in the applicable Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Lender shall have the
right to purchase from the Borrower, at the applicable Exercise Price (adjusted,
as set forth and defined in the Warrant Agreement), an additional number of
shares of Preferred Stock (as defined in the Warrant Agreement) which number
shall be determined by (i) multiplying the outstanding principal amount which is
due, but unpaid by one-half percent (.5%) and (ii) dividing the product thereof
by the applicable Exercise Price. In addition to the foregoing, Borrower shall
pay to Lender a cash payment in an amount equal to one-half percent (.5%)of the
outstanding unpaid principal amount.

SECTION 3. SECURITY INTEREST

As security for the prompt, complete and indefeasible payment when due (whether
at stated payment dates or otherwise) of all the Secured Obligations and in
order to induce Lender to make the Loan upon the terms and subject to the
conditions of the Notes(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for security purposes only, and
hereby grants to Lender a security interest in, all of Borrower's right, title
and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):

               (a) All Receivables;

               (b) All Equipment;

               (c) All Fixtures;

               (d) All General Intangibles (excluding Intellectual Property);

               (e) All Inventory;

               (f) All other goods and personal property of Borrower whether
                   tangible or intangible (specifically excluding Intellectual
                   Property) and whether now or hereafter owned or existing,
                   leased, consigned by or to, or acquired by, Borrower and
                   wherever located; and

               (g) To the extent not otherwise included, all Proceeds of each of
                   the foregoing and all accessions to, substitutions and
                   replacements for, and rents, profits and products of each of
                   the foregoing.


                                      -9-
<PAGE>   10

SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER

        The Borrower represents, warrants and agrees that;

        4.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.

        4.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest in the Collateral as
security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims, other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection herewith as the
Lender may reasonably request. Except as set forth herein, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.

        4.3 Borrower is a corporation duly organized, legally existing and in
good standing under the laws of the State of Delaware, and is duly qualified as
a foreign corporation in all jurisdictions in which the nature of its business
or location of its properties require such qualifications and where the failure
to be qualified would have a Material Adverse Effect.

        4.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents required to be
delivered or executed in connection herewith, and the Warrant Agreement(s) have
been duly authorized by all necessary corporate action of Borrower, the
individual or individuals executing the Loan Documents and the Warrant
Agreement(s) were duly authorized to do so; and the Loan Documents and the
Warrant Agreement(s) constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization or other similar laws
generally affecting the enforcement of the rights of creditors.

        4.5 This Agreement, the other Loan Documents and the Warrant
Agreement(s) do not and will not violate any provisions of Borrower's
Certificate of Incorporation, bylaws or any material contract, or agreement,
law, regulation, order, injunction, judgment, decree or writ to which the
Borrower is subject, or result in the creation or imposition of any lien,
security interest or other encumbrance upon the Collateral, other than those
created by this Agreement.

        4.6 The execution, delivery and performance of this Agreement, the other
Loan Documents and the Warrant Agreement(s) do not require the consent or
approval of any other person or entity including, without limitation, any
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state thereof.

        4.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred is continuing.

        4.8 No fact or condition exists that would (or would, with the passage
of time, 



                                      -10-
<PAGE>   11

the giving of notice, or both) constitute a default under the Loan Agreement
between Borrower and Senior Creditor.

        4.9 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and has duly paid or fully reserved for all
taxes or installments thereof (including any interest or penalties) as and when
due, which have or may become due pursuant to such returns or pursuant to any
assessment received by Borrower for the three (3) years preceding the Closing
Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).

SECTION 5. INSURANCE

        5.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies evidencing such
insurance to provide for at least thirty (30) days prior written notice by the
underwriter or insurance company to Lender in the event of cancellation or
expiration. Such policies shall be issued by such insurers and in such amounts
as are reasonably acceptable to Lender.

        5.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's gross negligence or willful misconduct.

SECTION 6. COVENANTS OF BORROWER

        Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:

        6.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):

               (a) as soon as practicable (and in any event within thirty (30)
days) after the end of each month, unaudited interim financial statements as of
the end of such month (prepared on a consolidated and consolidating basis, if
applicable), including balance sheet and related statements of income and cash
flows accompanied by a report, to the extent 



                                      -11-
<PAGE>   12

applicable, detailing any material contingencies (including the commencement of
any material litigation by or against Borrower) or any other occurrence that
could reasonably be expected to have a Material Adverse Effect, all certified by
Borrower's Chief Executive Officer or Chief Financial Officer to be true and
correct in all material respects;

               (b) as soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year, unqualified audited financial
statements as of the end of such year (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows, and setting forth in comparative form the
corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Borrower and reasonably
acceptable to Lender, accompanied by any management report from such
accountants;

               (c) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower files
with the Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities exchange; and

               (d) promptly, any additional information, financial or otherwise
(including, but not limited to, tax returns and names of principal creditors) as
Lender reasonably believes necessary to evaluate Borrower's continuing ability
to meet its financial obligations.

        6.2 Borrower shall permit any authorized representative of Lender and
its attorneys and accountants on reasonable notice to inspect, examine and make
copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours; provided, that not more than two
such inspections or examinations shall take place in any calendar year except
upon the occurrence and continuation of an Event of Default. In addition, such
representative of Lender and its attorneys and accountants shall have the right
to meet with management and officers of Borrower to discuss such books of
account and records.

        6.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be reasonably requested by lender;
and take all further action that may be necessary or desirable, or that Lender
may reasonably request, to confirm, perfect, preserve and protect the security
interests intended to be granted hereby, and in addition, and for such purposes
only, Borrower hereby authorizes Lender to execute and deliver on behalf of
Borrower and to file such financing statements, security agreement and other
documents without the signature of Borrower either in Lender's name or in the
name of Borrower as agent and attorney-in-fact for Borrower. The parties agree
that a carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement and may be filed in any appropriate office
in lieu thereof.

        6.4 Borrower shall protect and defend Borrower's title as well as the
interest 



                                      -12-
<PAGE>   13

of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender or Permitted Liens) and shall give Lender immediate written
notice thereof.

        6.5 Without Lender's prior written consent, Borrower shall not, to the
extent such action would have a Material Adverse Effect, (a) grant any material
extension of the time of payment of any of the Receivables, (b) to any material
extent, compromise, compound or settle the same for less than the full amount
thereof, (c) release, wholly or partly, any Person liable for the payment
thereof, or allow any credit or discount whatsoever thereon other than trade
discounts granted in the ordinary course of business of Borrower.

        6.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.

        6.7 Borrower shall not merge with or into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of twenty (20) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof.

        6.8 Borrower shall not, without the prior written consent of Lender,
such consent not to be unreasonably withheld, declare or pay any cash dividend
or make a distribution on any class of stock, other than pursuant to employee
repurchase plans upon an employee's death or termination of employment or
transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except inventory sold in the normal course of business).

        6.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection.

        6.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.

                                      -13-
<PAGE>   14

        6.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (A) (i) with prior
notice to the Lender; and (ii) if such relocation shall be within the
continental United States, or (B) in the case of field production equipment, in
the ordinary course of business. If permitted to relocate Collateral pursuant to
the foregoing sentence, unless otherwise agreed in writing by Lender, and other
than with respect to field production equipment, Borrower shall first (a) cause
to be filed and/or delivered to the Lender all Uniform Commercial Code financing
statements, certificates or other documents or instruments necessary to continue
in effect the perfected security interest of the Lender in the Collateral, and
(b) have given the Lender no less than fifteen (15) days prior written notice of
such relocation.

        6.12 Borrower shall not sell, transfer, assign, hypothecate or otherwise
encumber its Intellectual Property without Lender's prior written consent, such
consent not to be unreasonably withheld.

        6.13 Borrower shall, within ninety (90) days of the Closing Date, enter
into an equipment lease agreement with Lender in an amount equal to or in
excess of FIVE HUNDRED THOUSAND DOLLARS ($500,000).

SECTION 7. CONDITIONS PRECEDENT TO LOAN

        The obligation of Lender to fund each installment of the Loan on each
Advance Date shall be subject to satisfaction by Borrower or waiver by Lender,
in Lender's sole discretion, of the following conditions:

        7.1    (a)  Phase I: The Advance Date for any installment shall occur on
or before August 19, 1999; .

               (b)  Phase II: The Advance Date for any installment shall occur 
on or before the date six (6) months from the date of Lender's approval of
availability of funds, such approval to be subject to the following conditions:

                    (i)    formal written request of Borrower,

                    (ii)   continued successful execution of relationship with
                           National Broadcasting Corporation;

                    (iii)  continued successful execution of "Around Alone"
                           event; and

                    (iv)   due diligence and approval of Lender.

        7.2 DOCUMENT DELIVERY. Borrower, on or prior to the Closing Date, shall
have delivered to Lender the following:

               (a) executed originals of the Agreement, [Note(s)], and any
documents reasonably required by Lender to effectuate the liens of Lender, with
respect to all 



                                      -14-
<PAGE>   15

Collateral;

               (b) certified copy of resolutions of Borrower's board of
directors evidencing approval of the borrowing and other transactions evidenced
by the Loan Documents and the Warrant Agreement(s);

               (c) certified copies of the Certificate of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower,

               (d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in which it
does business and where the failure to be qualified would have a Material
Adverse Effect; and

               (e) such other documents as Lender may reasonably request.

        7.3 ADVANCE REQUEST. Borrower shall:

               (a) deliver to Lender, at least five (5) business days prior to
the Advance Date, written notice in the form of an Advance Request (attached as
Exhibit C), or as otherwise specified by Lender from time to time, specifying
the date and amount of such Advance.

               (b) deliver executed original Note(s) and Warrant Agreement(s) as
set forth in Section 2, as applicable.

               (c) pay the Facility Fee; and

               (d) provide such other documents as Lender may reasonably
request.

        7.4 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or
caused to be taken such actions reasonably requested by Lender to grant Lender a
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be necessary or desirable to
perfect the security interest of Lender in such Collateral

        7.5 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a default under the Senior Loan Documents between Borrower and Senior
Creditor.

        7.6 MATERIAL ADVERSE EFFECT. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing, but excluding operating losses of
Borrower which are within 



                                      -15-
<PAGE>   16

Borrower's projections as specified on Schedule I hereto.

SECTION 8. DEFAULT

        The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:

        8.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or

        8.2 Borrower defaults in the performance of any other covenant or
Secured Obligation of Borrower hereunder or under the Note(s) or any of the
other Loan Documents, and such default continues for more than twenty (20) days
after Lender has given notice of such default to Borrower.

        8.3 Any representation or warranty made herein by' Borrower shall prove
to have been false or misleading in any material respect as of the date made; or

        8.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower, or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower, or

        8.5 Sixty (60) days shall have expired after the commencement of an
action by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or

        8.6 Sixty (60) days shall have expired after the appointment, without
the consent or acquiescence of Borrower, of any trustee, receiver or liquidator
of Borrower or of all or any substantial part of the properties of Borrower
without such appointment being vacated; or

        8.7 The default by Borrower under any Excluded Agreement(s), any other
promissory note or agreement for borrowed money which results in an acceleration
of the 



                                      -16-
<PAGE>   17

obligations thereunder, or any other agreement between Borrower and Lender; or

        8.8 The occurrence of any default under any lease or other agreement or
obligation of Borrower involving an amount in excess of $100,000.00 or having a
Material Adverse Effect; or the entry of any judgment against Borrower involving
an award in excess of $100,000.00 that would have a Material Adverse Effect,
that has not been bonded or stayed on appeal within thirty (30) days; or

        8.9 The occurrence of any material default under the Senior Loan
Documents.

SECTION 9. REMEDIES

        Upon the occurrence and continuation of any one or more Events of
Default, Lender, at its option, may declare the Note(s) and all of the other
Secured Obligations to be accelerated and immediately due and payable (provided,
that upon the occurrence of an Event of Default of the type described in
Sections 8.4 or 8.5, the Note(s) and all of the other Secured Obligations shall
automatically be accelerated and made due and payable without any further act),
whereupon the unpaid principal of and accrued interest on such Note(s) and all
other outstanding Secured Obligations shall become immediately due and payable,
and shall thereafter bear interest at the Default Rate set forth in, and
calculated according to, Section 2.3 (c) of this Agreement. Lender may exercise
all rights and remedies with respect to the Collateral under the Loan Documents
or otherwise available to it under applicable law, including the right to
release, hold or otherwise dispose of all or any part of the Collateral and the
right to occupy, utilize, process and commingle the Collateral.

        Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
five (5) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to Lender and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender in the following order of
priorities:

        First, to Lender in an amount sufficient to pay in full Lender's costs
        and professionals' and advisors' fees and expenses;

        Second, to Lender in an amount equal to the then unpaid amount of the
        Secured Obligations in such order and priority as Lender may choose in
        its sole discretion; and

        Finally, upon payment in full of all of the Secured Obligations, to
        Borrower or its representatives or as a court of competent jurisdiction
        may direct.

        Lender shall be deemed to have acted reasonably in the custody,
preservation and 



                                      -17-
<PAGE>   18

disposition of any of the Collateral if it complies with the obligations of a
secured party under Section 9207 of the UCC.

        Lender's rights and remedies hereunder are subject to the terms and
conditions of the Subordination Agreement.

SECTION 10. MISCELLANEOUS

        10.1 CONTINUATION OF SECURITY INTEREST. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in full force and
effect and all the rights, powers and remedies of Lender hereunder shall
continue to exist until the Secured Obligations are paid in full as the same
become due and payable and until Lender has executed a written termination
statement (which Lender shall execute within a reasonable time, not to exceed
ten (10) business days, after full payment of the Secured Obligations
hereunder), reassigning to Borrower, without recourse, the Collateral and all
rights conveyed hereby and returning possession of the Collateral to Borrower.
The rights, powers and remedies of Lender hereunder shall be in addition to all
rights, powers and remedies given by statute or rule of law and are cumulative.
The exercise of any one or more of the rights, powers and remedies provided
herein shall not be construed as a waiver of or election of remedies with
respect to any other rights, powers and remedies of Lender.

        10.2 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

        10.3 NOTICE. Except as otherwise provided herein, all notices and
service of process required, contemplated, or permitted hereunder or with
respect to the subject matter hereof shall be in writing, and shall be deemed to
have been validly served, given or delivered upon the earlier of (i) the first
business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:

               (a)    IF TO LENDER:

                      COMDISCO, INC.
                      Legal Department
                      Attention: General Counsel
                      6111 North River Road
                      Rosemont, IL 60018
                      Facsimile: (847) 518-5088
                      Telephone:  (847) 698-3000

                      WITH A COPY TO:

                                      -18-
<PAGE>   19

                      COMDISCO, INC./COMDISCO VENTURES
                      6111 North River Road
                      Rosemont, IL 60018
                      Facsimile: (847) 518-5465

               (b)    IF TO BORROWER:

                      QUOKKA SPORTS, INC.
                      Attention: Chief Financial Officer
                      525 Brannan Street, Ground Floor
                      San Francisco, CA 94107
                      Facsimile: (415) 908-1841
                      Telephone: (415) 908-3800

or to such other address as each party may designate for itself by like notice.

        10.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and the
other Loan Documents, and the Warrant Agreement(s) constitute the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and thereof, and supersede and replace in their entirety any prior
proposals, term sheets, letters, negotiations or other documents or agreements,
whether written or oral, with respect to the subject matter hereof or thereof
(including, without limitation, Lender's proposal letter dated February 3,
1999), all of which are merged herein and therein. None of the terms of this
Agreement, the Note(s), or any of the other Loan Documents may be amended except
by an instrument executed by each of the parties hereto.

        10.5 HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.

        10.6 NO WAIVER. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at any
time to enforce any right or remedy reserved to it, or to require performance of
any of the terms, covenants or provisions hereof by Borrower at any time
designated, shall be a waiver of any such right or remedy to which Lender is
entitled, nor shall it in any way affect the right of Lender to enforce such
provisions thereafter.

        10.7 SURVIVAL. All agreements, representations and warranties contained
in this Agreement, the Note(s), the other Loan Documents and the Warrant
Agreement(s) or in any document delivered pursuant hereto or thereto shall be
for the benefit of Lender and shall survive the execution and delivery of this
Agreement and the expiration or other termination of this Agreement.

        10.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement, the other
Loan Documents and the Warrant Agreement(s) shall inure to the benefit of and be
binding on 



                                      -19-
<PAGE>   20

Borrower and its permitted assigns (if any). Borrower shall not assign its
obligations under this Agreement, the Note(s), any of the other Loan Documents
or the Warrant Agreement(s), without Lender's express written consent, and any
such attempted assignment shall be void and of no effect. Lender may assign,
transfer, or endorse its rights hereunder and under the other Loan Documents or
Warrant Agreement(s) without prior notice to Borrower, and all of such rights
shall inure to the benefit of Lender's successors and assigns.

        10.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.

        10.10 GOVERNING LAW. This Agreement, the Note(s), the other Loan
Documents and the Warrant Agreement(s) have been negotiated and delivered to
Lender in the State of Illinois, and shall not become effective until accepted
by Lender in the State of Illinois. Payment to Lender by Borrower of the Secured
Obligations is due in the State of Illinois. This Agreement, the Note(s), the
other Loan Documents and the Warrant Agreement(s) shall be governed by, and
construed and enforced in accordance with, the laws of the State of Illinois,
excluding conflict of laws principles that would cause the application of laws
of any other jurisdiction.

        10.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings
arising in or under or related to this Agreement, the Note(s), any of the other
Loan Documents or Warrant Agreement(s) may be brought in any state or federal
court of competent jurisdiction located in the State of Illinois. By execution
and delivery of this Agreement, each party hereto generally and unconditionally:
(a) consents to personal jurisdiction in Cook County, State of Illinois; (b)
waives any objection as to jurisdiction or venue in Cook County, State of
Illinois; (c) agrees not to assert any defense based on lack of jurisdiction or
venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement, the Note(s), the
other Loan Documents or Warrant Agreement(s). Service of process on any party
hereto in any action arising out of or relating to this agreement shall be
effective if given in accordance with the requirements for notice set forth in
Section 10.3, above and shall be deemed effective and received as set forth in
Section 10.3, above. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of either party to
bring proceedings in the courts of any other jurisdiction.

        10.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
EACH OF BORROWER AND LENDER SPECIFICALLY WAI'VES ANY RIGHT IT MAY HAVE TO TRIAL
BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY
CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST


                                      -20-
<PAGE>   21

LENDER OR ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This
waiver extends to all such Claims, including, without limitation, Claims which
involve persons or entities other than Borrower and Lender; Claims which arise
out of or are in any way connected to the relationship between Borrower and
Lender; and any Claims for damages, breach of contract arising out of this
Agreement, any other Loan Document or any of the Excluded Agreements, specific
performance, or any equitable or legal relief of any kind.

        10.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to customer lists, certain General
Intangibles and any Financial Statements provided pursuant to Section 6 hereof,
constitute proprietary and confidential information of the Borrower (the
"Confidential Information"). Accordingly, Lender agrees that any Confidential
Information it may obtain in the course of acquiring, perfecting or foreclosing
on the Collateral or otherwise provided under this Agreement, provided such
Confidential Information is marked as confidential by Borrower at the time of
disclosure, or if oral information, which is confirmed in writing and marked as
confidential within thirty (30) days following disclosure, shall be received in
the strictest confidence and will not be disclosed to any other person or entity
in any manner whatsoever, in whole or in part, without the prior written consent
of the Borrower, unless and until Lender has acquired indefeasible title
thereto.

        10.14 COUNTERPARTS. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.




                                      -21-
<PAGE>   22





        IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and
delivered this Agreement as of the day and year first above written.

        BORROWER:                              QUOKKA SPORTS, INC.

                                               Signature: /s/ LES SCHMIDT
                                                         -----------------------

                                               Print Name:  Les Schmidt
                                                          ----------------------

                                               Title:  SVP & CFO
                                                     ---------------------------

Accepted in Rosemont, Illinois:

        LENDER:                                COMDISCO, INC.

                                               Signature: /s/ JAMES P. LABE
                                                         -----------------------

                                               Print Name:  James P. Labe
                                                          ----------------------

                                               Title: President
                                                     ---------------------------
                                                      Comdisco Ventures Division


                                      -22-
<PAGE>   23





                                    EXHIBIT A

                          SUBORDINATED PROMISSORY NOTE

$_____________                                                   Date: 

                                                                 Due:  

FOR VALUE RECEIVED, Quokka Sports, Inc., a Delaware corporation (the "Borrower")
hereby promises to pay to the order of Comdisco, Inc., a Delaware corporation
(the "Lender") at P.O. Box 91744, Chicago, IL 60693 or such other place of
payment as the holder of this Secured Promissory Note (this "Note") may specify
from time to time in writing, in lawful money of the United States of America,
the principal amount of ___________ and 00/100 Dollars ($________________). The
principal amount shall accrue interest at the rate of twelve and one quarter
percent (12.25%) per annum from the date of this Note and no payment of interest
or principal shall be due until the earliest of (i) the effective date of an
initial public offering of the Borrower's securities; (ii) the effective date of
an acquisition or merger of Borrower in which more than fifty percent (50%) of
the voting power of the Borrower is transferred, excluding any merger effected
exclusively to change the domicile of Borrower; or (iii) February 1, 2000. Upon
the occurrence of the earliest of the foregoing events, unless prepaid in
accordance with the terms of Section 2.2 of the Loan Agreement, the principal
and accrued interest due hereunder shall be payable in equal monthly
installments of principal and interest commencing on the first day of the month
immediately following such event and on the same day of each month thereafter to
and including thirty-six (36) months after the date of this Note, such
installments to be applied first to accrued and unpaid interest and the balance
to be unpaid principal. Interest shall be computed on the basis of a year
consisting of twelve months of thirty days each.

This Note is one of the Note(s) referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement of even
date herewith by and between Borrower and Lender (as the same may from time to
time be amended, modified or supplemented in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same definitions
when used herein, unless otherwise defined herein.

THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF CERTAIN SUBORDINATION
AGREEMENT(S) BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR
CREDITOR AND BETWEEN LENDER AND SENIOR CREDITOR. IN THE EVENT OF ANY
CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND ANY SUBORDINATION
AGREEMENT(S), THE TERMS OF THE SUBORDINATION AGREEMENT(S) SHALL CONTROL.

The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.



                                      -23-
<PAGE>   24







        This Note has been negotiated and delivered to Lender and is payable in
the State of Illinois, and shall not become effective until accepted by Lender
in the State of Illinois. This Note shall be governed by and construed and
enforced in accordance with, the laws of the State of Illinois, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.

        BORROWER:                         QUOKKA SPORTS, INC.
                                          525 Brannan Street, Ground Floor
                                          San Francisco, CA 94107

                                          Signature:______________________

                                          Print Name:_____________________

                                          Title:__________________________




                                      -24-
<PAGE>   25





                                    EXHIBIT C

                                 ADVANCE REQUEST

Date:________________

Name:____________________          ("Borrower")

Address:_________________                            


Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the amount
of $_____________ on ____________, 1999 (the "Advance Date") under that
Subordinated Loan and Security Agreement between Borrower and Lender dated
February 12, 1999 (the "Agreement").

Please:

               (a)    Issue a check payable to Borrower _______________________

                             or

               (b)    Wire Funds to Borrower's account _______________________  

               Bank: _________________________________________________________

               Address: ______________________________________________________

               ABA Number: ___________________________________________________

               Account Number: _______________________________________________

               Account Name: _________________________________________________

Borrower hereby affirms that all Representations and Warranties of Borrower set
forth in Section 4 and all Conditions Precedent to Loan set forth in Section 7
of the Agreement remain true and correct as of the date hereof.

Executed this _ day of ___________ 1999 by:

        BORROWER:                             QUOKKA SPORTS, INC.

                                              By: ___________________________

                                              Title: ________________________

                                              Print: ________________________


                                        
                                      -25-


<PAGE>   1
                                                                   Exhibit 10.10

                                                       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.
                                      
                                       1.
<PAGE>   2
                                                       INTEL/QUOKKA CONFIDENTIAL


        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
                                       2.
<PAGE>   3
                                                       INTEL/QUOKKA CONFIDENTIAL

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.


[*] Confidential Treatment Requested
                                       3.
<PAGE>   4
                                                       INTEL/QUOKKA CONFIDENTIAL


                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 


                                       4.
<PAGE>   5
                                                       INTEL/QUOKKA CONFIDENTIAL

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.


                                       5.
<PAGE>   6
                                                       INTEL/QUOKKA CONFIDENTIAL

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 respect to any proprietary information or patent, copyright,
trade secret or other intellectual property right



                                       6.
<PAGE>   7
                                                       INTEL/QUOKKA CONFIDENTIAL


owned or controlled by Intel, except as expressly provided in this Agreement.

        3.5 QUOKKA VENUE BASED SOFTWARE SOURCE CODE. Effective six (6) months
after delivery of the Intel Software to Quokka, Quokka hereby grants to Intel
under Quokka's Intellectual Property Rights a worldwide, perpetual, irrevocable
(except as set forth in Section 9.3.2), non-exclusive, non-sublicensable,
royalty-free license to use, reproduce, perform and display the Quokka Venue
Based Software in source code form for internal use only, solely for the purpose
of (i) creating the Intel Software, (ii) creating the TSI SDK or other Intel
product incorporating the Quokka Venue Based Software, (iii) preparing Intel
Derivatives for incorporation into the TSI SDK or other Intel product, (iv)
making Intel Improvements, (v) preparing Intel Derivatives for the purpose of
correcting any infringement of any third party intellectual property right, and
(vi) providing technical support for the TSI SDK or other Intel products. The
Intel Derivatives, the TSI SDK and all Intel products incorporating the Quokka
Venue Based Software or Intel Derivatives shall be the property of Intel subject
to Quokka's ownership of the Quokka Venue Based Software, and Intel shall be the
owner of all right, title and interest (including without limitation, all
intellectual property rights) therein provided, however, that to the extent that
Quokka or any Quokka employee, agent or contractor may make any contribution to
the Intel Software, the Intel Derivatives, the TSI SDK or any Intel product
incorporating the same, Quokka agrees to license under the Quokka Intellectual
Property Rights in such contribution and hereby grants to Intel a worldwide,
perpetual, irrevocable (except as set forth in Section 9.3.2), non-exclusive,
royalty-free license under the Quokka Intellectual Property Rights in such
contribution (to the extent that Quokka has the right to grant such a license)
to use, reproduce, perform, display, sublicense and distribute such
contributions as incorporated in the Intel Software, TSI SDK, Intel Derivatives
and Intel products incorporating the same. The parties intend the Intel
Software, the Intel Derivatives, the TSI SDK and the Intel products
incorporating the same be the property of Intel and not jointly owned by Quokka
and Intel.

        3.6 QUOKKA VENUE BASED SOFTWARE OBJECT CODE. Quokka hereby grants to
Intel 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 Quokka Venue
Based Software only in binary code form and only incorporated into the TSI SDK
or other Intel product (or as part of any Intel Derivative) that adds
significant functionality to the Quokka Venue Based Software.

        3.7 SDK MATERIALS. Quokka hereby grants to Intel a worldwide,
irrevocable (except as set forth in Section 9.3.2), perpetual, non-exclusive,
royalty free license to reproduce, make Derivative Works of, distribute, license
through multiple levels of distribution, display and perform the SDK Materials.

        3.8 LICENSED PRODUCTS. Quokka hereby grants to Intel a non-exclusive,
worldwide, royalty free, irrevocable (except for material breach), perpetual
license to use, reproduce, distribute, perform and display the Quokka
Application and other Licensed Products for promotional purposes to demonstrate
the Intel Software, the Quokka Venue Based Software, the TSI SDK and the
Project.

        3.9 RESTRICTIONS ON INTEL. Intel shall not assign, sub-license, lease,
or in any other way transfer, use, perform, display or disclose the Quokka Venue
Based Software to any third party or reproduce or distribute any part of the
Quokka Venue Based Software except as specifically provided in this Agreement.
Quokka acknowledges, however, that Intel's third party vendors and developers
may require temporary access to source code for the Quokka 

                                       7.
<PAGE>   8
                                                       INTEL/QUOKKA CONFIDENTIAL


Venue Based Software in emergency situations, and, subject to Quokka's prior
written approval, which will not unreasonably be withheld, Intel may grant such
access (subject to appropriate confidentiality agreements) as reasonably
necessary to remedy an emergency situation.

        3.10 NO OTHER RIGHTS IN QUOKKA PROPERTY. No rights or licenses are
granted by Quokka to Intel under this Agreement, expressly, by estoppel or by
implication, with respect to any proprietary information or patent, copyright,
trade secret or other intellectual property right owned or controlled by Quokka,
except as expressly provided in this Agreement.

SECTION 4.     PROPRIETARY RIGHTS

        The Intel Software, Intel Derivatives and all Intel products
incorporating the same, in whole or in part, and all copies, are and shall
remain owned by and be the sole and exclusive property of Intel. Intel has the
right to use, copy, modify, license, sub-license, make derivative works of,
perform and display the Intel Software in any manner and for any purpose that
Intel deems appropriate at its sole discretion, subject only to Quokka's
ownership of the Quokka Venue Based Software and the license rights granted to
Quokka by Intel under this Agreement. Similarly, the Quokka Derivatives, the
Quokka Application, the Quokka Venue Based Software and other Licensed Products
shall be the sole and exclusive property of Quokka as provided in Section 3.5 of
this Agreement subject only to Intel's ownership of the Intel Software and the
license rights granted to Intel by Quokka under this Agreement.

SECTION 5.     TECHNICAL SUPPORT AND UPDATES

        5.1 QUOKKA. Quokka shall provide commercially appropriate technical
support for all Licensed Products. Quokka shall have no obligation to provide
technical or other support to Intel or its customers in regard to the TSI SDK.
Subject to the license set forth in Section 3.5 and 3.6, Quokka shall provide
Intel updates and improvements to the Quokka Venue Based Software in source and
object code form that Quokka may make, but Quokka shall have no obligation to
make any such updates and improvements.

        5.2 INTEL. INTEL WILL NOT BE REQUIRED TO PROVIDE ANY TECHNICAL OR OTHER
SUPPORT, ASSISTANCE, INSTALLATION, TRAINING OR OTHER SERVICES EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT. EXCEPT AS SET FORTH IN THIS SECTION
5.2, INTEL WILL NOT BE REQUIRED TO PROVIDE ANY UPDATES, ENHANCEMENTS OR
EXTENSIONS TO THE INTEL SOFTWARE OF ANY KIND OR PROVIDE ANY TECHNICAL SUPPORT
FOR THE LICENSED PRODUCTS. Intel shall, at its sole discretion, provide
technical support of all kinds at all levels for the TSI SDK and Intel products.
Intel shall have no obligation to provide technical or other support to Quokka
or its customers in regard to the Licensed Products. Subject to the license set
forth in Section 3.1 and 3.2, Intel shall provide Quokka updates and
improvements to the TSI SDK in source and object code form that Intel may make,
but Intel shall have no obligation to make any such updates and improvements.

SECTION 6.     MARKETING AND PROMOTION

        The parties will issue a press release describing the Intel-Quokka
cooperation in relation to the Project as soon as reasonably practicable after
execution of this Agreement. Text of the press release will be subject to the
prior review and approval of Intel and Quokka.


                                       8.
<PAGE>   9
                                                       INTEL/QUOKKA CONFIDENTIAL


SECTION 7.     COPYRIGHTS AND TRADEMARK

        7.1 COPYRIGHTS. The Intel Software, the Intel Derivatives, the Quokka
Derivatives, the Quokka Venue Based Software, the Quokka Application and the
Licensed Products are copyrighted and are protected by United States copyright
laws and international treaty provisions. Quokka shall use commercially
reasonable efforts to prevent any unauthorized copying of the Intel Software and
the Intel Derivatives and Intel shall use commercially reasonable efforts to
prevent any unauthorized copying of the Quokka Derivatives, the Quokka Venue
Based Software, the Quokka Application and the Licensed Products. Quokka shall
not remove or obscure any of Intel's or its vendors' copyright notices or other
proprietary notices from the Intel Software and the Intel Derivatives and Intel
shall not remove or obscure any of Quokka's or its vendors' copyright notices or
other proprietary notices from the Quokka Derivatives, the Quokka Venue Based
Software, the Quokka Application or the Licensed Products. In addition, each
Licensed Product shall display "Portions Copyright 1998 Intel Corporation" in
"About" boxes of Licensed Products. Quokka and its licensees shall display
"Broadband Media Technologies by Intel Corporation" (or such other attribution
that Intel may reasonably request) in 10 point or larger type in start-up or
"splash" screens of Licensed Products. Intel and its licensees shall display
such copyright and other reasonable attribution that Quokka may reasonably
request in 10 point or larger type in start-up or "splash" screens of the TSI
SDK and Intel products incorporating the same.

        7.2 TRADEMARKS. No rights or licenses are granted by this Agreement,
expressly or by implication, to use any Intel trademark or trade name, or any
word or mark similar thereto, in connection with any products manufactured, used
or sold by Quokka, or as part of Quokka's corporate, firm or trade name, or for
any other purpose, except as expressly provided for in this Agreement. No rights
or licenses are granted by this Agreement, expressly or by implication, to use
any Quokka trademark or trade name, or any word or mark similar thereto, in
connection with any products manufactured, used or sold by Intel, or as part of
Intel's corporate, firm or trade name, or for any other purpose, except as
expressly provided for in this Agreement.

SECTION 8.     NO WARRANTIES; LIMITED LIABILITY

        8.1 INTEL SOFTWARE AS IS. INTEL MAKES NO WARRANTY OF ANY KIND REGARDING
THE INTEL SOFTWARE AND ANY SUPPORT, INPUT, RECOMMENDATIONS, ASSISTANCE OR OTHER
CONTRIBUTIONS OF ANY KIND THAT INTEL MAY MAKE TO THE PROJECT. INTEL SOFTWARE IS
LICENSED TO QUOKKA ON AN "AS IS" BASIS. INTEL SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY
RIGHT AND FITNESS FOR A PARTICULAR PURPOSE.

        8.2 QUOKKA VENUE BASED SOFTWARE AS IS. QUOKKA MAKES NO WARRANTY OF ANY
KIND REGARDING THE QUOKKA VENUE BASED SOFTWARE AND ANY SUPPORT, INPUT,
RECOMMENDATIONS, ASSISTANCE OR OTHER CONTRIBUTIONS OF ANY KIND THAT QUOKKA MAY
MAKE TO THE PROJECT. THE QUOKKA VENUE BASED SOFTWARE IS LICENSED TO INTEL ON AN
"AS IS" BASIS. QUOKKA SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, NONINFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT AND FITNESS
FOR A PARTICULAR PURPOSE.

                                       9.
<PAGE>   10
                                                       INTEL/QUOKKA CONFIDENTIAL


        8.3 LIMITED LIABILITY. EXCEPT FOR QUOKKA'S DUTY TO INDEMNIFY, DEFEND AND
HOLD INTEL HARMLESS WITHOUT LIMITATION PURSUANT TO SECTION 12.1 OF THIS
AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGE OF ANY KIND. IN NO EVENT SHALL A PARTY BE LIABLE TO THE
OTHER UNDER THIS AGREEMENT IN AN AMOUNT EXCEEDING $[*].

SECTION 9.     TERM AND TERMINATION

        9.1 TERM. The term of this Agreement shall commence on the date first
written above and shall continue until the date of Project Completion, unless
earlier terminated by a party as permitted herein. This Agreement may be
extended for such additional term and under such conditions as the parties may
mutually agree in a duly executed writing

        9.2 TERMINATION. Either party may terminate this Agreement at any time
without cause by giving the other party written notice of termination. Either
party may terminate this Agreement for cause in the event of a material breach
of the terms of this Agreement by the other party, provided that it gives
written notice of such breach to the other party and the other party has not
cured such breach within thirty (30) days of receipt of such notice.

        9.3    EFFECT OF TERMINATION.

               9.3.1 CONSIDERATION. If Quokka terminates this Agreement for
other than uncured material breach, Intel may keep all consideration given by
Quokka to Intel hereunder without further obligation. If Quokka terminates this
Agreement for cause as a result of uncured, material breach by Intel prior to
delivery of the Intel Software to Quokka, the Quokka Warrants shall expire. If
Intel terminates the Agreement for cause due to uncured, material breach by
Quokka, Intel may keep all consideration given by Quokka to Intel without
further obligation and the Quokka Warrants may thereafter be exercised by Intel
notwithstanding anything to the contrary in this Agreement. In the event that
Intel terminates the Agreement for other than uncured, material breach by
Quokka, Intel's rights with respect to the Quokka Warrants shall expire as
follows:
<TABLE>
<CAPTION>
TERMINATION DATE                                                          NUMBER OF WARRANTS
                                                                               EXPIRING
<S>                                                                       <C>    
Between March 21, 1998 and August 20, 1998                                       490,196
Between August 21, 1998 and January 21, 1999                                     343,137
Between January 22, 1999 and June 22, 1999                                       199,078
Between June 23, 1999 and November 1, 1999                                        98,039
</TABLE>

Nothing in this Section shall be construed to limit Intel's right to exercise
the Quokka Warrants upon Project Completion as that term is defined herein.

               9.3.2 LICENSES. If Intel terminates this Agreement for any reason
other than for uncured, material breach by Quokka, or if Quokka terminates this
Agreement for uncured, material breach by Intel, Intel shall deliver to Quokka
the Intel Software in its then current form (both binary and source code). If
Quokka terminates this Agreement for any reason other than for uncured, material
breach by Intel, or if Intel terminates this Agreement for uncured, material
breach by Quokka, Quokka shall deliver to Intel the Quokka Venue Based Software
in its then current form (both binary and source code). The licenses granted by
Intel to Quokka and by Quokka to Intel pursuant to 


[*] Confidential Treatment Requested

                                      10.
<PAGE>   11
                                                       INTEL/QUOKKA CONFIDENTIAL


Section 3 of this Agreement, however, may only be revoked for uncured material
breach of the license terms as provided in this Agreement. Each party reserves
the right to verify the other party's compliance with this Agreement and the
licenses granted herein by reasonable means, and each party agrees to cooperate
with the other in that regard. In the event that a party is in material breach
of any of the licenses granted herein, the non-breaching has the right to
terminate all license rights granted herein upon thirty (30) days written notice
to the breaching party if the breaching party fails to correct such material
noncompliance within the thirty (30) day notice period.

               9.3.3 OTHER. Sections 3 (unless the licenses therein are
terminated pursuant to Section 9.3.2), 4, 5, 7, 8, 9, 10, 11, 12, 15, and 16
shall survive any termination or expiration of this Agreement.

SECTION 10.    CONFIDENTIALITY AND NON-DISCLOSURE

        10.1 SOURCE CODE. The Intel Software, Intel Derivatives, TSI SDK (other
than the Quokka Venue Based Software) and source code constitute proprietary,
confidential, and trade secret information of Intel, and the Quokka Derivatives,
the Quokka Venue Based Software, the Quokka Application and the Licensed
Products (other than the Intel Software) and source code constitute proprietary,
confidential, and trade secret information of Quokka. Each of the parties shall
ensure that the source code of the other party receives at least the same degree
of confidentiality that is accorded to its own source code. Except as expressly
permitted by this Agreement, neither party shall disclose the other party's
source code to any third party absent prior written approval from the other
party and a prior written confidentiality and nondisclosure agreement with each
such third party that is satisfactory to the other party in its sole discretion.

        10.2 CNDA. This Agreement and the terms thereof are confidential and
shall not be disclosed to any third party without the prior written consent of
the non-disclosing party. Except as expressly provided herein, this Agreement
and all disclosures relating thereto, shall be governed by CNDA number 101693
executed by the parties on November 18, 1997.

SECTION 11.    NOTICES

        All notices required or permitted to be given hereunder shall be in
writing, shall make reference to this Agreement, and shall be delivered by hand,
or dispatched by prepaid nationally recognized overnight air courier or by
registered or certified airmail, postage prepaid, addressed as follows:

If to Quokka:                                      If to Intel:

525 Brannan Street                                 Intel Corporation
Ground Floor                                       211 N.E. 25th Avenue
San Francisco, CA 94107                            Hillsboro, OR 97124-5961
Attn: President                                    JF3-145
                                                   Attn: Legal Counsel

With a copy to:                                    With a copy to:
Cooley Godward LLP                                 Post Contract Management
One Maritime Plaza                                 Same Address
20th Floor


                                      11.
<PAGE>   12
                                                       INTEL/QUOKKA CONFIDENTIAL

San Francisco, CA 94111
Attn: Paul Startz, Esq.

        Such notices shall be deemed served on the earlier of: (i) actual
receipt by addressee, (ii) two (2) days after deposit with a nationally
recognized overnight air courier or (iii) five (5) days after appropriate
mailing. Either party may give written notice of a change of address and, after
notice of such change has been received, any notice or request shall thereafter
be given to such party at such changed address.

SECTION 12.    INDEMNITY

        12.1 QUOKKA AND LICENSED PRODUCTS. Quokka shall defend, indemnify, and
hold Intel harmless from and against any loss, cost, liability and expense
(including reasonable attorney fees) arising from any action or claim brought or
threatened against Quokka or Intel or their customers alleging that any Licensed
Product infringes any patent, copyright, trademark, trade secret, or other
intellectual property right of any third party provided that Intel (i) promptly
notifies Quokka in writing of any such suit or proceeding brought against it,
(ii) provides Quokka at its sole discretion with sole control over the defense
or settlement of such suit or proceeding, and (iii) provides reasonable
information and assistance in the defense and/or settlement of any such claim or
action brought against it. Without limiting Quokka's duty to defend and hold
Intel harmless, Quokka's indemnity obligation hereunder shall not apply to any
successful suit or proceeding based solely upon a claim that the Intel Software
or a part thereof (except any Quokka Improvement), alone and not in combination
with any other technology or product (including but not limited to the Licensed
Product or the Quokka Venue Based Software), constitutes a direct infringement
of any patent or copyright of any third party; provided that Quokka (i) promptly
notifies Intel in writing of any such suit or proceeding, (ii) provides Intel at
its sole discretion and at its own expense with sole control over the defense or
settlement of such suit or proceeding, (iii) provides reasonable information and
assistance in the defense and/or settlement of any such claim or action, and
(iv) a court of competent jurisdiction (after appropriate appeals have been
filed) concludes that the Intel Software, or a part thereof (except any Quokka
Improvement), alone and not in combination with any other technology or product
(including but not limited to the Licensed Product or the Quokka Venue Based
Software) constitutes a direct infringement of any patent or copyright of any
third party.

        12.2 QUOKKA AND QUOKKA VENUE BASED SOFTWARE IN TSI SDK OR INTEL PRODUCT.
Subject to an aggregate limit of US$[*], Quokka shall defend, indemnify and
hold Intel harmless from and against any loss, cost, liability and expense
(including reasonable attorney fees) arising solely from an action or claim
brought against Intel alleging that the Quokka Venue Based Software incorporated
and distributed in the TSI SDK or other Intel product, alone and not in
combination with any other product or technology, infringes any United States
copyright of any third party provided that Intel (i) promptly notifies Intel in
writing of any such suit or proceeding, (ii) provides Quokka at its sole
discretion with sole control over the defense or settlement of such suit or
proceeding, and (iii) provides reasonable information and assistance in the
defense and/or settlement of any such claim or action and (iv) a court of
competent jurisdiction (after appropriate appeals have been filed) concludes
that the Quokka Venue Based Software, or a part thereof (except any Intel
Improvement), alone and not in combination with any other technology or product
(including but not limited to the Intel Software) constitutes a direct
infringement of any United States copyright of any third party.

[*] Confidential Treatment Requested.

                                      12.
<PAGE>   13
                                                       INTEL/QUOKKA CONFIDENTIAL


        12.3 INTEL. Subject to an aggregate limit of US$[*], Intel shall
defend, indemnify and hold Quokka harmless from and against any loss, cost,
liability and expense (including reasonable attorney fees) arising solely from
an action or claim brought against Quokka alleging only that the Intel Software,
alone and not in combination with any other product or technology, infringes any
United States copyright of any third party provided that Quokka (i) promptly
notifies Intel in writing of any such suit or proceeding, (ii) provides Intel at
its sole discretion with sole control over the defense or settlement of such
suit or proceeding, and (iii) provides reasonable information and assistance in
the defense and/or settlement of any such claim or action and (iv) a court of
competent jurisdiction (after appropriate appeals have been filed) concludes
that the Intel Software, or a part thereof (except any Quokka Improvement),
alone and not in combination with any other technology or product (including but
not limited to a Licensed Product and the Quokka Venue Based Software)
constitutes a direct infringement of any United States copyright of any third
party.

        12.4 LIMITATIONS. Intel shall not be liable for any claims, liabilities,
damages, losses, and costs (including attorney fees), and Quokka shall
indemnify, defend and hold Intel harmless from, any claims, liabilities,
damages, losses, and costs (including reasonable attorney fees) resulting from
any suit or proceeding to the extent arising from (i) Intel's compliance with
Quokka's designs specifications or instructions in the development of the Intel
Software (other than the Project Specification) or (ii) modifications to or
Derivative Works of the Intel Software by Quokka.

        12.5 REMEDIES. If the distribution of a Licensed Product is permanently
enjoined, or Intel determines in its reasonable discretion that it may be
enjoined, because the Intel Software or a part thereof constitutes or appears to
constitute an infringement of any patent, copyright, trademark, trade secret, or
other intellectual property right of any third party, Intel may, at its sole
discretion (i) procure sufficient rights for Quokka to enable distribution of
the Licensed Product consistent with this Agreement (ii) modify the Intel
Software so that it becomes non-infringing, or (iii) terminate the Intel
Software licenses granted herein without liability to Quokka. Nothing in this
section, however, shall preclude Quokka from modifying the Intel Software to
correct the infringement, and, if such corrective action is taken to the
satisfaction of Intel that the infringement has been corrected, the licenses
granted herein with respect to the Intel Software may not be terminated by Intel
pursuant to this Section on the basis of infringement. If the distribution of
the TSI SDK or an Intel product is permanently enjoined, or Quokka determines in
its reasonable discretion that it may be enjoined, because the Quokka Venue
Based Software or a part thereof constitutes or appears to constitute an
infringement of any patent, copyright, trademark, trade secret, or other
intellectual property right of any third party, Quokka may, at its sole
discretion (i) procure sufficient rights for Intel to enable distribution of the
TSI SDK or Intel product consistent with this Agreement (ii) modify the Quokka
Venue Based Software so that it becomes non-infringing, or (iii) terminate the
Quokka Venue Based Software licenses granted herein without liability to Intel.
Nothing in this section, however, shall preclude Intel from modifying the Quokka
Venue Based Software to correct the infringement and if such corrective action
is taken to the satisfaction of Quokka that the infringement has been corrected,
the licenses granted herein with respect to the Quokka Venue Based Software may
not be terminated by Quokka pursuant to this Section for infringement. If a
party elects to terminate a license rather than cure the infringement on which
the termination is based ("Infringing Party") and the other party
("Non-Infringing Party") does not elect to cure the infringement itself, then
all license rights granted by the Non-Infringing Party to the Infringing Party
in this Agreement shall terminate.

[*] Confidential Treatment Requested.

                                      13.

<PAGE>   14
                                                       INTEL/QUOKKA CONFIDENTIAL

SECTION 13.    FORCE MAJEURE

        Neither party shall be liable for any failure to perform due to
unforeseen circumstances or causes beyond that party's reasonable control,
including, but not limited to, acts of God, war, riot, embargoes, acts of civil
or military authorities, delay in delivery by vendors, fire, flood, earthquake,
accident, strikes, inability to secure transportation, facilities, fuel, energy,
labor or materials. In the event of force majeure, the time for delivery or
other performance will be extended for a period equal to the duration of the
delay caused thereby.

SECTION 14.    ASSIGNMENT, SALE OR TRANSFER

        Neither party shall transfer or assign any of its rights under this
Agreement to any person. Any attempt to assign any rights, duties or obligations
hereunder without the other party's written consent shall be void.

SECTION 15.    RELATIONSHIP OF THE PARTIES

        This Agreement shall not be construed to create a partnership, joint
venture or other agency relationship between the parties. Neither party hereto
will be deemed the agent or legal representative of the other for any purpose
whatsoever and each party will act as an independent contractor with regard to
the other in its performance under this Agreement. Nothing herein will authorize
either party to create any obligation or responsibility whatsoever, express or
implied, on behalf of the other or to bind the other in any manner, or to make
any representation, commitment or warranty on behalf of the other.

SECTION 16.    MISCELLANEOUS

        16.1 EXPORT RESTRICTIONS. The Intel Software, the Intel Derivatives, the
Quokka Derivatives, the Quokka Venue Based Software, the Quokka Application and
the Licensed Products may be controlled for export purposes by the U.S.
Government. Neither party shall export, either directly or indirectly, any such
material without first obtaining any required license or other approval from the
U.S. Department of Commerce or any other agency or department of the United
States Government as required. The parties agree to provide reasonable
cooperation to one another in connection with obtaining any such licenses or
approvals.

        16.2 GOVERNING LAW. Any claim arising under or relating to this
Agreement shall be governed by the internal substantive laws of the State of
California, without regard to principles of conflict of laws.


                                      14.
<PAGE>   15
                                                       INTEL/QUOKKA CONFIDENTIAL


        16.3 INTEGRATION. This Agreement, together with the and the CNDA,
constitute the entire agreement between Quokka and Intel relating to the subject
matter hereof. This Agreement shall only be amended by a writing signed by both
parties.

        16.4 HEADINGS. The headings to the paragraphs and subparagraphs of this
Agreement are to facilitate reference only, do not form a part of this
Agreement, and will not in any way affect the interpretation thereof.

        16.5 SEVERABILITY. The terms and conditions of this Agreement are
severable. If any paragraph, provision, or clause in this Agreement shall be
found or be held to be invalid or unenforceable in any jurisdiction in which
this Agreement is being performed, the remainder of this Agreement shall be
valid and enforceable and the parties shall use good faith to negotiate a
substitute, valid and enforceable provision that most nearly effects the
parties' intent in entering into this Agreement.

        16.6 REMEDIES. The rights and remedies provided in this Agreement are in
addition to any other rights and remedies provided at law or in equity.

        IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first written above.

QUOKKA SPORTS, INC.                    INTEL CORPORATION


By: /s/ ALAN RAMADAN                   By: /s/ D. CRAIG KINNIC
   -----------------------------          -----------------------------------

Name:   Alan Ramadan                   Name:   D. Craig Kinnic
   -----------------------------          -----------------------------------

Title:  President & CEO                Title:  Vice President, Director IAL
   -----------------------------          -----------------------------------


                                      15.
<PAGE>   16



Mr. Alan Ramadan
President
Quokka Sports, Inc.
Ground Floor
525 Brannan Street
San Francisco, CA 94107


August 10, 1998


Dear Al:

In connection with the purchase by Intel Corporation ("Intel") of 1,141,202
shares of Series B Preferred Stock of Quokka Sports, Inc. ("Quokka") pursuant to
the Series a Preferred Stock Purchase Agreement (the "Purchase Agreement") dated
June 12, 1999 among Quokka, Intel and the Investors named therein, Quokka and
Intel hereby agree as follows:

1.      Amendments to the Software License and Development Agreement. Pursuant
        to that certain Software License and Development Agreement (the
        "Agreement") dated March 20, 1998 between Quokka and Intel, Intel and
        Quokka agreed to use commercially reasonable efforts to complete the
        Project (as defined in the Agreement) by April 30, 1999. Pursuant to
        Section 16.3 of the Agreement. the parties hereby amend Agreement as
        follows:

        1.1     In Section 2.1, "April 30, 1999" is changed to "August 31,
                1999."

        1.2     At the end of Section 1.13 the following is added:
                "Notwithstanding any provision herein to the contrary, and in
                addition to the engineer man years set forth above, Intel shall
                also dedicate [*] Intel engineers from February 1999 through
                August 1999 to the Project, with such engineers to provide no
                less than forty hours per week to the Project during such
                period."

        1.3     At the end of Section 1.2, the following is added:
                "Notwithstanding any provision herein to the contrary, Intel
                Software shall, without limiting the foregoing, include the
                following:

                1.2.1   [*]

                1.2.2   [*]

                1.2.3   [*]

                1.2.4   [*]

                1.2.5   [*]



[*] Confidential Treatment Requested
<PAGE>   17
      1.2.6 PACKAGE DELIVERY SOFTWARE. For purposes of this Section 1.2,
            "Package Delivery Software shall mean software that performs a
            "Package Delivery" functionality (as defined below). Package
            Delivery will allow Quokka to deliver files from the production
            facility to client systems. It will provide a file transfer
            protocol, a mechanism to tag the content of the files and the
            ability to notify the application when specific files have arrived.
            Intel will provide a sample application that demonstrates how to use
            the components on both the content provider system and the client
            system. Intel will work with Quokka to ensure that the file transfer
            can be accomplished using at least one broadband service provider to
            be jointly identified by the two parties."

2.    CUSTOMIZATION OF TECHNOLOGY TO NEXT APPLICATION. Intel and Quokka agree to
      negotiate in good faith a new agreement with substantially the same
      technology licensing terms to those set forth in the Agreement pursuant to
      which Intel will work with Quokka to customize the key technology
      components of the next application that Quokka will create. Intel and
      Quokka currently anticipate that this application will be in another motor
      sports series, an adventure sports series or in a water sports series.

3.    [*] OPTIMIZATION. Based on a mutual belief that they will execute an
      agreement to optimize Quokka products for the [*] processor as described
      below, Intel and Quokka currently anticipate that the Project (as defined
      in the Agreement) will use a [*] optimized version of the [*] to decode
      multiple video streams delivered over a satellite network. The parties
      will negotiate in good faith an agreement for Intel to contribute
      engineering resources and/or money to help Quokka optimize its products
      for the [*] processor. The products may include a user interface to take
      advantage of multiple video streams delivered over a satellite network,
      and end user functionality that allows users to view multiple video
      streams (at least 3) as part of the Project. Intel will loan to Quokka,
      under standard terms and conditions to which Intel makes such systems
      available to other strategic technology partners, two early [*] platforms
      for the optimization work. In addition, Intel will make available one
      Intel Application Engineer as needed to assist Quokka personnel in this
      effort.

4.    [*] Intel agrees to license to Quokka, under mutually agreeable terms and
      conditions, its [*] to be included in the Project.

5.    BOARD OBSERVER.

      5.1   The Company acknowledges that Intel will likely have, from time to 
      time, information that may be of interest to Quokka ("Information") 
      regarding a wide variety of matters including, by way of example only, 
      (1) Intel's technologies, plans and services, and plans and strategies 
      relating thereto, (2) current and future investments Intel has made, may 
      make, may consider or may become aware of with respect to other companies 
      and other technologies, products and services, including, without 
      limitation, companies that may be competitive with Quokka's, and (3) 
      developments with respect to the technologies, products and services, and 
      plans and strategies relating thereto, of other companies, including, 
      without limitation, companies that may be competitive with Quokka. The 
      Company recognizes that a portion of such Information may be of interest 
      to Quokka. Such Information may or may not be known by Intel's observer. 
      The Company, as a material part of the consideration for the Purchase 
      Agreement, agrees that Intel and its observer shall have no duty to 
      disclose any Information to Quokka or permit Quokka to participate in any 
      projects or investments based on any Information, or


[*] Confidential Treatment Requested.
<PAGE>   18
to otherwise take advantage of any opportunity that may be of interest to Quokka
if it were aware of such information, and hereby waives, to the extent permitted
by law, any claim based on the corporate opportunity doctrine or otherwise that
could limit Intel's ability to pursue opportunities based on such information or
that would require Intel or its observer to disclose any such information to
Quokka or offer any opportunity relating thereto to Quokka.

        5.2    Pursuant to Section 3.3 of the Amended and Restated Investors'
               Rights Agreement dated June 12, 1996 (as such may be amended and
               restated from time to time, the "Investor Agreement"), the
               representative designated by Intel to attend Quokka Board
               meetings and receive all Board materials is obligated to hold all
               information so acquired "in confidence and trust" Quokka and
               Intel hereby acknowledge and agree that such obligation shall not
               limit such representative's ability to report such information to
               other Intel employees. Intel acknowledges that any information to
               so disclosed shall be "confidential information" under Section
               4.1 of the Investor Agreement.

6.      JOINT MARKETING ACTIVITY. Intel and Quokka will make reasonable efforts
        to identify joint marketing and promotional activities to promote
        Quokka's application in industry events. Intel and Quokka intend to use
        Quokka products optimized for the [*] platform at the [*] launch.

7.      INTEL INSIDE(R) PROGRAM OPTIMIZED CONTENT. Intel will offer technical
        assistance to Quokka to meet the current IIPOC criteria (found at
        http:www.intel.com/business/intelinsideprogram/optcontent/) for a period
        of 6 months.

8.      EQUITY PURCHASE. In partial consideration of Intel's obligations under
        this letter, Quokka has allowed Intel to purchase an additional 666,667
        shares of Series B Preferred Stock for a purchase price of $1 million
        and 50 cents (the "Put Shares"), above and beyond the 474,636 shares
        which represented Intel's pro rata portion of the Series B round.
        Failure by Intel to fulfill its obligations in this letter shall
        constitute a material breach. If Intel falls to cure such material
        breach within sixty days after written notice from Quokka, Quokka shall
        have the right to repurchase the Put Shares from Intel at a purchase
        price of $1 million and 50 cents. Purchase of the Put Shares would
        constitute the sale and final remedy for Intel's breach under this
        letter agreement (other than the expiration of the warrants as set forth
        in paragraph 10 below), and Quokka would automatically waive all claims
        it might have against Intel arising out of such breach (other than the
        expiration of the warrants as set forth in paragraph 10 below). Such
        right of Quokka to purchase the Put Shares may be assigned by Quokka.

9.      INVESTMENT IN NEW ENTITY FOR MOTOR SPORTS. Quokka is currently planning
        to create a new entity for products relating to motor sports. Intel is
        interested in the possibility of lending a first round of financing for
        such entity. So, when the time comes, Quokka will provide Intel with the
        opportunity to meet with the Board of Directors of Quokka and present a
        proposal for Intel to lead the financing round. Quokka and Intel agree
        to reasonably cooperate with each other so that the timing of this
        opportunity will in no way put Intel at a disadvantage to other
        potential lead investors or adversely impact the formation or financing
        of such entity. Quokka will consider Intel's proposal fairly, using its
        best business judgment. Whether or not Intel ends up the lead investor,
        Intel will have the opportunity to invest at least $5 million or 10% of
        the total cash raised, whichever is greater, in the first round of
        financing for such entity.

10.     WARRANTS. As partial consideration for Intel's obligations hereunder,
        Quokka has granted 

[*] Confidential Treatment Requested
<PAGE>   19
Intel warrants in the form attached hereto as Attachment A.

11.     NO LICENSES. Except with respect to any license resulting from the
        amendments to the Agreement set forth herein, nothing in this agreement
        grants any rights to the technology or intellectual property of either
        party.

Your signature below indicates your agreement with the terms of this letter.

                                      Very truly yours,

                                      /s/ RONALD J. WHITTIER
                                      -----------------------------------------
                                      Ronald J. Whittier
                                      Senior Vice President and General Manager,
                                      Content Group
                                      Intel Corporation

ACCEPTED AND AGREED TO:

QUOKKA SPORTS, INC.


By: /s/ ALAN RAMADAN
   ---------------------------------
        Alan Ramadan
        President

Date:   11 Aug. 98                       
     ------------------





<PAGE>   20







Mr. Alan Ramadan
President
Quokka Sports, Inc.
Ground Floor
525 Brannan Street
San Francisco, CA 94107


Dear Al:

In connection with the amendment and restatement as of the effective date hereof
of the Quokka Warrants (as such term is defined in that certain Software License
and Development Agreement dated March 20, 1998 between Quokka Sports, Inc. and
Intel Corporation, as amended by letter agreement dated August 10, 1998 (the
"Agreement")), Quokka Sports, Inc. and Intel Corporation hereby agree to amend
Section 2.6 of the Agreement by deleting the following sentences in their
entirety:

        "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 capital stock."

Quokka Sports, Inc. and Intel Corporation agree that the Quokka Warrants, as
amended and restated as of the date hereof, shall be exercisable and shall
terminate as set forth therein.

This letter agreement shall be effective as of August 11, 1998.

Your signature below indicates your agreement with the terms of this letter.

                                     Very truly yours,

                                      /s/ RONALD J. WHITTIER
                                      -----------------------------------------
                                      Ronald J. Whittier
                                      Senior Vice President and General Manager,
                                      Content Group
                                      Intel Corporation

ACCEPTED AND AGREED TO:

QUOKKA SPORTS, INC.


By: /s/ ALAN RAMADAN
   ---------------------------------
        Alan Ramadan
        President







<PAGE>   1
                                                                   EXHIBIT 10.11



                                      LEASE


1. PARTIES. This Lease, dated, for reference purposes only October 1, 1996, is
made by and between BRANNAN STREET PARTNERS, a California limited partnership
(herein called "Landlord"), and QUOKKA SPORTS, INC., a Delaware corporation
(herein called "Tenant").

2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases from
Landlord that certain office space (herein called "Premises") indicated on
Exhibit "A" attached hereto and hereby reference thereto made a part hereof,
said Premises being agreed, for the purpose of this Lease, to have an area of
approximately 10,000 square feet and being situated on the ground floor of that
certain Building known as 525 Brannan Street, San Francisco, California
("Building").

        Said Lease is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
said performance.

3. TERM. The term of this Lease shall be for five (5) years, commencing fifteen
(15) days following written notice from Landlord to Tenant of Landlord's
substantial completion of Landlord's Work as described below. Following
commencement, Landlord and Tenant shall execute a Memorandum to be attached
hereto confirming the occupancy date.

        LANDLORD'S WORK. As partial consideration for this Lease, Landlord
agrees to provide and pay for tenant improvements to the Premises up to the
total sum of TWO HUNDRED THOUSAND AND NO/HUNDREDTHS DOLLARS ($200,000.00)
("Landlord's Work") pursuant to plans and specifications mutually agreed upon
between Landlord and Tenant. In the event Landlord's Work costs in excess of
$200,000, but less than $250,000, Landlord agrees to amortize the additional
cost as part of the rent over the five (5)-year term of this Lease, together
with interest at 10% per annum on the unpaid balance (Landlord would prefer that
Tenant pay this excess in cash at the time of construction). To the extent
Landlord's Work costs in excess of $250,000, Tenant agrees to pay such
additional costs in cash prior to the commencement of construction. In the event
Landlord's Work costs less than $200,000, the rent shall be reduced pursuant to
the following formula:

      $750,000 + Cost of Landlord's Work x $15,833.33 = new monthly rental
      ----------------------------------
                 $950,000

        Landlord's Work shall include, but not be limited to, the costs of all
labor and materials, architectural, design, permits, fees and costs of
construction of Tenant's improvements; provided, however, the following items
shall be completed by Landlord, and the cost thereof shall be excluded:
demolition, code compliance (e.g., ADA, general fire safety), new entrance in
the front of the building, entrance in the rear freight lobby, convert loading
dock doors to windows, landscape the atrium and installation of HVAC system to
(but not within) the Premises.

        Landlord and Tenant shall diligently pursue the preparation of all plans
and specifications for all improvements to the Premises, whether Landlord's Work
or Tenant's Work. All such plans and specifications shall have the approval of
both Landlord and Tenant, which approval shall not be unreasonably withheld by
either party.

        Upon execution of this Lease, Tenant, at its expense, shall have
provided Landlord's architect with instructions sufficient to enable Landlord's
architect to prepare complete plans and specifications for Landlord's Work. Such
plans and specifications and a cost estimate for Landlord's 



                                       1
<PAGE>   2

work shall also have been prepared by Landlord's architect and submitted to
Landlord and Tenant for preliminary approval within ten (10) business days from
the date of execution of this Lease. When the plans, specifications and cost
estimate are so approved by Landlord and Tenant, Landlord shall obtain from its
general contractor a quotation of the cost of Landlord's Work under Landlord's
construction contract and, if Landlord approves such quotation, it shall submit
the same to Tenant for approval. If Tenant disagrees with the quotation from
Landlord's general contractor, Tenant may obtain its own quotation for
Landlord's approval. If Landlord and Tenant are unable to agree upon a quotation
for the cost of Landlord's Work and the contractor to do Landlord's Work, the
parties agree to submit the dispute to arbitration under the Construction
Arbitration Rules of the American Arbitration Association. One arbitrator shall
be Landlord's architect; one arbitrator shall be appointed by Tenant and the
third arbitrator shall be appointed by the two arbitrators or, lacking
agreement, the Presiding Judge of the Superior Court of the City and County of
San Francisco. The arbitrators shall be appointed within ten (10) days of the
parties' disagreement and there shall be a hearing and decision within twenty
(20) days' of the arbitrators' appointment. Upon written approval by Tenant or
determination by arbitration, Landlord and Tenant shall be deemed to have given
final approval to the plans and specifications on the basis of which the
quotation was made, or cost determined, and Landlord shall be authorized to
proceed with the Landlord's Work to the Premises in accordance with such plans
and specifications. Tenant shall bear the cost of any changes in the work
requested by Tenant after final approval of plans and specifications.

        All work, labor, materials and supplies furnished to the Premises other
than Landlord's Work shall be furnished and installed at Tenant's sole cost and
expense ("Tenant's Work"). All of Tenant's Work shall be subject to the terms
and conditions of par. 10 of this Lease and shall be coordinated with Landlord's
Work if undertaken at the same time. All of Tenant's Work shall comply with all
state, Federal and local laws and regulations, with the standards of the
National Board of Fire Underwriters (NBFU), the National Electrical Code (NEC),
the American Gas Association (AGA), and the American Society of Heating and
Ventilating Engineers (ASHVE), and shall conform to the following: Tenant's Work
shall be performed in a first-class, workmanlike manner and prosecuted
diligently to completion, free of defects in workmanship and materials. All
contracts for Tenant's Work shall require that the contractor repair or replace
in a first-class, workmanlike manner, without additional charge, all defective
work done under such contract whether by the contractor or its subcontractors,
for a period which shall not be less than one year following recording notice of
completion. Tenant's Work shall be performed by licensed contractors and
licensed subcontractors who will work harmoniously with each other and with
Landlord and its contractors and subcontractors, and who shall be capable of
providing a completion and a mechanics' and materialmen's lien bond to Tenant
for such work.

        Upon Landlord's fifteen (15)-day notice to Tenant, Tenant shall have
access to the Premises for cabling and move-in, provided Tenant does not
interfere with Landlord's contractor. Tenant shall not be required to pay any
rent during such fifteen (15)-day period.

4.      POSSESSION.

        4.a. Landlord and Landlord's agents and contractors shall use their best
efforts and diligence to complete Landlord's work and deliver possession of the
Premises to the Tenant on or before February 1, 1997. If the Landlord, for any
reason whatsoever, cannot deliver possession of the said Premises to the Tenant
at the commencement of the term hereof, this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, nor shall the expiration date of the above term be in any
way extended, but in that event, all rent shall be abated under this Lease (but
not as to the second floor "temporary premises," par. 31) during the period



                                       2
<PAGE>   3

between the commencement of said term and the time when Landlord delivers
possession. Notwithstanding the provisions of this paragraph, if Landlord has
not delivered the Premises to Tenant in the condition required under this Lease
oil or before April 1, 1997, Tenant shall have the right to cancel this Lease.
Upon such cancellation, Landlord shall return to Tenant all sums theretofore
deposited by Tenant with Landlord, and both parties shall be released from all
further liability under this Lease.

        4.b. In the event that Landlord shall permit Tenant to occupy the
Premises prior to the commencement date of the term, such occupancy shall be
subject to all the provisions of this Lease, except for payment of rent. Said
early possession shall not advance the termination date hereinabove provided.

5. RENT. Tenant agrees to pay to Landlord as rental, without prior notice or
demand, for the Premises the sum of NINE HUNDRED FIFTY THOUSAND DOLLARS
($950,000.00) for the term of this Lease or FIFTEEN THOUSAND EIGHT HUNDRED
THIRTY-THREE AND NO/HUNDREDTHS DOLLARS ($15,833.33) per month (subject to
adjustment pursuant to par. 3) on or before the first day of the first full
calendar month of the term hereof and a like sum on or before the first day of
each and every successive calendar month thereafter during the term hereof,
except that the first month's rent shall be paid upon the execution hereof Rent
for any period during the term hereof which is for less than one (1) month shall
be a prorated portion of the monthly installment herein, based upon a thirty
(30)-day month. Said rental shall be paid to Landlord without deduction or
offset in lawful money of the United States of America, which shall be legal
tender at the time of payment at the office of the Building, or to such other
person or at such other place as Landlord may from time to time designate in
writing.

6. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of THIRTY-ONE
THOUSAND SIX HUNDRED SIXTY-SIX AND 66/HUNDREDTHS DOLLARS ($31,666.66). In
addition, a Letter of Credit, in form and substance acceptable to Landlord for
an additional equivalent sum (i.e., $31,666.66) will be delivered to Landlord
upon written notice from Landlord to Tenant of Landlord's substantial completion
of Landlord's Work Said sum and Letter of Credit shall be held by Landlord as
security for the faithful performance by Tenant of all the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to the provisions relating to the payment of rent,
Landlord may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in
default, or for the payment of any amount which Landlord may spend or become
obligated to spend by reason of Tenant's default, or to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said deposit is so used or applied, Tenant shall
within seven (7) business days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the security deposit to its original
amount and Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep this security deposit separate from its
general funds, and Tenant shall not be entitled to interest on such deposit. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be returned
to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest
hereunder) at the expiration of the Lease term. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit to
Landlord's successor in interest. Provided Tenant is not then in default after
expiration of any applicable cure period, at the second (2nd) anniversary of the
commencement of the term of this Lease, if Landlord determines in Landlord's
reasonable discretion that Tenant has a sufficient financial condition, income,
profits and net worth, Tenant's security deposit shall be reduced to $15,833.33
cash and a Letter of Credit for an additional equivalent sum (i.e., $15,833.33).

7. OPERATING EXPENSE ADJUSTMENTS.  [DELETED]



                                       3
<PAGE>   4

8. USE. Tenant shall use the Premises for general office purposes, software
development, multimedia studio, occasional special events for the "trade" and
related uses, and shall not use or permit the Premises to be used for any other
purpose without the prior written consent of Landlord.

        Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of or affect any fire or other insurance upon the Building or any
of its contents, or cause cancellation of any insurance policy covering said
Building or any part thereof or any of its contents. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.

9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit anything to
be done in or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirement snow in force or which may hereafter be in force, and
with the requirements of any board of fire insurance underwriters or other
similar bodies now or hereafter constituted, relating to, or affecting Tenant's
use or occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between the Landlord and Tenant. 

10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises, or any part
thereof, in excess of a value of $5,000.00 without the written consent of
Landlord first had and obtained and any alterations, additions or improvements
to or of said Premises, including, but not limited to, wall covering, paneling
and built-in cabinet work, but excepting movable furniture and trade fixtures,
shall on the expiration of the term become a part of the realty and belong to
the Landlord and shall be surrendered with the Premises. In the event Landlord
consents to the making of any alterations, additions or improvements to the
Premises by Tenant, the same shall be made by Tenant at Tenant's sole cost and
expense, and any contractor or person selected by Tenant to make the same must
first be approved of in writing by the Landlord. Tenant shall provide Landlord
with written notice of the value and description of alterations, additions or
improvements with a value of $2,000 to $5,000.00. Upon the expiration or sooner
termination of the term hereof, Tenant shall, upon written demand by Landlord,
given at least thirty (30) days prior to the end of the term, at Tenant's sole
cost and expense, forthwith and with all due diligence remove any alterations,
additions, or improvements made by Tenant, designated by Landlord to be removed
by written notice to Tenant at the time of Landlord's granting approval for such
addition, alteration or improvement (or Landlord's receiving notice from Tenant
if the value is $2,000.00 to $5,000.00) and Tenant shall, forthwith and with all
due diligence at its sole cost and expense, repair any damage to the Premises
caused by such removal.

11. REPAIRS.

        11.a. By taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises as being in good, sanitary order, condition and
repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises and
every part thereof in good condition and repair, damage thereto from causes
beyond the reasonable control of Tenant and ordinary wear and tear excepted.
Tenant shall upon the expiration or sooner termination of this Lease hereof
surrender the Premises to the Landlord in good condition, ordinary wear and tear
and damage from causes beyond the reasonable control of Tenant excepted. Except
as specifically provided in an addendum', if any, to this Lease, Landlord shall



                                       4
<PAGE>   5

have no obligation whatsoever to alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.

        11.b. Notwithstanding the provisions of par. 11(a) hereinabove, Landlord
shall repair and maintain the structural portions of the Building, including the
basic plumbing, air conditioning, heating, and electrical systems, installed or
furnished by Landlord, unless such maintenance and repairs are caused in part or
in whole by the act, neglect, fault or omission of any duty by the Tenant, its
agents, servants, employees or invitees in which case Tenant shall pay to
Landlord the reasonable cost of Tenant's share of such maintenance and repairs.
Landlord shall not be liable for any failure to make any such repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need of such repairs or maintenance is given to
Landlord by tenant. Except as provided in par. 22 hereof, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. Tenant waives the
right to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect.

        11.c. Notwithstanding any provision of this Lease, Landlord warrants to
Tenant that on the commencement of the term hereof, the Premises and any
improvements to be constructed by Landlord (a) shall be free from material
structural defects and (b) shall comply with all applicable covenants and
restrictions of record, statutes, ordinances, codes, rules, regulations, orders,
and requirements, including Title 24 of the California Administrative Code and
the Americans with Disabilities Act. In the event of a breach of the foregoing
warranties, Landlord shall promptly rectify such breach at its sole cost and
expense. Landlord also shall protect, indemnify, defend, and hold Tenant
harmless from an against any and all liability, loss, suits, claims, actions,
costs, and expense (including, without limitation, attorneys' fees) arising from
any breach of the foregoing warranties. The provisions of this section shall
survive the termination of this Lease.

12. LIENS. Tenant shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by tenant. Landlord may require, at Landlord's
sole option, that Tenant shall provide to Landlord, at Tenant's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half (1/2)
times any and all estimated costs of any improvements, additions, or alterations
in the Premises, to insure Landlord against any liability for mechanics' and
materialmen's liens and to insure completion of the work.

13. ASSIGNMENT AND SUBLETTING. Except as set forth in this paragraph 13, Tenant
shall not either voluntarily or by operation of law, assign, transfer, mortgage,
pledge, hypothecate or encumber this Lease or any interest therein, and shall
not sublet the said Premises or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person (the employees, agents, servants
and invitees of Tenant excepted) to occupy or use the said Premises, or any
portion thereof, without the written consent of Landlord first had and obtained,
which consent shall not be unreasonably withheld, and a consent to one
assignment, subletting, occupation or use by any other person shall not be
deemed to be a consent to any subsequent assignment, subletting, occupation or
use by another person. Any such assignment or subletting without such consent
shall be void, and shall, at the option of the Landlord, constitute a default
under this Lease. An assignment or subletting shall include, but not be limited
to, a merger or a sale or exchange of more than 50% of Tenant's stock or assets.

        (a) If at any time or from time to time during the term of this Lease
Tenant desires to sublet all or any part of the Premises, including any
expansion space, Tenant shall give notice to Landlord setting forth the terms of
the proposed subletting and the space so proposed to be sublet. Landlord shall
have the option, exercisable by notice given to Tenant within twenty (20) days
after Tenant's notice is 



                                       5
<PAGE>   6

given, either to sublet from Tenant such space at the rental and other terms set
forth in Tenant's notice, or, if the proposed subletting is for the entire
Premises for (lie balance of the term of this Lease, to terminate this Lease;
provided, however, that should Landlord so notify Tenant, Tenant shall have the
right to withdraw its request within twenty (20) days after receiving Landlord's
notice. If Landlord does not exercise such option, Tenant shall be free to
sublet such space to any third party subject to the following conditions:

               (1) The sublease shall be on the same terms set forth in the
notice given to Landlord;

               (2) No sublease shall be made without the prior written consent
of Landlord, which consent Landlord agrees will not unreasonably be withheld or
delayed;

               (3) No sublease shall be valid and not subtenant shall take
possession of the Premises sublease until an executed counterpart of such
sublease has been delivered to Landlord;

               (4) No subtenant shall have a right further to sublet; and

               (5) Any sums or other economic consideration received by Tenant
as a result of such subletting (except all out-of-pocket costs incurred in
connection with such subletting or assignment ((including, without limitation,
leasing commissions, advertising costs, rental concessions and legal fees)) and
rental or other payments received which are attributable to the amortization of
the cost of leasehold improvements, other than building standard tenant
improvements, made to the sublet portion of the Premises by Landlord) whether
denominated rentals under the sublease or otherwise, which exceed, in the
aggregate, the total sums which Tenant is obligated to pay Landlord under this
Lease (prorated to reflect obligations allocable to that portion of the Premises
subject to such sublease) shall be payable to Landlord as additional rental
under this Lease without affecting or reducing any other obligation of Tenant
hereunder.

        (b) Notwithstanding the provisions of paragraphs 13 and 31(a) above,
Tenant may "go public" under the Securities Act of 1933 (even if it involves
trading in excess of 50% of the Company's stock) or assign this Lease or sublet
the Premises or any portion thereof, including any expansion space, without
Landlord's consent and without extending any option to Landlord, to any
corporation which controls, is controlled by or is under common control with
Tenant, or to any corporation resulting from the merger or consolidation with
Tenant, or to any person or entity which acquires all the assets of Tenant as a
going concern of the business that is being conducted oil the Premises, provided
that said assignee has substantially the same or better financial condition then
Tenant and assumes, in full, the obligations of Tenant under this Lease.

        (c) Regardless of Landlord's consent, no subletting or assignment shall
release Tenant of Tenant's obligation or alter the primary liability of Tenant
to pay the rental and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of rental by Landlord from any other person shall not
be deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Tenant or
any successor of Tenant in the performance of any of the terms hereof, Landlord
may proceed directly against Tenant without the necessity of exhausting remedies
against such assignee or successor.

        (d) In the event Tenant shall assign or sublet the Premises or request
the consent of Landlord to any assignment or subletting or if Tenant shall
request the consent of Landlord for any act that Tenant proposes to do, then
Tenant shall pay Landlord's reasonable attorneys' fees (not to exceed $500.00
per request) incurred in connection therewith.



                                       6
<PAGE>   7

14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of tile Premises for the
conduct of its business or from any activity, work, or other thing done or
permitted by the Tenant in or about the Building (or suffered by Tenant in the
Premises), and shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under tile terms of this Lease,
or arising from any willful misconduct or negligence of the Tenant, or any
officer, agent, employee, guest, or invitee of Tenant, and from all and against
all costs, attorneys' fees, expenses and liabilities incurred in or about any
such claim or any action or proceeding brought thereon, and, in any case, action
or proceeding be brought against Landlord by reason of any such claim, Tenant
upon notice from Landlord shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant as a material part of the
consideration to Landlord hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises, from any cause other than
negligence or willful misconduct of Landlord or its agents and Tenant hereby
waives all claims in respect thereof against Landlord.

        Landlord or its agents shall not be liable for any damage to property
entrusted to employees of the Building, nor for loss or damage to any property
by theft or otherwise, nor for any injury to or damage to persons or property
resulting from fire, explosion, Falling plaster, steam, gas, electricity, water
or rain which may leak from any part of the Building or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever,
unless caused by or due to the negligence or willful misconduct of Landlord, its
agents, servants or employees. Landlord or its agents shall not be liable for
interference with the light or other incorporeal hereditaments, loss of business
by Tenant, nor shall Landlord be liable for any latent defect in tile Premises
or in the Building unless known to Landlord or its agents. Tenant shall give
prompt notice to Landlord in case of fire or accidents in the Premises or in the
Building or of defects therein or in the fixtures or equipment.

        Landlord hereby indemnifies; and holds harmless Tenant and its agents,
employees and successors and assignees against any and all liability, loss,
suits, claims, actions, costs and expense arising from (i) Landlord's or
Landlord's agents' breach of this Lease and (ii) the negligence or willful
misconduct of Landlord or its agents.

15. SUBROGATION. As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer, to
evidence compliance with the aforementioned waiver.

16. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Landlord and Tenant against any liability arising out of the
ownership, use, occupancy or maintenance of tile Premises and all areas
appurtenant thereto. The limit of said insurance shall not, however, limit the
liability of the Tenant hereunder. Tenant may carry said insurance under a
blanket policy, providing, however, said insurance by Tenant shall have a
Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant. Insurance
required hereunder, shall be in companies rated A+ AAA or better in "Best's
Insurance Guide". Tenant shall deliver to Landlord prior to occupancy of the
Premises copies of policies of liability insurance required herein or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Landlord. No policy shall be cancellable or
subject to reduction of coverage except after ten (10) days' prior written
notice to Landlord.



                                       7
<PAGE>   8

17. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder,
Landlord agrees to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at its reasonable
discretion (minimum 8:00 a.m. - 6:00 p.m. Monday through Friday) and subject to
the rules and regulations of the Building of which the Premises are a part,
electricity for normal lighting and fractional horsepower office machines, heat
and air conditioning required in Landlord's judgment for the comfortable use and
occupation of the Premises and janitorial service. Landlord shall also maintain
and keep lighted the common stairs, common entries and toilet rooms in the
Building of which the Premises are a part. Landlord shall not be liable for, and
Tenant shall not be entitled to, any reduction of rental by reason of Landlord's
failure to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord. Landlord shall not be liable under any
circumstances for a loss of or injury to property, however occurring, through or
in connection with or incidental to failure to furnish any of the foregoing
unless such loss or injury is caused by the negligence or willful misconduct of
Landlord or Landlord's agents. Wherever heat generating machines or equipment
are used in the Premises which affect the temperature otherwise maintained by
the air conditioning system, Landlord reserves the right to install
supplementary air conditioning units in the Premises and the cost thereof,
including the cost of installation, and the cost of operation and maintenance
thereof shall be paid by Tenant to Landlord upon demand by Landlord.

        Tenant will not, without written consent of Landlord, use any apparatus
or device in the Premises, including, but without limitation thereto, electronic
data processing machines, punch card machines, and machines using in excess of
120 volts, which will in any way materially increase the amount of electricity
usually furnished or supplied for the use of the Premises as general office
space nor connect with electric current except through existing electrical
outlets in the Premises, any apparatus or device, for the purpose of using
electric current. If Tenant shall require water or electric current in excess of
that usually furnished or supplied for the use of the Premises as general office
space, Tenant shall first procure the written consent of Landlord, to the use
thereof and Landlord may cause a water meter or electrical current meter to be
installed in the Premises, so as to measure the amount of water and electric
current consumed for any such use, or otherwise charge Tenant the reasonably
estimated cost thereof. The cost of any such meters and of installation,
maintenance and repair thereof shall be paid for by the Tenant and Tenant agrees
to pay to Landlord promptly upon demand therefor by Landlord for all such water
and electric current consumed as shown by said meters or estimate, at the rates
charged for such services by the local public utility furnishing the same, plus
any additional expense incurred in keeping account of the water and electric
current so consumed. If a separate meter is not installed, such excess cost for
such water and electric current will be established by an estimate made by a
utility company or electrical engineer.

18. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures
and personal property located in the Premises; except that which has been paid
for by Landlord and is the standard of the Building. In the event any or all of
the Tenant's leasehold improvements, equipment, furniture, fixtures and personal
property shall be assessed and taxed with the Building, Tenant shall pay to
Landlord its share of such taxes within ten (10) days after delivery to Tenant
by Landlord of a statement in writing setting forth the amount of such taxes
applicable to Tenant's property.

19. RULES AND REGULATIONS. Tenant shall faithfully observe And comply with the
rules and regulations that Landlord shall from time to time promulgate. Landlord
reserves the right from time to time to make all reasonable modifications to
said rules, provided any such modifications do not unreasonably interfere with
Tenant's use of, or access to, the Premises. The additions and modifications to
those rules shall be binding upon Tenant upon delivery of a copy of them to
Tenant.



                                       8
<PAGE>   9

20. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy shall be a tenancy from month to month at a
rental in the amount of the last monthly rental, plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month to month tenancy.

21. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have the
right (upon reasonable notice to Tenant except in cases of emergency) to enter
the Premises, inspect the same, supply janitorial service and other service to
be provided by Landlord to Tenant hereunder, to submit said Premises to
prospective purchasers or tenants, to post notices of non-responsibility, and to
after, improve or repair the Premises and any portion of the Building of which
the Premises are a part that Landlord may deem necessary or desirable, without
abatement of rent and may for that purpose erect scaffolding any other necessary
structures where reasonably required by the character of the work to be
performed, always providing that the entrance to the Premises shall not be
blocked thereby, and further providing that the business of the Tenant shall not
be interfered with unreasonably. Tenant hereby waives any claim for damages or
for any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby, unless caused by the negligence or willful misconduct of
Landlord or its agents. For each of the aforesaid purposes, Landlord shall at
all times have and retain a key with which to unlock all of the doors in, upon
and about the Premises, excluding Tenant's vaults, safes and files, and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency, in order to obtain entry to the Premises
without liability to Tenant except for any failure to exercise due care for
Tenant's property. Any entry to the Premises obtained by Landlord by any of said
means, or otherwise shall not under any circumstances be construed or deemed to
be a forceable or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises or any portion thereof.

22. RECONSTRUCTION. In the event the Premises or the Building of which the
Premises are a part are damaged by fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same; and this Lease
shall remain in full force and effect, except that Tenant shall be entitled to a
proportionate reduction of the rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall materially interfere with the business carried on by the Tenant in
the premises. If the damage is due to the fault or neglect of Tenant or its
employees, there shall be no abatement of rent.

        In the event the Premises or the Building of which the Premises are a
part are damaged as a result of any cause other than the perils covered by fire
and extended coverage insurance, then Landlord shall forthwith repair the same,
provided the extent of the destruction be less than twenty-five percent (25%) of
the then full replacement cost of the Premises or the Building of which the
Premises are a part. In the event the destruction of the Premises or the
Building is to an extent greater than twenty-five percent (25%) of the full
replacement cost, then Landlord shall have the option: (1) to repair or restore
such damage within forty-five (45) days (if Landlord is unable to do so, Tenant
shall have the right to terminate this Lease upon written notice to Landlord),
this Lease continuing in full force and effect, but the rent to be
proportionately reduced as hereinabove in this Article provided; or (2) give
notice to Tenant at any time within twenty (20) days after such damage
terminating this Lease as of the (late specified in such notice, which date
shall be thirty (30) days after the giving of such notice. In the event of
giving such notice, this Lease shall expire and all interest of the Tenant in
the Premises shall terminate on the date so specified in such notice and the
Rent, reduced by a proportionate amount, based upon the extent, if any, to which
such damage materially interfered with the business carried on by the Tenant in
the Premises, shall be paid up to date of said such termination.

        Notwithstanding anything to the contrary in this Article, Landlord shall
not have any obligation whatsoever to repair, reconstruct or restore the
Premises when the damage resulting from any casualty 



                                       9
<PAGE>   10

covered under this Article occurs during the last nine (9) months of the term of
this Lease or any extension thereof

        Landlord shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacements of any panels, decoration,
office fixtures, railings, floor covering, partitions, or any other property
installed in the Premises by Tenant unless such damage or injury is caused by
the negligence or willful misconduct of Landlord or Landlord's agents.

        Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the premises, Tenant's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration unless caused by the negligence or willful
misconduct of Landlord or Landlord's agents.

23. DEFAULT. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant.

        23.a. The vacating or abandonment of the Premises by Tenant.

        23.b. The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of five (5) business days after written
notice thereof by Landlord to Tenant.

        23.c. The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Tenant, other than described in par. 23(b) above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.

        23.d. The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt, or a petition or reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interests in this Lease,
where such seizure is not discharged in thirty (30) days.

24. REMEDIES IN DEFAULT. In the event of any such material default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach:

        24.a. Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
any real estate commission actually paid; the worth at the time of award by (lie
court having jurisdiction thereof of the amount by which the unpaid rent for the
balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Tenant proves could be reasonably avoided;
that portion of the leasing commission paid by Landlord and applicable to the
unexpired term of this Lease. Unpaid installments of rent or other sums shall
bear 



                                       10
<PAGE>   11

interest from the date due at the rate of ten (10%) per cent per annum. In the
event Tenant shall have abandoned the Premises, Landlord shall have the option
of (a) taking possession of the Premises and recovering from Tenant the amount
specified in this paragraph, or (b) proceeding under the provisions of the
following par. 24(b).

        24.b. Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.

        24.c. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decision of the State in which the Premises are
located.

25. EMINENT DOMAIN. If more than twenty-five (25%) per cent of the Premises
shall be taken or appropriated by any public or quasi-public authority under the
power of eminent domain, either party hereto shall have the right, at its
option, to terminate this Lease, and Landlord shall be entitled to any and all
income, rent, award, or any interest therein whatsoever which may be paid or
made in connection with such public or quasi-public use or purpose, and Tenant
shall have no claim against Landlord for the value of any unexpired term of this
Lease. If either less than or more than twenty-five (25%) per cent of the
Premises is taken and neither party elects to terminate as herein provided, the
rental thereafter to be paid shall be equitably reduced based upon the
proportion of the Premises taken. If more than fifty percent (50%) of the
Building other than the Premises may be so taken or appropriated, Landlord shall
have the right at its option to terminate this Lease and shall be entitled to
the entire award as above provided. Notwithstanding any of the foregoing in the
event that any taking under the power of eminent domain shall affect the
Premises in such a manner that, in Tenant's reasonable opinion, such damage
materially and adversely interferes with the conduct of Tenant's business,
Tenant shall have the right to terminate this Lease upon written notice thereof
to Landlord. Notwithstanding the foregoing, Tenant shall be entitled to that
portion of any award which is separately stated which compensates Tenant for
Tenant's relocation expenses and loss of fixtures, equipment and personal
property.

26. OFFSET STATEMENT. [DELETED]

27. PARKING. [DELETED]

28. AUTHORITY OF PARTIES.

        28.a. CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.

        28.b. LIMITED PARTNERSHIPS. If the Landlord herein is a limited
partnership, it is understood and agreed that any claims by Tenant on Landlord
shall be limited to the assets of the limited partnership, and furthermore,
Tenant expressly waives any and all rights to proceed against the individual
partners or the officers, directors or shareholders of any corporate partner,
except to the extent of their interest in said limited partnership.

29. GENERAL PROVISIONS.

        (i) PLATS AND RIDERS. Clauses, plats and riders, if any, signed by the
Landlord and the Tenant and endorsed on or affixed to this Lease are a part
hereof.



                                       11
<PAGE>   12

        (ii) WAIVER. The waiver by Landlord of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of (lie same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of the
Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of the acceptance of such rent.

        (iii) NOTICES. All notices and demands which may or are to be required
or permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail, postage prepaid or overnight courier, addressed to the
Tenant at the Premises, or to such other place as Tenant may from time to time
designate in a notice to the Landlord. All notices and demands by the Tenant to
the Landlord shall be sent by United States Mail, postage prepaid or overnight
courier, addressed to the Landlord at the office of the Building, or to such
other person or place as the Landlord may from time to time designate in a
notice to the Tenant.

        (iv) JOINT OBLIGATIONS. If there be more than one Tenant the obligations
hereunder imposed upon Tenants shall be joint and several.

        (v) MARGINAL HEADINGS. The marginal headings and paragraph titles to the
paragraphs of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.

        (vi) TIME. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.

        (vii) SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.

        (viii) RECORDATION. Neither Landlord nor Tenant shall record this Lease
or a short form memorandum hereof without the prior written consent of the other
party.

        (xi) QUITE POSSESSION. Upon Tenant paying the rent reserved hereunder
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.

        (x) LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent or other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of a sum due from Tenant shall not be
received by Landlord or Landlord's designee within ten (10) days after Tenant's
receipt of written notice that said amount is past due, then Tenant shall pay
toe Landlord a late charge equal to seven (7%) per cent of such overdue amount.
The parties hereby agree that such late charges represent a fair and reasonable
estimate of the cost that Landlord will incur by reason of the late payment by
Tenant. Acceptance of such later charges by the Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder.



                                       12
<PAGE>   13

        (xi) PRIOR AGREEMENTS. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

        (xii) INABILITY TO PERFORM. This Lease and the obligations of the Tenant
and Landlord hereunder shall not be affected or impaired because either party is
unable to fulfill any of its obligations hereunder or is delayed in doing so, if
such inability or delay is caused by reason of strike, labor troubles, acts of
God, or any other cause beyond the reasonable control of such party. This
provision shall not excuse or extend performance of Tenant's rental payment
obligation hereunder.

        (xiii) ATTORNEYS' FEES. In the event of any action or proceeding brought
by either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable
as attorneys' fees.

        (xiii) SALE OF PREMISES BY LANDLORD. In the event of any sale of the
Building, after delivery to the purchaser of Tenant's security deposit and any
other funds of Tenant held by Landlord on account of Tenant's obligations
hereunder, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease.

        (xv) SUBORDINATION, ATTORNMENT. Upon request of the Landlord, Tenant
will in writing subordinate its rights hereunder to the lien of any first
mortgage, or first deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any buildings hereafter placed upon the land
of which the Premises are a part, and to all advances made or hereafter to be
made upon the security thereof, provided that such bank, insurance company or
other lending institution delivers to Tenant a non-disturbance agreement
reasonably satisfactory to Tenant.

        In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the Premises, the Tenant shall attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease, provided that such bank, insurance company or other
lending institution delivers to Tenant a non-disturbance agreement reasonably
satisfactory to Tenant.

        The provisions of this Article to the contrary notwithstanding, and so
long as Tenant is not in default hereunder, this Lease shall remain in full
force and effect for the full term hereof.

        Within 30 days of execution of this Lease, Landlord shall deliver to
Tenant a non-disturbance agreement in a form reasonably satisfactory to Tenant
executed by each beneficiary or mortgagee holding a lien on the Premises.

        (xvi) NAME. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.



                                       13
<PAGE>   14

        (xvii) SEPARABILITY. Any provision of this Lease which shall prove to be
invalid, void or Illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.

        (xviii) CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

        (xix) CHOICE OF LAW. This Lease shall be governed by the laws of the
State in which the Premises are located.

        (xx) SIGNS AND AUCTIONS. Tenant shall not place any sign upon the
Premises or Building or conduct any auction thereon without Landlord's prior
written consent, which shall not be unreasonably withheld or delayed. Landlord,
at its sole cost and expense, shall provide building directory signage for
Tenant in the first floor lobby. Tenant shall have the right to install exterior
Building signage both in the front and back of the Building, with the design to
be mutually agreed upon by Landlord and Tenant. Said design is to be tasteful
and fully integrated into the design of the Building.

30. BROKERS. Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease excepting only
Whitney Cresinan Limited (for Landlord) and Cushman & Wakefield (for Tenant) and
it knows of no other real estate broker or agent who is entitled to a commission
in connection with this Lease.

31. TEMPORARY PREMISES. Upon the Landlord's completion of construction of a
demising wall or October 1, 1996, Landlord shall lease to Tenant, and Tenant
shall lease from Landlord, approximately 1,545 sq. ft. of office space located
on the second floor of the building containing the Premises, as indicated on
Exhibit "B" attached hereto and hereby reference to and made a part hereof,
"AS-IS" at a monthly rent of $2,446.25 per month, and otherwise subject to all
of the terms and conditions of this Lease. Tenant shall pay Landlord the first
month's rent upon execution of this Lease. The lease of this temporary premises
shall automatically terminate upon commencement of the term of this Lease, or
become month-to-month, pursuant to par. 3 of this Lease.

32. RIGHT OF FIRST OPPORTUNITY TO LEASE ADDITIONAL SPACE. Provided Tenant is not
then in default after expiration of any applicable cure period under any of the
terms and provisions of this Lease, Tenant shall have a "right of first
opportunity" to lease any additional space that comes available in the Building
during the term of this Lease. Landlord shall notify Tenant in writing of any
such space becoming available after receiving notice from an existing tenant
intending to vacate such space. Tenant shall respond to Landlord's notice of the
right of first opportunity within fifteen (15) business days of the date of
written notice from Landlord.

        The term of the lease of the additional space shall coincide with the
remaining term of this Lease. The rent shall be the fair market value for the
space as a gross lease for comparable space in similar buildings in the area of
the building. Within fifteen (15) days of Tenant's response, Landlord and Tenant
shall attempt to agree upon a mutually acceptable rent.

        If the parties are unable to agree on the new rent within that period,
then within ten (10) days after expiration of that period each party, at its
cost and by giving notice to the other party, shall appoint a real estate
appraiser with at least five (5)-years' full-time commercial appraisal
experience in (he area in which the Premises are located to appraise and set the
new rent for the additional space. If a party does not appoint an appraiser with
ten (10) days after the other party has given notice of the name of its
appraiser, the single appraiser appointed shall be the sole appraiser and shall
set the new rent for the additional space. If the two appraisers are appointed
by the parties as stated in this paragraph, they shall meet promptly and attempt
to set the new rent. If they are unable to agree within thirty (30) days 



                                       14
<PAGE>   15

after the second appraiser has been appointed, they shall attempt to select a
third appraiser meeting the qualifications stated in this paragraph within ten
(10) days after the last day the two appraisers are given to set the new rent.
If the parties are unable to agree oil the third appraiser, either of the
parties to this Lease by giving ten (10) days' notice to the other party can
file a petition with the American Arbitration Association solely for the purpose
of selecting a third appraiser who meets the qualifications stated in this
paragraph. Each party shall bear half the cost of the American Arbitration
Association's appointing the third appraiser and of paying the third appraiser's
fee. The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either party. Within thirty (30) days after
the selection of the third appraiser, a majority of the appraisers shall set the
new rent for the additional space. If a majority of the appraisers are unable to
set the new rent within the stipulated period of time, the three appraisals
shall be added together and their total divided by three; the resulting quotient
shall be the new rent for the additional space and the parties shall execute an
Amendment to this Lease describing the space as part of the Premises and setting
forth the rent. The additional space shall be otherwise subject to all of the
terms and conditions of this Lease.

33. OPTION TO TERMINATE. Upon expiration of the thirty-second (32nd) month of
the term of this Lease, if Landlord is unable to accommodate Tenant's expansion
needs, Tenant shall have the option to terminate this Lease by providing
Landlord one hundred twenty (120) days' advanced written notice to Landlord and
paying Landlord all current rent and performing all covenants and conditions of
this Lease to the effective date of termination. In, addition, in the event
Tenant exercises its option to terminate, as consideration, Tenant shall pay
Landlord the unamortized portion of tenant improvements and leasing commissions
(e.g., by way of example, $20.00 per sq. ft. T.I. allowance + $5.00 per sq. ft.
commission x 10,000 sq. ft./60 months = $4,166.66 per month).

34. REASONABLE CONSENT OR APPROVAL. When any provision of this Lease, or the
accompanying Rules and Regulations, calls for a party's consent or approval,
Landlord and Tenant each agree that such consent or approval shall not be
unreasonably withheld or delayed.

35. ESTOPPEL CERTIFICATE. Tenant shall at any time and from time to time upon
not less than ten (10) business days' prior notice from Landlord execute,
acknowledge and deliver to Landlord a statement in writing, which may be in the
form specified by Landlord, which shall certify: (a) that the Premises have been
completed to the satisfaction of Tenant and accepted and possessed by Tenant,
(b) the date the term of Lease commenced, the term of the Lease, any portions to
renew or extend, the amount of any security deposit and the date to which rental
and any other charges are paid in advance, (c) that the Lease is in full force
and effect and unmodified (or if there have been modifications, stating the
nature of the modifications and certifying that the Lease so modified is in full
force and effect), (d) that no notice has been received by Tenant of any default
of Tenant which has not been cured (or specifying such notices), (e) that there
are no uncured defaults on the part of Landlord (or specifying such defaults if
any are claimed), off-sets, counterclaims or credits against the rents,
obligations or stipulations due or to become due or required, (f) that Tenant
has no knowledge of an, prior assignment, hypothecation or pledge of rents and
(g) such other matters as may be reasonably requested by Landlord. Any such
certificate may be relied upon by any prospective purchase of all or any portion
of the real property of which the Premises are a part.

36. SUBORDINATION. This Lease shall be subject and subordinated at all times to
(a) all ground or underlying leases which may hereafter be executed affecting
the real property of which the Premises are a part, and (b) the lien of all
mortgages and deeds of trust in any amount or amounts whatsoever now or
hereafter placed on or against said real property or on or against Landlord's
interest or estate therein or on or against all such ground or underlying
leases, all without the necessity of having further instruments executed on the
part of Tenant to effectuate such subordination. Notwithstanding the foregoing,
(1) in the event of termination for any reason whatsoever of any such ground or
underlying lease, this Lease shall not then be barred, terminated, cut off or
foreclosed nor shall the rights and possession of Tenant hereunder be disturbed
if Tenant shall not then be in default in 



                                       15
<PAGE>   16

the payment of rental or other sums or be otherwise in default under the terms
of this Lease and Tenant shall attorn to Landlord of any such ground or
underlying lease, or, if requested, enter into a new lease for the balance of
the original or extended term hereof then remaining upon the same terms and
provisions as are in this Lease contained; (2) in the event of a foreclosure of
any such mortgage or deed of trust or of any other action or proceeding of the
enforcement thereof, or of any sale thereunder, this Lease will not be barred,
terminated, cut off or foreclosed nor will the rights and possession of Tenant
thereunder be disturbed if Tenant shall not then be in default in the payment of
rental or other sums or be otherwise in default under the terms of this Lease
and Tenant shall attorn to the purchaser at such foreclosure, sale or other
action or proceeding; and (3) Tenant agrees to execute and deliver upon demand
such further instrument evidencing such subordination of this Lease to said
deed, to such ground or underlying leases, and to the lien of any such mortgages
or deeds of trust as may reasonably be required by Landlord. Tenant's covenant
to subordinate this Lease to ground or underlying leases and/or mortgages or
deeds of trust hereafter executed is conditioned upon each such senior
instrument containing the commitments specified in the preceding clauses (1) and
(2).

        THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE AND ON THE
DATES SPECIFIED IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.

        IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY
THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTIONS RELATING
THERETO.

Dated: October 1, 1996                       BRANNAN STREET PARTNERS, a 
                                             California limited partnership



Address: 525 Brannan Street, Suite 300       By: /s/ W. LANEY THORNTON
         San Francisco, CA 94105                --------------------------------
         Attn:  Diana E. Lees                   W. Laney Thornton, General 
                                                Partner


                                                                        LANDLORD



Dated:  September __, 1996                   QUOKKA SPORTS INC., a Delaware
                                             corporation



                                             By: /s/ [Signature Illegible]
                                                --------------------------------
                                                                       President

Address: 525 Brannan Street, Suite 203       By: /s/ [Signature Illegible]
         San Francisco, CA 94105                --------------------------------
         Attn:                                                         Secretary



                                       16
<PAGE>   17

                              RULES AND REGULATIONS


1.      No sign, placard, picture, advertisement, name or notice shall be
        inscribed, displayed or printed or affixed on or to any part of (lie
        outside or inside of the Building (excluding the interior of the
        Premises) without the written consent of Landlord first had and obtained
        and Landlord shall have the right to remove any such sign, placard,
        picture, advertisement, name or notice without notice to and at the
        expense of Tenant.

2.      The sidewalks, halls, passages, exits, entrances, elevators and
        stairways shall not be obstructed by any of the tenants or used by them
        for any purpose other than for ingress and egress from their respective
        Premises.

3.      Tenant shall not alter any lock or install any new or additional locks
        or any bolts on any doors or windows of the Premises.

4.      The toilet rooms, urinals, wash bowls and other apparatus shall not be
        used for any purpose other than that for which they were constructed and
        no foreign substance of any kind whatsoever shall be thrown therein and
        the expense of any breakage, stoppage or damage resulting from the
        violation of this rule shall be borne by the Tenant who, or whose
        employees or invitees shall have caused it.

5.      Tenant shall not overload the floor of the Premises or in any way deface
        the Premises or any part thereof.

6.      No heavy or large volume of furniture, freight or equipment of any kind
        shall be brought into the Building without the prior notice to Landlord
        and all moving of the same into or out of the Building shall be done at
        a reasonable time and manner as Landlord shall designate. Landlord shall
        have the right to prescribe the weight, size and position of all safes
        and other heavy equipment brought into the Building and also the times
        and manner of moving the same in and out of the Building Safes or other
        heavy objects shall, if considered necessary by Landlord, stand on
        supports of such thickness as is necessary to properly distribute the
        weight. Landlord will not be responsible for loss of or damage to any
        such safe or property from any cause and all damage done to the Building
        by moving or maintaining any such safe or other property shall be
        repaired at the expense of Tenant.

7.      Tenant shall not use, keep or permit to be used or kept any foul or
        noxious gas or substance in the Premises, or permit or suffer the
        Premises to be occupied or used in a manner offensive or objectionable
        to the Landlord or other occupants of the Building by reason of noise,
        odors and/or vibrations, or interfere in any way with other tenants or
        those having business therein, nor shall any animals or birds be brought
        in or kept in or about the Premises or the Building.

8.      No cooking shall be done or permitted by any Tenant on the Premises, nor
        shall the Premises be used for the storage of merchandise, for washing
        clothes, for lodging, or for any improper, objectionable or immoral
        purposes.

9.      Tenant shall not use or keep in the Premises or the Building any
        kerosene, gasoline or inflammable or combustible fluid or material or
        use any method of heating or air conditioning other than that supplied
        by Landlord.

10.     Landlord will direct electricians as to where and how telephone and
        telegraph wires are to be introduced. No boring or cutting for wires
        will be allowed without the consent of the Landlord. The location of
        telephones, call boxes and other office equipment affixed to the
        Premises shall be subject to the approval of Landlord.



                                       17
<PAGE>   18

11.     On Saturdays, Sundays and legal holidays, and on other days between the
        hours of 6:00 P.M. and 8:00 A.M. the following day, access to the
        Building, or to the halls, corridors, elevators or stairways in the
        Building, or to the Premises may be refused unless the person seeking
        access is known to the person or employee of the Building in charge and
        has a pass or is properly identified. The Landlord shall in no case be
        liable for damages for any error with regard to the admission to or
        exclusion from the Building of any person. In case of invasion, mob,
        riot, public excitement, or other commotion, the Landlord reserves (lie
        right to prevent access to (lie Building during the continuance of the
        same by closing of the doors or otherwise, for the safety of the tenants
        and protection of property in the Building and the Building.

12.     Landlord reserves the right to exclude or expel from the Building ally
        person who, in the judgment of Landlord, is intoxicated or under the
        influence of liquor or drugs, or who shall in any manner do any act in
        violation of any of the rules and regulations of the Building.

13.     No vending machine or machines of any description shall be installed,
        maintained or operated upon the Premises without the written consent of
        the Landlord.

14.     Landlord shall have the right, exercisable without notice and without
        liability to Tenant, to change the name and street address of the
        Building of which the Premises are a part.

15.     Tenant shall not disturb, solicit, or canvass any occupant of the
        Building and shall cooperate to prevent same.

16.     Without the written consent of Landlord, Tenant shall not use the name
        of the Building in connection with or in promoting or advertising the
        business of Tenant except as Tenant's address.

17.     Landlord shall have the right to control and operate the public portions
        of the Building, and the public facilities, and heating and air
        conditioning, as well as facilities furnished for the common use of the
        tenants, in such manner as it deems best for the benefit of the tenants
        generally.

18.     All entrance doors in the Premises shall be left locked when the
        Premises are not in use, and all doors opening to public corridors shall
        be kept closed except for normal ingress and egress from the Premises.

19.     Except for seeing eye dogs, no animals shall be allowed in the Building
        at any time.

20.     Landlord may waive any one or more of these Rules and Regulations for
        the benefit of any particular Tenant or Tenants, but no such waiver by
        Landlord shall be construed as a waiver of such Rules and Regulations in
        favor of any other Tenant or Tenants, nor prevent Landlord from
        thereafter enforcing any such Rules and Regulations against any or all
        of the Tenants of the Building.



                                       18
<PAGE>   19

                            FIRST AMENDMENT TO LEASE


        THIS FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered
into this 17th day of August 1998, by and between BRANNAN STREET PARTNERS, a
California limited partnership ("Landlord"), and QUOKKA SPORTS, INC., a Delaware
corporation ("Tenant").

                                    RECITALS

        WHEREAS, Landlord and Tenant have made and entered into that certain
Lease dated October 1, 1996, as amended by that letter agreement dated July 10,
1997 (collectively, "Lease"), for the lease and improvement by Landlord to
Tenant of those certain premises consisting of approximately 10,000 rentable
square feet on the ground floor of the building commonly known as 525 Brannan
Street San Francisco, California, as more particularly described in the Lease
("Premises"); and

        WHEREAS, Landlord and Tenant desire to amend the Lease further to
provide for adding additional premises on the Second Floor of the Building to
the Premises and agree upon certain other and related matters upon the terms and
conditions hereinafter set forth.

        NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and conditions hereinafter set forth, Landlord and Tenant agree to
amend the Lease as follows:

        1. ADDITIONAL PREMISES. Upon commencement of the Additional Premises
Term (as hereinafter defined), paragraph 2 of the Lease is hereby amended to add
the following to the Premises, subject to all of the terms and conditions of the
Lease and this Amendment: that certain office space, known as "Suites 207 and
208," indicated on Exhibit "A-l" attached hereto consisting of One Thousand
Three Hundred Fifty-Two (1,352) sq. ft. on the Second Floor of the Building
(said space shall be sometimes hereinafter specifically referred to as the
"Additional Premises").



                                       1
<PAGE>   20

        2. TERM OF THE ADDITIONAL PREMISES. The term of the lease of the
Additional Premises ("Additional Premises Term") shall commence on August 17,
1998. The Additional Premises Term shall expire on August 31, 1999; provided,
however, that Tenant may give Landlord written notice on or before June 1, 1999,
of Tenant's election to extend the Additional Premises Term so as to be
co-terminus with the term of the Premises. The term of this Lease for the
Premises (including the Additional Premises if Tenant gives the notice referred
to in the preceding sentence) shall expire on March 31, 2002, subject to
Tenant's option to terminate as provided in paragraph 33 of the Lease, as
amended by this First Amendment.

        3. CONDITION OF THE ADDITIONAL PREMISES. Tenant acknowledges that it has
had an opportunity to inspect and investigate the condition of the Additional
Premises and Tenant accepts the Premises in its present condition, "as-is." Any
changes or alterations to the Premises shall be made pursuant to paragraph 10 of
this Lease and shall be subject to Landlord's prior written consent.

        4. RENT FOR THE ADDITIONAL PREMISES. Upon commencement of the Additional
Premises Term; paragraph 5 of the Lease is hereby amended to provide that Tenant
agrees to pay to Landlord as rental, without prior notice or demand, for the
Additional Premises the sum of THREE THOUSAND TWO HUNDRED ELEVEN AND
NO/HUNDREDTHS DOLLARS ($3,211.00) per month on or before the first day of the
first full calendar month of the term hereof, commencing with the commencement
of the Additional Premises Term, and a like sum on or before the first day of
each and every successive calendar month thereafter during the term hereof
except that the first partial month's rent of $1,533.71 (15/31ths) shall be paid
upon the execution hereof. The aforesaid sum of rental is payable in addition to
payment of the sum of $15,833.33 per month, making the total rental to be in the
sum of NINETEEN THOUSAND FORTY-FOUR AND 33/HUNDREDTHS DOLLARS ($19,044.33) per
month. Rent for any period during the term hereof which is for less than one
month shall be a prorated portion of the monthly installment based upon a
thirty-day month.

        5. SECURITY DEPOSIT. Paragraph 6 of the Lease is hereby amended to
delete the reference to the Letter of Credit and that Absolute Guaranty of Lease
dated July 10, 1997, executed by John E. Bertrand, Alan S. Ramadan and Richard
Williams ("Guaranty") which replaced it and reduction in the security deposit.
In lieu thereof upon execution hereof, Tenant agrees to deposit with Landlord
the additional sum of SIX THOUSAND FOUR HUNDRED TWENTY-TWO AND N0/HUNDREDTHS
DOLLARS ($6,422.00), representing two (2) months' rent for the Additional
Premises which, when added to the present security deposit of $31,666.66 (two
months' rent prior to this Amendment), makes the total security deposit the sum
of THIRTY-EIGHT THOUSAND EIGHTY-EIGHT AND 66/HUNDREDTHS DOLLARS ($38,088.66),
which sum shall not be reduced, but rather, shall be held by 



                                       2
<PAGE>   21

Landlord pursuant to paragraph 6 for the entire term of the Lease. Upon
execution of this First Amendment Landlord shall return to Tenant the original
Guaranty, which is null and void as of June 23, 1998.

        6. OPTION TO TERMINATE. Paragraph 33 of the Lease is hereby amended to
provide that Tenant's option to terminate the Lease shall not be effective until
on or after March 31, 2000. Landlord and Tenant also confirm that Landlord's
contribution to the total amount of tenant improvements for the ground floor was
in the sum of $200,000.00 and leasing commissions for the ground floor were in
the sum of $53,199.99 and that the unamortized portion is 60 months less the
period commencing April 1, 1997, to the date of termination divided by 60
months.

        7. RATIFICATION. Landlord and Tenant hereby ratify, confirm and readopt
all of the terms and provisions of the Lease, as amended by this First
Amendment.

        IN WITNESS WHEREOF, Landlord and Tenant have executed this First
Amendment as of the date first above written.

LANDLORD                                TENANT

BRANNAN STREET PARTNERS,                QUOKKA SPORTS, INC.,
a California limited partnership        a Delaware corporation



By: /s/ WILLIAM LANEY THORNTON          By: /s/ [Signature Illegible]
   --------------------------------        -------------------------------------
     William Laney Thornton,                                      President
     General Partner



                                        By: /s/ [Signature Illegible]
                                           -------------------------------------
                                                                  Secretary



                                       3

<PAGE>   22







                                 [FLOOR PLAN]

<PAGE>   1
                                                                   EXHIBIT 10.12

                                    SUBLEASE

        THIS SUBLEASE (hereinafter referred to as the "Lease"), dated for
reference purposes only June 23, 1998, is made by and between SAN FRANCISCO
MERCANTILE COMPANY, INC., a California corporation (herein called "Landlord"),
and QUOKKA SPORTS, INC., a Delaware corporation (herein called "Tenant").

1. RECITALS.

        (a) BRANNAN STREET PARTNERS, a California limited partnership, as
Landlord ("Master Lessor"), and SAN FRANCISCO MERCANTILE COMPANY, INC., a
California corporation, as Tenant ("Landlord"), are parties to that certain
Lease dated December 1, 1985, as amended ("Master Lease"), pursuant to which
Landlord has leased from Master Lessor those certain Premises (as hereinafter
defined) for a term ending on December 14, 2005, and otherwise upon the terms
and conditions set forth in the Master Lease.

        (b) Landlord desires to sublease the Premises to Tenant pursuant to the
terms and conditions of this Lease.

        (c) By its signature to this Lease, Master Lessor hereby consents to
this Lease, agrees to contribute the consideration referred to in par. 3 below
and agrees to assume and perform all of the terms and condition of this Lease to
be performed by Landlord hereunder in the event of termination of the Master
Lease while this Lease is still in full force and effect.

        (d) Landlord agrees that, to the extent that the Lease requires Master
Lessor to perform any obligations in connection with the Premises, Tenant shall
have direct privity with Master Lessor in order to enforce Tenant's rights
hereunder.

        (e) Upon any termination of the Master Lease, this Lease shall also
terminate; provided, however, that to the extent the Master Lease grants
Landlord any discretionary rights to terminate the Master Lease, whether due to
casualty, cancellation, or otherwise, Landlord shall not exercise such right
without the consent of Tenant, which consent may be granted or withhold in
Tenant's sole discretion. In addition, Landlord shall not amend or modify the
Master Lease in any manner without the prior written consent of Tenant, which
may be granted or withheld in Tenant's sole discretion.

        (f) In the event that, without the fault of Tenant, Landlord shall
default under the Master Lease and Master Lessor shall terminate this Lease,
Master Lessor shall enter into a direct lease with Tenant the remainder of the
term of this Lease upon the same terms and conditions as set forth herein.


[Signature]                                  [Signature]
- -----------------------------                ----------------------------------
Landlord's Initials                          Tenant's Initials



                                       1

<PAGE>   2

        (g) Landlord certifies and acknowledges the following: as of the date
hereof, (i) the master Lease, a copy of which is attached hereto as Exhibit "A",
is in full force and effect, has not been terminated, and is enforceable in
accordance with its terms, (ii) neither Landlord, nor, to Landlord's knowledge,
Master Lessor, is in default under any of the terms, covenants or conditions of
the Master Lease, and (iii) Landlord has not received from Master Lessor any
notice of any outstanding default as of the date hereof.

2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases from
Landlord that certain office space (herein called "Premises") indicated on
Exhibit "A-1" attached hereto and hereby reference thereto made a part hereof,
said Premises being agreed, for the purpose of this Lease, to have an area of
Seven Thousand Eight Hundred Twenty-Four (7,824) rentable sq. ft. on the Second
Floor of that certain Building known as 525 Brannan Street, San Francisco,
California ("Building").

        Said Lease is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
said performance.

3. TERM. The term of this Lease shall commence fifteen (15) days following
written notice from Landlord to Tenant of Landlord's substantial completion of
Landlord's Work as described below and shall expire on March 31, 2002, subject
to Tenant's option to terminate as provided in paragraph 31 below. Following
commencement, Landlord and Tenant shall execute a Memorandum to be attached
hereto confirming the occupancy date.

        LANDLORD'S WORK. As partial consideration for this Lease, Master Lessor
agrees to provide and pay for tenant improvements to the Premises up to the
total sum of ONE HUNDRED THOUSAND AND NO/HUNDREDTHS DOLLARS ($100,000.00)
("Landlord's Work") pursuant to plans and specifications mutually agreed upon
between Master Lessor and Tenant. In addition, upon such date specified by
Tenant (which date shall not be later than 60 days from June 12, 1998), Master
Lessor shall purchase 33,333 shares of Series B Preferred Stock, par value
$0.0001 per share, of Tenant, for an aggregate purchase price of FORTY-NINE
THOUSAND NINE HUNDRED NINETY-NINE AND 50/HUNDREDTHS DOLLARS ($49,999.50)
pursuant to the terms of that certain Series B Preferred Stock Purchase
Agreement dated June 12, 1998, among Tenant and certain purchasers of Tenant's
Series B Preferred Stock. The foregoing shall constitute Master Lessor's and
Landlord's total responsibility concerning improvement of the Premises. Master
Lessor shall pay amounts constituting Landlord's Work as such costs are
incurred. After Master Lessor's contribution, Tenant shall pay any and all costs
of improvement of the Premises, as such costs are incurred.



                                       2
<PAGE>   3

        Landlord's Work shall include, but not be limited to, the costs of all
labor and materials, architectural, design, permits, fees and costs of
construction of Tenant's improvements. Master Lessor and Tenant shall diligently
pursue the preparation of all plans and specifications for all improvements to
the Premises, whether Landlord's Work or Tenant's Work. All such plans and
specifications shall have the approval of both Master Lessor and Tenant, which
approval shall not be unreasonably withheld by either party. Upon execution of
this Lease, Tenant, at its expense, shall have provided Master Lessor's
architect with instructions sufficient to enable Master Lessor's architect to
prepare complete plans and specifications for Landlord's Work. Such plans and
specifications and a cost estimate for Landlord's Work shall also have been
prepared by Master Lessor's architect and submitted to Master Lessor and Tenant
for preliminary approval within ten (10) business days from the date of
execution of this Lease. When the plans, specifications and cost estimate are so
approved by Master Lessor and Tenant, Master Lessor shall obtain from its
general contractor a quotation of the cost of Landlord's Work under Master
Lessor's construction contract and, if Master Lessor approves such quotation, it
shall submit the same to Tenant for approval. If Tenant disagrees with the
quotation from Master Lessor's general contractor, Tenant may obtain its own
quotation for Master Lessor's approval. If Master Lessor and Tenant are unable
to agree upon a quotation for the cost of Landlord's Work and the contractor to
do Landlord's Work, the parties agree to submit the dispute to arbitration under
the Construction Arbitration Rules of the American Arbitration Association. One
arbitrator shall be Master Lessor's architect; one arbitrator shall be appointed
by Tenant and the third arbitrator shall be appointed by the two arbitrators or,
lacking agreement, the Presiding Judge of the Superior Court of the City and
County of San Francisco. The arbitrators shall be appointed within ten (10) days
of the parties' disagreement and there shall be a hearing and decision within
twenty (20) days' of the arbitrators' appointment. Upon written approval by
Tenant or determination by arbitration, Master Lessor and Tenant shall be deemed
to have given final approval to the plans and specifications on the basis of
which the quotation was made, or cost determined, and Master Lessor shall be
authorized to proceed with Landlord's Work to the Premises in accordance with
such plans and specifications. Tenant shall bear the cost of any changes in the
work requested by Tenant after final approval of plans and specifications.

        All work, labor, materials and supplies furnished to the Premises other
than Landlord's Work shall be furnished and installed at Tenant's sole cost and
expense ("Tenant's Work"). All of Tenant's Work shall be subject to the terms
and conditions of par. 10 of this Lease and shall be coordinated with Landlord's
Work if undertaken at the same time. All of Tenant's Work shall comply with all
state, Federal and local laws and regulations, with the standards of the
National Board of Fire Underwriters (NBFU), the National Electrical Code (NEC)
, the American Gas Association (AGA), and the American Society of Heating and
Ventilating Engineers (ASHVE), and shall conform to the following: Tenant's
Work shall be performed in a first-class, workmanlike manner and prosecuted
diligently to completion, free of defects in workmanship and materials. All
contracts for Tenant's Work shall require that the contractor repair or replace
in a first-class, workmanlike manner, without additional charge, all defective
work done under such contract whether by the contractor or its subcontractors,
for a period which shall not be less than one year following recording notice of


                                       3
<PAGE>   4

completion. Tenant's Work shall be performed by licensed Contractors and
licensed subcontractors who will work harmoniously with each other and with
Master Lessor and its contractors and subcontractors, and who shall be capable
of providing a completion and a mechanics' and materialmen's lien bond to Tenant
for such work.

        Upon Landlord's fifteen (15)-day notice to Tenant, Tenant shall have
access to the Premises for cabling and move-in, provided Tenant does not
interfere with Master Lessor's contractor. Tenant shall not be required to pay
any rent during such fifteen (15)-day period.

4. POSSESSION.

        4.a. Master Lessor, and Master Lessor's agents and contractors, shall
use their best efforts and diligence to complete Landlord's Work and deliver
possession of the Premises to Tenant on or before October 1, 1998. If the
Landlord, for any reason whatsoever, cannot deliver possession of the said
Premises to the Tenant at the commencement of the term hereof, this Lease shall
not be void or voidable, nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom, nor shall the expiration date of the above term be
in any way extended, but in that event, all rent shall be abated under this
Lease during the period between the commencement of said term and the time when
Landlord delivers possession. Notwithstanding the provisions of this paragraph,
if Landlord has not delivered the Premises to Tenant in the condition required
under this Lease on or before December 1, 1998, Tenant shall have the right to
cancel this Lease. Upon such cancellation, Landlord shall return to Tenant all
sums theretofore deposited by Tenant with Landlord, and both parties shall be
released from all further liability under this Lease.

        4.b. In the event that Landlord shall permit Tenant to occupy the
Premises prior to the commencement date of the term, such occupancy shall be
subject to all the provisions of this Lease, except for payment of rent. Said
early possession shall not advance the termination date hereinabove provided.

5. RENT. Tenant agrees to pay to Landlord as rental, without prior notice or
demand, for the Premises the sum of EIGHTEEN THOUSAND FIVE HUNDRED EIGHTY-TWO
AND NO/HUNDREDTHS DOLLARS ($18,582.00) per month on or before the first day of
the first full calendar month of the term hereof and a like sum on or before the
first day of each and every successive calendar month thereafter during the term
hereof, except that the first month's rent shall be paid upon the execution
hereof Rent for any period during the term hereof which is for less than one (1)
month shall be a prorated portion of the monthly installment herein, based upon
a thirty (30)-day month. Said rental shall be paid to Landlord without
deduction or offset in lawful money of the United States of America, which shall
be legal tender at the time of payment at the office of the Building, or to such
other person or at such other place as Landlord may from time to time designate
in writing.



                                       4
<PAGE>   5

6. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of THIRTY-SEVEN
THOUSAND ONE HUNDRED SIXTY-FOUR AND NO/HUNDREDTHS DOLLARS ($317,164.00), which
sum and shall be held by Landlord as security for the faithful performance by
Tenant of all the terms, covenants, and conditions of this Lease to be kept and
performed by Tenant during the term hereof. If Tenant defaults with respect to
any provision of this Lease, including, but not limited to the provisions
relating to the payment of rent, Landlord may (but shall not be required to) 
use, apply or retain all or any part of this security deposit for the payment of
any rent or any other sum in default, or for the payment of any amount which
Landlord may spend or become obligated to spend by reason of Tenant's default,
or to compensate Landlord for any other loss or damage which Landlord may suffer
by reason of Tenant's default. If any portion of said deposit is so used or
applied, Tenant shall within seven (7) business days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
security deposit to its original amount and Tenant's failure to do so shall be a
material breach of this Lease. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) at the expiration
of the Lease term. In the event of termination of Landlord's interest in this
Lease, Landlord shall transfer said deposit to Landlord's successor in interest.

7. OPERATING EXPENSE ADJUSTMENTS. [DELETED]

8. USE. Tenant shall use the Premises for general office purposes, software
development, multimedia studio, occasional special events for the "trade" and
related uses, and shall not use or permit the Premises to be used for any other
purpose without the prior written consent of Landlord.

        Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of or affect any fire or other insurance upon the Building or any
of its contents, or cause cancellation of any insurance policy covering said
Building or any part thereof or any of its contents. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.

9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit anything to
be done in or about the Premises which will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force, or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirement snow in force or which may hereafter be in force, and



                                       5
<PAGE>   6

with the requirements of any board of fire insurance underwriters or other
similar bodies now or hereafter constituted, relating to, or affecting Tenant's
use or occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between the Landlord and Tenant.

10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises, or any part
thereof, in excess of a value of $5,000.00 without the written consent of
Landlord first had and obtained and any alterations, additions or improvements
to or of said Premises, including, but not limited to, wall covering, paneling
and built-in cabinet work, but excepting movable furniture and trade fixtures,
shall on the expiration of the term become a part of the realty and belong to
the Landlord and shall be surrendered with the Premises. In the event Landlord
consents to the making of any alterations, additions or improvements to the
Premises by Tenant, the same shall be made by Tenant at Tenant's sole cost and
expense, and any contractor or person selected by Tenant to make the same must
first be approved of in writing by the Landlord. Tenant shall provide Landlord
with written notice of the value and description of alterations, additions or
improvements with a value of $2,000 to $5,000.00. Upon the expiration or sooner
termination of the term hereof, Tenant shall, upon written demand by Landlord,
given at least thirty (30) days prior to the end of the term, at Tenant's sole
cost and expense, forthwith and with all due diligence remove any alterations,
additions, or improvements made by Tenant, designated by Landlord to be removed
by written notice to Tenant at the time of Landlord's granting approval for such
addition, alteration or improvement (or Landlord's receiving notice from Tenant
if the value is $2,000.00 to $5,000.00) and Tenant shall, forthwith and with all
due diligence at its sole cost and expense, repair any damage to the Premises
caused by such removal.

11. REPAIRS.

        11.a. By taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises as being in good, sanitary order, condition and
repair. Tenant shall, at Tenant's sole cost and expense, keep the Premises and
every part thereof in good condition and repair, damage thereto from causes
beyond the reasonable control of Tenant and ordinary wear and tear excepted.
Tenant shall upon the expiration or sooner termination of this Lease hereof
surrender the Premises to the Landlord in good condition, ordinary wear and tear
and damage from causes beyond the reasonable control of Tenant excepted. Except
as specifically provided in an addendum, if any, to this Lease, Landlord shall
have no obligation whatsoever to alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.

        11.b. Notwithstanding the provisions of par. 11.a. hereinabove, Landlord
shall repair and maintain the structural portions of the Building, including the
basic plumbing, air conditioning, heating, and electrical systems, installed or
furnished by Landlord, unless such maintenance and repairs are 



                                       6
<PAGE>   7

caused in part or in whole by the act, neglect, fault or omission of any duty by
the Tenant, its agents, servants, employees or invitees in which case Tenant
shall pay to Landlord the reasonable cost of Tenant's share of such maintenance
and repairs. Landlord shall not be liable for any failure to make any such
repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in par. 22
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
Building or the Premises or in or to fixtures, appurtenances and equipment
therein. Tenant waives the right to make repairs at Landlord's expense under any
law, statute or ordinance now or hereafter in effect.

        11.c. Notwithstanding any provision of this Lease, Landlord warrants to
Tenant that on the commencement of the term hereof, the Premises and any
improvements to be constructed by Landlord (a) shall be free from material
structural defects and (b) shall comply with all applicable covenants and
restrictions of record, statutes, ordinances, codes, rules, regulations, orders,
and requirements, including Title 24 of the California Administrative Code and
the Americans with Disabilities Act. In the event of a breach of the foregoing
warranties, Landlord shall promptly rectify such breach at its sole cost and
expense. Landlord also shall protect, indemnify, defend, and hold Tenant
harmless from an against any and all liability, loss, suits, claims, actions,
costs, and expense (including, without limitation, attorneys' fees) arising from
any breach of the foregoing warranties. The provisions of this section shall
survive the termination of this Lease.

12. LIENS. Tenant shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by Tenant. Landlord may require, at Landlord's
sole option, that Tenant shall provide to Landlord, at Tenant's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half
(1-1/2) times any and all estimated costs of any improvements, additions, or
alterations in the Premises, to insure Landlord against any liability for
mechanics' and materialmen's liens and to insure completion of the work.

13. ASSIGNMENT AND SUBLETTING. Except as set forth in this paragraph 13, Tenant
shall not either voluntarily or by operation of law, assign, transfer, mortgage,
pledge, hypothecate or encumber this Lease or any interest therein, and shall
not sublet the said Premises or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person (the employees, agents, servants
and invitees of Tenant excepted)  to occupy or use the said Premises, or any
portion thereof, without the written consent of Landlord first had and obtained,
which consent shall not be unreasonably withheld, and a consent to one
assignment, subletting, occupation or use by any other person shall not be
deemed to be a consent to any subsequent assignment, subletting, occupation or
use by another person. Any such assignment or subletting without such consent
shall be void, and shall, at the option of the Landlord, constitute a default
under this Lease. An assignment or subletting shall include, but not be limited
to, a merger or a sale or exchange of more than 50% of Tenant's stock or assets.



                                       7
<PAGE>   8

        (a) If at any time or from time to time during the term of this Lease
Tenant desires to sublet all or any part of the Premises, including any
expansion space, Tenant shall give notice to Landlord setting forth the terms of
the proposed subletting and the space so proposed to be sublet. Landlord shall
have the option, exercisable by notice given to Tenant within twenty (20) days
after Tenant's notice is given, either to sublet from Tenant such space at the
rental and other terms set forth in Tenant's notice, or, if the proposed
subletting is for the entire Premises for the balance of the term of this Lease,
to terminate this Lease; provided, however, that should Landlord so notify
Tenant, Tenant shall have the right to withdraw its request within twenty (20) 
days after receiving Landlord's notice. If Landlord does not exercise such
option, Tenant shall be free to sublet such space to any third party subject to
the following conditions:

               (1) The sublease shall be on the same terms set forth in the
notice given to Landlord;

               (2) No sublease shall be made without the prior written consent
of Landlord, which consent Landlord agrees will not unreasonably be withheld or
delayed;

               (3) No sublease shall be valid and not subtenant shall take
possession of the Premises sublease until an executed counterpart of such
sublease has been delivered to Landlord;

               (4) No subtenant shall have a right further to sublet; and

               (5) Any sums or other economic consideration received by Tenant
as a result of such subletting (except all out-of-pocket costs incurred in
connection with such subletting or assignment ((including, without limitation,
leasing commissions, advertising costs, rental concessions and legal fees) ) and
rental or other payments received which are attributable to the amortization of
the cost of leasehold improvements, other than building standard tenant
improvements, made to the sublet portion of the Premises by Landlord) whether
denominated rentals under the sublease or otherwise, which exceed, in the
aggregate, the total sums which Tenant is obligated to pay Landlord under this
Lease (prorated to reflect obligations allocable to that portion of the Premises
subject to such sublease) shall be payable to Landlord as additional rental
under this Lease without affecting or reducing any other obligation of Tenant
hereunder.

        (b) Notwithstanding the provisions of paragraphs 13 and 31(a)  above,
Tenant may "go public" under the Securities Act of 1933 (even if it involves
trading in excess of 50% of the Company's stock)  or assign this Lease or sublet
the Premises or any portion thereof, including any expansion space, without
Landlord's consent and without extending any option to Landlord, to any
corporation which controls, is controlled by or is under common control with
Tenant, or to any corporation resulting from the merger or consolidation with
Tenant or to any person or entity which acquires all the assets of Tenant as a
going concern of the business that is being conducted on the Premises, provided
that said assignee has substantially the same or better financial condition then
Tenant and assumes, in full, the obligations of Tenant under this Lease.



                                       8
<PAGE>   9

        (c) Regardless of Landlord's consent, no subletting or assignment shall
release Tenant of Tenant's obligation or alter the primary liability of Tenant
to pay the rental and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of rental by Landlord from any other person shall not
be deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Tenant or
any successor of Tenant in the performance of any of the terms hereof, Landlord
may proceed directly against Tenant without the necessity of exhausting remedies
against such assignee or successor.

        (d) In the event Tenant shall assign or sublet the Premises or request
the consent of Landlord to any assignment or subletting or if Tenant shall
request the consent of Landlord for any act that Tenant proposes to do, then
Tenant shall pay Landlord's reasonable attorneys' fees (not to exceed $500.00
per request) incurred in connection therewith.

14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work, or other thing done or
permitted by the Tenant in or about the Building (or suffered by Tenant in the
Premises), and shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any willful misconduct or negligence of the Tenant, or any
officer, agent, employee, guest, or invitee of Tenant, and from all and against
all costs, attorneys' fees, expenses and liabilities incurred in or about any
such claim or any action or proceeding brought thereon, and, in any case, action
or proceeding be brought against Landlord by reason of any such claim, Tenant
upon notice from Landlord shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant as a material part of the
consideration to Landlord hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises, from any cause other than
negligence or willful misconduct of Landlord or its agents and Tenant hereby
waives all claims in respect thereof against Landlord. Landlord or its agents
shall not be liable for any damage to property entrusted to employees of the
Building, nor for loss or damage to any property by theft or otherwise, nor for
any injury to or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water or rain which may leak from any
part of the Building or from the pipes, appliances or plumbing works therein or
from the roof, street or subsurface or from any other place resulting from
dampness or any other cause whatsoever, unless caused by or due to the
negligence or willful misconduct of Landlord, its agents, servants or employees.
Landlord or its agents shall not be liable for interference with the light or
other incorporeal hereditaments, loss of business by Tenant, nor shall Landlord
be liable for any latent defect in the Premises or in the Building unless known
to Landlord or its agents. Tenant shall give prompt notice to Landlord in case
of fire or accidents in the Premises or in the Building or of defects therein or
in the fixtures or equipment.



                                       9
<PAGE>   10

        Landlord hereby indemnifies and holds harmless Tenant and its agents,
employees and successors and assignees against any and all liability, loss:
suits, claims, actions, costs and expense arising from (i)  Landlord's or
Landlord's agents' breach of this Lease and (ii)  the negligence or willful
misconduct of Landlord or its agents.

15. SUBROGATION. As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer, to
evidence compliance with the aforementioned waiver.

16. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Landlord and Tenant against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. The limit of said insurance shall not, however, limit the
liability of the Tenant hereunder. Tenant may carry said insurance under a
blanket policy, providing, however, said insurance by Tenant shall have a
Landlord's protective liability endorsement attached thereto. If Tenant shall to
procure and maintain said insurance, Landlord may, but shall not be required to,
procure and maintain same, but at the expense of Tenant. Insurance required
hereunder, shall be in companies rated A+ AAA or better in "Best's Insurance
Guide". Tenant shall deliver to Landlord prior to occupancy of the Premises
copies of policies of liability insurance required herein or certificates
evidencing the existence and amounts of such insurance with loss payable clauses
satisfactory to Landlord. No policy shall be cancellable or subject to reduction
of coverage except after ten (10) days' prior written notice to Landlord.

17. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder,
Landlord agree to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at its reasonable
discretion (minimum 8:00 a.m. - 6:00 p.m. Monday through Friday)  and subject to
the rules and regulations of the Building of which the Premises are a part,
electricity for normal lighting and fractional horsepower office machines, heat
and air conditioning required in Landlord's judgment for the comfortable use and
occupation of the Premises and janitorial service. Landlord shall also maintain
and keep lighted the common stairs, common entries and toilet rooms in the
Building of which the Premises are a part. Landlord shall not be liable for, and
Tenant shall not be entitled to, any reduction of rental by reason of Landlord's
failure to furnish any of the foregoing when such failure is caused by accident
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord. Landlord shall not be liable under any
circumstances for a loss of or injury to property, however occurring, through or
in connection with or incidental to failure to furnish any of the foregoing
unless such loss or injury is caused by the negligence or willful misconduct of
Landlord or Landlord's agents. Wherever heat generating machines or equipment
are used in the 



                                       10
<PAGE>   11

Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises and the cost thereof, including the cost of
installation, and the cost of operation and maintenance thereof shall be paid by
Tenant to Landlord upon demand by Landlord.


        Tenant will not, without written consent of Landlord, use any apparatus
or device in the Premises, including, but without limitation thereto, electronic
data processing machines, punch card machines, and machines using in excess of
120 volts, which will in any way materially increase the amount of electricity
usually furnished or supplied for the use of the Premises as general office
space; nor connect with electric current except through existing electrical
outlets in the Premises, any apparatus or device, for the purpose of using
electric current. If Tenant shall require water or electric current in excess of
that usually furnished or supplied for the use of the Premises as general office
space, Tenant shall first procure the written consent of Landlord, to the use
thereof and Landlord may cause a water meter or electrical current meter to be
installed in the Premises, so as to measure the amount of water and electric
current consumed for any such use, or otherwise charge Tenant the reasonably
estimated cost thereof. The cost of any such meters and of installation,
maintenance and repair thereof shall be paid for by the Tenant and Tenant agrees
to pay to Landlord promptly upon demand therefor by Landlord for all such water
and electric current consumed as shown by said meters or estimate, at the rates
charged for such services by the local public utility furnishing the same, plus
any additional expense incurred in keeping account of the water and electric
current so consumed. If a separate meter is not installed, such excess cost for
such water and electric current will be established by an estimate made by a
utility company or electrical engineer.

18. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures
and personal property located in the Premises; except that which has been paid
for by Landlord and is the standard of the Building. In the event any or all of
the Tenant's leasehold improvements, equipment, furniture, fixtures and personal
property shall be assessed and taxed with the Building, Tenant shall pay to
Landlord its share of such taxes within ten (10) days after delivery to Tenant
by Landlord of a statement in writing setting forth the amount of such taxes
applicable to Tenant's property.

19. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the
rules and regulations that Landlord shall from time to time promulgate. Landlord
reserves the right from time to time to make all reasonable modifications to
said rules, provided any such modifications do not unreasonably interfere with
Tenant's use of, or access to, the Premises. The additions and modifications to
those rules shall be binding upon Tenant upon delivery of a copy of them to
Tenant.

20. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy 


                                       11
<PAGE>   12

shall be a tenancy from month to month at a rental in the amount of the last
monthly rental, plus all other charges payable hereunder, and upon all the terms
hereof applicable to a month to month tenancy.

21. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have the
right (upon reasonable notice to Tenant except in cases of emergency) to enter
the Premises, inspect the same, supply janitorial service and other service to
be provided by Landlord to Tenant hereunder, to submit said Premises to
prospective purchasers or tenants, to post notices of non-responsibility, and to
alter, improve or repair the Premises and any portion of the Building of which
the Premises are a part that Landlord may deem necessary or desirable, without
abatement of rent and may for that purpose erect scaffolding any other necessary
structures where reasonably required by the character of the work to be
performed, always providing that the entrance to the Premises shall not be
blocked thereby, and further providing that the business of the Tenant shall not
be interfered with unreasonably. Tenant hereby waives any claim for damages or
for any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby, unless caused by the negligence or willful misconduct of
Landlord or its agents. For each of the aforesaid purposes, Landlord shall at
all times have and retain a key with which to unlock all of the doors in, upon
and about the Premises, excluding Tenant's vaults, safes and files, and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency, in order to obtain entry to the Premises
without liability to Tenant except for any failure to exercise due care for
Tenant's property. Any entry to the Premises obtained by Landlord by any of said
means, or otherwise shall not under any circumstances be construed or deemed to
be a forceable or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises or any portion thereof.

22. RECONSTRUCTION. In the event the Premises or the Building of which the
Premises are a part are damaged by fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same; and this Lease
shall remain in full force and effect, except that Tenant shall be entitled to a
proportionate reduction of the rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall materially interfere with the business carried on by the Tenant in
the Premises. If the damage is due to the fault or neglect of Tenant or its
employees, there shall be no abatement of rent.

        In the event the Premises or the Building of which the Premises are a
part are damaged as a result of any cause other than the perils covered by fire
and extended coverage insurance, then Landlord shall forthwith repair the same,
provided the extent of the destruction be less than twenty-five percent (25%) of
the then full replacement cost of the Premises or the Building of which the
Premises are a part. In the event the destruction of the Premises or the
Building is to an extent greater than twenty-five percent (25%) of the full
replacement cost, then Landlord shall have the option: (1) to repair or restore
such damage within forty-five (45) days (if Landlord is unable to do so, Tenant
shall have the right to terminate this Lease upon written notice to Landlord) ,
this Lease continuing in full force and effect, but the rent to be
proportionately reduced as hereinabove in this Article provided; or


                                       12
<PAGE>   13

(2) give notice to Tenant at any time within twenty (20) days after such damage
terminating this Lease as of the date specified in such notice, which date shall
be thirty (30) days after the giving of such notice. In the event of giving such
notice, this Lease shall expire and all interest of the Tenant in the Premises
shall terminate on the date so specified in such notice and the Rent reduced by
a proportionate amount, based upon the extent if any, to which such damage
materially interfered with the business carried on by the Tenant in the
Premises, shall be paid up to date of said such termination.

        Notwithstanding anything to the contrary in this Article, Landlord shall
not have any obligation whatsoever to repair, reconstruct or restore the
Premises when the damage resulting from any casualty covered under this Article
occurs during the last nine (9) months of the term of this Lease or any
extension thereof.

        Landlord shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacements of any panels, decoration,
office fixtures, railings, floor covering, partitions, or any other property
installed in the Premises by Tenant unless such damage or injury is caused by
the negligence or willful misconduct of Landlord or Landlord's agents.

        Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the premises, Tenant's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration unless caused by the negligence or willful
misconduct of Landlord or Landlord's agents.

23. DEFAULT. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant.

        23.a. The vacating or abandonment of the Premises by Tenant.

        23.b. The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of five (5) business days after written
notice thereof by Landlord to Tenant.

        23.c. The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Tenant, other than described in par. 23.b. above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.

        23.d. The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt, or a



                                       13
<PAGE>   14

petition or reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
within sixty (60) days) ; or the appointment of a trustee or a receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within thirty (30) days; or the attachment, execution or other judicial seizure
of substantially all of Tenant's assets located at the Premises or of Tenant's
interests in this Lease, where such seizure is not discharged in thirty (30)
days.

24. REMEDIES IN DEFAULT. In the event of any such material default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach:

        24.a. Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
any real estate commission actually paid; the worth at the time of award by the
court having jurisdiction thereof of the amount by which the unpaid rent for the
balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Tenant proves could be reasonably avoided;
that portion of the leasing commission paid by Landlord and applicable to the
unexpired term of this Lease. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of ten (10%) per cent per annum. In
the event Tenant shall have abandoned the Premises, Landlord shall have the
option of (a) taking possession of the Premises and recovering from Tenant the
amount specified in this paragraph, or (b) proceeding under the provisions of
the following par. 24.b.

        24.b. Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.

        24.c. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decision of the State in which the Premises are
located.

25. EMINENT DOMAIN. If more than twenty-five (25%)  per cent of the Premises
shall be taken or appropriated by any public or quasi-public authority under the
power of eminent domain, either party hereto shall have the right, at its
option, to terminate this Lease, and Landlord shall be entitled to any and all
income, rent, award, or any interest therein whatsoever which may be paid or
made in connection with such public or quasi-public use or purpose, and Tenant
shall have no claim against Landlord for the value of any unexpired term of this
Lease. If either less than or more than twenty-five (25%) per cent of the
Premises is taken and neither party elects to terminate as herein 


                                       14
<PAGE>   15

provided, the rental thereafter to be paid shall be equitably reduced based upon
the proportion of the Premises taken. If more than fifty percent (50%) of the
Building other than the Premises may be so taken or appropriated, Landlord shall
have the right at its option to terminate this Lease and shall be entitled to
the entire award as above provided. Notwithstanding any of the foregoing in the
event that any taking under the power of eminent domain shall affect the
Premises in such a manner that, in Tenant's reasonable opinion, such damage
materially and adversely interferes with the conduct of Tenant's business,
Tenant shall have the right to terminate this Lease upon written notice thereof
to Landlord. Notwithstanding the foregoing, Tenant shall be entitled to that
portion of any award which is separately stated which compensates Tenant for
Tenant's relocation expenses and loss of fixtures, equipment and personal
property.

26. OFFSET STATEMENT.  [DELETED]

27. PARKING.  [DELETED]

28. AUTHORITY OF PARTIES.

        28.a. CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.

        28.b. LIMITED PARTNERSHIPS. If the Landlord herein is a limited
partnership, it is understood and agreed that any claims by Tenant on Landlord
shall be limited to the assets of the limited partnership, and furthermore,
Tenant expressly waives any and all rights to proceed against the individual
partners or the officers, directors or shareholders of any corporate partner,
except to the extent of their interest in said limited partnership.

29. GENERAL PROVISIONS.

        (i) PLATS AND RIDERS. Clauses, plats and riders, if any, signed by the
Landlord and the Tenant and endorsed on or affixed to this Lease are a part
hereof.

        (ii) WAIVER. The waiver by Landlord of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of the
Tenant to pay 


                                       15
<PAGE>   16

the particular rental so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of the acceptance of such rent.

        (iii) NOTICES. All notices and demands which may or are to be required
or permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail, postage-prepaid or overnight courier, addressed to the
Tenant at the Premises, or to such other place as Tenant may from time to time
designate in a notice to the Landlord. All notices and demands by the Tenant to
the Landlord shall be sent by United States Mail, postage prepaid or overnight
courier, addressed to the Landlord at the office of the Building, or to such
other person or place as the Landlord may from time to time designate in a
notice to the Tenant.

        (iv) JOINT OBLIGATIONS. If there be more than one Tenant the obligations
hereunder imposed upon Tenants shall be joint and several.

        (v) MARGINAL HEADINGS. The marginal headings and paragraph titles to the
paragraphs of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.

        (vi) TIME. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.

        (vii) SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.

        (viii) RECORDATION. Neither Landlord nor Tenant shall record this Lease
or a short form memorandum hereof without the prior written consent of the other
party.

        (ix) QUITE POSSESSION. Upon Tenant paying the rent reserved hereunder
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.

        (x) LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent or other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of a sum due from Tenant shall not be
received by Landlord or Landlord's 


                                       16
<PAGE>   17

designee within ten (10) days after Tenant's receipt of written notice that said
amount is past due, then Tenant shall pay toe Landlord a late charge equal to
seven (7%) per cent of such overdue amount. The parties hereby agree that such
late charges represent a fair and reasonable estimate of the cost that Landlord
will incur by reason of the late payment by Tenant. Acceptance of such later
charges by the Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder.

        (xi) PRIOR AGREEMENTS. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

        (xii) INABILITY TO PERFORM. This Lease and the obligations of the Tenant
and Landlord hereunder shall not be affected, or impaired because either party
is unable to fulfill any of its obligations hereunder or is delayed in doing so,
if such inability or delay is caused by reason of strike, labor troubles, acts
of God, or any other cause beyond the reasonable control of such party. This
provision shall not excuse or extend performance of Tenant's rental payment
obligation hereunder.

        (xiii) ATTORNEYS' FEES. In the event of any action or proceeding brought
by either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable
as attorneys' fees.

        (xiv) SALE OF PREMISES BY LANDLORD. In the event of any sale of the
Building, after delivery to the purchaser of Tenant's security deposit and any
other funds of Tenant held by Landlord on account of Tenant's obligations
hereunder, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease.

        (xv) SUBORDINATION, ATTORNMENT. Upon request of the Landlord, Tenant
will in writing subordinate its rights hereunder to the lien of any first
mortgage, or first deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any buildings hereafter placed upon the land
of which the Premises are a part, and to all advances made or hereafter to be
made upon the security thereof,



                                       17
<PAGE>   18

provided that such bank, insurance company or other lending institution delivers
to Tenant a non-disturbance agreement reasonably satisfactory to Tenant.

        In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the Premises, the Tenant shall attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease, provided that such bank, insurance company or other
lending institution delivers to Tenant a non-disturbance agreement reasonably
satisfactory to Tenant.

        The provisions of this Article to the contrary notwithstanding, and so
long as Tenant is not in default hereunder, this Lease shall remain in full
force and effect for the full term hereof.

        Within 30 days of execution of this Lease, Landlord shall deliver to
Tenant a non-disturbance agreement in a form reasonably satisfactory to Tenant
executed by each beneficiary or mortgagee holding a lien on the Premises.

        (xvi) NAME. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.

        (xvii) SEPARABILITY. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.

        (xviii) CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

        (xix) CHOICE OF LAW. This Lease shall be governed by the laws of the
State in which the Premises are located.

        (xx) SIGNS AND AUCTIONS. Tenant shall not place any sip upon the
Premises or Building or conduct any auction thereon without Landlord's prior
written consent, which shall not be unreasonably withheld or delayed. Landlord,
at its sole cost and expense, shall provide building directory signage for
Tenant in the first floor lobby. Tenant shall have the right to install exterior
Building signage both in the front and back of the Building, with the design to
be mutually agreed upon by Landlord and Tenant. Said design is to be tasteful
and fully integrated into the design of the Building.

30. BROKERS. Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease excepting only
Whitney Cressman Limited (for Landlord) 



                                       18
<PAGE>   19

and Cushman & Wakefield (for Tenant) and it knows of no other real estate broker
or agent who is entitled to a commission in connection with this Lease.

31. OPTION TO TERMINATE. On or after December 1, 1999, if Landlord is unable to
accommodate Tenant's expansion needs, Tenant shall have the option to terminate
this Lease by providing Landlord one hundred twenty (120) days' advanced written
notice to Landlord and paying Landlord all current rent and performing all
covenants and conditions of this Lease to the effective date of termination. In,
addition, in the event Tenant exercises its option to terminate, as
consideration, Tenant shall pay to Master Lessor one-half (1/2) of the
unamortized (i.e. assuming a commencement date of October 1, 1998, 42 months
less the period commencing October 1, 1998, to the date of termination divided
by 42 months) portion of (a) Master Lessor's contribution to tenant improvements
of $100,000.00 and (b) leasing commissions of $45,711.72 with respect to the
Premises.

32. REASONABLE CONSENT OR APPROVAL. When any provision of this Lease, or the
accompanying Rules and Regulations, calls for a party's consent or approval,
Landlord and Tenant each agree that such consent or approval shall not be
unreasonably withheld or delayed.

33. ESTOPPEL CERTIFICATE. Tenant shall at any time and from time to time upon
not less than ten (10) business days' prior notice from Landlord execute,
acknowledge and deliver to Landlord a statement in writing, which may be in the
form specified by Landlord, which shall certify: (a) that the Premises have been
completed to the satisfaction of Tenant and accepted and possessed by Tenant,
(b) the date the term of Lease commenced, the term of the Lease, any portions to
renew or extend, the amount of any security deposit and the date to which rental
and any other charges are paid in advance, (c) that the Lease is in full force
and effect and unmodified (or if there have been modifications, stating the
nature of the modifications and certifying that the Lease so modified is in full
force and effect), (d) that no notice has been received by Tenant of any
default of Tenant which has not been cured (or specifying such notices), (e)
that there are no uncured defaults on the part of Landlord (or specifying such
defaults if any are claimed), off-sets, counterclaims or credits against the
rents, obligations or stipulations due or to become due or required, (f) that
Tenant has no knowledge of any prior assignment, hypothecation or pledge of
rents and (g) such other matters as may be reasonably requested by Landlord. Any
such certificate may be relied upon by any prospective purchase of all or any
portion of the real property of which the Premises are a part.

34. SUBORDINATION. This Lease shall be subject and subordinated at all times to
(a)  all ground or underlying leases which may hereafter be executed affecting
the real property of which the Premises are a part, and (b)  the lien of all
mortgages and deeds of trust in any amount or amounts whatsoever now or
hereafter placed on or against said real property or on or against Landlord's
interest or estate therein or on or against all such ground or underlying
leases, all without the necessity of having further instruments executed on the
part of Tenant to effectuate such subordination. Notwithstanding the foregoing,
(1) in the event of termination for any reason whatsoever of any such 



                                       19
<PAGE>   20

ground or underlying lease, this Lease shall not then be barred, terminated, cut
off or foreclosed nor shall the rights and possession of Tenant hereunder be
disturbed if Tenant shall not then be in default in the payment of rental or
other sums or be otherwise in default under the terms of this Lease and Tenant
shall attorn to Landlord of any such ground or underlying lease, or, if
requested, enter into a new lease for the balance of the original or extended
term hereof then remaining upon the same terms and provisions as are in this
Lease contained; (2) in the event of a foreclosure of any such mortgage or deed
of trust or of any other action or proceeding of the enforcement thereof, or of
any sale thereunder, this Lease will not be barred, terminated, cut off or
foreclosed nor will the rights and possession of Tenant thereunder be disturbed
if Tenant shall not then be in default in the payment of rental or other sums or
be otherwise in default under the terms of this Lease and Tenant shall attorn to
the purchaser at such foreclosure, sale or other action or proceeding; and (3)
Tenant agrees to execute and deliver upon demand such further instrument
evidencing such subordination of this Lease to said deed, to such ground or
underlying leases, and to the lien of any such mortgages or deeds of trust as
may reasonably be required by Landlord. Tenant's covenant to subordinate this
Lease to ground or underlying leases and/or mortgages or deeds of trust
hereafter executed is conditioned upon each such senior instrument containing
the commitments specified in the preceding clauses (1) and (2) .

        THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE AND ON THE
DATES SPECIFIED IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.

        IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY
THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTIONS RELATING
THERETO.

DATED: June 23, 1998                       SAN FRANCISCO MERCANTILE
                                           COMPANY, INC., a California 
                                           corporation



Address:  525 Brannan Street, Suite 300    By /s/ W. LANEY THORNTON
          San Francisco, CA 94105             ----------------------------------
          Attn: Diana E. Lees                   W. Laney Thornton, Chairman
                                 


                                           By /s/ DIANA E. LEES 
                                              ----------------------------------
                                                Diana E. Lees, 
                                                Secretary-Treasurer

                                                                      "LANDLORD"



                                       20
<PAGE>   21

DATED: June 23, 1998.                      QUOKKA SPORTS, INC., a Delaware
                                           corporation



Address:  525 Brannan Street, Suite 300    By [Signature]
          San Francisco, CA 94105             ----------------------------------
          Attn:                                          President
                                  


                                           By [Signature]
                                              ----------------------------------
                                                         Secretary

                                                                        "TENANT"


[Signature]                                  [Signature]
- --------------------------                   ----------------------------------
Landlord's Initials                                Tenant's Initials



                                       21
<PAGE>   22


        The undersigned, as Master Lessor under that certain Lease dated
December 1, 1985, as amended ("Master Lease"), hereby consents to the foregoing
Sublease, agrees to contribute the consideration referred to in par. 3 of the
foregoing Sublease and agrees to assume and perform all of the terms and
conditions of the Sublease to be performed by Landlord thereunder in the event
of termination of the Master Lease while the Sublease is still in full force and
effect.

DATED: June 23, 1998.                      BRANNAN STREET PARTNERS, a
                                           California limited partnership


                                           By /s/ W. LANEY THORNTON
                                              ----------------------------------
                                              W. Laney Thornton, General Partner


                                       22
<PAGE>   23



                              RULES AND REGULATIONS

1.      No sign, placard, picture, advertisement name or notice shall be
        inscribed, displayed or printed or affixed on or to any part of the
        outside or inside of the Building (excluding the interior of the
        Premises) without the written consent of Landlord first had and obtained
        and Landlord shall have the right to remove any such sign, placard,
        picture, advertisement, name or notice without notice to and at the
        expense of Tenant.

2.      The sidewalks, halls, passages, exits, entrances, elevators and
        stairways shall not be obstructed by any of the tenants or used by them
        for any purpose other than for ingress and egress from their respective
        Premises.

3.      Tenant shall not alter any lock or install any new or additional locks
        or any bolts on any doors or windows of the Premises.

4.      The toilet rooms, urinals, wash bowls and other apparatus shall not be
        used for any purpose other than that for which they were constructed and
        no foreign substance of any kind whatsoever shall be thrown therein and
        the expense of any breakage, stoppage or damage resulting from the
        violation of this rule shall be borne by the Tenant who, or whose
        employees or invitees shall have caused it.

5.      Tenant shall not overload the floor of the Premises or in any way deface
        the Premises or any part thereof.

6.      No heavy or large volume of furniture, freight or equipment of any kind
        shall be brought into the Building without the prior notice to Landlord
        and all moving of the same into or out of the Building shall be done at
        a reasonable time and manner as Landlord shall designate. Landlord shall
        have the right to prescribe the weight, size and position of all safes
        and other heavy equipment brought into the Building and also the times
        and manner of moving the same in and out of the Building Safes or other
        heavy objects shall, if considered necessary by Landlord, stand on
        supports of such thickness as is necessary to properly distribute the
        weight. Landlord will not be responsible for loss of or damage to any
        such safe or property from any cause and all damage done to the Building
        by moving or maintaining any such safe or other property shall be
        repaired at the expense of Tenant.

7.      Tenant shall not use, keep or permit to be used or kept any foul or
        noxious gas or substance in the Premises, or permit or suffer the
        Premises to be occupied or used in a manner offensive or objectionable
        to the Landlord or other occupants of the Building by reason of noise,
        odors and/or vibrations, or interfere in any way with other tenants or
        those having business therein, nor shall any animals or birds be brought
        in or kept in or about the Premises or the Building.



                                       23
<PAGE>   24

8.      No cooking shall be done or permitted by any Tenant on the Premises, nor
        shall the Premises be used for the storage of merchandise, for washing
        clothes, for lodging, or for any improper, objectionable or immoral
        purposes.

9.      Tenant shall not use or keep in the Premises or the Building any
        kerosene, gasoline or inflammable or combustible fluid or material or
        use any method of heating or air conditioning other than that supplied
        by Landlord.

10.     Landlord will direct electricians as to where and how telephone and
        telegraph wires are to be introduced. No boring or cutting for wires
        will be allowed without the consent of the Landlord. The location of
        telephones, call boxes and other office equipment affixed to the
        Premises shall be subject to the approval of Landlord.

11.     On Saturdays, Sundays and legal holidays, and on other days between the
        hours of 6:00 P.M. and 8:00 A.M. the following day, access to the
        Building, or to the halls, corridors, elevators or stairways in the
        Building, or to the Premises may be refused unless the person seeking
        access is known to the person or employee of the Building in charge and
        has a pass or is properly identified. The Landlord shall in no case be
        liable for damages for any error with regard to the admission to or
        exclusion from the Building of any person. In case of invasion, mob,
        riot, public excitement, or other commotion, the Landlord reserves the
        right to prevent access to the Building during the continuance of the
        same by closing of the doors or otherwise, for the safety of the tenants
        and protection of property in the Building and the Building.

12.     Landlord reserves the right to exclude or expel from the Building any
        person who, in the judgment of Landlord, is intoxicated or under the
        influence of liquor or drugs, or who shall in any manner do any act in
        violation of any of the rules and regulations of the Building.

13.     No vending machine or machines of any description shall be installed,
        maintained or operated upon the Premises without the written consent of
        the Landlord.

14.     Landlord shall have the right, exercisable without notice and without
        liability to Tenant, to change the name and street address of the
        Building of which the Premises are a part.

15.     Tenant shall not disturb, solicit, or canvass any occupant of the
        Building and shall cooperate to prevent same.

16.     Without the written consent of Landlord, Tenant shall not use the name
        of the Building in connection with or in promoting or advertising the
        business of Tenant except as Tenant's address.



                                       24
<PAGE>   25

17.     Landlord shall have the right to control and operate the public portions
        of the Building, and the public facilities, and heating and air
        conditioning, as well as facilities furnished for the common use of the
        tenants, in such manner as it deems best for the benefit of the tenants
        generally.

18.     All entrance doors in the Premises shall be left locked when the
        Premises are not in use, and all doors opening to public corridors shall
        be kept closed except for normal ingress and egress from the Premises.

19.     Except for seeing eye dogs, no animals shall be allowed in the Building
        at any time.

20.     Landlord may waive any one or more of these Rules and Regulations for
        the benefit of any particular Tenant or Tenants, but no such waiver by
        Landlord shall be construed as a waiver of such Rules and Regulations in
        favor of any other Tenant or Tenants, nor prevent Landlord from
        thereafter enforcing any such Rules and Regulations against any or all
        of the Tenants of the Building.



                                       25
<PAGE>   26
                                    EXHIBIT A

                               AMENDMENT TO LEASE


        This Amendment to Lease (this "Amendment") dated as of April 1, 1997, is
entered into by and between BRANNAN STREET PARTNERS, a California limited
partnership ("Brannan"), and THE SAN FRANCISCO MERCANTILE COMPANY, INC., a
California corporation ("Mercantile"), in accordance with the following facts:

        A. Brannan and Mercantile are landlord and tenant, respectively, under a
lease dated December 1, 1985 (the "Lease") for premises at 525 Brannan Street,
San Francisco, California (the "Premises").

        B. Pursuant to a lease amendment effective October 1, 1986, the Premises
were expanded to include the front portion of the third floor of the building.
As a result of such expansion, the size of the Premises increased from 27,306
square feet to 29,298 square feet and the monthly rent increased from
$__________ to $__________.

        C. Pursuant to a lease amendment effective December 15, 1987, the
monthly rent increased by five percent, from $_________ to $_________ per month.

        D. Pursuant to a lease amendment effective October 1, 1994, the Premises
were reduced in size to exclude the front portions of the second and third
floors of the building. As a result of such reduction in space, the size of the
Premises decreased from 29,298 square feet to 25,184 square feet and the monthly
rent decreased from $_________ to $________.

        E. Pursuant to a lease amendment effective June 1, 1996, the Premises
were reduced in size to exclude the first floor of the building. This space
reduction occurred to accommodate a new tenant (Quokka Sports) which desired to
lease the first floor of the building. As a result of such reduction in space,
the size of the Premises decreased from 25,184 square feet to 15,954 square feet
and the monthly rent decreased from $________ pursuant to a two-step process:
(1) upon Mercantile's relinquishment of the first floor space, Brannan reduced
the monthly rent to $_________ and (2) Brannan agreed to further reduce the
monthly rent upon the date Quokka Sports became obligated to remit monthly rent
to Brannan for use of the first floor, as provided below.

        F. Pursuant to a lease amendment effective September 1, 1996, the
Premises were reduced in size to exclude a portion of the second floor of the
building, which is now known as suite 203. As a result of such reduction in
space, the size of the Premises decreased from 15,954 square feet to 14,442
square feet and the monthly rent decreased from $_________ to $________.


<PAGE>   27

        G. Quokka Sports is obligated to being ________________ April 1, 1997.
The parties intend by this Amendment to clarify Mercantile's new monthly rent as
a result of such event.

        NOW, THEREFORE, in consideration of the mutual covenants expressed in
this Amendment , the parties agree as follows:

        1. NEW RENT. Commencing on April 1, 1997, Mercantile's monthly rent for
the Premises shall be $___________.

        2. NO OTHER CHANGES. The Lease, as modified by this Amendment, remains
in full force and effect.

        Executed at San Francisco, California, as of the date first written
above.

"LANDLORD"                              "TENANT"

BRANNAN STREET PARTNERS,                THE SAN FRANCISCO MERCANTILE COMPANY,
a California limited Partnership        INC., a California corporation


By /s/ WILLIAM LANEY THORNTON           By  /s/ AILEEN WESTERBEKE    
  ---------------------------------         ------------------------------------
   General Partner                                     Its President
                                                           ---------------------



                                     - 2 -
<PAGE>   28

                                                                       EXHIBIT A

                               AMENDMENT TO LEASE


        THIS AMENDMENT TO LEASE ("Amendment") is made and entered into this 23rd
day of June, 1998, by and between BRANNAN STREET PARTNERS, a California limited
partnership ("Landlord") and SAN FRANCISCO MERCANTILE COMPANY, INC., a
California corporation ("Tenant").

                                    RECITALS

        WHEREAS, Landlord and Tenant have made and entered into that certain
Lease dated December 1, 1985, as amended April 1, 1997 (collectively, "Lease"),
for the lease and improvement by Landlord to Tenant of certain premises located
in the building commonly known as 525 Brannan Street, San Francisco, California,
as more particularly described in the Lease ("Premises");

        WHEREAS, Landlord and Tenant desire to amend the Lease to adjust the
Premises and rent and agree upon certain other and related matters upon the
terms and conditions hereinafter set forth.

        NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and conditions hereinafter set forth, Landlord and Tenant agree to
amend the Lease as follows:

        1. PREMISES. The lease amendment effective September 1, 1996, is
cancelled and that certain space known as Suite 203 is added back to the
Premises. The Premises now consist of a total of 17,747 rentable square feet.

        2. RENT. Effective October 1, 1998, the monthly rent for the Premises
shall be in the amount of __________________________ AND _____/HUNDREDTHS
DOLLARS ($_______) per month, payable on or before the first day of the first
full calendar month of the term hereof and a like sum on or before the first day
of each and every successive calendar month thereafter during the term hereof.
Concurrently herewith, Tenant is entering into a Sublease of a portion of the
Second Floor of the Premises to Quokka Sports, Inc. Commencing with the
commencement of the term of the Sublease, and continuing so long as the Sublease



                                       1
<PAGE>   29

remains in full force and effect, the total rental for the Premises shall be
increased to the total sum of _________________________ AND ____/HUNDREDTHS
DOLLARS ($___________) per month. Rent for any period during the term hereof
which is for less than one month shall be a prorated portion of the monthly
installment, based upon a thirty-day month. Paragraph 35 of the Lease is deleted
in its entirely.

        3. SERVICES AND UTILITIES. In consideration for this Amendment, par. 37
of the Lease is deleted and Landlord confirms its agreement to provide
janitorial service and utilities pursuant to paragraph 17 of the Lease,
including to Quokka Sports, Inc. pursuant to paragraph 17 of the sublease.

        4. RATIFICATION. Landlord and Tenant hereby ratify, confirm and readopt
all of the terms and provisions of the Lease, as amended.

        IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the date first above written.

"LANDLORD"                              "TENANT"

BRANNAN STREET PARTNERS,                THE SAN FRANCISCO MERCANTILE COMPANY,
a California limited Partnership        INC., a California corporation


By                                      By
  ---------------------------------       --------------------------------------
   William Laney Thornton                   Aileen Westerbeke, President
   General Partner

<PAGE>   30







                                  [FLOOR PLAN]



<PAGE>   31
                                                                       EXHIBIT A

                             RULES AND REGULATIONS

1.   No sign, placard, pictures, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Landlord first had and 
obtained and Landlord shall have the right to remove any such sign, placard, 
picture, advertisement, name or notice without notice to and at the expense of 
Tenant.

     All approved signs or lettering on doors shall be printed, painted, 
affixed or inscribed at the expense of Tenant by a person approved of by 
Landlord.

     Tenant shall not place anything or allow anything to be placed near the 
glass of any window, door, partition or wall which may appear unsightly from 
outside the Premises; provided, however, that Landlord may furnish and install 
a Building standard window covering at all exterior windows. Tenant shall not 
without prior written consent of Landlord cause or otherwise sunscreen any 
window.

2.   The sidewalks, halls, passages, exits, entrances, elevators and stairways 
shall not be obstructed by any of the tenants or used by them for any purpose 
other than for ingress and egress from their respective Premises.

3.   Tenant shall not alter any lock or install any new or additional locks or 
any bolts on any doors or windows of the Premises.

4.   The toilet rooms, urinals, wash bowls and other apparatus shall not be 
used for any purpose other than that for which they were constructed and no 
foreign substance of any kind whatsoever shall be thrown therein and the 
expense of any breakage, stoppage or damage resulting from the violation of 
this rule shall be borne by the Tenant who, or whose employees or invitees 
shall have caused it.

5.   Tenant shall not overload the floor of the Premises or in any way deface 
the Premises or any part thereof.

6.   No furniture, freight or equipment of any kind shall be brought into the 
Building without the prior notice to Landlord and all moving of the same into 
or out of the Building shall be done at such time and in such manner as 
Landlord shall designate. Landlord shall have the right to prescribe the 
weight, size and position of all safes and other heavy equipment brought into 
the Building and also the times and manner of moving the same in and out of the 
Building. Safes or other heavy objects shall, if considered necessary by 
Landlord, stand on supports of such thickness as is necessary to properly 
distribute the weight. Landlord will not be responsible for loss of or damage 
to any such safe or property from any cause and all damage done to the Building 
by moving or maintaining any such safe or other property shall be repaired at 
the expense of Tenant.

7.   Tenant shall not use, keep or permit to be used or kept any foul or 
noxious gas or substance in the Premises, or permit or suffer the Premises to 
be occupied or used in a manner offensive or objectionable to the Landlord or 
other occupants of the Building by reason of noise, odors and/or vibrations, or 
interfere in any way with other tenants or those having business therein, nor 
shall any animals or birds be brought in or kept in or about the Premises or 
the Building.

8.   No cooking shall be done or permitted by any Tenant on the Premises, nor 
shall the Premises be used for the storage of merchandise, for washing clothes, 
for lodging, or for any improper, objectionable or immoral purposes.

9.   Tenant shall not use or keep in the Premises or the Building any kerosene, 
gasoline or inflammable or combustible fluid or material, or use any method of 
heating or air conditioning other than that supplied by Landlord.

10.  Landlord will direct electricians as to where and how telephone and 
telegraph wires are to be introduced. No boring or cutting for wires will be 
allowed without the consent of the Landlord. The location of telephones, call 
boxes and other office equipment affixed to the Premises shall be subject to 
the approval of Landlord.

11.  On Saturdays, Sundays and legal holidays, and on other days between the 
hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building, or 
to the halls, corridors, elevators or stairways in the Building, or to the 
Premises may be refused unless the person seeking access is known to the person 
or employee of the Building in charge and has a pass or is properly 
identified. The Landlord shall in no case be liable for damages for any error 
with regard to the admission to or exclusion from the Building of any person. 
In case of invasion, mob, riot, public excitement, or other commotion, the 
Landlord reserves the right to prevent access to the Building during the 
continuance of the same by closing of the doors or otherwise, for the safety of 
the tenants and protection of property in the Building and the Building.

12.  Landlord reserves the right to exclude or expel from the Building any 
person who, in the judgment of Landlord, is intoxicated or under the influence 
of liquor or drugs, or who shall in any manner do any act in violation of any 
of the rules and regulations of the Building.

13.  No vending machine or machines of any description shall be installed, 
maintained or operated upon the Premises without the written consent of the 
Landlord.

14.  Landlord shall have the right, exercisable without notice and without 
liability to Tenant, to change the name and street address of the Building of 
which the Premises are a part.

15.  Tenant shall not disturb, solicit, or canvass any occupant of the Building 
and shall cooperate to prevent same.

16.  Without the written consent of Landlord, Tenant shall not use the name of 
the Building in connection with or in promoting or advertising the business of 
Tenant except as Tenant's address.

17.  Landlord shall have the right to control and operate the public portions 
of the Building, and the public facilities, and heating and air conditioning, 
as well as facilities furnished for the common use of the tenants, in such 
manner as it deems best for the benefit of the tenants generally.

18.  All entrance doors in the Premises shall be left locked when the Premises 
are not in use, and all doors opening to public corridors shall be kept closed 
except for normal ingress and egress from the Premises.

19.  Except for seeing eye dogs, no animals shall be allowed in the Building at 
any time.

20.  Landlord may waive any one or more of these Rules and Regulations for the 
benefit of any particular Tenant or Tenants, but no such waiver by Landlord 
shall be construed as a waiver of such Rules and Regulations in favor of any 
other Tenant or Tenants, nor prevent Landlord from thereafter enforcing any 
such Rules and Regulations against any or all of the Tenants of the Building.



                             (PAGE 5 - OFF. BLDG.)

<PAGE>   32

                                                                       EXHIBIT A


                                   L E A S E


1.   PARTIES. This Lease, dated for reference purposes only, December 1, 1985, 
is made by and between BRANNAN STREET PARTNERS (herein called "Landlord") and 
SAN FRANCISCO MERCANTILE COMPANY, INC. (herein called "Tenant").

2.   PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases 
from Landlord that certain space (herein called "Premises") listed on Exhibit 
"A" attached hereto and hereby reference thereto made a part hereof, said 
Premises being agreed, for the purpose of this Lease, to be an area of 
approximately 27,306 square feet and being situated on various floors of that 
certain building known as 525 Brannan Street, San Francisco, California. Said 
Lease is subject to the terms, covenants and conditions herein set forth and 
the Tenant covenants as a material part of the consideration for this lease to 
keep and perform each and all of said terms, covenants and conditions by it to 
be kept and performed and that this Lease is made upon the condition of said 
performance.

3.   TERM. The term of this Lease shall be for 20 years, commencing on the 15th 
day of December, 1985, and ending on the 14th day of December, 2005.

4.   POSSESSION.

     4.a.  If the Landlord, for any reason whatsoever, cannot deliver 
possession of the said Premises to the Tenant at the commencement of the term
rent, this Lease shall not be void or voidable, nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom, nor shall the expiration date
of the above term be in any way extended, but in that event, all rent shall be
abated during the period between the commencement of said term and the time when
Landlord delivers possession.

     4.b.  In the event that Landlord shall permit Tenant to occupy the 
Premises prior to the commencement date of the term, such occupancy shall be
subject to all the provisions of this Lease. Said early possession shall not
advance the termination date hereinabove provided.

5.   RENT. Tenant agrees to pay to Landlord as rental, without prior notice or 
demand, for the Premises, the sum of: _________________________________________ 
($_____________) Dollars, on or before the first day of the first full calendar 
month of the term hereof and a like sum on or before the first day of each and 
every successive calendar month thereafter during the term hereof, except that 
the first month's rent shall be paid upon the execution hereof. Rent for any 
period during the term hereof which is for less than one (1) month shall be a 
prorated portion of the monthly installment herein, based upon a thirty (30) day
month. Said rental shall be paid to Landlord without deduction or xxxxxxx in 
lawful money of the United States of America, which shall be legal tender at 
the time of payment at the Office of the Building, or to such other person or 
at such other place as Landlord may from time to time designate in writing.

6.   SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of -0- 
Dollars. Said sum shall be held by Landlord as security for the faithful 
performance by Tenant of all the terms, covenants, and provisions of this Lease 
to be kept and performed by Tenant during the term hereof. If Tenant defaults 
with respect to any provision of this Lease, including, but not limited to the 
provisions relating to the payment of rent, Landlord may (but shall not be 
required to) use, apply or retain all or any part of this security deposit for 
the payment of any rent or any other sum in default, or for the payment of any 
amount which Landlord may spend or become obligated to spend by reason of 
Tenant's default, or to compensate Landlord for any other loss or damage which 
Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall within five (5) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the security deposit to its original amount and Tenant's failure to do so shall
be a material breach of this Lease. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. Tenant shall fully and faithfully perform
every provision of this Lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease
term. In the event of termination of Landlord's interest in this Lease, Landlord
shall transfer said deposit to Landlord's successor in interest.
<PAGE>   33

7.   [DELETED]

8.   USE.  Tenant shall use the Premises for general garment manufacturing and 
related purposes and shall not use or permit the Premises to be used for any 
other purpose without the prior written consent of Landlord.

   Tenant shall not do or permit anything to be done in or about the Premises 
nor bring or keep anything therein which will in any way increase the existing
rate of or affect any fire or other insurance upon the Building or any of its
contents, or cause cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or
injure or annoy them or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.

9.   COMPLIANCE WITH LAW.  Tenant shall not use the Premises or permit 
anything to be done in or about the Premises which will in any way conflict with
any law, statute, ordinance or government rule or regulation now in force or
which may hereafter be enacted or promulgated. Tenant shall, at his sole cost
and expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, and with the requirements of any board of fire insurance
underwriters or other similar bodies now or hereafter constituted, relating to,
or affecting the condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by Tenant's improvements or acts.
The judgment of any court of competent jurisdiction or the admission of Tenant
in any action against Tenant, whether Landlord be a party therein or note, that
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement, shall be conclusive of that fact as between the Landlord and
Tenant.

10.  ALTERATIONS AND ADDITIONS.  Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises or any part thereof
without the written consent of Landlord first had and obtained any alterations,
additions or improvements to or of said Premises, including, but not limited to,
wall covering, paneling and built-in cabinet work, but excepting moveable
furniture and trade fixtures, shall on the expiration of the term become a part
of the realty and belong to the Landlord and shall be surrendered with the
Premises. In the event Landlord consents to the making of any alterations,
additions or improvements to the Premises by Tenant, the same shall be made by
Tenant of Tenant's sole costs and expense, and any contractor or person selected
by Tenant to make the same must first be approved of in writing by the Landlord.
Upon the expiration or sooner termination of the term hereof, Tenant shall, upon
written demand by Landlord, given at least thirty (30) days prior to the end of
the term, at Tenant's sole cost and expense, forthwith and with all due
diligence remove any alternations, additions, or improvements made by Tenant,
designated by Landlord to be removed, and Tenant shall, forthwith and with all
due diligence at its sole costs and expense, repair any damage to the Premises
caused by such removal.

11.  REPAIRS.
     11.a.  By taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in good, sanitary order, condition and repair.
Tenant shall, at Tenant's sole cost and expense, keep the Premises and every
part thereof in good condition and repair, damage thereto from causes beyond the
reasonable control of Tenant and ordinary wear and tear excepted. Tenant shall
upon the expiration or sooner termination of this Lease hereof surrender the
Premises to the Landlord in good condition, ordinary wear and tear and damage
from causes beyond the reasonable control of Tenant excepted. Except as
specifically provided in an addendum, if any, to this Lease, Landlord shall have
no obligation whatsoever to alter, remodel, improve, repair, decorate or paint
the Premises or any part thereof and the parties hereto affirm that landlord has
made no representation to Tenant respecting the condition of the Premises or the
Building except as specifically herein set forth. 
     11.b.  Notwithstanding the provisions of Article 11.a. hereinabove, 
Landlord shall repair and maintain the structural portions of the Building,
including the basic plumbing, air conditioning, heating, and electrical systems,
installed or furnished by Landlord, unless such maintenance and repairs are
caused in part or in whole by the act, neglect, fault or omission of any duty by
the Tenant, its agents, servants, employees or invites, in which case Tenant
shall pay to Landlord the reasonable cost of such maintenance and repairs.
Landlord shall not be liable for any failure to make any such repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need of such repairs or maintenance is given to
Landlord by Tenant. Except as provided in Article 22 hereof, there shall be no
abatement of rent and no liability by Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Building or the Premises
or in or to fixtures, appurtenances and equipment therein. Tenant waives the
right to make repairs at Landlord's expense under any law, statute or ordinance
now or hereafter in effect.

12.  LIENS.  Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide to Landlord, as Tenant's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half (1 1/2)) times any and all estimated cost of any improvements,
additions, or alterations in the Premises, to insure Landlord against any
liability for mechanics' and materialmen's liens and to insure completion of the
work.

13.  [DELETED]

14.  HOLD HARMLESS.  Tenant shall indemnify and hold harmless Landlord against
and from any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all and against all cost, attorney's fees, expenses and
liabilities incurred in or about any such claim or any action or proceeding
brought thereon, and, in any case, action or proceeding be brought against
Landlord by reason of any such claim. Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel satisfactory to Landlord. Tenant
as a material part of the consideration to Landlord hereby assumes all risk of
damage to property or injury to persons, in, upon or about the Premises, from
any cause other than Landlord's negligence, and Tenant hereby waives all claims
in respect thereof against Landlord. 
     Landlord or his agents shall not be liable for any damage to property 
entrusted to employees of the Building, nor for loss or damage to any property
by theft or otherwise, nor for any injury to or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity, water
or rain which may leak from any part of the Building or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever,
unless caused by or due to the negligence of Landlord, its agents, servants or
employees. Landlord or its agents shall not be liable for interference with the
light or other incorporeal hereditaments, loss of business by Tenant, nor shall
Landlord be liable for any latent defects in the Premises or in the Building.
Tenant shall give prompt notice to Landlord in case of fire or accidents in the
Premises or in the Building or of defects therein or in the fixtures or
equipment.

15.  SUBROGATION.  As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer in
evidence compliance with the aforementioned waiver.

16.  LIABILITY INSURANCE.  Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Landlord and Tenant against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. The limit of said insurance shall not, however, limit the
liability of the Tenant hereunder. Tenant may carry said insurance under a
blanket policy, providing, however, said insurance by Tenant shall have a
Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to process and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant. Insurance
required hereunder, shall be in companies rated A+ or better in "Best's
Insurance Guide". Tenant shall deliver to Landlord prior to occupancy of the
Premises copies of policies of liability insurance required herein or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Landlord. No policy shall be cancellable or
subject to reduction of coverage except after ten (10) day's prior written
notice to Landlord.

17.  SERVICES AND UTILITIES.  Provided that Tenant is not in default hereunder,
Landlord agrees to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at his sole discretion,
and subject to the rules and regulations of the Building of which the Premises
are a part, electricity for normal lighting and functional horsepower office
machines, heat and air conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises, and janitorial service. Landlord
shall also maintain and keep lighted the common stairs, common entities and
toilet rooms in the Building of which the Premises are a part. Landlord shall
not be liable for, and Tenant shall not be entitled to, any reduction of rental
by reason of Landlord's failure to furnish any of the foregoing when such
failure is caused by accident, breakage, repairs, strikes, lockouts or other
labor disturbances or labor disputes of any character, or by any other cause,
similar or dissimilar, beyond the reasonable control of
SEE ADDENDUM 

                                    (PAGE 2)
<PAGE>   34
Landlord. Landlord shall not be liable under any circumstances for a loss of or 
injury to property, however occurring, through or in connection with or 
incidental to failure to furnish any of the foregoing. Whereever heat 
generating machines or equipment are used in the Premises which affect the 
temperature otherwise maintained by the air conditioning system, Landlord 
reserves the right to install supplementary air conditioning units in the 
Premises and the cost thereof, including the cost of installation, and the cost 
of operation and maintenance thereof shall be paid by Tenant to Landlord upon 
demand by Landlord.
   Tenant will not, without written consent of Landlord, use any apparatus or 
device in the Premises, including, but without limitation thereto, electronic 
data processing machines, punch card machines, and machines using in excess of 
120 volts, which will in any way increase the amount of electricity usually 
furnished or supplied for the use of the Premises as general office space; nor 
connect with electric current except through existing electrical outlets in the 
Premises, any apparatus or device, for the purpose of using electric current. 
If Tenant shall require water or electric current in excess of that usually 
furnished or supplied for the use of the Premises as general office space, 
Tenant shall first procure the written consent of Landlord, which Landlord may 
refuse, to the use thereof and Landlord may cause a water meter or electrical 
current meter to be installed in the Premises, so as to measure the amount of 
water and electric current consumed for any such use. The cost of any such 
meters and of installation, maintenance and repair thereof shall be paid for 
the Tenant and Tenant agrees to pay to Landlord promptly upon demand 
therefor by Landlord for all such water and electric current consumed as shown 
by said meters, at the rates charged for such service by the local public 
utility furnishing the same, plus any additional expense incurred in keeping 
account of the water and electric current so consumed. If a separate meter is 
not installed, such excess cost for such water and electric current will be 
established by an estimate made by a utility company or electrical engineer.

18.  PROPERTY TAXES.  Tenant shall pay, or cause to be paid, before 
delinquency, any and all taxes levied or assessed and which become payable 
during the term hereof upon all Tenant's leasehold improvements, equipment, 
furniture, fixtures and personal property located in the Premises; except that 
which has been paid for by Landlord, and is the standard of the Building. In 
the event any or all of the Tenant's leasehold improvements, equipment, 
furniture, fixtures and personal property shall be assessed and taxed with the 
building, Tenant shall pay to Landlord his share of such taxes within ten (10) 
days after delivery to Tenant by Landlord of a statement in writing setting 
forth the amount of such taxes applicable to Tenant's property.

19.  RULES AND REGULATIONS.  Tenant shall faithfully observe and comply with 
the rules and regulations that Landlord shall from time to time promulgate. 
Landlord reserves the right from time to time to make all reasonable 
modifications to said rules. The addition and modifications to those rules 
shall be binding upon Tenant upon delivery of a copy of them to Tenant. 
Landlord shall not be responsible to Tenant for the nonperformance of any said 
rules by any other tenants or occupants.

20.  HOLDING OVER.  If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy shall be tenancy from month to month at a
rental in the amount of the last monthly rental, plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month to month tenancy.

21.  ENTRY BY LANDLORD.  Landlord reserves and shall at any and all times have
the right to enter the Premises, inspect the same, supply janitorial service and
any other service to be provided by Landlord to Tenant hereunder, to submit said
Premises to prospective purchasers or tenants, to post notices of
non-responsibility, and to alter, improve or repair the Premise and any portion
of the Building of which the Premises are a part that Landlord may deem
necessary or desirable, without abatement of rent and may for the purpose erect
scaffolding and other necessary structures where reasonable required by the
character of the work to be performed, always providing that the entrance to the
Premises shall not be blocked thereby, and further providing that the business
of the Tenant shall not be interfered with unreasonably. Tenant hereby waives
any claim for damages or for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, excluding Tenant's vaults, safes and files, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency, in order to obtain entry to the
Premises without liability to Tenant except for any failure to exercise due care
for Tenant's property. Any entry to the Premises obtained by Landlord by any of
said means, or otherwise shall not under any circumstances be construed or
deemed to be a or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises or any portion thereof.

22.  RECONSTRUCTION.  In the event the Premises or the Building of which the 
Premises are a part are damaged by fire or other perils covered by extended 
coverage insurance, Landlord agrees to forthwith repair the same; and this 
Lease shall remain in full force and affect, except that Tenant shall be 
entitled to a proportionate reduction of the rent while such repairs are being 
made, such proportionate reduction to be based upon the extent to which the 
making of such repairs shall materially interfere with the business carried on 
by the Tenant in the Premises. If the damage is due to the fault or neglect of 
Tenant or its employees, there shall be no abatement of rent.
   In the event the Premises or the Building of which the Premises are a part 
are damaged as a result of any cause other than the perils covered by fire and 
extended coverage insurance, then Landlord shall forthwith repair the same, 
provided the extent of the destruction be less than ten (10%) per cent of the 
then full replacement cost of the Premises or the Building of which the 
Premises are a part. In the event the destruction of the Premises or the 
Building is to an extent greater than ten (10%) per cent of the full 
replacement cost, then Landlord shall have the option: (1) to repair or restore 
such damage, this Lease continuing in full force and effect, but the rent to be 
proportionately reduced as hereinabove in this Article provided; or (2) give 
notice to Tenant at any time within sixty (60) days after such damage 
terminating this Lease as of the date specified in such notice, which date 
shall be no less than thirty (30) and no more than sixty (60) days after the 
giving of such notice. In the event of giving such notice, this Lease shall 
expire and all interest of the Tenant in the Premises shall terminate on the 
date so specified in such notice and the Rent, reduced by a proportionate 
amount, based upon the extent, if any, to which such damage materially 
interfered with the business carried on by the Tenant in the Premises, shall be 
paid up to date of said such termination.
   Notwithstanding anything to the contrary in this Article, Landlord shall not 
have any obligation whatsoever to repair, reconstruct or restore the Premises 
when the damage resulting from any casualty covered under this Article occurs 
during the last twelve (12) months of the term of this Lease or any extension 
thereof.
   Landlord shall not be required to repair any injury or damage by fire or 
other cause, or to make any repairs or replacements of any panels, decoration, 
office fixtures, railings, floor covering, partitions, or any other property 
installed in the Premises by Tenant.
   The Tenant shall not be entitled to any compensation or damages from 
Landlord for loss of the use of the whole or any part of the premises, Tenant's 
personal property or any inconvenience or annoyance occasioned by such damage, 
repair, reconstruction or restoration.

23.  DEFAULT.  The occurrence of any one or more of the following events shall 
constitute a default and breach of this Lease by Tenant.
     23.a.  The vacating or abandonment of the Premises by Tenant.
     23.b.  The failure by Tenant to make any payment of rent or any other 
payment required to be made by Tenant hereunder, as and when due, where such 
failure shall continue for a period of three (3) days after written notice 
thereof by Landlord to Tenant.
     23.c.  The failure by Tenant to observe or perform any of the covenants, 
conditions or provisions of this Lease to be observed or performed by the 
Tenant, other than described in Article 23.b above, where such failure shall 
continue for a period of thirty (30) days after written notice thereof by 
Landlord to Tenant; provided, however, that if the nature of Tenant's default 
is such that more than thirty (30) days are reasonably required for its cure, 
then Tenant shall not be deemed to be in default. If Tenant commences such cure 
within said thirty (30) day period and thereafter diligently prosecutes such 
cure to completion.
     23.d.  The making by Tenant of any general assignment or general 
arrangement for the benefit of creditors; or the filing by or against Tenant of 
a petition to have Tenant adjudged a bankrupt, or a petition or reorganization 
or arrangement under any law relating to bankruptcy (unless, in the case of a 
petition filed against Tenant, the same is dismissed within sixty (60) days); 
or the appointment of a trustee or a receiver to take possession of 
substantially all of Tenant's assets located at the Premises or of Tenant's 
interest in this Lease, where possession is not restored to Tenant within 
thirty (30) days; or the attachment, execution or other judicial seizure of 
substantially all of Tenant's assets located at the Premises or of Tenant's 
interest in this Lease, where such seizure is not discharged in thirty (30) 
days.

24.  REMEDIES IN DEFAULT.  In the event of any such material default or breach 
by Tenant, Landlord may at any time thereafter, with or without notice or 
demand and without limiting Landlord in the exercise of a right or remedy which 
Landlord may have by reason of such default or breach:
   24a.  Terminate Tenant's right to possession of the Premises by any lawful 
means, in which case this Lease shall terminate and Tenant shall immediately 
surrender possession of the Premises to Landlord. In such event Landlord shall 
be entitled to recover from Tenant all damages incurred by Landlord by reason 
of Tenant's default including, but not limited to, the cost of recovering 
possession of the Premises; expenses of reletting, including necessary 
renovation and alteration of the Premises, reasonable attorney's fees, any real 
estate commission actually paid; the worth at the time of award by the court 
having jurisdiction thereof of the amount of which the unpaid rent for the 
balance of the term after the time of such award exceeds the amount of such 
rental loss for the same period that Tenant proves could be reasonably avoided; 
that portion of the leasing commission paid by Landlord and applicable to the 
unexpired term of this Lease. Unpaid installments of rent or other items shall 
bear interest from the date due at the rate of ten (10%) per cent per annum. In 
the event Tenant shall have abandoned the Premises, Landlord shall have the 
option of (a) taking possession of the Premises and recovering from Tenant the 
amount specified in this paragraph, or the proceeding under the provisions of 
the following Article 24.4.
     24.b.  Maintain Tenant's right to possession, in which case this Lease 
shall continue in effect whether or not Tenant shall have abandoned the 
Premises. In such event Landlord shall be entitled to enforce all of Landlord's 
rights and remedies under this Lease, including the right to recover the rent 

                                    (PAGE 3)
<PAGE>   35
as it becomes due hereunder.

     24c. Pursue any other remedy now or hereafter available to Landlord under 
the laws or judicial decision of the State in which the Premises are located.

25.  EMINENT DOMAIN. If more than twenty-five (25%) per cent of the Premises 
shall be taken or appropriated by any public or quasi-public authority under 
the power of eminent domain, either party hereto shall have the right, at its 
option, to terminate this Lease, and Landlord shall be entitled to any and all 
income, rent, award, or any interest therein whatsoever which may be paid or 
made in connection with such public or quasi-public use or purpose, and Tenant 
shall have no claim against Landlord for the value of any unexpired term of 
this Lease. If either less than or more than twenty-five (25%) per cent of the 
Premises is taken, and neither party elects to terminate as herein provided, 
the rental thereafter to be paid shall be equitably reduced. If any part of the 
Building other than the Premises may be so taken or appropriated, Landlord 
shall have the right at its option to terminate this Lease and shall be 
entitled to the entire award as above provided.

26.  OFFSET STATEMENT. Tenant shall at any time and from time to time upon not 
less than ten (10) days' prior written notice from Landlord execute, 
acknowledge and deliver to Landlord a statement in writing, (a) certifying that 
this Lease is unmodified and in full force and effect (or, if modified, stating 
the nature of such modification and certifying that this Lease as so modified, 
is in full force and effect), and the date to which the rental and other 
charges are paid in advance, if any, and (b) acknowledging that there are not, 
to Tenant's knowledge, any uncured defaults on the part of the Landlord 
hereunder, or specifying such defaults if any are claimed. Any such statement 
may be relied upon by any prospective purchaser or encumbrancer of all or any 
portion of the real property of which the Premises are a part.

27.  PARKING. Tenant shall have the right to use in common with other tenants 
or occupants of the Building the parking facilities of the Building, if any, 
subject to the monthly rates, rules and regulations, and any other charges of 
Landlord for such parking facilities which may be established or altered by 
Landlord at any time or from time to time during the term hereof.

28.  AUTHORITY OF PARTIES.

     28a. Corporate Authority. If Tenant is a corporation, such individual 
executing this Lease on behalf of said corporation represents and warrants that 
he is duly authorized to execute and deliver this Lease on behalf of said 
corporation, in accordance with a duly adopted resolution of the board of 
directors of said corporation or in accordance with the by-laws of said 
corporation, and that this Lease is binding upon said corporation in accordance 
with its terms.

     28b. Limited Partnerships. If the Landlord herein is a limited 
partnership, it is understood and agreed that any claims by Tenant on Landlord 
shall be limited to the assets of the limited partnership, and furthermore, 
Tenant expressly waives any and all rights to proceed against the individual 
partners or the officers, directors or shareholders of any corporate partner, 
except to the extent of their interest in said limited partnership.

29.  GENERAL PROVISIONS.

     (i)  Plats and Riders. Clauses, plats and riders, if any, signed by the 
Landlord and the Tenant and endorsed on or affixed to this Lease are a part 
hereof.

    (ii)  Waiver. The waiver by Landlord of any term, covenant or condition 
herein contained shall not be deemed to be a waiver of such term, covenant or 
condition on any subsequent breach of the same or any other term, covenant or 
condition herein contained. The subsequent acceptance of rent hereunder by 
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant 
of any term, covenant or condition of this Lease, other than the failure of the 
Tenant to pay the particular rental so accepted, regardless of Landlord's 
knowledge of such preceding breach at the time of the acceptance of such rent.

   (iii)  Notices. All notices and demands which may or are to be required or 
permitted to be given by either party to the other hereunder shall be in 
writing. All notices and demands by the Landlord to the Tenant shall be sent by 
United States Mail, postage prepaid, addressed to the Tenant at the Premises, 
or to such other place as Tenant may from time to time designate in a notice to 
the Landlord. All notices and demands by the Tenant to the Landlord shall be 
sent by United States Mail, postage prepaid, addressed to the Landlord at the 
Office of the Building, or to such other person or place as the Landlord may 
from time to time designate in a notice to the Tenant.

    (iv)  Joint Obligation. If there be more than one Tenant the obligations 
hereunder imposed upon Tenants shall be joint and several.

     (v)  Marginal Headings. The marginal headings and Article titles to the 
Articles of this Lease are not a part of this Lease and shall have no effect 
upon the construction or interpretation of any part hereof.

    (vi)  Time. Time is of the essence of this Lease and each and all of its 
provisions in which performance is a factor.

   (vii)  Successors and Assigns. The covenants and conditions herein 
contained, subject to the provisions as to assignment, apply to and bind the 
heirs, successors, executors, administrators and assigns of the parties hereto.

  (viii)  Recordation. Neither Landlord nor Tenant shall record this Lease or a 
short form memorandum hereof without the prior written consent of the other 
party.

    (ix)  Quiet Possession. Upon Tenant paying the rent reserved hereunder and 
observing and performing all of the covenants, conditions and provisions on 
Tenant's part to be observed and performed hereunder, Tenant shall have quiet 
possession of the Premises for the entire term hereof, subject to all the 
provisions of this Lease.

     (x)  Late Charges. Tenant hereby acknowledges that late payment by Tenant 
to Landlord of rent or other sums due hereunder will cause Landlord to incur 
costs not contemplated by this Lease, the exact amount of which will be 
extremely difficult to ascertain. Such costs include, but are not limited to, 
processing and accounting charges, and late charges which may be imposed upon 
Landlord by terms of any mortgage or trust deed covering the Premises. 
Accordingly, if any installment of rent or of a sum due from Tenant shall not 
be received by Landlord or Landlord's designee within ten (10) days after 
written notice that said amount is past due, then Tenant shall pay to Landlord 
a late charge equal to ten (10%) per cent of such overdue amount. The parties 
hereby agree that such late charge represents a fair and reasonable estimate of 
the cost that Landlord will incur by reason of the late payment by Tenant. 
Acceptance of such late charges by the Landlord shall in no event constitute a 
waiver of Tenant's default with respect to such overdue amount, nor prevent 
Landlord from exercising any of the other rights and remedies granted hereunder.

    (xi)  Prior Agreements. This Lease contains all of the agreements of the 
parties hereto with respect to any matter covered or mentioned in this Lease, 
and no prior agreements or understanding pertaining to any such matters shall 
be effective for any purpose. No provision of this Lease may be amended or 
added to except by an agreement in writing signed by the parties hereto 
or their respective successors in interest. This Lease shall not be effective 
or binding on any party until fully executed by both parties hereto.

   (xii)  Inability to Perform. This Lease and the obligations of the Tenant 
hereunder shall not be affected or impaired because the Landlord is unable to 
fulfill any of its obligations hereunder or is delayed in doing so, if such 
inability or delay is caused by reason of strike, labor troubles, acts of God, 
or any other cause beyond the reasonable control of the Landlord.

  (xiii)  Attorneys' Fees. In the event of any action or proceeding brought by 
either party against the other under this Lease the prevailing party shall be 
entitled to recover all costs and expenses including the fees of its attorneys 
in such action or proceeding in such amount as the court may adjudge reasonable 
as attorneys' fees.

   (xiv)  Sale of Premises by Landlord. In the event of any sale of the 
Building, Landlord shall be and is hereby entirely freed and relieved of all 
liability under any and all of its covenants and obligations contained in or 
derived from this Lease arising out of any act, occurrence or omission 
occurring after the consummation of such sale; and the purchaser, at such sale 
or any subsequent sale of the Premises shall be deemed, without any further 
agreement between the parties or their successors in interest or between the 
parties and any such purchaser, to have assumed and agreed to carry out any and 
all of the covenants and obligations of the Landlord under this Lease.

    (xv)  Subordination, Attornment. Upon request of the Landlord, Tenant will 
in writing subordinate its rights hereunder to the lien of any first mortgage,
or that deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any buildings hereafter placed upon the land
of which Premises are a part, and to all advances made or hereafter to be made
upon the security thereof.

     In the event any proceedings are brought for foreclosure, or in the event 
of the exercise of the power of sale under any mortgage or deed of trust made 
by the Landlord covering the Premises, the Tenant shall attorn to the purchaser 
upon any such foreclosure or sale and recognize such purchaser as the Landlord 
under this Lease.

     The provisions of this Article to the contrary notwithstanding, and so 
long as Tenant is not in default hereunder, this Lease shall remain in full 
force and effect for the full term hereof.

   (xvi)  Name. Tenant shall not use the name of the Building or of the 
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.

  (xvii)  Separability. Any provision of this Lease which shall prove to be 
invalid, void or illegal shall in no way affect, impair or invalidate any other 
provision hereof and such other provision shall remain in full force and effect.

 (xviii)  Cumulative Remedies. No remedy or election hereunder shall be deemed 
exclusive but shall, wherever possible, be cumulative with all other remedies 
at law or in equity.

   (xix)  Choice of Law. This Lease shall be governed by the laws of the State 
in which the Premises are located.

    (xx)  Signs and Auctions. Tenant shall not place any sign upon the Premises 
or Building or conduct any auction thereon without Landlord's prior written 
consent.



                                    (PAGE 4)
<PAGE>   36
                                                                       EXHIBIT A

30.  BROKERS.  Tenant warrants that it has had no dealings with any real estate 
broker or agents in connection with the negotiation of this Lease excepting
only ___________________________________________________________________________
and it knows of no other real estate broker or agent who is entitled to a 
commission in connection with this Lease.

31.   ASSIGNMENT AND SUBLETTING.  (a) If at any time or from time to time during
the term of this Lease Tenant desires to sublet all or any part of the Premises,
Tenant shall give notice to Landlord setting forth the terms of the proposed
subletting and the space so proposed to be sublet. Landlord shall have the
option, exercisable by notice given to Tenant within twenty (20) days after
Tenant's notice is given, either to sublet from Tenant such space at the rental
and other terms set forth in Tenant's notice, or, if the proposed subletting is
for the entire Premises for the balance of the terms of this Lease, to terminate
this Lease. If Landlord does not exercise such option, Tenant shall be free to
sublet such space to any third party subject to the following conditions:

          (1)  The sublease shall be on the same terms set forth in the 
notice given to Landlord;

          (2)  No sublease shall be made without the prior written consent of 
Landlord, which consent Landlord agrees will not unreasonably be withheld as to 
a subletting of the entire Premises;

          (3)  No sublease shall be valid and no subtenant shall take 
possession of the Premises subleased until an executed counterpart of such 
sublease has been delivered to Landlord;

          (4)  No subtenant shall have a right further to sublet; and

          (5)  Any sums or other economic consideration received by Tenant as a 
result of such subletting (except rental or other payments received which are 
attributable to the amortization of the cost of leasehold improvements, other 
than building standard tenant improvements, made to the public portion of the 
Premises by Landlord) whether denominated rentals under the sublease or 
otherwise, which exceed, in the aggregate, the total sums which Tenant is 
obligated to pay Landlord under this Lease (prorated to reflect obligations 
allocable to that portion of the Premises subject to such sublease) shall be 
payable to Landlord as additional rental under this Lease without affecting or 
reducing any other obligation of Tenant hereunder.

          (b)  Notwithstanding the provisions of paragraph 13 and 31(a) above, 
Tenant may assign this Lease or sublet the Premises or any portion thereof, 
without Landlord's consent and without extending any option to Landlord, to any
corporation which controls, is controlled by or is under common control with 
Tenant, or to any corporation resulting from the merger or consolidation with 
Tenant, or to any person or entity which acquires all the assets of Tenant as a 
going concern of the business that is being conducted on the Premises, provided 
that said assignee has substantially the same or better financial condition 
than Tenant and assumes, in full, the obligations of Tenant under this Lease.

          (c)  Regardless of Landlord's consent, no subletting or assignment 
shall release Tenant of Tenant's obligation or alter the primary liability of 
Tenant to pay the rental and to perform all other obligations to be performed 
by Tenant hereunder. The acceptance of rental by Landlord from any other person 
shall not be deemed to be a waiver by Landlord of any provision hereof. Consent 
to one assignment or subletting shall not be deemed consent to any subsequent 
assignment or subletting. In the event of default by any assignee of Tenant or 
any successor of Tenant in the performance of any of the terms hereof, Landlord 
may proceed directly against Tenant without the necessity of exhausting 
remedies against such assignee or successor. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this 
Lease with assignee of Tenant's, without notifying Tenant, or any successor of 
Tenant, and without obtaining its or their consent thereto and such action 
shall not relieve Tenant of liability under this Lease.

          (d)  In the event Tenant shall assign or sublet the Premises or 
request the consent of Landlord to any assignment or subletting or if Tenant 
shall request the consent of Landlord for any act that Tenant proposes to do, 
then Tenant shall pay Landlord's reasonable attorneys' fees incurred in 
connection therewith.

32.  ESTOPPEL CERTIFICATE.  Tenant shall at any time and from time to time upon 
not less than five (5) days prior notice from Landlord execute, acknowledge and 
deliver to Landlord a statement in writing, which may be in the form specified 
by Landlord, which shall certify: (a) that the Premises have been completed to 
the satisfaction of Tenant and accepted and possessed by Tenant, (b) the date 
the term of Lease commenced, the term of the Lease, any portions to renew or 
extend, the amount of any security deposit and the date to which rental and any 
other charges are paid in advance, (c) that the Lease is in full force and 
effect and unmodified (or if there have been modifications, stating the nature 
of the modifications and certifying that the Lease so modified is in full force 
and effect), (d) that no notice has been received by Tenant of any default of 
Tenant which has not been cured (or specifying such notices), (e) that there 
are no uncured defaults on the part of Landlord (or specifying such defaults if
any are claimed), off-sets, counterclaims or credits against the rents,
obligations or stipulations due or to become due or required, (f) that Tenant
has no knowledge of any prior assignment, hypothecation or pledge of rents and
(g) such other matters as may be reasonably requested by Landlord. Any such
certificate may be relied upon by any prospective purchaser of all or any
portion of the real property of which the Premises are a part.

     33.  SUBORDINATION. This Lease shall be subject and subordinated at all
times to (a) all ground or underlying leases which may hereafter be executed
affecting the real property of which the Premises are a part, and (b) the lien
of all mortgages and deeds of trust in any amount or amounts whatsoever now or
hereafter placed on or against said real property or on or against Landlord's
interest or estate therein or on or against all such ground or underlying
leases, all without the necessity of having further instruments executed on the
part of Tenant to effectuate such subordination. Notwithstanding the foregoing,
(1) in the event of termination for any reason whatsoever of any such ground or
underlying lease, this Lease shall not then be barred, terminated, cut off or
foreclosed nor shall the rights and possession of Tenant hereunder be disturbed
if Tenant shall not then be in default in the payment of rental or other sums or
be otherwise in default under the terms of this Lease and Tenant shall attorn to
Landlord of any such ground or underlying lease, or, if requested, enter into a
new lease for the balance of the original or extended term hereof then remaining
upon the same terms and provisions as are in this Lease contained; (2) in the
event of a foreclosure of any such mortgage or deed of trust or of any other
action or proceeding of the enforcement thereof, or of any sale thereunder, this
Lease will not be barred, terminated, cut off or foreclosed nor will the rights
and possession of Tenant thereunder be disturbed if Tenant shall not then be in
default in the payment of rental or other sums or be otherwise in default under
the terms of this Lease and Tenant shall attorn to the purchaser at such
foreclosure, sale or other action or proceeding; and (3) Tenant agrees to
execute and deliver upon demand such further instruments evidencing such
subordination of this Lease to said deed, to such ground or underlying leases,
and to the lien of any such mortgages or deeds of trust as may reasonably be
required by Landlord. Tenant's covenant to subordinate this Lease to ground or
underlying leases and/or mortgages or deeds of trust hereafter executed is
conditioned upon each such senior instrument containing the commitments
specified in the preceding clauses (1) and (2).

     34.  ADJUSTMENTS TO RENT. Commencing with the third year of the term of
this Lease, the monthly rent to be paid Landlord by Tenant shall be increased
annually effective on the anniversary of the commencement date of this Lease by
a percentage equal to the annual percentage increase in the Consumer Price
Index. As used herein, the term "Consumer Price Index" shall mean the United
States Department of Labor Statistics' Consumer Price Index, All Union
Consumers, All Items, San Francisco/Oakland, California (1967-1(I)), or the
successor of such index. The lease of the index for computation of the increase,
if any, shall be the month in which this Lease commences. If no publication is
made for the month in which this Lease commences, the Lease shall be the last
prevailing month for which publication is made. The index for the same month
shall be compared annually to determine the percentage increase and the
resulting percentage shall be applied to the monthly rental rate then in effect
to determine the monthly rent to be paid the ensuing year. Landlord shall notify
Tenant of any increase in the monthly rental rate resulting from such
computation and Tenant shall pay Landlord the amount of such increase
retroactively to the effective date thereof. In no event shall the rate of
increase exceed seven percent (7%) per annum. In the case of the initial rental
adjustment, its rate of increase shall not exceed fourteen percent (14%).

     35.  OPTION TO EXTEND. Tenant shall have the option to extend the term of 
this Lease for an additional period of ten (10) years at a rental equal to the 
then current fair market rate in the area of the Premises. Such option may be 
exercised by written notice to Landlord given not less than ninety (90) days 
prior to the expiration of the Lease term.

     36.  UTILITIES. All utilities provided to the Premises shall be separately 
metered if possible. If not Landlord shall pro-rate utility costs for the 
Premises and bill Tenant for them monthly. Tenant shall pay all such utility 
bills promptly upon receipt.

     The parties hereto have executed this Lease at the place and on the dates 
specified immediately adjacent to their respective signatures.

     If this Lease has been filled in, it has been prepared for submission to 
your attorney for his approval. No representation or recommendation is made by 
the real estate broker or its agents or employees as to the legal sufficiency, 
legal effect, or tax consequences of this Lease or the transactions relating 
thereto.

     
                                        BRANNAN STREET PARTNERS


Address                                 By     /s/ [Signature Illegible]
        ---------------------------        -------------------------------------
                                                                 General Partner
- -----------------------------------             
                                                      "LANDLORD"

                                        San Francisco Mercantile Company,  Inc.
                                    
                                        By
                                           -------------------------------------

Address                                 By 
        ---------------------------        -------------------------------------

- -----------------------------------                     "TENANT"
                           (PAGE 5)




<PAGE>   1
                                                                   EXHIBIT 10.13



                                  OFFICE LEASE

                                 BY AND BETWEEN

                         TIFFANY M. GIN AND STANTON LOWE
                            DBA SPEAR STREET SAPPHIRE

                                   AS LANDLORD

                                       AND

                               QUOKKA SPORTS, INC.

                                    AS TENANT

                             DATED FEBRUARY 18, 1999



                              PREMISES LOCATED AT:
                    128 SPEAR STREET, SECOND AND THIRD FLOORS
                            SAN FRANCISCO, CALIFORNIA



<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         
<S>               <C>                                                                                    
ARTICLE 1         REAL PROPERTY, BUILDING, AND PREMISES

ARTICLE 2         SUBSTITUTION OF OTHER PREMISES

ARTICLE 3         LEASE TERM

ARTICLE 4         BASE RENT

ARTICLE 5         ADDITIONAL RENT

ARTICLE 6         PREPAID RENT; AND LETTER OF CREDIT AS SECURITY DEPOSIT

ARTICLE 7         USE

ARTICLE 8         COMPLIANCE WITH LAWS

ARTICLE 9         HAZARDOUS MATERIAL

ARTICLE 10        UTILITIES AND SERVICES

ARTICLE 11        REPAIRS AND MAINTENANCE

ARTICLE 12        ALTERATIONS AND ADDITIONS

ARTICLE 13        COVENANT AGAINST LIENS

ARTICLE 14        EXCULPATION, INDEMNIFICATION, AND INSURANCE

ARTICLE 15        DAMAGE AND DESTRUCTION

ARTICLE 16        CONDEMNATION

ARTICLE 17        ASSIGNMENT AND SUBLEASING

ARTICLE 18        SURRENDER OF PREMISES

ARTICLE 19        HOLDING OVER

ARTICLE 20        ESTOPPEL CERTIFICATES

ARTICLE 21        SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT

ARTICLE 22        DEFAULTS AND REMEDIES

ARTICLE 23        LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS

ARTICLE 24        LATE PAYMENTS

ARTICLE 25        NONWAIVER

ARTICLE 26        WAIVER OF RIGHT TO JURY TRIAL; DISPUTE RESOLUTION

ARTICLE 27        ATTORNEY FEES AND COSTS

ARTICLE 28        LANDLORD'S ACCESS TO PREMISES

ARTICLE 29        SIGNS

ARTICLE 30        TENANT PARKING

ARTICLE 31        MISCELLANEOUS
</TABLE>


Exhibit A         Diagram Of Premises 
Exhibit B         Legal Description Of Real Property 
Exhibit C         Omitted 
Exhibit D         Omitted 
Exhibit E         Rules And Regulations 
Exhibit F         Estoppel Certificate 
Exhibit G         Letter Of Credit 
Exhibit H         Stock Grant Agreement


<PAGE>   3
                             TABLE OF DEFINED TERMS

DEFINED TERMS                                       LEASE SECTION
- -------------                                       -------------
ACMs                                                9.3
Additional Rent Summary                             Section 7
                                                    5.1
Additional Required Work                            12.1.2
Affiliate                                           17.7.3
Alterations                                         12.1
Award                                               16.5.1
Base Building                                       Exhibit C
Base Building Systems                               12.1.2
Base Rent                                           Summary section 6
                                                    4.1
Base Year                                           Summary section 7(a)
                                                    5.2.1
Brokers Summary                                     Section 14
                                                    31.23
Building                                            Summary section 4(a)
                                                    1.1
                                                    Exhibit F
Building Hours                                      10.1.1
Casualty                                            15.1
Claims                                              14.3.2
Comparable Buildings                                1.7
Condemnation                                        16.1
Condemnation Notice                                 16.2
Condemnor                                           16.1
Control                                             17.8.2
Date of Lease                                       Summary section 1
Delivery Date                                       5.3.3
Excess                                              5.3.1
Exercise Notice                                     3.5.3.3
Expense Year                                        5.2.3
Extension Option                                    3.5
Fair Market Rental Value of the Premises            3.5.2.1
Hazardous Material                                  9.5
Holidays                                            10.1.1
Interest Notice                                     3.5.3.1
Landlord                                            Summary section 2
                                                    Exhibit F
Landlord Parties                                    14.1
Landlord's Taking Termination Notice                16.3.3
Laws and Orders                                     8.1
Lease                                               Exhibit C
                                                    Exhibit F
Lease Commencement Date                             Summary section 5(b)
                                                    3.1
Lease Expiration Date                               Summary section 5(c)
                                                    3.1
Lease Term                                          Summary section 5(a)
                                                    3.1


<PAGE>   4
Lease Year                                          Summary section 6
                                                    3.3
Letter of Credit/Irrevocable                        Summary section 8
                                                    6.1
Market Notice                                       1.6.4
Monthly Base Rent                                   Summary section 6
Net Worth                                           17.7.2
OCP                                                 14.5.2
Operating Expenses                                  5.2.4
Option Rent                                         3.5.2
Option Rent Notice                                  3.5.3.2
Option Term                                         3.5
Outside Agreement Date                              26.3.1
Permitted Use                                       Summary section 9
                                                    7.1
Premises                                            Summary section 4(c)
                                                    1.1
                                                    Exhibit F, section 1
Prepaid Rent/Irrevocable LC                         Summary section 8
                                                    6.1
Quoted Rent                                         17.3.1
Real Property                                       1.1
                                                    Exhibit F, section 1
Recapture Notice                                    17.5.1
Rent                                                5.1
Rentable Area                                       Summary section 4(b)
                                                    1.5.1
Rentable Square Feet                                Summary section 4(b)(c)
                                                    1.5.1
Rentable Square Footage                             1.5.1
Repair Period Notice                                15.2
Restoration Notice                                  16.3.4.2
Rules and Regulations                               7.2
Statement                                           5.3.2
Subject Space                                       17.2.1
Substantial Completion                              Exhibit C
Tax Expenses                                        5.2.5
Tenant                                              Summary section 3
                                                    Exhibit F, section 1
Tenant Parties                                      14.1
Tenant Rent                                         17.4.2
Tenant's Share                                      Summary section 7
                                                    5.2.6
Tenant's Termination Notice                         15.4
Termination Date                                    16.3.1
Transfer                                            17.1.1
Transfer Fee                                        17.2.2
Transfer Notice                                     17.2.1
Transfer Premium                                    17.4.2
Transferee                                          17.1.1
Transferee Rent                                     17.4.2
Underlying Leases                                   21.1
Usable Area Summary                                 section 4(c) 1.5.1
Usable Square Feet                                  Summary section 4(c)
                                                    1.5.1


<PAGE>   5
                                  OFFICE LEASE


         This Lease is made by the Landlord and Tenant named below, who agree as
follows:

                                     PART I

                       SUMMARY OF BASIC LEASE INFORMATION

         The basic terms of this Lease are:

         1.       DATE OF LEASE:   February 18, 1999

         2.       LANDLORD:        TIFFANY M. GIN and STANTON LOWE, DBA SPEAR
                                   STREET SAPPHIRE

         3.       TENANT:          QUOKKA SPORTS, INC., a Delaware Corporation

         4.       PREMISES AND BUILDING:

                  a)       Building (section 1.1):
                           The Magna Building
                           Second and Third Floors
                           128 Spear Street
                           San Francisco, California  94105

                  b)       Number of Rentable Sq. Ft. for Building 
                           (section 1.1):  22,000

                  c)       Premises (section 1.1): 11,000 square feet; see
                           Exhibit A

                  d)       SPECIAL SECURE AREAS:  [TO BE DETERMINED]

         5.       LEASE TERM:

                  a)       Duration (section 3.1):  6 years and 0 months

                  b)       Lease Commencement Date (section 3.1); March 1, 1999

                  c)       Lease Expiration Date (section 3.1): The last day of
                           the month in which the Sixth (6th) anniversary of the
                           Lease Commencement Date occurs

         6.       BASE RENT (SECTION 4.1):

<TABLE>
<CAPTION>
                                                      ANNUAL BASE RENT                             
         LEASE YEAR         MONTHLY BASE RENT              PER RSF            ANNUALIZED BASE RENT
         ----------         -----------------         ----------------        --------------------
<S>                         <C>                       <C>                     <C>      
         First                 $ 33,916.67                 $ 37.00                 $ 407,000
         Second                $ 34,833.33                 $ 38.00                 $ 418,000
         Third                 $ 35,750.00                 $ 39.00                 $ 429,000
         Fourth                $ 36,666.67                 $ 40.00                 $ 440,000
         Fifth                 $ 37,583.33                 $ 41.00                 $ 451,000
         Sixth                 $ 38,500.00                 $ 42.00                 $ 462,000
</TABLE>

         7.       ADDITIONAL RENT (ARTICLE 5):


                                       1
<PAGE>   6
                  a)       Base Year (subsection 5.2.1): The calendar year of
                           1999.

                  b)       Tenant's Share of Direct Expenses (subsection 5.2.6):
                           50 percent

         8.       PREPAID RENT; / LETTER OF CREDIT AS SECURITY DEPOSIT (SECTION
                  6.1):

                  a)       Prepaid Rent in cash in the amount of   $429,000;

                  b)       Irrevocable Letter of Credit (LOC) of  $434,500

         9.       PERMITTED USE (SECTION 7.1):  General office use

         10.      LIABILITY INSURANCE (MINIMUM) (SUBSECTION 14.5.10):

                  a)       General aggregate limit (other than
                           products-completed operations): $3 Million

                  b)       Products-completed operations aggregate limit: $3
                           Million

                  c)       Personal injury and advertising injury limit: $2
                           Million

                  d)       Each occurrence limit:  $1 Million

                  e)       Fire damage liability limit (any one fire): $1
                           Million

                  f)       Medical payments (or expenses) limit (any one
                           person): $25,000

         11.      LATE CHARGE AND INTEREST (ARTICLE 24):

                  a)       Late charge (section 24.1): $2500 for Base Rent and
                           seven and one half percent of any other amount due

                  b)       Interest on delinquent Rent (section 24.2): one
                           percent per month or any lower legal maximum

         12.      PARKING (SECTION 30.1):  Not applicable

         13.      ADDRESSES FOR NOTICES:

                  a)       Landlord's address (subsection 31.11.3) 
                           Spear Street Sapphire 
                           128 Spear Street, 4th Floor 
                           San Francisco, CA 94105

                  b)       Tenant's address (subsection 31.11.3) 
                           Quokka Sports, Inc., 
                           525 Brannan Street 
                           San Francisco, CA 94107

                           With copies to:

                           Quokka Sports, Inc.
                           128 Spear St., 2nd/3rd Flrs
                           San Francisco, CA   94105
                           Tel:   (415)
                           Attn:    CEO or CFO

                           And Paul Churchill
                           Cooley Godward
                           One Maritime Plaza, 20th Floor
                           San Francisco, CA 94111

                  c)       Address of Landlord's lender (subsection 31.11.4):


                                       2
<PAGE>   7
                           Mr. Allan Tan, Credit Administrator 
                           Citicorp Bank 
                           One Sansome Street, 23rd Flr.
                           San Francisco, CA    94103

         14.      BROKERS (SECTION 31.23): Landlord and Tenant recognize James
                  Sobel, Colliers International as Landlord's Broker and John
                  Casey, Triton Commercial as Tenant's Broker for the basic
                  lease transaction, no Broker will be recognized with respect
                  to the exercise of any option or extension of the Lease.

         15.      EQUITY: In consideration of Landlord entering into this Lease,
                  upon execution and delivery of the Stock Grant Agreement
                  attached as Exhibit H by both Landlord and Tenant at the same
                  time this Lease is executed, Tenant shall issue to Tiffany M.
                  Gin and Stanton Lowe, together, 3077 shares of Tenant's common
                  stock. Such shares shall be fully paid and nonassessable and
                  shall have all of the rights and privileges of the common
                  stock issued or issuable to Tenant's senior executives
                  pursuant to its Equity Incentive Plan or other form of grant
                  and related documentation, including voting and dividend
                  rights as well as any antidilution and registration rights.

         Each reference in this Lease to any provision in this Summary shall be
construed to incorporate all the terms provided under that provision of the
Summary. In the event of any conflict between a provision in this Summary and a
provision in the balance of the Lease, the latter shall control.

         Executed as of the date stated in section 1 of this Summary.

LANDLORD:

TIFFANY M. GIN and STANTON LOWE
dba SPEAR STREET SAPPHIRE


By: /s/ TIFFANY M. GIN                 By: /s/ STANTON LOWE
    -------------------------------        ---------------------------------
    Tiffany M. Gin                         Stanton Lowe

Its:  Principal                        Its:  Principal

TENANT:

QUOKKA SPORTS, INC.,
a Delaware Corporation


By: /s/ LES SCHMIDT
    -------------------------------
    Les Schmidt

Its:  Chief Financial Officer and Senior Vice President


                                       3
<PAGE>   8
                                     PART II

                                LEASE PROVISIONS

                                   ARTICLE 1

                      REAL PROPERTY, BUILDING, AND PREMISES

1.1      LEASE OF PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the premises described in Summary of Basic Lease Information section
4c) (Premises), which are located in the building described in Summary section
4(a) (Building), reserving to Landlord the rights described in Lease section
1.3. The outline of the Premises is set forth in Exhibit A. The Rentable Area or
Usable Area of the Premises and the Rentable Area of the Building are set forth
in Summary sections 4(b) and 4(c). The Building, the areas servicing the
Building (including any adjacent parking structure and parking area), and the
land on which the Building and those areas are located (as shown on the site
plan attached to this Lease as Exhibit B) are sometimes collectively referred to
as the "Real Property." Tenant acknowledges that Landlord has made no
representation or warranty regarding the condition of the Real Property except
as specifically stated in this Lease.

1.2      APPURTENANT RIGHTS. Tenant is granted the right at all times during the
Lease Term to the nonexclusive use of the main lobby of the Building, common
corridors and hallways, stairwells, elevators, restrooms, and other public or
common areas located on the Real Property. Landlord, however, has the sole
discretion to determine the manner in which those public and common areas are
maintained and operated, and the use of those areas shall be subject to the
Rules and Regulations, as defined in section 7.2.

1.3      LANDLORD'S RESERVATION OF RIGHTS. The following rights are reserved to
Landlord:

         (a)      The right to all of the Building, except for the space within
                  the Premises;

         (b)      The right to change all elements of the Real Property, except
                  for the space within the Premises;

         (c)      The rights reserved to Landlord by provisions of this Lease or
                  by operation of law;

         (d)      The exclusive right to consent to the use or occupancy of the
                  Premises by any person other than Tenant; and

         (e)      All rights in the economic value of the leasehold estate in
                  the Premises, as stated in Articles 16-17.

1.4      PREPARATION OF PREMISES; ACCEPTANCE. The rights and obligations of the
parties regarding the construction of the Premises before the commencement of
the Lease Term are stated in the Leasehold Improvement Agreement attached to
this Lease as Exhibit C. If this Lease conflicts with the Leasehold Improvement
Agreement, the Leasehold Improvement Agreement shall prevail.

1.5      RENTABLE AREA AND USABLE AREA.

1.5.1    ACCEPTANCE OF CALCULATION. For purposes of this Lease, Landlord and
Tenant agree that both the "Rentable Area," and "Usable Area" for 2nd and 3rd
floors as Premises is 11,000 SQ. FT.

                                    ARTICLE 2

                         SUBSTITUTION OF OTHER PREMISES

            [THIS ARTICLE WAS INTENTIONALLY DELETED FROM THIS LEASE.]


                                       4
<PAGE>   9
                                   ARTICLE 3
                                   LEASE TERM

3.1      LEASE TERM. The provisions of this Lease shall be effective as of the
date of this Lease. The term of this Lease (Lease Term) shall be the period
stated in Summary of Basic Lease Information section 5(a). The Lease Term shall
commence on the date (Lease Commencement Date) stated in Summary section 5(b)
and shall expire on the date (Lease Expiration Date) stated in Summary section
5(c) unless this Lease is sooner terminated as provided in this Lease.

3.2      CONFIRMATION OF LEASE INFORMATION. At any time during the Lease Term,
Landlord may deliver to Tenant a notice in the form set forth in Exhibit D,
attached to this Lease, which Tenant shall execute and return to Landlord within
five (5) days after receipt. Landlord can elect to reasonably modify the
provisions of Exhibit D from time to time.

3.3      LEASE YEAR. For purposes of this Lease, the term "Lease Year" means
each consecutive twelve- month (12-month) period during the Lease Term as long
as:

         (a)      The first Lease Year commences on the Lease Commencement Date
                  and ends on twelve (12) months thereafter;

         (b)      The second (2nd) and each succeeding Lease Year commences on
                  the first day of the next calendar month; and

         (c)      The last Lease Year ends on the Lease Expiration Date or
                  earlier date of termination.

3.4      DELAY IN DELIVERY OF PREMISES. If Landlord is unable to deliver
possession of the Premises to Tenant on or before the projected Lease
Commencement Date, Landlord shall not be subject to any liability for its
failure to do so. This failure shall not affect the validity of this Lease, the
Lease Expiration Date or the obligations of Tenant under it, but the Lease Term
(and the obligation to pay Rent) shall commence on the date on which Landlord
delivers possession of the Premises to Tenant.

3.5      OPTION TO EXTEND TERM. Landlord grants to Tenant one (1) option to
extend the Lease Term (Extension Option) for a period of five (5) years (Option
Term), subject to the conditions described in this section 3.5. Tenant shall
have no other right to extend the term beyond the Option Term.

3.5.1    CONDITIONS OF OPTION. The Extension Option is subject to the following
conditions:

         (a)      The Extension Option may be exercised only by written notice
                  delivered by Tenant to Landlord as provided in this section
                  3.5 and only if, as of the date of delivery of the notice,
                  Tenant is not in default under this Lease.

         (b)      The rights contained in this section 3.5 shall be personal to
                  the originally named Tenant and may be exercised only by the
                  originally named Tenant (and not any assignee, sublessee, or
                  other transferee of Tenant's interest in this Lease) and only
                  if the originally named Tenant occupies the entire Premises as
                  of the date it exercises the Extension Option in accordance
                  with the terms of this section 3.5.

         (c)      Tenant properly exercises the Extension Option and is not in
                  default under this Lease at the end of the initial Lease Term,
                  the Lease Term, as it applies to the entire Premises then
                  leased by Tenant, shall be extended for the Option Term.

3.5.2    OPTION RENT. The Rent payable by Tenant during the Option Term (Option
Rent) shall be equal to the Fair Market Rental Value of the Premises as of the
commencement date of the Option Term but shall not be less than the sum of Base
Rent and Tenant's Share of Direct Expenses payable by Tenant immediately before
the Option Term.


                                       5
<PAGE>   10
3.5.2.1  FAIR MARKET RENTAL VALUE. For purposes of this section 3.5, Fair Market
Rental Value of the Premises shall be the rental rate, determined in accordance
with subsection 3.5.2, at which tenants lease comparable space as of the
commencement of the Option Term. For this purpose, "comparable space" shall be
office space that is:

         (a)      Not subleased;

         (b)      Not subject to another tenant's expansion rights;

         (c)      Comparable in size, location, and quality to the Premises;

         (d)      Leased for a term comparable to the Option Term; and

         (e)      Located in Comparable Buildings.

3.5.2.2  RENTAL RATE OF COMPARABLE SPACE. In determining the rental rate of
comparable space, the rate of comparable space, the parties shall include all
escalations and take into consideration the following concessions:

         (a)      Rental abatement concessions, if any, being granted to tenants
                  in connection with the comparable space; and

         (b)      Tenant improvements or allowances provided or to be provided
                  for the comparable space, taking into account the value of the
                  existing improvements in the Premises, based on age, quality,
                  and layout of the improvements.

3.5.2.3  ADJUSTMENT FOR TENANT IMPROVEMENT ALLOWANCE. If in determining the Fair
Market Rental Value the parties determine that the economic terms of leases of
comparable space include a tenant improvement allowance, Landlord may, at
Landlord's sole option, elect to do the following:

         (a)      Grant some or all of the value of the tenant improvement
                  allowance as an allowance for the refurbishment of the
                  Premises; and

         (b)      Reduce the base rent component of the Fair Market Rental Value
                  to be an effective rental rate that takes into consideration
                  the total dollar value of that portion of the tenant
                  improvement allowance that Landlord has elected not to grant
                  to Tenant (in which case that portion of the tenant
                  improvement allowance evidenced in the effective rental rate
                  shall not be granted to Tenant).

3.5.2.4  SECURITY DEPOSIT DURING OPTION TERM. During the Option Term, Landlord
may require that Tenant provide a security deposit in an appropriate amount
based on Landlord's assessment of market conditions, Tenant's financial
condition and net worth at the time it exercises the Extension Option and
Tenant's reasonably expected profitability for the next twelve (12) months. Such
amount shall not be more than one year of Base Rent or less than one month's
Base Rent. If such amount exceeds two (2) months' Base Rent, then Tenant can
elect to provide a letter of credit in lieu of cash as set forth in Section 6.2.
Tenant will reasonably cooperate with Landlord's information requests in this
regard provided Landlord maintains the confidentiality of such information.

3.5.3    EXERCISE OF OPTION. The Extension Option must be exercised by Tenant,
if at all, only at the time and in the manner provided in this subsection 3.5.3.

3.5.3.1  INTEREST NOTICE. If Tenant wishes to exercise the Extension Option,
Tenant shall deliver written notice (Interest Notice) to Landlord no less than
twelve (12) months before the expiration of the initial Lease Term.

3.5.3.2  OPTION RENT AND SECURITY DEPOSIT NOTICE. After receipt of Tenant's
Interest Notice, Landlord shall deliver notice (Option Rent and Security Deposit
Notice) to Tenant no less than ten (10) months before the expiration of the
initial Lease Term, stating the Option Rent based on Landlord's determination of
the Fair Market Rental Value of the Premises as of the commencement date of the
Option Term, and stating the amount of any Security Deposit required pursuant to
Section 3.5.2.4, as reasonably determined by Landlord.


                                       6
<PAGE>   11
3.5.3.3  EXERCISE NOTICE. If Tenant wishes to exercise the Extension Option,
Tenant must, on or before the earlier of (a) the date occurring nine (9) months
before the expiration of the initial Lease Term or (b) the date occurring thirty
(30) days after Tenant's receipt of the Option Rent and Security Deposit Notice,
exercise the Extension Option by delivering written notice (Exercise Notice) to
Landlord.

3.5.3.4  OBJECTION TO OPTION RENT. If Tenant wishes to contest the Option Rent
or the Security Deposit stated in the Option Rent and Security Deposit Notice,
Tenant must provide, with the Exercise Notice, written notice to Landlord that
Tenant objects to the stated Option Rent and/or Security Deposit. If Tenant
provides such written objection, the parties shall follow the procedure
described in Article 26, and the Option Rent and/or Security Deposit shall be
determined as set forth in that section.

3.5.3.5  FAILURE TO DELIVER TIMELY NOTICE. If Tenant fails to deliver a timely
Interest Notice or Exercise Notice, Tenant shall be considered to have elected
not to exercise the Extension Option.

3.5.4    AMENDMENT TO LEASE. If Tenant timely exercises its Extension Option,
Landlord and Tenant shall, within fifteen (15) days after the Option Rent is
determined under this section 3.5 or Article 26, execute an amendment to this
Lease extending the Lease Term on the terms and conditions set forth in this
section 3.5.

                                    ARTICLE 4
                                    BASE RENT

4.1      DEFINITION OF "BASE RENT"--NO SETOFF. Tenant shall pay to Landlord base
rent (Base Rent) in equal monthly installments as set forth in Summary of Basic
Lease Information section 6 in advance on or before the first day of every
calendar month during the Lease Term, without any setoff or deduction. Payment
shall be made at the management office of the Building or at any other place
that Landlord may from time to time designate in writing. Payment must be in
United States dollars, either in the form of a check (drawn on a bank located in
the State of California) or via electronically transmitted funds.

4.2      INITIAL PAYMENT; PRORATION. The Base Rent for the first full calendar
month of the Lease Term shall be paid when Tenant executes this Lease. If any
payment date (including the Lease Commencement Date) for "Rent," as defined in
section 5.1, falls on a day other than the first day of that calendar month, or
if any Rent payment is for a period shorter than one calendar month, the Rent
for that fractional calendar month shall accrue on a daily basis for each day of
that fractional month at a daily rate equal to 1/365 of the total annual Rent.
All other payments or adjustments that are required to be made under the terms
of this Lease and that require proration on a time basis shall be prorated on
the same basis. 

4.3      APPLICATION OF PAYMENTS. All payments received by Landlord from Tenant
shall be applied to the oldest payment obligation owed by Tenant to Landlord,
unless Landlord elects an alternative application. No designation by Tenant,
either in a separate writing or on a check or money order, shall modify this
clause or have any force or effect.

                                   ARTICLE 5
                                 ADDITIONAL RENT

5.1      ADDITIONAL RENT; RENT. In addition to paying the Base Rent specified in
Article 4, Tenant shall pay as additional rent Tenant's Share of the annual
Direct Expenses (as defined in subsections 5.2.2 and 5.2.6) that are in excess
of the amount of Direct Expenses applicable to the Base Year (as defined in
subsection 5.2.1). That additional rent, together with other amounts of any kind
(other than Base Rent) payable by Tenant to Landlord under the terms of this
Lease, shall be collectively referred to in this Lease as "Additional Rent."
Base Rent and Additional Rent are collectively referred to in this Lease as
"Rent." All amounts due under this Article 5 as Additional Rent are payable for
the same periods and in the same manner, time, and place as the Base Rent.
Without limitation on other obligations of Tenant that survive 


                                       7
<PAGE>   12
the expiration of the Lease Term, Tenant's obligations to pay the Additional
Rent provided for in this Article 5 survive the expiration of the Lease Term.

5.2      DEFINITIONS. The following definitions apply in this Article 5:

5.2.1    BASE YEAR. "Base Year" means the period stated in Summary of Basic
Lease Information section 7(a).

5.2.2    DIRECT EXPENSES. "Direct Expenses" mean Operating Expenses plus Tax
Expenses.

5.2.3    EXPENSE YEAR: "Expense Year" means each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires.

5.2.4    OPERATING EXPENSES. "Operating Expenses" means all expenses, costs, and
amounts of every kind that Landlord pays or incurs during any Expense Year
because of or in connection with the ownership, operation, management,
maintenance, repair, replacement, or restoration of the Real Property.

5.2.4.1  EXAMPLES OF OPERATING EXPENSES. The definition of "Operating Expenses"
includes any amounts paid or incurred for:

         (a)      The cost of supplying any utilities.

         (b)      The cost of operating, managing, maintaining, and repairing
                  the following systems: utility, mechanical, sanitary, storm
                  drainage, escalator, and elevator.

         (c)      The cost of supplies and tools and of equipment, maintenance,
                  and service contracts in connection with those systems.

         (d)      The cost of licenses, certificates, permits, and inspections.

         (e)      The cost of contesting the validity or applicability of any
                  government enactments that may affect the Operating Expenses.

         (f)      The costs incurred in connection with the implementation and
                  operation of a transportation system management program or
                  similar program.

         (g)      The cost of insurance carried by Landlord, in amounts
                  reasonably determined by Landlord.

         (h)      Fees, charges, and other costs including management fees (or
                  amounts in lieu of such fees), consulting fees, legal fees,
                  and accounting fees of all persons engaged by Landlord or
                  otherwise reasonably incurred by Landlord in connection with
                  the operation, management, repair and maintenance of the Real
                  Property.

         (i)      Wages, salaries, and other compensation and benefits of all
                  persons engaged in the operation, maintenance, or security of
                  the Building plus employer's Social Security taxes,
                  unemployment taxes, insurance, and any other taxes imposed on
                  Landlord that may be levied on those wages, salaries, and
                  other compensation and benefits. If any of Landlord's
                  employees provide services for more than one building of
                  Landlord, only the prorated portion of those employees' wages,
                  salaries, other compensation and benefits, and taxes
                  reflecting the percentage of their working time devoted to the
                  Real Property shall be included in Operating Expenses.

         (j)      Payments under any easement, license, operating agreement,
                  declaration, restrictive covenant, or instrument relating to
                  the sharing of costs by the Building.

         (k)      Amortization (including interest on the unamortized cost at a
                  rate equal to the floating commercial loan rate announced from
                  time to time by Bank of America's as its prime rate plus two
                  (2) percentage points per annum) of the cost of acquiring or
                  renting personal property used in the maintenance, repair, and
                  operation of the Building and Real Property.

         (l)      The cost of capital improvements or other costs incurred in
                  connection with the Real Property that (1) are intended as a
                  labor- saving device or to effect other economies in the
                  maintenance or operation of all or part of the Real Property
                  or (2) are required under any government law or regulation but
                  that were not required in connection with the Real Property
                  when permits for the construction of the Building were
                  obtained. All permitted 


                                       8
<PAGE>   13
                  capital expenditures shall be amortized (including interest on
                  the unamortized cost at the rate stated in subparagraph (l))
                  over their useful life, as reasonably determined by Landlord.

5.2.4.2  ADJUSTMENT OF OPERATING EXPENSES. Operating Expenses shall be adjusted
as follows:

5.2.4.2.1 Gross-Up Adjustment When Building Is Less Than Fully Occupied. If the
occupancy of the Building during any part of any Expense Year (including the
Base Year) is less than 95 percent, Landlord shall make an appropriate
adjustment of the variable components of Operating Expenses for that Expense
Year, as reasonably determined by Landlord using sound accounting and management
principles, to determine the amount of Operating Expenses that would have been
incurred had the Building been 95 percent occupied. This amount shall be
considered to have been the amount of Operating Expenses for that Expense Year.
For purposes of this subsection 5.2.4.2.1, "variable components" include only
those component expenses that are affected by variations in occupancy levels.

5.2.4.2.2 Adjustment When Landlord Does Not Furnish a Service to All Tenants.
If, during any part of any Expense Year (including the Base Year), Landlord is
not furnishing a particular service or work (the cost of which, if furnished by
Landlord, would be included in Operating Expenses) to a tenant (other than
Tenant) that has undertaken to perform such service or work in lieu of receiving
it from Landlord, Operating Expenses for that Expense Year shall be considered
to be increased by an amount equal to the additional Operating Expenses that
Landlord would reasonably have incurred during this period if Landlord had
furnished such service or work to that tenant.

5.2.4.3  EXCLUSIONS FROM OPERATING EXPENSES. Despite any other provision of
subsection 5.2.4, Operating Expenses shall not include:

         (a)      Depreciation on the Building, Premises and improvements,
                  interest, or amortization on mortgages or ground lease
                  payments.

         (b)      Legal fees incurred in negotiating and enforcing tenant
                  leases.

         (c)      Real estate brokers' leasing commissions.

         (d)      Improvements to tenant spaces.

         (e)      The cost of providing any service directly to and paid
                  directly by any tenant.

         (f)      Any costs expressly excluded from Operating Expenses elsewhere
                  in this Lease.

         (g)      Costs of any items for which Landlord receives reimbursement
                  from insurance proceeds or a third party. Insurance proceeds
                  shall be excluded from Operating Expenses in the year in which
                  they are received, except that any deductible amount under any
                  insurance policy shall be included within Operating Expenses.

         (h)      Costs of capital improvements, except as otherwise stated in
                  this section 5.2.

         (i)      Payments to Landlord's subsidiaries or affiliates for
                  management or other services on or to the Building, including
                  insurance, or for supplies or other materials to the extent
                  that the cost of the services, supplies, or materials exceeds
                  the cost that would have been paid had the services, supplies,
                  or materials been provided by unaffiliated parties on an arm's
                  length basis.

         (j)      All rental and other payments due under any ground or
                  underlying lease, or any lease for any equipment ordinarily
                  considered to be of a capital nature (except janitorial
                  equipment which is not affixed to any Building and equipment
                  leased in order to reduce operating expenses.)

         (k)      Any compensation paid to clerks, attendants, or other persons
                  in commercial concessions operated by Landlord.

         (l)      Wages, salaries, or other compensation paid to any executive
                  employees above the grade of building manager.

         (m)      The cost of correcting any building code or other violations
                  which were in effect on or prior to the Commencement Date,
                  unless occasioned by Tenant's special use of the Premises or
                  Alterations.

         (n)      Increased or incremental costs caused by Landlord's breach of
                  this Lease, gross negligence or willful misconduct, including
                  any fines or penalties due to violation of law or regulation.


                                       9
<PAGE>   14
         (o)      Any costs in excess of 100% of actual Operating Expenses and
                  any Gross Up Adjustments pursuant to Section 5.2.4.2.1 above.

         (p)      Any costs billed to Tenant more than one year after Landlord
                  incurred such cost and was invoiced for same.

5.2.5    TAX EXPENSES. "Tax Expenses" means all federal, state, county, or local
government or municipal taxes, fees, charges, or other impositions of every kind
(whether general, special, ordinary, or extraordinary) that are paid or incurred
by Landlord during any Expense Year (without regard to any different fiscal year
used by any government or municipal authority) because of or in connection with
the ownership, leasing, and operation of the Real Property. These expenses
include taxes, fees, and charges such as real property taxes, general and
special assessments, transit taxes, leasehold taxes, and taxes based on the
receipt of rent (including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant); personal property taxes
imposed on the fixtures, machinery, equipment, apparatus, systems, and
equipment; appurtenances; furniture; and other personal property used in
connection with the Building.

5.2.5.1  ADJUSTMENT OF TAXES. For purposes of this Lease, Tax Expenses shall be
calculated as if the tenant improvements in the Building were fully constructed
and the Real Property, the Building, and all tenant improvements in the Building
were fully assessed for real estate tax purposes. Landlord specifically agrees
that the gross-receipts component of Tax Expenses for the Base Year and each
subsequent year shall be calculated as if the Building were one-hundred-percent
(100%) occupied with rent-paying tenants.

5.2.5.2  INCLUDED TAX EXPENSES. Tax Expenses shall include:

         (a)      Any assessment, tax, fee, levy, or charge in addition to, or
                  in partial or total substitution of, any assessment, tax, fee,
                  levy, or charge previously included within the definition of
                  "real property tax." Tenant and Landlord acknowledge that
                  Proposition 13 was adopted by the voters of the State of
                  California in June 1978 and that assessments, taxes, fees,
                  levies, and charges may be imposed by government agencies for
                  services such as fire protection; street, sidewalk, and road
                  maintenance; conservation; refuse removal; and other
                  government services formerly provided without charge to
                  property owners or occupants. In further recognition of the
                  decrease in the level and quality of government services and
                  amenities as a result of Proposition 13 (or as a result of any
                  other restriction on real property taxes whether by law or by
                  choice of the applicable legislative or assessing body), Tax
                  Expenses shall also include any government or private
                  assessments (or the Building's contribution toward a
                  government or private cost-sharing agreement) for the purpose
                  of augmenting or improving the quality of services and
                  amenities normally provided by government agencies. Tenant and
                  Landlord intend that all new and increased assessments, taxes,
                  fees, levies, and charges and all similar assessments, taxes,
                  fees, levies, and charges be included within the definition of
                  "Tax Expenses" for purposes of this Lease.

         (b)      Any assessment, tax, fee, levy, or charge allocable to, or
                  measured by, the area of the Premises or the rent payable
                  under this Lease, including any gross income tax with respect
                  to the receipt of that rent, or on or relating to the
                  possession, leasing, operating, management, maintenance,
                  alteration, repair, use, or occupancy by Tenant of the
                  Premises or any portion of the Premises.

         (c)      Any assessment, tax, fee, levy, or charge on this transaction
                  or any document to which Tenant is a party, creating or
                  transferring an interest or an estate in the Premises.

         (d)      Any possessory taxes charged or levied in place of real
                  property taxes.


                                       10
<PAGE>   15
5.2.5.3  CONTEST COSTS; REFUNDS. Any expenses incurred by Landlord in attempting
to protest, reduce, or minimize Tax Expenses shall be included in Tax Expenses
in the Expense Year in which those expenses are paid. Tax refunds shall be
deducted from Tax Expenses. Such tax refunds shall be deducted from Tax Expenses
in the Expense Year in which they are received by Landlord.

5.2.5.4  EXCLUDED TAXES. Despite any other provision of subsection 5.2.5 (except
as provided in subsection 5.2.5.2 or levied entirely or partially in lieu of Tax
Expenses), the following shall be excluded from Tax Expenses:

         (a)      All excess profits taxes, franchise taxes, gift taxes, capital
                  stock taxes, inheritance and succession taxes, estate taxes,
                  federal and state income taxes, and other taxes applied or
                  measured by Landlord's general or net income (as opposed to
                  rents, receipts, or income attributable to operations at the
                  Building); 

         (b)      Any items included as Operating Expenses; and

         (c)      Any items paid by Tenant under section 5.5.

5.2.6    TENANT'S SHARE. "Tenant's Share" means the percentage stated in Summary
of Basic Lease Information section 7(b). Tenant's Share is calculated by
dividing the number of Rentable Square Feet of the Premises by the total
Rentable Square Feet in the Building and multiplying the result by 100. If
either the Premises or the Building is expanded or reduced, Tenant's Share shall
be appropriately adjusted. Tenant's Share for the Expense Year in which that
change occurs shall be determined on the basis of the number of days during the
Expense Year in which each such Tenant's Share was in effect.

5.3      CALCULATION AND PAYMENT OF ADDITIONAL RENT. Tenant's Share of any
Direct Expenses for any Expense Year shall be calculated and paid as follows:

5.3.1    CALCULATION OF EXCESS. If Tenant's Share of Direct Expenses for any
Expense Year ending or beginning within the Lease Term exceeds Tenant's Share of
the amount of Direct Expenses applicable to the Base Year, Tenant shall pay as
Additional Rent to Landlord an amount equal to that excess (Excess), in the
manner stated in subsection 5.3.2.

5.3.2    STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT. Landlord
shall endeavor to give to Tenant on or before the first day of April following
the end of each Expense Year a statement (Statement) stating the Direct Expenses
incurred or accrued for that preceding Expense Year and indicating the amount,
if any, of any Excess. On receipt of the Statement for each Expense Year ending
during the Lease Term for which an Excess exists, Tenant shall pay, with its
next installment of Base Rent due, the full amount of that Excess, less the
amounts (if any) paid during that Expense Year as Estimated Excess (as defined
in subsection 5.3.3). Landlord's failure to furnish the Statement for any
Expense Year in a timely manner shall not prejudice Landlord from enforcing its
rights under this Article 5. Even if the Lease Term has expired and Tenant has
vacated the Premises, if an Excess exists when the final determination is made
of Tenant's Share of the Direct Expenses for the Expense Year in which this
Lease terminates, Tenant shall immediately pay to Landlord the amount calculated
under subsection 5.3.1. The provisions of this subsection 5.3.2 shall survive
the expiration or earlier termination of the Lease Term.

5.3.3    STATEMENT OF ESTIMATED DIRECT EXPENSES. Landlord shall give Tenant a
yearly expense estimate statement (Estimate Statement) stating:

         (a)      Landlord's reasonable estimate (Estimate) of the total amount
                  of Direct Expenses for the then-current Expense Year; and

         (b)      The estimated excess (Estimated Excess). The Estimated Excess
                  shall be calculated by comparing estimated Direct Expenses
                  (which shall be based on the Estimate) to the amount of Direct
                  Expenses applicable to the Base Year. Landlord's failure to
                  furnish the Estimate Statement for any Expense Year in a
                  timely manner shall not preclude Landlord from enforcing its
                  rights to collect any Estimated Excess under this Article 5.
                  If an Estimated Excess is calculated for the then-current
                  Expense Year, Tenant shall pay, with 


                                       11
<PAGE>   16
                  its next installment of Base Rent due, a fraction of that
                  Estimated Excess for the then current Expense Year (reduced by
                  any amounts paid as provided in the last sentence of this
                  subsection 5.3.3). The numerator of that fraction shall be the
                  number of months that have elapsed in that current Expense
                  Year (including the month of the payment), and the denominator
                  shall be twelve (12). Until a new Estimate Statement is
                  furnished, Tenant shall pay monthly, along with the monthly
                  Base Rent installments, an amount equal to one twelfth
                  (1/12th) of the total Estimated Excess stated in the previous
                  Estimate Statement delivered by Landlord to Tenant.

5.4      ALLOCATION OF DIRECT EXPENSES. Despite any other provision of this
Article 5, in the calculation of Direct Expenses for the Base Year:

         (a)      Direct Expenses shall not include any increase in Tax Expenses
                  attributable to (1) special assessments, charges, costs, or
                  fees; or (2) modifications or changes in government laws or
                  regulations, including institution of a split tax roll; and

         (b)      Operating Expenses shall exclude (1) market-wide labor-rate
                  increases arising from extraordinary circumstances (such as
                  boycotts and strikes) and (2) utility rate increases arising
                  from extraordinary circumstances (such as conservation
                  surcharges, boycotts, embargoes, or other shortages).] [omit?]

5.5      TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.
Tenant shall reimburse Landlord, on demand, as Additional Rent, for any taxes
required to be paid by Landlord that are not already included in Tax Expenses,
excluding state, local, and federal personal or corporate income taxes measured
by the net income of Landlord from all sources and estate and inheritance taxes,
regardless of whether such taxes are now customary or within the contemplation
of the parties to this Lease, when those taxes are:

         (a)      Measured by or reasonably attributable to: (1) The cost or
                  value of Tenant's equipment, furniture, fixtures, and other
                  personal property located in the Premises; or (2) The cost or
                  value of any leasehold improvements made in or to the Premises
                  by or for Tenant (to the extent that the cost or value of
                  those leasehold improvements exceeds the cost or value of a
                  building-standard build-out, as reasonably determined by
                  Landlord, regardless of whether title to those improvements is
                  vested in Tenant or Landlord);

         (b)      Assessed on or related to the possession, leasing, operation,
                  management, maintenance, alteration, repair, use, or occupancy
                  by Tenant of:

                  (1) The Premises;

                  (2) Any portion of the Real Property; or

                  (3) Any parking facility used by Tenant in connection with
                  this Lease; or

         (c)      Assessed either on this transaction or on any document to
                  which Tenant is a party that creates or transfers an interest
                  or an estate in the Premises.

5.6      LANDLORD'S BOOKS AND RECORDS. If Tenant disputes the amount of
Additional Rent stated in the Statement, Tenant may designate, within forty-five
days after receipt of that Statement, an independent certified public accountant
to inspect Landlord's records. Tenant is not entitled to request that
inspection, however, if Tenant is then in default under this Lease. The
accountant must not charge a fee based on the amount of Additional Rent that the
accountant is able to save Tenant by the inspection. Tenant must give reasonable
notice to Landlord of the request for inspection, and the inspection must be
conducted in Landlord's offices at a reasonable time or times. If, after that
inspection, Tenant still disputes the Additional Rent, a certification of the
proper amount shall be made by an independent certified public accountant
selected by Landlord and who is a member of a nationally recognized accounting
firm. That certification shall be final and conclusive. The cost of such
certification shall be borne by Tenant, unless the certification determines that
Tenant has overpaid Landlord by more than five percent of the sum actually due
for the applicable time period. Landlord shall promptly remit the balance of any
overpayment to Tenant or credit such sum against the next due installments of
Additional Rent.


                                       12
<PAGE>   17
                                   ARTICLE 6
             PREPAID RENT; AND LETTER OF CREDIT AS SECURITY DEPOSIT

6.1      AMOUNT OF PREPAID RENT. Concurrently with Tenant's execution of this
Lease, Tenant shall deliver to Landlord as prepaid rent for the third year of
the Lease a cash sum of Four Hundred Twenty Nine Thousand Dollars or $429,000
earning no interest for the Tenant , as property of Landlord , subject to
Sections 31.16 and 31.17 hereof. Landlord shall apply such sum to Tenant's Base
Rent obligation pursuant to Article 4.

6.2      LETTER OF CREDIT AS SECURITY DEPOSIT . Tenant shall also deliver to
Landlord, concurrently with execution of this Lease, and cause to be in effect
during the term of this Lease, as a security deposit in lieu of a cash security
deposit for the full and faithful performance by Tenant of all of its
obligations under this Lease, an irrevocable negotiable letter of credit, in the
form and containing the terms required herein, running in favor of Landlord
issued by a solvent bank under the supervision of the Superintendent of Banks of
the State of California or a National Banking Association in the amount of Four
Hundred Thirty Four Thousand Five Hundred Dollars ($434,500) for the initial
five (5) years of the Lease Term and thereafter in the amount of Two Hundred
Seventeen Thousand Two Hundred Fifty Thousand Dollars ($217,250); unless Tenant
is in default under this Lease at the beginning of the sixth year of the Lease,
in which case the amount shall remain $434,5000 for the balance of the Lease
Term (the "Letter of Credit").

         The Letter of Credit is intended to be utilized as a security deposit
in the event of Tenant's monetary default and for the performance of Tenant's
obligations under this Lease. If Tenant defaults on any provision of this Lease,
Landlord may, after notice of breach and opportunity to cure as set forth in
Article 22 and without prejudice to any other remedy it has, draw on the Letter
of Credit and apply all or part of the Security Deposit to:

         (a)      Any Rent or other sum in default;

         (b)      Any amount that Landlord may spend or become obligated to
                  spend in exercising Landlord's rights under Article 23; or

         (c)      Any expense, loss, or damage that Landlord may suffer because
                  of Tenant's default. Tenant waives the provisions of
                  California Civil Code section 1950.7, and all other provisions
                  of law now in force or that become in force after the date of
                  execution of this Lease, that provide that Landlord may claim
                  from a security deposit only those sums reasonably necessary
                  to remedy defaults in the payment of Rent, to repair damage
                  caused by Tenant, or to clean the Premises. Landlord and
                  Tenant agree that Landlord may, in addition, claim those sums
                  reasonably necessary to compensate Landlord for any other
                  reasonably foreseeable loss or damage caused by the act or
                  omission of Tenant or Tenant's officers, agents, employees,
                  independent contractors, or invitees.

6.3      FORM AND TERMS OF LETTER OF CREDIT. The Letter of Credit (and the bank
issuing the same) below shall be acceptable to Landlord, in Landlord's
reasonable discretion. The Letter of Credit shall be:

         (a)      Drawable at sight and irrevocable.

         (b)      Maintained in effect, whether through replacement, renewal or
                  extension, for the entire Lease term and for thirty (30) days
                  thereafter (the "Letter of Credit Expiration Date") and Tenant
                  shall deliver a new Letter of Credit or certificate of renewal
                  or extension to Landlord at least thirty (30) days prior to
                  the expiration of the Letter of Credit without any action
                  whatsoever on the part of Landlord.

         (c)      Subject to the Uniform Customs and Documentary Credits
                  (1983-Rev) International Chamber of Commerce Publication #400.

         (d)      Acceptable to Landlord in its reasonable discretion.

         (e)      Tenant shall pay all expenses, points, or fees incurred by
                  Tenant in obtaining the Letter of Credit.

         (f)      Subject to partial draws.


                                       13
<PAGE>   18
6.3.1    LANDLORD'S RIGHTS TO DRAW ON LETTER OF CREDIT:

         (1)      Landlord, shall have the right to draw down in an amount
                  necessary to cure Tenant's default pursuant to Section 6.2 up
                  to the face amount of the Letter of Credit upon the
                  presentation to the issuing bank of Landlord's statement under
                  penalty of perjury, that Tenant is in default hereunder after
                  written notice hereof and expiration of the application cure
                  period and such amount is due to Landlord under the terms and
                  conditions of this Lease, it being understood that if Landlord
                  be a corporation, partnership or other entity, then such
                  statement shall be signed by an officer (if a corporation), a
                  general partner (if a partnership), or any authorized party
                  (if another entity);

         (2)      The Letter of Credit and draw request will be honored by the
                  issuing bank without inquiry as to the accuracy thereof and
                  regardless of whether the Tenant disputes the content of such
                  statement;

         (3)      In the event of a transfer of Landlord's interest in any of
                  the Buildings of which the Premises are a part, Landlord shall
                  have the right to transfer the Letter of Credit, in whole or
                  in part (or cause a substitute letter of credit to be
                  delivered, as applicable), to the transferee and thereupon the
                  Landlord shall, without any further agreement between the
                  parties, be released by Tenant from all liability therefor if
                  such transferee assumes such obligations. If, as a result of
                  any such application of all or any part of such security, the
                  amount secured by the Letter of Credit shall be less than FOUR
                  HUNDRED THIRTY FOUR THOUSAND FIVE HUNDRED DOLLARS ($434,500),
                  or any lesser amount required hereunder, Tenant shall
                  forthwith provide Landlord with additional letter(s) of credit
                  or cash in an amount equal to the deficiency and each such
                  additional letter of credit shall comply with all the
                  provisions of this section. In no event shall the total amount
                  of the Letter of Credit exceed $434,500, however.

6.3.2    TENANT'S COVENANTS AND WARRANTS ON LETTER OF CREDIT: Tenant further
covenants and warrants that it will not assign nor encumber the Letter of Credit
or any part thereof and that neither Landlord nor its successors or assigns will
be bound by such an assignment, encumbrance, attempted assignment or attempted
encumbrance.

6.3.3    EXPIRATION, RENEWAL, SUBSTITUTION OF ANOTHER LETTER OF CREDIT: If the
Letter of Credit expires earlier than the Letter of Credit Expiration Date,
Landlord will accept a renewal thereof or substitute letter of credit (such
renewal or substitute letter of credit to be in effect not later than thirty
(30) days prior to the expiration thereof), irrevocable and automatically
renewable as above provided through the Letter of Credit Expiration Date upon
the same terms as the expiring letter of credit or such other terms as may be
acceptable to Landlord.

However, if the Letter of Credit is not timely renewed or a substitute letter of
credit or cash is not timely received, or if Tenant fails to maintain the Letter
of Credit in the amount and terms set forth in this Section, Tenant, at least
thirty (30) days prior to the expiration of the Letter of Credit, or immediately
upon its failure to comply with each and every term of this Section, must
deposit with Landlord cash security in the amounts required by, and to be held
subject to and in accordance with, all of the terms and conditions set forth in
this Section and all other applicable provisions of this Lease, failing which
the Landlord may present such Letter of Credit to the bank in accordance with
the terms of this Section, and the entire sum secured thereby shall be paid to
Landlord, to be held by Landlord as provided in this Section.

If Tenant is in default beyond any applicable notice and cure period in the
payment of Basic Rent or operating expenses or taxes due hereunder, Landlord
may, but without obligation to do so, use the Security Deposit, or any portion
thereof, to cure such default, in which case Tenant shall no longer be deemed to
be in default hereunder, and this Lease shall continue in full force and effect.
Tenant shall, immediately on demand, pay Landlord a sum equal to the portion of
the Security Deposit so applied or used so as to replenish the amount of the
Security Deposit held to increase such deposit to the amount required under this
Lease.


                                       14
<PAGE>   19
6.4      LANDLORD'S TRANSFER OF IRREVOCABLE LETTER OF CREDIT/SECURITY DEPOSIT ON
TRANSFER OF REAL PROPERTY. If Landlord disposes of its interest in the Premises,
Landlord may deliver or credit the Security Deposit to Landlord's successor in
interest in the Premises and thereupon be relieved of further responsibility
with respect to the Security Deposit, if such transferee assumes these
obligations.

6.5      RESTORATION OF IRREVOCABLE LETTER OF CREDIT/SECURITY DEPOSIT:. If
Landlord applies any portion of the Security Deposit, Tenant shall, within
thirty days (30) after demand by Landlord, deposit with Landlord an amount
sufficient to restore the Letter of Credit/Security Deposit to its original
amount.

6.6      INTEREST ON PREPAID RENT/SECURITY DEPOSIT. Tenant is not entitled to
any interest on the Security Deposit nor Prepaid Rent.

                                   ARTICLE 7
                                       USE

7.1      PERMITTED USE. Tenant shall use the Premises solely for the "Permitted
Use," as defined in Summary of Basic Lease Information section 9. Tenant shall
not use or permit the Premises to be used for any other purpose without
Landlord's prior written consent, which may be granted or withheld in Landlord's
sole discretion.

7.2      RULES AND REGULATIONS. Tenant shall comply with the rules attached to
this Lease as Exhibit E and any reasonable amendments or additions promulgated
by Landlord from time to time after reasonable notice and opportunity to comment
by Tenant for the safety, care, and cleanliness of the Premises, Building, and
Real Property or for the preservation of good order (Rules and Regulations).
Such Rules and Regulations shall be applicable to all office tenants in the
Building. Landlord shall not be responsible to Tenant for the failure of any
other tenants or occupants of the Building to comply with the Rules and
Regulations.

7.3      ADDITIONAL RESTRICTIONS ON USE. In addition to complying with other
provisions of this Lease concerning the use of the Premises:

         (a)      Tenant shall not permit the occupancy of the Premises at any
                  time during the Lease Term to exceed one person (including
                  visitors) per 165 Usable Square Feet of space in the Premises;

         (b)      Tenant shall not use or allow any person to use the Premises
                  for any purpose that is contrary to the Rules and Regulations,
                  that violates any Laws and Orders, that constitutes waste or
                  nuisance, or that would unreasonably annoy other occupants of
                  the Building or the owners or occupants of buildings adjacent
                  to the Building; and

         (c)      Tenant shall comply with all recorded covenants, conditions,
                  and restrictions that now or later affect the Real Property.

                                   ARTICLE 8
                              COMPLIANCE WITH LAWS

8.1      DEFINITION OF "LAWS AND ORDERS." For purposes of this Article 8, the
term "Laws and Orders" includes all federal, state, county, city, or government
agency laws, statutes, ordinances, standards, rules, requirements, or orders now
in force or hereafter enacted, promulgated, or issued. The term also includes
government measures regulating or enforcing public access, occupational, health,
or safety standards for employers, employees, landlords, or tenants.

8.2      REPAIRS, REPLACEMENTS, ALTERATIONS, AND IMPROVEMENTS. Tenant shall
continuously and without exception repair and maintain the Premises, including
Tenant Improvements, Alterations, fixtures, and furnishings, in an order and
condition in compliance with all Laws and Orders. Tenant, at Tenant's 


                                       15
<PAGE>   20
sole expense, shall promptly make all repairs, replacements, alterations, or
improvements needed to comply with all Laws and Orders to the extent that the
Laws and Orders relate to or are triggered by (a) Tenant's particular use of the
Premises, (b) improvements to the Premises by Tenant subsequent to the Lease
Execution Date, or (b) any proposed Alterations located in the Premises. Tenant
shall not otherwise be responsible to bring the Premises into compliance with
Laws and Orders to the extent the Premises failed to comply with same as of the
Commencement Date. Tenant shall not be required by Landlord to implement
proposed Improvements or Alterations if Tenant determines that the additional
costs associated with compliance with Laws and Orders are prohibitive, unless
legally required to do so.

Landlord, at Landlord's sole expense, shall promptly make all repairs,
replacements, alterations, or improvements needed to comply with all Laws and
Orders to the extent that the Laws and Orders relate to the Base Building. If,
however, such compliance work on the Base Building is triggered by the Tenant
Improvements or Alterations requested by Tenant under Article 12, Tenant shall
bear all expense of such work on the Base Building.

8.3      COLLATERAL ESTOPPEL. The judgment of any court of competent
jurisdiction, or the admission of Tenant in any judicial or administrative
action or proceeding that Tenant has violated any Laws and Orders shall be
conclusive, between Landlord and Tenant, of that fact, whether or not Landlord
is a party to that action or proceeding.

                                   ARTICLE 9
                               HAZARDOUS MATERIAL

9.1      USE OF HAZARDOUS MATERIAL. Tenant shall not cause or permit any
Hazardous Material, as defined in section 9.5, to be generated, brought onto,
used, stored, or disposed of in or about the Premises or the Building by Tenant
or its agents, employees, contractors, subtenants, or invitees, except for
limited quantities of standard office and janitorial supplies containing
chemicals categorized as Hazardous Material. Tenant shall:

         (a)      Use, store, and dispose of all such Hazardous Material in
                  strict compliance with all applicable statutes, ordinances,
                  and regulations in effect during the Lease Term that relate to
                  public health and safety and protection of the environment
                  (Environment Laws), including those Environmental Laws
                  identified in section 9.5; and

         (b)      Comply at all times during the Lease with all Environmental
                  Laws. 9.2. NOTICE OF RELEASE OR INVESTIGATION. If during the
                  Lease Term (including any extensions), Tenant becomes aware of
                  (a) any actual or threatened release of any Hazardous Material
                  on, under, or about the Premises or the Building or (b) any
                  inquiry, investigation, proceeding, or claim by any government
                  agency or other person regarding the presence of Hazardous
                  Material on, under, or about the Premises or the Building,
                  Tenant shall give Landlord written notice of the release or
                  investigation within five (5) days after learning of it and
                  shall simultaneously furnish to Landlord copies of any claims,
                  notices of violation, reports, or other writings received by
                  Tenant that concern the release or investigation.

9.2      INDEMNIFICATION. Tenant shall, at Tenant's sole expense and with
counsel reasonably acceptable to Landlord, indemnify, defend, and hold harmless
Landlord and Landlord's shareholders, directors, officers, employees, partners,
affiliates, and agents with respect to all losses arising out of or resulting
from the release of any Hazardous Material in or about the Premises or the
Building, or the violation of any Environmental Law, by Tenant or Tenant's
agents, contractors, or invitees. This indemnification includes:

         (a)      Losses attributable to diminution in the value of the Premises
                  or the Building;

         (b)      Loss or restriction of use of rentable space in the Building;

         (c)      Adverse effect on the marketing of any space in the Building;
                  and

         (d)      All other liabilities, obligations, penalties, fines, claims,
                  actions (including remedial or enforcement actions of any kind
                  and administrative or judicial proceedings, orders, or


                                       16
<PAGE>   21
                  judgments), damages (including consequential and punitive
                  damages), and costs (including attorney, consultant, and
                  expert fees and expenses) resulting from the release or
                  violation.

         This indemnification shall survive the expiration or termination of
         this Lease.

9.3      REMEDIATION OBLIGATIONS. If the presence of any Hazardous Material
brought onto the Premises or the Building by Tenant or Tenant's employees,
agents, contractors, or invitees results in contamination of the Building,
Tenant shall promptly take all necessary actions, at Tenant's sole expense, to
return the Premises or the Building to the condition that existed before the
introduction of such Hazardous Material. Tenant shall first obtain Landlord's
approval of the proposed remedial action. This provision does not limit the
indemnification obligation set forth in section 9.3.

9.4      DEFINITION OF "HAZARDOUS MATERIAL." As used in this Article 9, the term
"Hazardous Material" shall mean any hazardous or toxic substance, material, or
waste that is or becomes regulated by the United States, the State of
California, or any local government authority having jurisdiction over the
Building. Hazardous Material includes:

         (a)      Any "hazardous substance," as that term is defined in the
                  Comprehensive Environmental Response, Compensation, and
                  Liability Act of 1980 (CERCLA) (42 United States Code sections
                  9601-9675);

         (b)      "Hazardous waste," as that term is defined in the Resource
                  Conservation and Recovery Act of 1976 (RCRA) (42 United States
                  Code sections 6901-6992k);

         (c)      Any pollutant, contaminant, or hazardous, dangerous, or toxic
                  chemical, material, or substance, within the meaning of any
                  other applicable federal, state, or local law, regulation,
                  ordinance, or requirement (including consent decrees and
                  administrative orders imposing liability or standards of
                  conduct concerning any hazardous, dangerous, or toxic waste,
                  substance, or material, now or hereafter in effect);

         (d)      Petroleum products;

         (e)      Radioactive material, including any source, special nuclear,
                  or byproduct material as defined in 42 United States Code
                  sections 2011-2297g-4;

         (f)      Asbestos in any form or condition; and

         (g)      Polychlorinated biphenyls (PCBs) and substances or compounds
                  containing PCBs.

                                   ARTICLE 10

                             UTILITIES AND SERVICES

10.1     STANDARD UTILITIES AND SERVICES. Subject to applicable government
rules, regulations, and guidelines and the rules or actions of the public
utility furnishing the service, Tenant shall be responsible to pay for its usage
on the 2nd and 3rd floors the following utilities and services on all days
during the Lease Term, unless otherwise stated in the Lease:

10.1.1 HEATING AND AIR-CONDITIONING. Tenant shall pay the cost of heating and
air conditioning in the Premises, as reasonably and solely determined by Tenant.

10.1.2 ELECTRICITY. Tenant shall pay electricity for lighting and power in the
Premises. Landlord shall replace lamps, starters, and ballasts for Building
standard lighting fixtures within the Premises on Tenant's request and at
Tenant's expense. Tenant shall replace lamps, starters, and ballasts for
non-Building standard lighting fixtures within the Premises at Tenant's expense.

10.1.3 WATER. Landlord shall provide city water from the regular Building
outlets for drinking, lavatory, and toilet purposes.

10.1.4 JANITORIAL SERVICES. Tenant is to pay for its own janitorial services in
and about the Premises on Mondays through Fridays, except on Holidays. Tenant is
also responsible to provide janitorial services at 


                                       17
<PAGE>   22
its costs to any above-standard improvements installed in the Premises such as
metallic trim, wood floor covering, glass panels, interior windows, kitchens,
and executive workrooms.

10.2     OVERSTANDARD TENANT USE. Tenant shall not, without Landlord's prior
written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
building standard lights in the Premises that may affect the temperature
otherwise maintained by the air-conditioning system or increase the water
normally furnished to the Premises by Landlord under section 10.1. If such
consent is given, Landlord shall have the right to install supplementary
air-conditioning units or other facilities in the Premises, including
supplementary or additional metering devices. On billing by Landlord, Tenant
shall pay the cost for such supplementary facilities, including the cost of (a)
installation, operation, and maintenance; (b) increased wear and tear on
existing equipment; and (c) other similar charges. If Tenant uses water,
electricity, heat, or air-conditioning in excess of that required to be supplied
by Landlord under section 10.1, Tenant shall pay to Landlord, on billing, the
cost of (a) the excess service; (b) installation, operation, and maintenance of
equipment installed to supply the excess service; and (c) increased wear and
tear on existing equipment caused by Tenant's excess consumption. Landlord may
install devices to separately meter any increased use. On demand, Tenant shall
pay the increased cost directly to Landlord, including the cost of the
additional metering devices. Tenant's use of electricity shall never exceed the
capacity of the feeders serving the Building and Premises or the risers or
wiring installation. If Tenant wishes to use heat, ventilation, or
air-conditioning during hours other than those for which Landlord is obligated
to supply such utilities under section 10.1, Tenant shall give Landlord such
prior notice as Landlord shall from time to time establish as appropriate, and
Landlord shall supply such utilities to Tenant at an hourly cost to Tenant as
Landlord shall from time to time establish. Amounts payable by Tenant to
Landlord under this section 10.2 for use of additional utilities shall be
considered Additional Rent under this Lease and shall be billed on a monthly
basis.

10.3     INTERRUPTION OF UTILITIES. Except to the extent of Landlord's gross
negligence or willful misconduct, Tenant agrees that Landlord shall not be
liable for damages, by abatement of Rent or otherwise, for failure to furnish or
delay in furnishing any service (including telephone and telecommunication
services) or for diminution in the quality or quantity of any service when the
failure, delay, or diminution is entirely or partially caused by:

         (a)      Breakage, repairs, replacements, or improvements;

         (b)      Strike, lockout, or other labor trouble;

         (c)      Inability to secure electricity, gas, water, or other fuel at
                  the Building after reasonable effort to do so;

         (d)      Accident or casualty;

         (e)      Act or default of Tenant or other parties; or

         (f)      Any other cause beyond Landlord's reasonable control.

         In any event, such failure, delay, or diminution shall not be
considered to constitute an eviction or a disturbance of Tenant's use and
possession of the Premises or relieve Tenant from paying Rent or performing any
of its obligations under this Lease.

         Landlord shall not be liable under any circumstances for a loss of or
injury to property or for injury to or interference with Tenant's business,
including loss of profits through, in connection with, or incidental to a
failure to furnish any of the utilities or services under this Article 10.
Landlord may comply with mandatory or voluntary controls or guidelines
promulgated by any government entity relating to the use or conservation of
energy, water, gas, light, or electricity or the reduction of automobile or
other emissions without creating any liability of Landlord to Tenant under this
Lease as long as compliance with voluntary controls or guidelines does not
materially and unreasonably interfere with Tenant's use of the Premises.

                                   ARTICLE 11
                             REPAIRS AND MAINTENANCE


                                       18
<PAGE>   23
11.1     TENANT'S REPAIR AND MAINTENANCE OBLIGATIONS. Tenant shall, at Tenant's
sole expense and in accordance with the terms of this Lease (including Article
12), keep the Premises (including all Tenant Improvements, Alterations,
fixtures, and furnishings) in good order, repair, and condition at all times
during the Lease Term. Under Landlord's supervision, subject to Landlord's prior
approval, and within any reasonable period specified by Landlord, Tenant shall,
at Tenant's sole expense and in accordance with the terms of this Lease
(including Article 12) promptly and adequately repair all damage to the Premises
and replace or repair all damaged or broken fixtures and appurtenances. At
Landlord's option or if Tenant fails to make such repairs, Landlord may, but
need not make the repairs and replacements. On receipt of an invoice from
Landlord, Tenant shall pay Landlord Landlord's out-of-pocket costs incurred in
connection with such repairs and replacements plus a percentage of such costs,
to be uniformly established for the Building, sufficient to reimburse Landlord
for all overhead, general conditions, fees, and other costs and expenses arising
from Landlord's involvement with such repairs and replacements. Tenant waives
and releases its rights, including its right to make repairs at Landlord's
expense, under California Civil Code sections 1941-1942 or any similar law,
statute, or ordinance now or hereafter in effect.

                                   ARTICLE 12
                            ALTERATIONS AND ADDITIONS

12.1     LANDLORD'S CONSENT TO ALTERATIONS. Tenant may not make any
improvements, alterations, additions, or changes to the Premises (Alterations)
without obtaining Landlord's prior written consent.

12.1.1   CONSENT PROCEDURE; CONDITIONS. Tenant shall request such consent by
written notice to Landlord, which must be accompanied by detailed and complete
plans and specifications for the proposed work. As a condition of its consent to
Alterations, Landlord may impose any requirements that Landlord considers
desirable, including a requirement that Tenant provide Landlord with a surety
bond, a letter of credit, or other financial assurance that the cost of the
Alterations will be paid when due.

12.1.2   REASONABLE CONSENT. Landlord shall not unreasonably withhold its
consent to proposed Alterations. The Alterations for which Landlord may
reasonably withhold consent include those that would or could:

         (a)      Affect the structure of the Building or any portion of the
                  Building other than the interior of the Premises;

         (b)      Affect the Base Building Systems (as defined below) of the
                  Premises or Building;

         (c)      Result in Landlord's being required under Laws and Orders to
                  perform any work that Landlord could otherwise avoid or defer
                  (Additional Required Work);

         (d)      Result in an increase in the demand for utilities or services
                  that Landlord is required to provide; or

         (e)      Cause an increase in the premiums for hazard or liability
                  insurance carried by Landlord. "Base Building Systems" means
                  all systems and equipment (including plumbing; heating,
                  ventilation, and air-conditioning; electrical;
                  fire/life-safety; elevator; and security systems) that serve
                  all or part of the Building.

12.1.3   COSTS OF REVIEW. Tenant shall reimburse Landlord for the reasonable
fees and costs of any architects, engineers, or other consultants retained by
Landlord to review the proposed Alterations.

12.2     COMPLIANCE OF ALTERATIONS WITH LAWS AND INSURANCE REQUIREMENTS. Tenant
shall cause all Alterations to comply with the following:

         (a)      Applicable Laws and Orders;

         (b)      Applicable requirements of a fire-rating bureau; or

         (c)      Applicable requirements of Landlord's hazard insurance carrier
                  to the extent that Tenant is informed of them.


                                       19
<PAGE>   24
Tenant shall also comply with those requirements in the course of constructing
the Alterations. Before beginning construction of any Alteration, Tenant shall
obtain a valid building permit and any other permits required by any government
entity having jurisdiction over the Premises. Tenant shall provide copies of
those permits to Landlord before the work begins.

Tenant shall, at Tenant's sole expense, perform any Additional Required Work in
the Premises, which shall be subject to the same requirements as any Alteration.
If any Additional Required Work must be performed outside the Premises, Landlord
may elect to perform that work at Tenant's expense. No consent by Landlord to
any proposed work shall constitute a waiver of Tenant's obligations under this
section 12.2.

12.3     MANNER OF CONSTRUCTION. Tenant shall build Alterations entirely within
the Premises and in conformance with Landlord's construction rules and
regulations, using only contractors and subcontractors approved in writing by
Landlord. All work relating to any Alterations shall be done in a good and
workmanlike manner, using new materials equivalent in quality to those used in
the construction of the initial improvements to the Premises. All work shall be
diligently prosecuted to completion.

Tenant shall ensure that all work is performed in a manner that does not
obstruct access to or through the Building or its common areas and that does not
interfere either with other tenants' use of their premises or with any other
work being undertaken in the Building. Tenant shall take all measures necessary
to ensure that labor peace is maintained at all times.

Within twenty (20) days after completion of any Alterations, Tenant shall
deliver to Landlord a reproducible copy of the drawings of Alterations as built.

12.4     PAYMENT FOR ALTERATIONS. Tenant shall promptly pay all charges and
costs incurred in connection with any Alteration, as and when required by the
terms of any agreements with contractors, designers, or suppliers. At least
seven (7) days before beginning construction of any Alteration, Tenant shall
give Landlord written notice of the expected commencement date of that
construction to permit Landlord to post and record a notice of
nonresponsibility.

         On completion of any Alteration, Tenant shall:

         (a)      Cause a timely notice of completion to be recorded in the
                  office of the recorder of the county in which the Building is
                  located, in accordance with Civil Code section 3093 or any
                  successor statute;

         (b)      Deliver to Landlord evidence of full payment and unconditional
                  final waivers of all liens for labor, services, or materials;
                  and

         (c)      Pay to Landlord five percent (5% of the cost of constructing
                  the Alteration to compensate Landlord for all overhead, costs,
                  and expenses arising from Landlord's involvement with that
                  work.

12.5     CONSTRUCTION INSURANCE. Before construction begins, Tenant shall
deliver to Landlord reasonable evidence that damage to, or destruction of, the
Alterations during construction will be covered either by the policies that
Tenant is required to carry under Article 14 or by a policy of builder's
all-risk insurance in an amount approved by Landlord.

If Landlord requires Tenant to provide builder's all-risk insurance for the
proposed Alterations, Tenant shall provide a copy of the policy, any
endorsements, and an original certificate of insurance that complies with
subsection 14.9.2.

Tenant shall cause each contractor and subcontractor to maintain all workers'
compensation insurance required by law and liability insurance (including
property damage) in amounts reasonably required by Landlord. Tenant shall
provide evidence of that insurance to Landlord before construction begins.


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<PAGE>   25
12.6     LANDLORD'S PROPERTY. All Alterations, signs, fixtures, or equipment
that may be installed or placed in or about the Premises from time to time shall
be and become the property of Landlord on installation. Tenant may remove any
trade fixtures or freestanding kitchen or office equipment that Tenant can
substantiate to Landlord has not been paid for with any tenant improvement
allowance funds provided to Tenant by Landlord. Tenant must repair any damage to
the Premises and Building caused by that removal.

By written notice to Tenant either before expiration of the Lease Term or within
a reasonable time after any earlier termination of this Lease, Landlord may
require Tenant, at Tenant's sole expense, to remove any Alterations and restore
the Premises to their configuration and condition before the Alterations were
made provided that Landlord so conditioned its consent to such Alterations. If
Tenant fails to complete that restoration before expiration of the Lease Term
or, in the case of earlier termination, within fifteen (15) days after written
notice from Landlord requesting the restoration, Landlord may do so and charge
the cost of the restoration to Tenant.

12.7     INITIAL IMPROVEMENTS. The construction of any initial improvements to
the Premises shall be governed by the terms of the Leasehold Improvement
Agreement, attached to this Lease as Exhibit C, and not the terms of this
Article 12.

                                   ARTICLE 13
                             COVENANT AGAINST LIENS

13.1     COVENANT AGAINST LIENS. Tenant shall not be the cause or object of any
liens or allow such liens to exist, attach to, be placed on, or encumber
Landlord's or Tenant's interest in the Premises, Building, or Real Property by
operation of law or otherwise. Tenant shall not suffer or permit any lien of
mechanics, material suppliers, or others to be placed against the Premises,
Building, or Real Property with respect to work or services performed or claimed
to have been performed for Tenant or materials furnished or claimed to have been
furnished to Tenant or the Premises. Landlord has the right at all times to post
and keep posted on the Premises any notice that it considers necessary for
protection from such liens. At least seven (7) days before beginning
construction of any Alteration or Tenant Improvements, Tenant shall give
Landlord written notice of the expected commencement date of that construction
to permit Landlord to post and record a notice of nonresponsibility.

If any such lien attaches or Tenant receives notice of any such lien, Tenant
shall cause the lien to be immediately released and removed of record. Despite
any other provision of this Lease, if the lien is not released and removed
within five (5) days after Landlord delivers notice of the lien to Tenant,
Landlord may immediately take all action necessary to release and remove the
lien, without any duty to investigate the validity of it. All expenses
(including reasonable attorney fees) incurred by Landlord in connection with the
lien shall be considered Additional Rent under this Lease and be immediately due
and payable by Tenant.

                                   ARTICLE 14
                   EXCULPATION, INDEMNIFICATION, AND INSURANCE

14.1     DEFINITION OF "TENANT PARTIES" AND "LANDLORD PARTIES." For purposes of
this Article 14, the term "Tenant Parties" refers singularly and collectively to
Tenant and Tenant's officers, members, partners, agents, employees, and
independent contractors as well as to all persons and entities claiming through
any of these persons or entities. The term "Landlord Parties" refers singularly
and collectively to Landlord and the partners, venturers, trustees, and
ancillary trustees of Landlord and the respective officers, directors,
shareholders, members, parents, subsidiaries, and any other affiliated entities,
personal representatives, executors, heirs, assigns, licensees, invitees,
beneficiaries, agents, servants, employees, lenders and independent contractors
of these persons or entities.

14.2     EXCULPATION.


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<PAGE>   26
14.2.1   EXCULPATION. To the fullest extent permitted by law, Tenant, on its
behalf and on behalf of all Tenant Parties, waives all claims (in law, equity,
or otherwise) against Landlord Parties arising out of, knowingly and voluntarily
assumes the risk of, and agrees that Landlord Parties shall not be liable to
Tenant Parties for any of the following:

         (a)      Injury to or death of any person; or

         (b)      Loss of, injury or damage to, or destruction of any tangible
                  or intangible property, including the resulting loss of use,
                  economic losses, and consequential or resulting damage of any
                  kind from any cause. Landlord Parties shall not be liable
                  under this clause regardless of whether the liability results
                  from any active or passive act, error or omission, ; or is
                  based on claims in which liability without fault or strict
                  liability is imposed or sought to be imposed on any of the
                  Landlord Parties. This exculpation clause shall not apply to
                  claims against Landlord Parties to the extent that a final
                  judgment of a court of competent jurisdiction establishes that
                  the injury, loss, damage, or destruction was approximately
                  caused by Landlord Parties' fraud, gross negligence, willful
                  injury to person or property, or violation of law.

14.2.2   SURVIVAL OF EXCULPATION. The clauses of this section 14.2 shall survive
the expiration or earlier termination of this Lease until all claims within the
scope of this section 14.2 are fully, finally, and absolutely barred by the
applicable statutes of limitations.

14.2.3   TENANT'S ACKNOWLEDGMENT OF FAIRNESS. Tenant acknowledges that this
section 14.2 was negotiated with Landlord, that the consideration for it is fair
and adequate, and that Tenant had a fair opportunity to negotiate, accept,
reject, modify, or alter it.

14.2.4   NO EXCULPATION FOR NONDELEGABLE DUTIES. This exculpation clause may not
be interpreted or construed as an attempt by Landlord to be relieved of
liability arising out of a nondelegable duty on the part of Landlord.

14.2.5   WAIVER OF CIVIL CODE SECTION 1542. With respect to the exculpation
provided in this Article 14, Tenant waives the benefits of Civil Code section
1542, which provides:

         A general release does not extend to claims which the creditor does not
         know or suspect to exist in his favor at the time of executing the
         release, which if known by him must have materially affected his
         settlement with the debtor.

14.3     INDEMNIFICATION.

14.3.1   TENANT'S INDEMNIFICATION OF LANDLORD PARTIES. To the fullest extent
permitted by law, Tenant shall, at Tenant's sole expense and with counsel
reasonably acceptable to Landlord, indemnify, defend, and hold harmless Landlord
Parties from and against all Claims, as defined in subsection 14.3.2, from any
cause, arising out of or relating (directly or indirectly) to this Lease, the
tenancy created under this Lease, or the Premises, except to the extent caused
by Landlord, including:

         (a)      The use or occupancy, or manner of use or occupancy, of the
                  Premises or Building by Tenant Parties;

         (b)      Any act, error, omission, or negligence of Tenant Parties or
                  of any invitee, guest, or licensee of Tenant in, on, or about
                  the Real Property;

         (c)      Tenant's conducting of its business;

         (d)      Any alterations, activities, work, or things done, omitted,
                  permitted, allowed, or suffered by Tenant Parties in, at, or
                  about the Premises or Building, including the violation of or
                  failure to comply with any applicable laws, statutes,
                  ordinances, standards, rules, regulations, orders, decrees, or
                  judgments in existence on the Lease Commencement Date or
                  enacted, promulgated, or issued after the date of this Lease;
                  and


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<PAGE>   27
         (e)      Any breach or default in performance of any obligation on
                  Tenant's part to be performed under this Lease, whether before
                  or during the Lease Term or after its expiration or earlier
                  termination.

14.3.2   DEFINITION OF CLAIMS. For purposes of this Lease, "Claims" means any
and all claims, losses, costs, damage, expenses, liabilities, liens, actions,
causes of action (whether in tort or contract, law or equity, or otherwise),
charges, assessments, fines, and penalties of any kind (including consultant and
expert expenses, court costs, and attorney fees actually incurred).

14.3.3   TYPE OF INJURY OR LOSS. This indemnification extends to and includes
Claims for:

         (a)      Injury to any persons (including death at any time resulting
                  from that injury);

         (b)      Loss of, injury or damage to, or destruction of property
                  (including all loss of use resulting from that loss, injury,
                  damage, or destruction); and

         (c)      All economic losses and consequential or resulting damage of
                  any kind.

14.3.4   ACTIVE OR PASSIVE NEGLIGENCE; STRICT LIABILITY. Except as provided in
this subsection 14.3.4, the indemnification in subsection 14.3.1 shall apply
regardless of the active or passive negligence of Landlord Parties and
regardless of whether liability without fault or strict liability is imposed or
sought to be imposed on Landlord Parties. The indemnification in subsection
14.3.1 shall not apply to the extent that a final judgment of a court of
competent jurisdiction establishes that a Claim against one Landlord Party was
proximately caused by the willful misconduct of that Landlord Party. In that
event, however, this indemnification shall remain valid for all other Landlord
Parties.

14.3.5   INDEMNIFICATION INDEPENDENT OF INSURANCE OBLIGATIONS. The
indemnification provided in this Article 14 may not be construed or interpreted
as in any way restricting, limiting, or modifying Tenant's insurance or other
obligations under this Lease and is independent of Tenant's insurance and other
obligations. Tenant's compliance with the insurance requirements and other
obligations under this Lease shall not in any way restrict, limit, or modify
Tenant's indemnification obligations under this Lease.

14.3.6   ATTORNEY FEES. The prevailing party shall be entitled to recover its
actual attorney fees and court costs incurred in enforcing the indemnification
clauses set forth in this section 14.3.

14.3.7   SURVIVAL OF INDEMNIFICATION. The clauses of this section 14.3 shall
survive the expiration or earlier termination of this Lease until all claims
against Landlord Parties involving any of the indemnified matters are fully,
finally, and absolutely barred by the applicable statutes of limitations.

14.3.8   DUTY TO DEFEND. Tenant's duty to defend Landlord Parties is separate
and independent of Tenant's duty to indemnify Landlord Parties. The duty to
defend includes claims for which Landlord Parties may be liable without fault or
strictly liable. The duty to defend applies regardless of whether the issues of
negligence, liability, fault, default, or other obligation on the part of Tenant
Parties have been determined. The duty to defend applies immediately, regardless
of whether Landlord Parties have paid any sums or incurred any detriment arising
out of or relating (directly or indirectly) to any Claims. It is the express
intention of the parties that Landlord Parties be entitled to obtain summary
adjudication or summary judgment regarding Tenant's duty to defend Landlord
Parties at any stage of any claim or suit within the scope of this section 14.3.

14.4     COMPLIANCE WITH INSURER REQUIREMENTS. Tenant shall, at Tenant's sole
expense, comply with all requirements, guidelines, rules, orders, and similar
mandates and directives pertaining to the use of the Premises and the Building,
whether imposed by Tenant's insurers, landlord's insurers, or both. If Tenant's
business operations, conduct, or use of the Premises or the Building cause any
increase in the premium for any insurance policies carried by Landlord, Tenant
shall, within ten (10) business days after receipt of written notice from
Landlord, reimburse Landlord for the increase. Tenant shall, at Tenant's sole
expense, comply with all rules, orders, regulations, or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and of any similar body.


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<PAGE>   28
14.5     TENANT'S LIABILITY COVERAGE. Subject only to section 31.12, Tenant
shall, at Tenant's sole expense, maintain the coverages set forth in this
section 14.5.

14.5.1   COMMERCIAL GENERAL LIABILITY INSURANCE. Tenant shall obtain commercial
general liability insurance written on an "occurrence" policy form, covering
bodily injury, property damage, personal injury, and advertising injury arising
out of or relating (directly or indirectly) to Tenant's business operations,
conduct, assumed liabilities, or use or occupancy of the Premises or the
Building.

14.5.2   BROAD FORM COVERAGE. Tenant's liability coverage shall include all the
coverages typically provided by the Broad Form Comprehensive General Liability
Endorsement, including broad form property damage coverage (which shall include
coverage for completed operations). Tenant's liability coverage shall further
include premises-operations coverage, products-completed operations coverage,
owners and contractors protective coverage (when reasonably required by
landlord), and the broadest available form of contractual liability coverage. It
is the parties' intent that Tenant's contractual liability coverage provide
coverage to the maximum extent possible of Tenant's indemnification obligations
under this Lease.

14.5.3   PRIMARY INSURED. Tenant shall be the first or primary named insured.

14.5.4   ADDITIONAL INSUREDS. Landlord Parties and any lender of Landlord shall
be named by endorsement as additional insureds under Tenant's general liability
coverage. The additional insured endorsement must be on ISO Form CG 20 11 11 85
or an equivalent acceptable to Landlord, with such modifications as Landlord may
require.

14.5.5   CROSS-LIABILITY; SEVERABILITY OF INTERESTS. Tenant's general liability
policies shall be endorsed as needed to provide cross-liability coverage for
Tenant, Landlord, and any lender of Landlord and to provide severability of
interests.

14.5.6   PRIMARY INSURANCE ENDORSEMENTS FOR ADDITIONAL INSUREDS. Tenant's
general liability policies shall be endorsed as needed to provide that the
insurance afforded by those policies to the additional insureds is primary and
that all insurance carried by Landlord Parties is strictly excess and secondary
and shall not contribute with Tenant's liability insurance.

14.5.7   SCOPE OF COVERAGE FOR ADDITIONAL INSUREDS. The coverage afforded to
Landlord and any lender of Landlord must be at least as broad as that afforded
to Tenant and may not contain any terms, conditions, exclusions, or limitations
applicable to Landlord or any lender of Landlord that do not apply to Tenant.

14.5.8   DELIVERY OF CERTIFICATE, POLICY, AND ENDORSEMENTS. Before the Lease
Commencement Date, Tenant shall deliver to Landlord the endorsements referred to
in this section 14.5 as well as a certified copy of Tenant's liability policy or
policies and an original certificate of insurance, executed by an authorized
agent of the insurer or insurers, evidencing compliance with the liability
insurance requirements. The certificate shall provide for no less than thirty
(30) days' advance written notice to Landlord from the insurer or insurers of
any cancellation, nonrenewal, or material change in coverage or available limits
of liability and shall confirm compliance with the liability insurance
requirements in this Lease.

The "endeavor to" and "failure to mail such notice shall impose no obligation or
liability of any kind upon the Company" language and any similar language shall
be stricken from the certificate.

14.5.9   CONCURRENCY OF PRIMARY, EXCESS, AND UMBRELLA POLICIES. Tenant's
liability insurance coverage may be provided by a combination of primary,
excess, and umbrella policies, but those policies must be absolutely concurrent
in all respects regarding the coverage afforded by the policies. The coverage of
any excess or umbrella policy must be at least as broad as the coverage of the
primary policy.


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<PAGE>   29
14.5.10  LIABILITY LIMITS. The minimum acceptable limits of liability for
Tenant's liability insurance are set forth in Summary of Basic Lease Information
section 10.

14.5.11  "PER LOCATION" ENDORSEMENT. Tenant shall, at Tenant's sole expense,
procure a "per location" endorsement or equivalent reasonably acceptable to
Landlord so that the general aggregate and other limits apply separately and
specifically to the Premises.

14.5.12  SURVIVAL OF INSURANCE REQUIREMENTS. Tenant shall, at Tenant's sole
expense, maintain in full force and effect the liability insurance coverages
required under this Lease and shall maintain Landlord Parties and any lender
specified by Landlord as additional insureds, as required by subsection 14.5.4
of this lease, for a period of no less than two (2) years after expiration or
earlier termination of this Lease.

14.6     TENANT'S WORKERS' COMPENSATION AND EMPLOYER LIABILITY COVERAGE. Tenant
shall procure and maintain workers' compensation insurance as required by law
and employer's liability insurance with limits of no less than ONE-MILLION
DOLLARS ($1,000,000).

14.7     TENANT'S FIRST PARTY INSURANCE. Tenant shall, at Tenant's sole expense,
procure and maintain the first party insurance coverages described in this
section 14.7.

14.7.1   TENANT'S PROPERTY INSURANCE. Tenant shall procure and maintain property
insurance coverage for:

         (a)      All office furniture, trade fixtures, office equipment,
                  merchandise, and all other items of Tenant's property in, on,
                  at, or about the Premises and the Building, including property
                  installed by, for, or at the expense of Tenant;

         (b)      "Tenant Improvements," as defined in the Leasehold Improvement
                  Agreement; an

         (c)      All other improvements, betterments, alterations, and
                  additions to the Premises.

         Tenant's property insurance must fulfill the following requirements:

         (a)      It must be written on the broadest available "all-risk"
                  (special-causes-of-loss) policy form or an equivalent form
                  acceptable to Landlord;

         (b)      It must include earthquakes as a covered cause of loss;

         (c)      It must include an agreed-amount endorsement for no less than
                  one-hundred (100) percent of the full replacement cost (new
                  without deduction for depreciation) of the covered items and
                  property; and

         (d)      The amounts of coverage must meet any coinsurance requirements
                  of the policy or policies.

         It is the parties' intent that Tenant shall structure its property
         insurance program so that no coinsurance penalty shall be imposed and
         there shall be no valuation shortfalls or disputes with any insurer or
         with Landlord. The property insurance coverage shall include vandalism
         and malicious mischief coverage, sprinkler leakage coverage, and
         earthquake sprinkler leakage coverage.

14.7.2   BUSINESS INCOME AND EXTRA EXPENSE COVERAGE. Tenant shall further
procure and maintain business income (business interruption) insurance and extra
expense coverage with coverage amounts that shall reimburse Tenant for all
direct or indirect loss of income and charges and costs incurred arising out of
all perils insured against by Tenant's property insurance coverage, including
prevention of, or denial of use of or access to, all or part of the Premises or
the Building, as a result of those perils.

The business income and extra expense coverage shall provide coverage for no
less than twelve (12) months of the loss of income, charges, and costs
contemplated under the Lease and shall be carried in amounts necessary to avoid
any coinsurance penalty that could apply. The business income and extra expense
coverage shall be issued by the insurer that issues Tenant's other first party
coverage.


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<PAGE>   30
14.8     OTHER TENANT INSURANCE COVERAGE. Tenant shall, at Tenant's sole
expense, procure and maintain any other and further insurance coverages that
Landlord or Landlord's lender may reasonably require as a result of changing
market conditions or additional risks to the extent such coverages are available
on commercially reasonable terms.

14.9     FORM OF POLICIES AND ADDITIONAL REQUIREMENTS.

14.9.1   INSURANCE INDEPENDENT OF EXCULPATION AND INDEMNIFICATION. The insurance
requirements set forth in sections 14.4-14.10 are independent of Tenant's
exculpation, indemnification, and other obligations under this Lease and shall
not be construed or interpreted in any way to restrict, limit, or modify
Tenant's exculpation, indemnification, and other obligations or to limit
Tenant's liability under this Lease.

14.9.2   FORM OF POLICIES. In addition to the requirements set forth in
subsection 14.5.8, the insurance required of Tenant under this Article 14 must:

         (a)      Name Landlord and any other party Landlord specifies by
                  endorsement as an additional insured;

         (b)      Be issued by an insurance company with a rating of no less
                  than A-VIII in the current Best's Insurance Guide, or that is
                  otherwise acceptable to Landlord, and admitted to engage in
                  the business of insurance in the State of California;

         (c)      Be primary insurance for all claims under it and provide that
                  any insurance carried by Landlord Parties and Landlord lenders
                  is strictly excess, secondary, and noncontributing with any
                  insurance carried by Tenant; and

         (d)      Provide that insurance may not be canceled, nonrenewed, or the
                  subject of material change in coverage or available limits of
                  coverage, except on thirty (30) days' prior written notice to
                  Landlord and Landlord's lenders.

14.9.3   TENANT'S DELIVERY OF POLICY, ENDORSEMENTS, AND CERTIFICATES. Tenant
shall deliver the policy or policies, along with any endorsements to them and
certificates required by this Article 14, to Landlord:

         (a)      On or before the Lease Commencement Date;

         (b)      At least thirty (30) days before the expiration date of any
                  policy; and

         (c)      On renewal of any policy.

14.9.4   DEDUCTIBLES AND SELF-INSURED RETENTIONS. All deductibles and
self-insured retentions under Tenant's policies are subject to Landlord's prior
written approval.

14.10    WAIVER OF SUBROGATION. Landlord and Tenant agree to cause the insurance
companies issuing their respective property (first party) insurance to waive any
subrogation rights that those companies may have against Tenant or Landlord,
respectively, as long as the insurance is not invalidated by the waiver. If the
waivers of subrogation are contained in their respective insurance policies,
Landlord and Tenant waive any right that either may have against the other on
account of any loss or damage to their respective property to the extent that
the loss or damage is insured under their respective insurance policies.

                                   ARTICLE 15
                             DAMAGE AND DESTRUCTION

15.1     REPAIR OF DAMAGE BY LANDLORD. Tenant agrees to notify Landlord in
writing promptly of any damage to the Premises resulting from fire, earthquake,
or any other identifiable event of a sudden, unexpected, or unusual nature
(Casualty). If the Premises are damaged by a Casualty or any common areas of the
Building providing access to the Premises are damaged to the extent that Tenant
does not have reasonable access to the Premises and if neither Landlord nor
Tenant has elected to terminate this Lease under section 15.3 or 15.4, Landlord
shall promptly and diligently restore at Landlord's sole cost and expense such
common areas of the Base Building and the Tenant Improvements in place on the
Lease Execution Date to substantially the same condition as existed before the
Casualty, except for 


                                       26
<PAGE>   31
modifications required by building codes and other laws and except for any other
reasonable modifications to the common areas considered desirable by Landlord.
In making these modifications, Landlord shall not materially impair Tenant's
access to the Premises. Landlord's obligation to restore is subject to
reasonable delays for insurance adjustment and other matters beyond Landlord's
reasonable control and subject to the other clauses of this Article 15. If
Tenant requests that Landlord modify the Tenant Improvements in connection with
the rebuilding, Landlord may condition its consent to those modifications on:

         (a)      Tenant's payment to Landlord before construction is begun of
                  any sums in excess of the amount of insurance proceeds
                  received by Landlord that are needed to complete the Tenant
                  Improvements; and

         (b)      Confirmation by Landlord's architect or contractor that the
                  modifications will not materially increase the scope of work
                  or the time necessary to complete the Tenant Improvements.

15.2     REPAIR PERIOD NOTICE. Landlord shall, within the later of (a) sixty
(60) days after the date on which Landlord determines the full extent of the
damage caused by the Casualty or (b) thirty (30) days after Landlord has
determined the extent of the insurance proceeds available to effectuate repairs,
provide written notice to Tenant indicating the reasonably anticipated period
for repairing the Casualty (Repair Period Notice). The Repair Period Notice
shall also state, if applicable, Landlord's election either to repair or to
terminate the Lease under section 15.3.

15.3     LANDLORD'S OPTION TO TERMINATE OR REPAIR. Landlord may elect either to
terminate this Lease or to effectuate repairs if:

         (a)      The Repair Period Notice reasonably estimates that the period
                  for repairing the Casualty exceeds two-hundred and seventy
                  (270) days from the date of the commencement of the repair;

         (b)      The estimated repair cost exceeds the insurance proceeds, if
                  any, available for such repair, plus any amount that Tenant is
                  obligated or elects to pay for such repair;

         (c)      The estimated repair cost of the Premises or the Building,
                  even though covered by insurance, exceeds fifty percent (50%)
                  of the full replacement cost; or

         (d)      The Building cannot be restored except in a substantially
                  different structural or architectural form than existed before
                  the Casualty.

         Landlord's election shall be stated in the Repair Period Notice.

15.4     TENANT'S OPTION TO TERMINATE. If the Repair Period Notice provided by
Landlord indicates that the anticipated period for repairing the Casualty
exceeds two-hundred and seventy (270) days, Tenant may elect to terminate this
Lease by providing written notice (Tenant's Termination Notice) to Landlord
within ten (10) days after receiving the Repair Period Notice. If Tenant does
not elect to terminate within this ten-day (10-day) period, Tenant shall be
considered to have waived the option to terminate.

15.5     RENT ABATEMENT DUE TO CASUALTY. Landlord and Tenant agree that, if the
Casualty was not the result of the gross negligence or willful misconduct of
Tenant or Tenant's employees, contractors, licensees, or invitees, Tenant shall
be provided with a proportionate abatement of Rent based on the Rentable Square
Footage of the Premises rendered unusable (due to physical damage to the
Premises or Base Building Systems or the unavailability of access to the
Premises) and not used by Tenant, but only to the extent that Landlord is
reimbursed from the proceeds of rental interruption insurance purchased by
Landlord as a part of Operating Expenses. That proportional abatement, if any,
shall be provided during the period beginning on the later of (a) the date of
the Casualty or (b) the date on which Tenant ceases to occupy the Premises and
ending on the date of Substantial Completion of Landlord's restoration
obligations as provided in this Article 15. Subject to section 15.4, the Rent
abatement provided in this section 15.5 is Tenant's sole remedy due to the
occurrence of the Casualty. Landlord shall not be liable to Tenant or any other
person or entity for any direct, indirect, or consequential damage (including
but not limited to lost profits of Tenant or loss of or interference with
Tenant's business), whether or not caused by the negligence of Landlord or
Landlord's employees, contractors, licensees, or invitees, due to, arising out
of, or as a result of the Casualty (including but not limited to the termination
of the Lease in connection 


                                       27
<PAGE>   32
with the Casualty). Tenant agrees to maintain business interruption insurance in
amounts and with coverage no less than that required by subsection 14.7.2 to
provide coverage regarding such matters.

15.6     DAMAGE NEAR END OF TERM. Despite any other provision of this Article
15, if the Premises or the Building is destroyed or damaged by a Casualty during
the last eighteen (18) months of the Lease Term and Landlord reasonably
anticipates that the time to make repairs exceeds ninety days, then either
Tenant or Landlord shall have the option to terminate this Lease by giving
written notice to the other of the exercise of that option within thirty (30)
days after that damage or destruction.

15.7     EFFECTIVE DATE OF TERMINATION; RENT APPORTIONMENT. If Landlord or
Tenant elects to terminate this Lease under this Article 15 in connection with a
Casualty, this termination shall be effective thirty (30) days after delivery of
notice of such election. Tenant shall pay Rent, properly apportioned up to the
date of the Casualty. After the effective date of the termination, Landlord and
Tenant shall be discharged of all future obligations under this Lease, except
for those provisions that, by their terms, survive the expiration or earlier
termination of the Lease. . Any Prepaid Rent which has not been earned shall
also be timely refunded and the Security Deposit shall be returned pursuant to
Article 6.

15.8     WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease, including
those in this Article 15, constitute an express agreement between Landlord and
Tenant that applies in the event of any Casualty to the Premises, Building, or
Real Property. Tenant, therefore, fully waives the provisions of any statute or
regulation, including California Civil Code sections 1932(2) and 1933(4), for
any rights or obligations concerning a Casualty.

                                   ARTICLE 16
                                  CONDEMNATION

16.1     DEFINITION OF "CONDEMNATION." As used in this Lease, the term
"Condemnation" means a permanent taking through (a) the exercise of any
government power (by legal proceedings or otherwise) by any public or
quasi-public authority or by any other party having the right of eminent domain
(Condemnor) or (b) a voluntary sale or transfer by Landlord to any Condemnor,
either under threat of exercise of eminent domain by a Condemnor or while legal
proceedings for condemnation are pending.

16.2     EFFECT ON RIGHTS AND OBLIGATIONS. If during the Lease Term or the
period between the date of execution of this Lease and the date on which the
Lease Term begins, there is any Condemnation of all or part of the Premises,
Building, or Real Property on which the Premises and Building are constructed,
the rights and obligations of the parties shall be determined under this Article
16, and Rent shall not be affected or abated except as expressly provided in
this Article. Landlord shall notify Tenant in writing of any Condemnation within
thirty (30) days after the later of (a) the filing of a complaint by Condemnor
or (b) the final agreement and determination by Landlord and Condemnor of the
extent of the taking (Condemnation Notice).

16.3     TERMINATION OF LEASE.

16.3.1   DEFINITION OF "TERMINATION DATE." The "Termination Date" shall be the
earliest of:

         (a)      The date on which Condemnor takes possession of the property
                  that is subject to the Condemnation;

         (b)      The date on which title to the property subject to the
                  Condemnation is vested in Condemnor;

         (c)      If Landlord has elected to terminate, the date on which
                  Landlord requires possession of the property in connection
                  with the Condemnation, as specified in written notice
                  delivered to Tenant no less than thirty (30) days before that
                  date; or

         (d)      If Tenant has elected to terminate, thirty (30) days after
                  Landlord's receipt of written notice of termination from
                  Tenant. If both Landlord and Tenant have elected to terminate
                  under 


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<PAGE>   33
                  this Article 16, the Termination Date shall be the earliest of
                  the dates described in subparagraphs (a)-(c).

16.3.2   AUTOMATIC TERMINATION. If the Premises are totally taken by
Condemnation, this Lease shall terminate as of the Termination Date, and the
Condemnation Award shall be allocated between Landlord and Tenant in accordance
with section 16.5.

16.3.3   LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the option to
terminate this Lease if:

         (a)      Ten percent (10%) or more of the Rentable Square Feet of the
                  Building or the Premises is taken through Condemnation;

         (b)      Any portion of the Building or Real Property necessary for
                  Landlord to operate the Building efficiently is taken through
                  Condemnation; or

         (c)      Any other areas providing access to the Premises or Building
                  are taken through Condemnation. To elect to terminate the
                  Lease under this subsection 16.3.3, Landlord must provide
                  written notice of its election (Landlord's Taking Termination
                  Notice) to Tenant within thirty (30) days after the later of
                  (a) the filing of a complaint by Condemnor or (b) the final
                  agreement and determination by Landlord and Condemnor of the
                  extent of the taking. In that event, this Lease shall be
                  terminated on the Termination Date, and all Rent shall be
                  prorated to that date. If Landlord does not elect to terminate
                  under this subsection 16.3.3, Landlord shall, subject to
                  subsection 16.3.4, be obligated to the extent of severance
                  damages received by Landlord to reasonably restore (to the
                  extent feasible) the Premises or access to the Premises,
                  subject to Landlord's obtaining all necessary approvals,
                  permits, and authorizations relating to such work.

16.3.4   TENANT'S RIGHT TO TERMINATE.

16.3.4.1 GROUNDS; TERMINATION NOTICE. Tenant shall have the option to terminate
this Lease by providing thirty (30) days' written notice to Landlord if one or
both of the following are taken through Condemnation:

         (a)      Twenty-five percent (25%) or more of the Usable Square Feet of
                  the Premises; or

         (b)      Any portion of the Building that provides Tenant with its
                  access to the Premises and that, if taken, would eliminate
                  Tenant's access to the Premises. Tenant's notice must be given
                  within thirty (30) days after Tenant's receipt of the
                  Condemnation Notice required by section 16.2.

16.3.4.2 LANDLORD'S RESTORATION NOTICE. Despite Tenant's termination right, this
Lease shall continue in full force and effect if Landlord gives Tenant written
notice (Restoration Notice) within thirty (30) days after the date on which the
nature and extent of the Condemnation are finally determined, stating that:

         (a)      Landlord shall, at Landlord's sole expense, reconfigure the
                  remaining Premises or provide alternative, reasonable access
                  to Tenant so that the area of the Premises shall be
                  substantially the same after the Condemnation and Tenant shall
                  have reasonable access to the Premises after the Condemnation;

         (b)      Landlord shall begin the restoration as soon as reasonably
                  practicable; and

         (c)      Landlord has reasonably determined that such restoration can
                  be completed within ninety (90) days after the date of the
                  notice.

16.3.5   TENANT'S WAIVER. Tenant agrees that its rights to terminate this Lease
due to partial Condemnation are governed by this Article 16. Tenant waives all
rights it may have under California Code of Civil Procedure section 1265.130, or
otherwise, to terminate this Lease based on a partial Condemnation.


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<PAGE>   34
16.3.6   PRORATION OF RENT. If this Lease is terminated under this Article 16,
the termination shall be effective on the Termination Date, and Landlord shall
prorate Rent to that date. Tenant shall be obligated to pay Rent for the period
up to, but not including, the Termination Date as prorated by Landlord. Landlord
shall return to Tenant prepaid Rent allocable to any period on or after the
Termination Date. Any Prepaid Rent which has not been earned shall also be
timely refunded and the Security Deposit shall be returned pursuant to Article
6.

16.4     EFFECT OF CONDEMNATION IF LEASE IS NOT TERMINATED. If any part of the
Premises is taken by Condemnation and this Lease is not terminated, Rent shall
be proportionately reduced based on the Rentable Square Footage of the Premises
taken. Landlord and Tenant agree to enter into an amendment to this Lease within
thirty (30) days after the partial taking, confirming the reduction in Rentable
Square Footage of the Premises and the reduction in Rent. If Landlord gives
Tenant a timely Restoration Notice under subsection 16.3.4.2, this Lease shall
continue in full force and effect without any reduction of Rent (unless the
Premises as restored are smaller than the existing Premises, in which case Rent
shall be proportionately reduced based on the reduced Rentable Square Footage),
except that Rent shall be abated for the portion of the Premises not usable by
Tenant until Landlord completes the restoration as provided in the Restoration
Notice.

16.5     ALLOCATION OF AWARD.

16.5.1   LANDLORD'S RIGHT TO AWARD. Except as provided in subsection 16.5.2 in
connection with a Condemnation:

         (a)      Landlord shall be entitled to receive all compensation and
                  anything of value awarded, paid, or received in settlement or
                  otherwise (Award); and

         (b)      Tenant irrevocably assigns and transfers to Landlord all
                  rights to and interests in the Award and fully releases and
                  relinquishes any claim to, right to make a claim on, or
                  interest in the Award, including any amount attributable to
                  any excess of the market value of the Premises for the
                  remainder of the Lease Term over the present value as of the
                  Termination Date of the Rent payable for the remainder of the
                  Term (commonly referred to as the "bonus value" of the Lease).

16.5.2   TENANT'S RIGHT TO COMPENSATION. Despite subsection 16.5.1, Tenant shall
have the right to make a separate claim in the Condemnation proceeding, as long
as the Award payable to Landlord is not reduced thereby, for:

         (a)      The taking of the unamortized or undepreciated value of any
                  leasehold improvements owned by Tenant that Tenant has the
                  right to remove at the end of the Lease Term and that Tenant
                  elects not to remove;

         (b)      Reasonable removal and relocation costs for any leasehold
                  improvements that Tenant has the right to remove and elects to
                  remove (if Condemnor approves of the removal); and

         (c)      Relocation costs under Government Code section 7262, the claim
                  for which Tenant may pursue by separate action independent of
                  this Lease.

16.6     TEMPORARY TAKING. If a temporary taking of part of the Premises occurs
through (a) the exercise of any government power (by legal proceedings or
otherwise) by Condemnor or (b) a voluntary sale or transfer by Landlord to any
Condemnor, either under threat of exercise of eminent domain by a Condemnor or
while legal proceedings for condemnation are pending, Rent shall abate during
the time of such taking in proportion to the portion of the Premises taken. The
entire Award relating to the temporary taking shall be and remain the property
of Landlord. Tenant irrevocably assigns and transfers to Landlord all rights to
and interest in the Award and fully releases and relinquishes any claim to,
right to make a claim on, and any other interest in the Award.


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<PAGE>   35
                                   ARTICLE 17

                            ASSIGNMENT AND SUBLEASING

17.1     RESTRICTED TRANSFERS.

17.1.1   CONSENT REQUIRED; DEFINITION OF "TRANSFER." Tenant shall obtain
Landlord's written consent before entering into or permitting any Transfer. A
"Transfer" consists of any of the following, whether voluntary or involuntary
and whether effected by death, operation of law, or otherwise:

         (a)      Any assignment, mortgage, pledge, encumbrance, or other
                  transfer of any interest in this Lease;

         (b)      Any sublease or occupancy of any portion of the Premises by
                  any persons other than Tenant and its employees; and

         (c)      Any of the changes (e.g., a change of ownership or
                  reorganization) included in the definition of Transfer in
                  section 17.7.

         Any person to whom any Transfer is made or sought to be made is a
"Transferee."

17.1.2   LANDLORD'S REMEDIES. If a Transfer fails to comply with this Article
17, Landlord may, at its option, do either or both of the following: (a) void
the Transfer or (b) declare Tenant in material and incurable default under
section 22.1 notwithstanding any cure period specified in section 22.1.

17.2     TRANSFER PROCEDURE.

17.2.1   TRANSFER NOTICE. Before entering into or permitting any transfer,
Tenant shall provide to Landlord a written "Transfer Notice" at least thirty
days before the proposed effective date of the Transfer. The Transfer Notice
shall include all of the following:

         (a)      Information regarding the proposed Transferee, including the
                  name, address, and ownership of Transferee; the nature of
                  Transferee's business; Transferee's character and reputation;
                  and Transferee's current financial statements (certified by an
                  officer, a partner, or an owner of Transferee);

         (b)      All the terms of the proposed Transfer, including the
                  consideration payable by Transferee; the portion of the
                  Premises that is subject to the Transfer (Subject Space); a
                  general description of any planned alterations or improvements
                  to the Subject Space; the proposed use of the Subject Space;
                  the effective date of the Transfer; a calculation of the
                  "Transfer Premium," as defined in subsection 17.4.2, payable
                  in connection with the Transfer; and a copy of all
                  documentation concerning the proposed Transfer;

         (c)      Any other information or documentation reasonably requested by
                  Landlord; and

         (d)      An executed estoppel certificate from Tenant in the form
                  attached to this Lease as Exhibit F.

17.2.2   APPLICATION FEE; TRANSFER FEE. As a condition to the effectiveness of
the Transfer Notice, Tenant shall, when providing a Transfer Notice, pay an
application fee of $1,000.00 toward Landlord's administrative and other costs in
reviewing and processing the Transfer Notice. In addition, within thirty (30)
days after Landlord's written request, Tenant shall pay as Additional Rent any
reasonable legal fees that Landlord incurs in reviewing and processing the
Transfer Notice (Transfer Fee). Such reasonable legal fees shall not exceed
$1,500 for such counsel's initial review of the request. Tenant shall pay the
application fee whether or not Landlord consents to the Transfer.

17.2.3   LIMITS OF CONSENT. If Landlord consents to any Transfer and does not
exercise its rights under section 17.5, the following limits apply:

         (a)      Landlord does not agree to waive or modify the terms and
                  conditions of this Lease.

         (b)      Landlord does not consent to any further Transfer by either
                  Tenant or Transferee.


                                       31
<PAGE>   36
         (c)      Tenant remains liable under this Lease, and any guarantor of
                  the Lease remains liable under the guaranty.

         (d)      Tenant may enter into that Transfer in accordance with this
                  Article 17 if:

                  (1)      The Transfer occurs within six (6) months after
                           Landlord's consent;

                  (2)      The Transfer is on substantially the same terms as
                           specified in the Transfer Notice;

                  (3)      Tenant delivers to Landlord, promptly after
                           execution, an original, executed copy of all
                           documentation pertaining to the Transfer in a form
                           reasonably acceptable to Landlord (including in the
                           case of a sublease Transferee's agreement to be
                           subject and subordinate to the Lease and to assume
                           Tenant's obligations under the Lease to the extent
                           applicable to the Subject Space).

         (e)      If the Transfer occurs after six (6) months or the terms of
                  the Transfer have materially changed from those in the
                  Transfer Notice, Tenant shall submit a new Transfer Notice
                  under subsection 17.2.1, requesting Landlord's consent, and
                  the Subject Space shall again be subject to Landlord's rights,
                  if any, under section 17.5. A material change is one the terms
                  or which would have entitled Landlord to refuse to consent to
                  the Transfer initially or would cause the proposed Transfer to
                  be more favorable to Transferee than the terms in the original
                  Transfer Notice.

17.3     LANDLORD'S CONSENT.

17.3.1   REASONABLE CONSENT. Landlord may not unreasonably withhold its consent
to any proposed Transfer that complies with this Article 17. Reasonable grounds
for denying consent include any of the following:

         (a)      Transferee's character, reputation, credit history, or
                  business is not consistent with the character or quality of
                  the Building;

         (b)      Transferee would significantly detract from the prestige of
                  the Building than Tenant;

         (c)      Transferee is either a government agency or an instrumentality
                  of one;

         (d)      Transferee's intended use of the Premises is inconsistent with
                  the Permitted Use or will materially and adversely affect
                  Landlord's interest;

         (e)      Transferee's financial condition is or may be inadequate to
                  support the Lease obligations of Transferee under the Transfer
                  documents;

         (f)      The Transfer would cause Landlord to violate another lease or
                  agreement to which Landlord is a party or would give a
                  Building tenant the right to cancel its lease;

         (g)      Transferee occupies space in the Building and such space is
                  not contiguous to the Premises, is negotiating with Landlord
                  to lease space in the Building, or has negotiated with
                  Landlord during the six (6) months immediately preceding the
                  Transfer Notice;

         (h)      Transferee does not intend to occupy the entire Premises and
                  conduct business there for a substantial portion of the term
                  of the Transfer; or

         (i)      The rent charged by Tenant to Transferee during the term of
                  that Transfer, using a present-value analysis, is less than
                  ninety percent (90%) of the rent then being quoted by Landlord
                  for comparable space in the Building for a comparable term
                  (Quoted Rent), using a present value analysis.

17.3.2   LANDLORD'S WRITTEN RESPONSE. Within twenty days after receipt of a
Transfer Notice that complies with subsection 17.2.1, Landlord shall approve or
disapprove the proposed Transfer in writing. 

17.3.3   [Omitted]

17.3.4   TENANT'S INDEMNITY. Tenant shall indemnify, defend, and hold harmless
Landlord from and against all Claims by any proposed Transferee and its agents
and brokers arising out of or relating (directly or indirectly) to a proposed
Transfer.

17.4     TRANSFER PREMIUM.


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<PAGE>   37
17.4.1   TRANSFER PREMIUM PAYMENT. As a reasonable condition to Landlord's
consent to any Transfer, Tenant shall pay to Landlord sixty percent (60%) of any
Transfer Premium, as defined in subsection 17.4.2.

17.4.2   DEFINITION OF "TRANSFER PREMIUM." "Transfer Premium" means all base
rent, additional rent, and other consideration payable by Transferee to Tenant
(including key money and bonus money and any payment in excess of fair market
value for services rendered by Tenant to Transferee or assets, fixtures,
inventory, equipment, or furniture transferred by Tenant to Transferee in
connection with the Transfer (Transferee Rent)), after deducting the Rent
payable by Tenant under this Lease (excluding the Transfer Premium) for the
Subject Space (Tenant Rent) and Tenant's reasonable costs of reletting,
including legal fees, advertising costs and the amortization over the remaining
Lease Term of any brokerage commissions and tenant improvement allowance If part
of the Transfer Premium is payable by Transferee other than in cash, Landlord's
share of that noncash consideration shall be in a form reasonably satisfactory
to Landlord.

17.4.3   MONTHLY PAYMENT OF TRANSFER PREMIUM; CALCULATION. Tenant shall pay the
Transfer Premium on a monthly basis, together with its payment of Additional
Rent under Article 5. In calculating the Transfer Premium, Tenant Rent,
Transferee Rent, and Quoted Rent, the parties shall first adjust the rent to the
actual effective rent to be paid, taking into consideration any and all
leasehold concessions, including any rent credit and tenant improvement
allowance. For purposes of calculating the effective rent, all those concessions
shall be amortized on a straight-line basis over the relevant term.

17.4.4   AUDIT OF TRANSFER PREMIUM. On Landlord's request, Tenant shall furnish
a complete statement, certified by an independent certified public accountant or
Tenant's chief financial officer, describing in detail the computation of any
Transfer Premium that Tenant has derived or will derive from the Transfer. If
Landlord's independent certified public accountant finds that the Transfer
Premium for any Transfer has been understated, Tenant shall, within thirty (30)
days after demand, pay the deficiency, the Late Charge and interest and
Landlord's costs of that audit.

17.5     LANDLORD'S OPTION TO RECAPTURE SPACE.

17.5.1   LANDLORD'S RECAPTURE RIGHT. Despite any other provision of this Article
17, Landlord has the option, by written notice to Tenant (Recapture Notice)
within twenty days after receiving any Transfer Notice, to recapture the Subject
Space by terminating this Lease for the Subject Space or taking an assignment or
a sublease of the Subject Space from Tenant. Landlord shall not have the right
to Recapture where the proposed Transfer is for an undemised and small portion
of the Premises for less than one year, however. A timely Recapture Notice
terminates this Lease or creates an assignment or a sublease for the Subject
Space for the same term as the proposed Transfer, effective as of the date
specified in the Transfer Notice. If Landlord declines or fails timely to
deliver a Recapture Notice, Landlord shall have no further right under this
section 17.5 to the Subject Space unless it becomes available again after
Transfer by Tenant.

17.5.2   CONSEQUENCES OF RECAPTURE. To determine the new Base Rent under this
Lease if Landlord recaptures the Subject Space, the original Base Rent under the
Lease shall be multiplied by a fraction, the numerator of which is the Rentable
Square Feet of the Premises retained by Tenant after Landlord's recapture and
the denominator of which is the total Rentable Square Feet of the Premises
before Landlord's recapture. The Additional Rent, to the extent that it is
calculated on the basis of the Rentable Square Feet within the Premises, shall
be reduced to reflect Tenant's proportionate share based on the Rentable Square
Feet of the Premises retained by Tenant after Landlord's recapture. This Lease
as so amended shall continue thereafter in full force and effect. Either party
may require written confirmation of the amendments to this Lease necessitated by
Landlord's recapture of the Subject Space. If Landlord recaptures the Subject
Space, Landlord shall, at Landlord's sole expense, construct any partitions
required to segregate the Subject Space from the remaining Premises retained by
Tenant.


                                       33
<PAGE>   38
Tenant shall, however, pay for painting, covering, or otherwise decorating the
surfaces of the partitions facing the remaining Premises retained by Tenant.

17.6     RIGHT TO COLLECT RENT. If this Lease is assigned, Landlord may collect
Rent directly from Transferee. If all or part of the Premises is subleased and
Tenant defaults, Landlord may collect Rent directly from Transferee. Landlord
may then apply the amount collected from Transferee to Tenant's monetary
obligations under this Lease. Collecting Rent from a Transferee or applying that
Rent to Tenant's monetary obligations does not waive any provisions of this
Article 17.

17.7     TRANSFERS OF OWNERSHIP INTERESTS AND OTHER ORGANIZATIONAL CHANGES.

17.7.1   CHANGE OF OWNERSHIP; REORGANIZATION. For purposes of this Article 17,
"Transfer" also includes:

         (a)      If Tenant is a partnership or limited liability company:

                  (1)      A change in ownership effected voluntarily,
                           involuntarily, or by operation of law, within a
                           twelve-month (12-month) period of twenty-five percent
                           (25%) or more of the partners or members or
                           twenty-five percent (25%) or more of the partnership
                           or membership interests; or

                  (2)      The dissolution of the partnership or limited
                           liability company without its immediate
                           reconstitution.

         (b)      If Tenant is a closely held corporation (i.e., one whose stock
                  is not publicly held and not traded through an exchange or
                  over the counter):

                  (1)      The sale or other transfer, within a twelve-month
                           (12-month) period, of more than an aggregate of
                           twenty-five percent (25%) of the voting shares of
                           Tenant (other than to immediate family members by
                           reason of gift or death) except in connection with an
                           initial public offering of shares in Tenant or other
                           financing of Tenant in which additional shares are
                           sold to Accredited Investors;

                  (2)      The sale, mortgage, hypothecation, or pledge, within
                           a twelve-month (12-month) period, of more than an
                           aggregate of twenty-five percent (25%) of the value
                           of Tenant's unencumbered assets; or

                  (3)      The dissolution, merger, consolidation, or other
                           reorganization of Tenant.

17.7.2   TRANSFER TO AFFILIATE. Despite any other provision of this Lease,
Landlord's consent is not required for any Transfer to an Affiliate, as defined
in subsection 17.7.3, as long as the following conditions are met:

         (a)      At least ten (10) business days before the Transfer, Landlord
                  receives written notice of the Transfer (as well as any
                  documents or information reasonably requested by Landlord
                  regarding the Transfer or Transferee);

         (b)      The Transfer is not a subterfuge by Tenant to avoid its
                  obligations under the Lease;

         (c)      If the Transfer is an assignment, Transferee assumes in
                  writing all of Tenant's obligations under this Lease relating
                  to the Subject Space; and

         (d)      Transferee has a tangible net worth, as evidenced by financial
                  statements delivered to Landlord and certified by an
                  independent certified public accountant in accordance with
                  generally accepted accounting principles that are consistently
                  applied (Net Worth), at least equal to Tenant's Net Worth
                  either immediately before the Transfer or as of the date of
                  this Lease, whichever is greater.


                                       34
<PAGE>   39
         17.7.3   DEFINITION OF "AFFILIATE." An "Affiliate" means any entity
         that controls, is controlled by, or is under common control with
         Tenant. "Control" means the direct or indirect ownership of more than
         fifty percent (50%) of the voting securities of an entity or possession
         of the right to vote more than fifty percent (50%) of the voting
         interest in the ordinary direction of the entity's affairs.

         17.7.4   SALES OF SHARES IN TENANT. In the event that Tenant offers for
         sale in a private placement prior to its initial public offering,
         shares of its preferred stock (a "Private Financing"), Tenant shall use
         commercially reasonable efforts to provide Landlord with the
         opportunity to participate as a purchaser in such Private Financing at
         a level to be determined by the Tenant, provided that Landlord is an
         accredited investor at such time.

17.8     RESTRICTIONS ON MARKETING THE SPACE. Tenant may not enter into any
listing agreement for marketing the Subject Space other than through the
exclusive leasing agent designated by Landlord for the Building, if any. Tenant
may not promote or advertise the availability of the Subject Space unless
Landlord has approved Tenant's advertising or promotional materials in writing.
Tenant shall use reasonable efforts to lease the available space on terms
comparable to the market rents then applicable for primary office space (rather
than sublease market rates).

                                   ARTICLE 18
                              SURRENDER OF PREMISES

18.1     SURRENDER OF PREMISES. No act of Landlord or its authorized
representatives shall constitute Landlord's acceptance of a surrender of the
Premises by Tenant unless that intent is specifically acknowledged in a writing
signed by Landlord. At the option of Landlord, a surrender and termination of
this Lease shall operate as an assignment to Landlord of all subleases or
subtenancies. Landlord shall exercise this option by giving notice of that
assignment to all subtenants within ten (10) days after the effective date of
the surrender and termination.

18.2     REMOVAL OF TENANT PROPERTY BY TENANT. Subject to Articles 15 and 16, on
the expiration or earlier termination of the Lease Term, Tenant shall quit the
Premises and surrender possession to Landlord in accordance with this section
18.2. Tenant shall leave the Premises in as good order and condition as when
Tenant took possession of the Premises, except for reasonable wear and tear and
repairs that are specifically made the responsibility of Landlord. Subject to
Articles 15 and 16, on expiration or termination, Tenant shall, without expense
to Landlord, remove or cause to be removed from the Premises:

         (a)      All debris and rubbish;

         (b)      Any items of furniture, equipment, freestanding cabinet work,
                  and other articles of personal property owned by Tenant or
                  installed or placed by Tenant at its expense in the Premises;

         (c)      Any similar articles of any other persons claiming under
                  Tenant that Landlord, in Landlord's sole discretion, requires
                  to be removed; and

         (d)      Any Alterations that Tenant is required to remove under
                  Article 12.

         Tenant shall, at Tenant's sole expense, repair all damage or injury
that may occur to the Premises or the Building caused by Tenant's removal of
those items and shall restore the Premises and Building to their original
condition.

                                   ARTICLE 19
                                  HOLDING OVER

19.1     HOLDOVER RENT. If Tenant remains in possession of the Premises after
expiration or earlier termination of this Lease with Landlord's express written
consent, Tenant's occupancy shall be a month-


                                       35
<PAGE>   40
to-month tenancy at a rent agreed on by Landlord and Tenant but in no event less
than the Base Rent and Additional Rent payable under this Lease during the last
full month before the date of expiration or earlier termination of this Lease.
The month-to-month tenancy shall be on the terms and conditions of this Lease
except as provided in (a) the preceding sentence and (b) the lease clauses
concerning lease term, and extension rights. Landlord's acceptance of rent after
such holding over with Landlord's written consent shall not result in any other
tenancy or in a renewal of the original term of this Lease. If Tenant remains in
possession of the Premises after expiration or earlier termination of this Lease
without Landlord's consent, Tenant's continued possession shall be on the basis
of a tenancy at sufferance and Tenant shall pay as rent during the holdover
period an amount equal to the greater of:

         (a)      One-hundred and fifty percent (150%) of the fair market rental
                  (as reasonably determined by Landlord) for the Premises; or

         (b)      Two-hundred percent (200%) of the Base Rent and Additional
                  Rent payable under this Lease for the last full month before
                  the date of expiration or termination.

19.2     NO CONSENT OR WAIVER IMPLIED. Nothing in this Article 19 shall be
construed as implied consent by Landlord to any holding over by Tenant. Landlord
expressly reserves the right to require Tenant to surrender possession of the
Premises to Landlord as provided in this Lease on expiration or other
termination of this Lease. The provisions of this Article 19 shall not be
considered to limit or constitute a waiver of any other rights or remedies of
Landlord provided in this Lease or at law.

                                   ARTICLE 20
                              ESTOPPEL CERTIFICATES

20.1     TENANT'S OBLIGATION TO PROVIDE ESTOPPEL CERTIFICATES. Within ten (10)
days after a written request by Landlord, Tenant shall execute and deliver to
Landlord an estoppel certificate, substantially in the form of Exhibit F (or
other form required by any existing or prospective lender, mortgagee, or
purchaser of all or part of the Building), indicating in the certificate any
exceptions to the statements in the certificate that may exist at that time. The
certificate shall also contain any other information reasonably requested by
Landlord or any existing or prospective lender, mortgagee, or purchaser.

20.2     ADDITIONAL REQUESTED DOCUMENTS OR INSTRUMENTS. Within ten (10) days
after a written request by Landlord, Tenant shall execute and deliver whatever
other documents or instruments may be reasonably required for sale or financing
purposes, including (if requested by Landlord) a current financial statement and
financial statements for the two (2) years preceding the current financial
statement year. In addition, in connection with Landlord's determination of the
security deposit requirements during the Option Term pursuant to Section 3.5,
Landlord may require that Tenant provide financial statements for the two (2)
years preceding the current financial statement year. Such financial statements
shall be prepared in accordance with generally accepted accounting principles
and shall be audited by an independent certified public accountant.

20.3     FAILURE TO DELIVER. Tenant's failure to execute or deliver an estoppel
certificate in the required time period shall constitute an acknowledgment by
Tenant that the statements included in the estoppel certificate are true and
correct, without exception. Tenant's failure to execute or deliver an estoppel
certificate or other document or instrument required under this Article 20 in a
timely manner shall be a material breach of this Lease.

                                   ARTICLE 21
                  SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT

21.1     AUTOMATIC SUBORDINATION. This Lease is subject and subordinate to:

         (a)      The lien of any mortgages, deeds of trust, or other
                  encumbrances (Encumbrances) of the Building and Real Property;


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<PAGE>   41
         (b)      All present and future ground or underlying leases (Underlying
                  Leases) of the Building and Real Property now or hereafter in
                  force against the Building and Real Property;

         (c)      All renewals, extensions, modifications, consolidations, and
                  replacements of the items described in subparagraphs (a)-(b);
                  and

         (d)      All advances made or hereafter to be made on the security of
                  the Encumbrances.

Despite any other provision of this Article 21, any Encumbrance holder or lessor
may elect that this Lease shall be senior to (or be junior to) and have priority
over that Encumbrance or Underlying Lease whether this Lease is dated before or
after the date of the Encumbrance or Underlying Lease.

21.2     SUBORDINATION AGREEMENT; AGENCY. This subordination is self-operative,
and no further instrument of subordination shall be required to make it
effective. To confirm this subordination, however, Tenant shall, within five (5)
days after Landlord's request, execute any further instruments or assurances in
recordable form that Landlord reasonably considers necessary to evidence or
confirm the subordination or superiority of this Lease to any such Encumbrances
or Underlying Leases; provided, however, that with respect to any Encumbrances
and Underlying Leases entered into after the Lease Commencement Date, Tenant
shall enter into such third party's proposed subordination documentation on the
condition that such third party agree not to disturb Tenant while Tenant is not
in default of this Lease. Tenant irrevocably appoints Trina L. Yun, Asset
Manager of Landlord, (or any replacement asset manager) as Tenant's agent to
execute and deliver in the name of Tenant any such instrument(s) if Tenant fails
to do so. This authorization shall in no way relieve Tenant of the obligation to
execute such instrument(s) of subordination or superiority. Tenant's failure to
execute and deliver such instrument(s) shall constitute a default under this
Lease. Landlord agrees to use reasonable efforts to cause the holders of
Encumbrances and Underlying Leases existing on the Lease Commencement Date to
enter into subordination and nondisturbance documentation with Tenant in a form
reasonably acceptable to such holders.

21.3     ATTORNMENT. Tenant covenants and agrees to attorn to the transferee of
Landlord's interest in the Real Property by foreclosure, deed in lieu of
foreclosure, exercise of any remedy provided in any Encumbrance or Underlying
Lease, or operation of law (without any deductions or setoffs), if requested to
do so by the transferee, and to recognize the transferee as the lessor under
this Lease; provided that such transferee agrees not to disturb Tenant while
Tenant is not in default of this Lease. Unless the transferee expressly assumes
the following obligations, the transferee shall not be liable for:

         (a)      Any acts, omissions, or defaults of Landlord that occurred
                  before the sale or conveyance; or

         (b)      The return of any prepaid rent or security deposit except for
                  rent and deposits actually paid to the transferee.

21.4     NOTICE OF DEFAULT; RIGHT TO CURE. Tenant agrees to give written notice
of any default by Landlord to the holder of any prior Encumbrance or Underlying
Lease. Tenant agrees that, before it exercises any rights or remedies under the
Lease, the lienholder or lessor shall have the right, but not the obligation, to
cure the default within the same time, if any, given to Landlord to cure the
default, plus an additional thirty (30) days. Tenant agrees that this cure
period shall be extended by the time necessary for the lienholder to begin
foreclosure proceedings and to obtain possession of the Building or Real
Property, as applicable, but not beyond an additional thirty days if the default
materially interferes with Tenant's use of the Premises.


                                       37
<PAGE>   42
                                   ARTICLE 22

                              DEFAULTS AND REMEDIES

22.1     TENANT'S DEFAULT. The occurrence of any of the following shall
constitute a default by Tenant under this Lease:

         (a)      Tenant's failure to pay when due any Rent required to be paid
                  under this Lease if the failure continues for three (3) days
                  after written notice of the failure from Landlord to Tenant;

         (b)      Tenant's failure to provide any instrument or assurance as
                  required by section 21.2 or estoppel certificate as required
                  by section 20.1 if the failure continues for five (5) days
                  after written notice of the failure from Landlord to Tenant;

         (c)      Tenant's failure to perform any other obligation under this
                  Lease if the failure continues for thirty days after written
                  notice of the failure from Landlord to Tenant; or such longer
                  reasonable period necessary to cure such default if Tenant
                  promptly commences and diligently pursues cure after notice
                  from Landlord not to exceed an additional sixty days if the
                  default materially interferes with Landlord's ability to use,
                  finance or transfer the Real Property.

         (d)      Tenant's abandonment of the Premises, including Tenant's
                  absence from the Premises for seven consecutive days
                  (excluding Saturdays, Sundays, and California legal holidays)
                  while in default of any material provision of this Lease,
                  including the obligation to pay Rent;

         (e)      To the extent permitted by law:

                  (1)      A general assignment by Tenant or any guarantor of
                           the Lease for the benefit of creditors;

                  (2)      The filing by or against Tenant, or any guarantor, of
                           any proceeding under an insolvency or bankruptcy law,
                           unless (in the case of an involuntary proceeding) the
                           proceeding is dismissed within sixty (60) days;

                  (3)      The appointment of a trustee or receiver to take
                           possession of all or substantially all the assets of
                           Tenant or any guarantor, unless possession is
                           unconditionally restored to Tenant or that guarantor
                           within thirty (30) days and the trusteeship or
                           receivership is dissolved;

                  (4)      Any execution or other judicially authorized seizure
                           of all or substantially all the assets of Tenant
                           located on the Premises, or of Tenant's interest in
                           this Lease, unless that seizure is discharged within
                           thirty (30) days;

         (f)      The committing of waste on the Premises; or

         (g)      Tenant's failure to occupy the Premises within ten (10)
                  business days after the Premises are ready for occupancy.

22.2     [OMITTED]

22.3     LANDLORD'S REMEDIES ON TENANT'S DEFAULT. On the occurrence of a default
by Tenant, Landlord shall have the right to pursue any one or more of the
following remedies in addition to any other remedies now or later available to
Landlord at law or in equity. These remedies are not exclusive but cumulative.


                                       38
<PAGE>   43
22.3.1   TERMINATION OF LEASE. Landlord may terminate this Lease and recover
possession of the Premises. Once Landlord has terminated this Lease, Tenant
shall immediately surrender the Premises to Landlord. On termination of this
Lease, Landlord may recover from Tenant all of the following:

         (a)      The worth at the time of the award of any unpaid Rent that had
                  been earned at the time of the termination, to be computed by
                  allowing interest at the rate set forth in Article 24 but in
                  no case greater than the maximum amount of interest permitted
                  by law;

         (b)      The worth at the time of the award of the amount by which the
                  unpaid Rent that would have been earned between the time of
                  the termination and the time of the award exceeds the amount
                  of unpaid Rent that Tenant proves could reasonably have been
                  avoided, to be computed by allowing interest at the rate set
                  forth in Article 24 but in no case greater than the maximum
                  amount of interest permitted by law;

         (c)      The worth at the time of the award of the amount by which the
                  unpaid Rent for the balance of the Lease Term after the time
                  of the award exceeds the amount of unpaid Rent that Tenant
                  proves could reasonably have been avoided, to be computed by
                  discounting that amount at the discount rate of the Federal
                  Reserve Bank of San Francisco at the time of the award plus
                  one percent (1%);

         (d)      Any other amount necessary to compensate Landlord for all the
                  detriment proximately caused by Tenant's failure to perform
                  obligations under this Lease, including brokerage commissions
                  and advertising expenses, expenses of remodeling the Premises
                  for a new tenant (whether for the same or a different use),
                  and any special concessions made to obtain a new tenant; and

         (e)      Any other amounts, in addition to or in lieu of those listed
                  above, that may be permitted by applicable law.

22.3.2   CONTINUATION OF LEASE IN EFFECT. Landlord shall have the remedy
described in Civil Code Section 1951.4, which provides that, when a tenant has
the right to sublet or assign (subject only to reasonable limitations), the
landlord may continue the lease in effect after the tenant's breach and
abandonment and recover Rent as it becomes due. Accordingly, if Landlord does
not elect to terminate this Lease on account of any default by Tenant, Landlord
may enforce all of Landlord's rights and remedies under this Lease, including
the right to recover all Rent as it becomes due.

22.3.3   TENANT'S SUBLEASES. Whether or not Landlord elects to terminate this
Lease on account of any default by Tenant, Landlord may:

         (a)      Terminate any sublease, license, concession, or other
                  consensual arrangement for possession entered into by Tenant
                  and affecting the Premises.

         (b)      Choose to succeed to Tenant's interest in such an arrangement.
                  If Landlord elects to succeed to Tenant's interest in such an
                  arrangement, Tenant shall, as of the date of notice by
                  Landlord of that election, have no further right to, or
                  interest in, the Rent or other consideration receivable under
                  that arrangement.

22.4     FORM OF PAYMENT AFTER DEFAULT. If Tenant fails to pay any amount due
under this Lease within three (3) days after the due date or if Tenant draws a
check on an account with insufficient funds, Landlord shall have the right to
require that any subsequent amounts paid by Tenant to Landlord under this Lease
(to cure a default or otherwise) be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
other form approved by Landlord despite any prior practice of accepting payments
in a different form.

22.5     EFFORTS TO RELET. For purposes of this Article 22, Tenant's right to
possession shall not be considered to have been terminated by Landlord's efforts
to relet the Premises, by Landlord's acts of 


                                       39
<PAGE>   44
maintenance or preservation with respect to the Premises, or by appointment of a
receiver to protect Landlord's interests under this Lease. This list is merely
illustrative of acts that may be performed by Landlord without terminating
Tenant's right to possession.

22.6     ACCEPTANCE OF RENT WITHOUT WAIVING RIGHTS. Under Article 25, Landlord
may accept Tenant's payments without waiving any rights under this Lease,
including rights under a previously served notice of default. If Landlord
accepts payments after serving a notice of default, Landlord may nevertheless
commence and pursue an action to enforce rights and remedies under the
previously served notice of default without giving Tenant any further notice or
demand.

22.7     TENANT'S REMEDIES ON LANDLORD'S DEFAULT. Tenant waives any right to
terminate this Lease on Landlord's default under this Lease. Tenant's sole
remedy on Landlord's default is an action for damages or injunctive or
declaratory relief.

                                   ARTICLE 23
                LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS

23.1     LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS. All obligations to be
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
expense and without any reduction of Rent. If Tenant's failure to perform an
obligation continues for five (5) days after notice to Tenant, Landlord may
perform the obligation on Tenant's behalf, without waiving Landlord's rights for
Tenant's failure to perform any obligations under this Lease and without
releasing Tenant from such obligations.

23.2     REIMBURSEMENT BY TENANT. Within fifteen (15) days after receiving a
statement from Landlord, Tenant shall pay to Landlord the amount of expense
reasonably incurred by Landlord, under section 23.1, in performing Tenant's
obligation.

                                   ARTICLE 24
                                  LATE PAYMENTS

24.1     LATE CHARGES. If any Rent payment is not received by Landlord or
Landlord's designee within five (5) days after that Rent is due, Tenant shall
pay to Landlord a late charge of $2500 for Base Rent and seven and one half of
any other sum due as liquidated damages, in lieu of actual damages (other than
interest under section 24.2 and attorney fees and costs under section 27.1).
Tenant shall pay this amount for the first month in which all or any part of any
Rent payment remains delinquent for more than five (5) days after the due date.
The parties agree that this late charge represents a reasonable estimate of the
expenses that Landlord will incur because of any late payment of Rent (other
than interest and attorney fees and costs). Landlord's acceptance of any
liquidated damages shall not constitute a waiver of Tenant's default with
respect to the overdue amount or prevent Landlord from exercising any of the
rights and remedies available to Landlord under this Lease. Tenant shall pay the
late charge as Additional Rent with the next installment of Rent.

24.2     INTEREST. If any Rent payment is not received by Landlord or Landlord's
designee within five (5) days after that Rent is due, Tenant shall pay to
Landlord interest on the past-due amount, from the date due until paid, at the
rate of ONE PERCENT PER MONTH (OR ANY LOWER LEGAL MAXIMUM). Despite any other
provision of this Lease, the total liability for interest payments shall not
exceed the limits, if any, imposed by the usury laws of the State of California.
Any interest paid in excess of those limits shall be refunded to Tenant by
application of the amount of excess interest paid against any sums outstanding
in any order that Landlord requires. If the amount of excess interest paid
exceeds the sums outstanding, the portion exceeding those sums shall be refunded
in cash to Tenant by Landlord. To ascertain whether any interest payable exceeds
the limits imposed, any nonprincipal payment (including late charges) shall be
considered to the extent permitted by law to be an expense or a fee, premium, or
penalty rather than interest.


                                       40
<PAGE>   45
                                   ARTICLE 25
                                    NONWAIVER

25.1     NONWAIVER. No waiver of any provision of this Lease shall be implied by
any failure of Landlord to enforce any remedy for the violation of that
provision, even if that violation continues or is repeated. Any waiver by
Landlord of any provision of this Lease must be in writing. Such written waiver
shall affect only the provision specified and only for the time and in the
manner stated in the writing.

25.2     ACCEPTANCE AND APPLICATION OF PAYMENT; NOT ACCORD AND SATISFACTION. No
receipt by Landlord of a lesser payment than the Rent required under this Lease
shall be considered to be other than on account of the earliest amount due, and
no endorsement or statement on any check or letter accompanying a payment or
check shall be considered an accord and satisfaction. Landlord may accept checks
or payments without prejudice to Landlord's right to recover all amounts due and
pursue all other remedies provided for in this Lease. Landlord's receipt of
monies from Tenant after giving notice to Tenant terminating this Lease shall in
no way reinstate, continue, or extend the Lease Term or affect the Termination
Notice given by Landlord before the receipt of those monies. After serving
notice terminating this Lease, filing an action, or obtaining final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of that Rent shall not waive or affect such prior notice, action, or
judgment.

                                   ARTICLE 26
                         WAIVER OF RIGHT TO JURY TRIAL;
                               DISPUTE RESOLUTION

26.1     WAIVER OF RIGHT TO JURY TRIAL. Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim of injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.

               _____[Landlord's initials]    _____[Tenant's initials]

26.2     RESOLVING DISAGREEMENT OVER FAIR MARKET RENTAL VALUE. If Tenant timely
and effectively objects to Landlord's determination of Fair Market Rental Value
or to Landlord's determination of the Security Deposit for the Option Term,
under subsection 1.6.4 or 3.5.2.4, the disagreement shall be resolved under this
section 26.2. For purposes of this Section 26.2, references to "Fair Market
Rental Value" shall also refer to the Security Deposit during the Option Period,
if the amount of the Security Deposit is disputed.

26.2.1   NEGOTIATED AGREEMENT. Landlord and Tenant shall diligently attempt in
good faith to agree on the Fair Market Rental Value on or before the tenth
(10th) day after Tenant's objection to the Fair Market Rental Value (Outside
Agreement Date).

26.2.2   PARTIES' SEPARATE DETERMINATIONS. If Landlord and Tenant fail to reach
agreement on or before the Outside Agreement Date, Landlord and Tenant shall
each make a separate determination of the Fair Market Rental Value and notify
the other party of this determination within five (5) days after the Outside
Agreement Date.

26.2.2.1 TWO DETERMINATIONS. If each party makes a timely determination of the
Fair Market Rental Value, those determinations shall be submitted to arbitration
in accordance with subsections 26.2.3.1-26.2.3.9.

26.2.2.2 ONE DETERMINATION. If Landlord or Tenant fails to make a determination
of the Fair Market Rental Value within the five-day (5-day) period, that failure
shall be conclusively considered to 


                                       41
<PAGE>   46
be that party's approval of the Fair Market Rental Value submitted within the
five-day (5-day) period by the other party.

26.2.3   ARBITRATION. If both parties make timely individual determinations of
the Fair Market Rental Value under subsection 26.2.2, the Fair Market Rental
Value shall be determined by arbitration under this subsection 26.2.3.

26.2.3.1 SCOPE OF ARBITRATION. The determination of the arbitrator(s) shall be
limited to the sole issue of whether Landlord's or Tenant's submitted Fair
Market Rental Value is the closest to the actual Fair Market Rental Value as
determined by the arbitrator(s), taking into account the requirements of section
1.7 or subsection 3.5.2.

26.2.3.2 QUALIFICATIONS OF ARBITRATOR(S). The arbitrator(s) must be a licensed
real estate broker/a licensed real estate appraiser who has been active in the
leasing/appraisal of commercial high-rise properties in the San Francisco
Downtown Financial District area over the five-year (5-year) period ending on
the date of appointment as arbitrator(s).

26.2.3.3 PARTIES' APPOINTMENT OF ARBITRATORS. Within fifteen (15) days after the
Outside Agreement Date, Landlord and Tenant shall each appoint one arbitrator
and notify the other party of the arbitrator's name and business address.

26.2.3.4 APPOINTMENT OF THIRD ARBITRATOR. If each party timely appoints an
arbitrator, the two (2) arbitrators shall, within ten (10) days after the
appointment of the second arbitrator, agree on and appoint a third arbitrator
(who shall be qualified under the same criteria set forth above for
qualification of the initial two (2) arbitrators) and provide notice to Landlord
and Tenant of the arbitrator's name and business address.

26.2.3.5 ARBITRATORS' DECISION. Within thirty (30) days after the appointment of
the third arbitrator, the three (3) arbitrators shall decide whether the parties
will use Landlord's or Tenant's submitted Fair Market Rental Value and shall
notify Landlord and Tenant of their decision. The decision of the majority of
the three (3) arbitrators shall be binding on Landlord and Tenant.

26.2.3.6 IF ONLY ONE ARBITRATOR IS APPOINTED. If either Landlord or Tenant fails
to appoint an arbitrator within fifteen (15) days after the Outside Agreement
Date, the arbitrator timely appointed by one of them shall reach a decision and
notify Landlord and Tenant of that decision within thirty (30) days after the
arbitrator's appointment. The arbitrator's decision shall be binding on Landlord
and Tenant.

26.2.3.7 IF ONLY TWO ARBITRATORS ARE APPOINTED. If each party appoints an
arbitrator in a timely manner, but the two (2) arbitrators fail to agree on and
appoint a third arbitrator within the required period, the arbitrators shall be
dismissed without delay and the issue of Fair Market Rental Value shall be
submitted to binding arbitration under the commercial/real estate arbitration
rules of arbitration service to be determined, subject to the provisions of this
section 26.2.

26.2.3.8 IF NO ARBITRATOR IS APPOINTED. If Landlord and Tenant each fail to
appoint an arbitrator in a timely manner, the matter to be decided shall be
submitted without delay to binding arbitration under the commercial/real estate
arbitration rules of the American Arbitration Association subject to the
provisions of this section 26.2.

26.2.3.9 COST OF ARBITRATION. The cost of the arbitration shall be paid by the
losing party.

                                   ARTICLE 27

                             ATTORNEY FEES AND COSTS

27.1     ATTORNEY FEES AND COSTS. If either party undertakes litigation or
arbitration against the other party arising out of or in connection with this
Lease, the prevailing party shall be entitled to recover from the 


                                       42

<PAGE>   47
other party all reasonable attorney fees, arbitration costs, and court costs
incurred. The prevailing party shall be determined under Civil Code section
1717(b)(1) or any successor statute.

                                   ARTICLE 28

                          LANDLORD'S ACCESS TO PREMISES

28.1     LANDLORD'S ACCESS TO PREMISES. Landlord and its agents shall have the
right at all reasonable times after reasonable notice to enter the Premises to:

         (a)      Inspect the Premises;

         (b)      Show the Premises to prospective purchasers, mortgagees, or
                  tenants or to ground lessors or underlying lessors;

         (c)      Serve, post, and keep posted notices required by law or that
                  Landlord considers necessary for the protection of Landlord or
                  the Building; or

         (d)      Make repairs, replacements, alterations, or improvements to
                  the Premises or Building that Landlord considers necessary or
                  desirable.

         Despite any other provision of this Article 28, Landlord may enter the
         Premises at any time to:

         (a)      Perform services required of Landlord on an emergency basis;

         (b)      Take possession due to any breach of this Lease; or

         (c)      Perform any covenants of Tenant that Tenant fails to perform.

         Tenant shall reasonably cooperate with Landlord during such access.

28.2     TENANT'S WAIVER. Landlord may enter the Premises without the abatement
of Rent and may take steps to accomplish the stated purposes. Tenant waives any
claims for damages caused by Landlord's entry, including damage claims for:

         (a)      Injuries;

         (b)      Inconvenience to or interference with Tenant's business;

         (c)      Lost profits; and

         (d)      Loss of occupancy or quiet enjoyment of the Premises.

28.3     METHOD OF ENTRY. For entry as permitted by this Article 28, Landlord
shall at all times have a key or, if applicable, a card key with which to unlock
all the doors in the Premises, excluding Tenant's vaults, safes, and special
security areas designated in Summary of Basic Lease Information section 4(d). In
an emergency situation, Landlord shall have the right to use any means that
Landlord considers proper to open the doors in and to the Premises. Any such
entry into the Premises by Landlord shall not be considered a forcible or
unlawful entry into, or a detainer of, the Premises or an actual or constructive
eviction of Tenant from any portion of the Premises.

                                   ARTICLE 29
                                      SIGNS

29.1     BUILDING NAME; LANDLORD'S SIGNAGE RIGHTS. Landlord may at any time
change the name of the Building and install, affix, and maintain all signs on
the exterior and interior of the Building as Landlord may, in Landlord's sole
discretion, desire. Tenant shall not have or acquire any property right or
interest in the name of the Building. Tenant may use the name of the Building or
pictures or illustrations of the Building in advertising or other publicity
during the Lease Term.

29.2     TENANT'S SIGNAGE RIGHTS WITHIN BUILDING.

29.2.1   SINGLE-TENANT FLOOR. If the Premises comprise an entire floor of the
Building, Tenant may, at Tenant's sole expense, install identification signs
(including its logo) anywhere in the Premises, including the elevator lobby of
the Premises, subject to the following requirements:


                                       43

<PAGE>   48
         (a)      Tenant must obtain Landlord's prior written approval for such
                  signs, which Landlord may, in Landlord's sole discretion,
                  grant or deny;

         (b)      All signs must be in keeping with the quality, design, and
                  style of the Building; and

         (c)      No sign may be visible from the exterior of the Building.

29.2.2   MULTI-TENANT FLOOR. If other tenants occupy space on the floor on which
the Premises are located, Tenant's identifying signs shall be provided by
Landlord at Tenant's expense. The signs shall be comparable to those used by
Landlord for other similar floors in the Building and shall comply with
Landlord's Building standard signage program.

29.2.3   PROHIBITED SIGNS AND OTHER ITEMS. Tenant may not display any signs on
the exterior or roof of the Building or in the common areas of the Building or
the Real Property. Tenant may not install or display any signs, window
coverings, blinds (even if located behind the Landlord-approved window coverings
for the Building), or other items visible from the exterior of the Premises
without Landlord's prior written approval, which Landlord may, in Landlord's
sole discretion, grant or withhold. Any signs, notices, logos, pictures, names,
or advertisements that are installed by or for Tenant without Landlord's
approval may be removed without notice by Landlord at Tenant's expense.

                                   ARTICLE 30
                                 TENANT PARKING

This Article was intentionally deleted from this Lease. No parking rights or
privileges are included in this Lease.

                                   ARTICLE 31
                                 MISCELLANEOUS

31.1     CAPTIONS. The captions of articles and sections and the table of
contents of this Lease are for convenience only and have no effect on the
interpretation of the provisions of this Lease.

31.2     WORD USAGE. Unless the context clearly requires otherwise:

         (a)      The plural and singular numbers shall each be considered to
                  include the other;

         (b)      The masculine, feminine, and neuter genders shall each be
                  considered to include the others;

         (c)      "Shall," "will," "must," "agrees," and "covenants" are each
                  mandatory;

         (d)      "May" is permissive;

         (e)      "Or" is not exclusive; and

         (f)      "Includes" and "including" are not limiting.

31.3     COUNTING DAYS. Days shall be counted by excluding the first day and
including the last day. If the last day is a Saturday, Sunday, or legal holiday
as described in Government Code sections 6700-6701, the time for performance of
that obligation shall be extended to 5 p.m. of the first following date that is
not a Saturday, Sunday or legal holiday. Any act required by this Lease to be
performed by a certain day shall be timely performed if completed before 5 p.m.
local time on that date. If the day for performance of any obligation under this
Lease is a Saturday, Sunday, or legal holiday, the time for performance of that
obligation shall be extended to 5 p.m. local time on the first following date
that is not a Saturday, Sunday, or legal holiday.

31.4     ENTIRE AGREEMENT; AMENDMENTS. This Lease and all exhibits , addenda,
schedules, and agreements referred to in this Lease constitute the final,
complete, and exclusive statement of the terms of the agreement between Landlord
and Tenant pertaining to Tenant's lease of 2nd and 3rd floors in the Building
and supersedes all prior and contemporaneous understandings or agreements of the
parties. Neither party has been induced to enter into this Lease by, and neither
party is relying on, any 


                                       44
<PAGE>   49
representation or warranty outside those expressly set forth in this Lease. This
Lease may be amended only by an agreement in writing signed by Landlord and
Tenant.

31.5     EXHIBITS. The Exhibits and Addendum, if applicable, attached to this
Lease are a part of this Lease and incorporated into this Lease by reference.

31.6     REASONABLENESS AND GOOD FAITH. Except as limited elsewhere in this
Lease, whenever this Lease requires Landlord or Tenant to give its consent or
approval to any action on the part of the other, such consent or approval shall
not be unreasonably withheld or delayed.

31.7     PARTIAL INVALIDITY. If a court or arbitrator of competent jurisdiction
holds any Lease clause to be invalid or unenforceable in whole or in part for
any reason, the validity and enforceability of the remaining clauses, or
portions of them, shall not be affected .

31.8     BINDING EFFECT. Subject to Article 17 and sections 31.16-31.17, this
Lease shall bind and benefit the parties to this Lease and their legal
representatives and successors in interest.

31.9     INDEPENDENT COVENANTS. This Lease shall be construed as though the
covenants between Landlord and Tenant are independent and not dependent. Tenant
expressly waives the benefit of any statute to the contrary and agrees that if
Landlord fails to perform its obligations under this Lease, Tenant shall not be
entitled:

         (a)      To make any repairs or perform any acts at Landlord's expense;
                  or

         (b)      To any setoff of the Rent or other amounts owing under this
                  Lease against Landlord.

         The foregoing, however, shall in no way impair Tenant's right to bring
a separate action against Landlord for any violation by Landlord of the
provisions of this Lease if notice is first given to Landlord and any lender of
whose address Tenant has been notified, and an opportunity is granted to
Landlord and that lender to correct those violations as provided in section 21.4
and subsection 22.7.1.

31.10    GOVERNING LAW. This Lease shall be construed and enforced in accordance
with the laws of the State of California.

31.11    NOTICES. All notices (including requests, demands, approvals, or other
communications) under this Lease shall be in writing.

31.11.1  METHOD OF DELIVERY. Notice shall be sufficiently given at the addresses
specified in section 13 of the Basic Lease Provisions for all purposes as
follows:

         (a)      When personally delivered to the recipient, notice is
                  effective on delivery.

         (b)      When mailed first class to the last address of the recipient
                  known to the party giving notice, notice is effective on
                  delivery.

         (c)      When mailed by certified mail with return receipt requested,
                  notice is effective on receipt if delivery is confirmed by a
                  return receipt.

         (d)      When delivered by overnight delivery Federal
                  Express/Airborne/United Parcel Service/DHL WorldWide Express
                  with charges prepaid or charged to the sender's account,
                  notice is effective on delivery if delivery is confirmed by
                  the delivery service.

         (e)      When sent by telex or fax to the last telex or fax number of
                  the recipient known to the party giving notice, notice is
                  effective on receipt as long as (1) a duplicate copy of the
                  notice is promptly given by first-class or certified mail or
                  by overnight delivery or (2) the receiving party delivers a
                  written 


                                       45
<PAGE>   50
                  confirmation of receipt. Any notice given by telex or fax
                  shall be considered to have been received on the next business
                  day if it is received after 5 p.m. (recipient's time) or on a
                  nonbusiness day.

31.11.2  REFUSED, UNCLAIMED, OR UNDELIVERABLE NOTICES. Any correctly addressed
notice that is refused, unclaimed, or undeliverable because of an act or
omission of the party to be notified shall be considered to be effective as of
the first date that the notice was refused, unclaimed, or considered
undeliverable by the postal authorities, messenger, or overnight delivery
service.

31.11.3  ADDRESSES. Addresses for purposes of giving notice are set forth in
section 13 of the Summary of Basic Lease Information. Either party may change
its address or telex or fax number by giving the other party notice of the
change in any manner permitted by this section 31.11.

31.11.4  LENDERS AND GROUND LESSOR. If Tenant is notified of the identity and
address of Landlord's lender or ground or underlying lessor and requested to
provide notice to same, Tenant shall give that lender or ground or underlying
lessor written notice of any default by Landlord under the terms of this Lease.

31.12    FORCE MAJEURE. If performance by a party of any portion of this Lease
is made impossible by any prevention, delay, or stoppage caused by strikes;
lockouts; labor disputes; acts of God; inability to obtain services, labor, or
materials or reasonable substitutes for those items; government actions; civil
commotions; fire or other casualty; or other causes beyond the reasonable
control of the party obligated to perform, performance by that party for a
period equal to the period of that prevention, delay, or stoppage is excused but
not beyond one hundred eighty days. Tenant's obligation to pay Rent, however, is
not excused by this section 31.12.

31.13    TIME OF THE ESSENCE. Time is of the essence of this Lease and each of
its provisions.

31.14    MODIFICATIONS REQUIRED BY LANDLORD'S LENDER. If any lender of Landlord
or ground lessor of the Real Property requires a modification of this Lease that
will not increase Tenant's cost or expense or materially or adversely change
Tenant's rights and obligations, this Lease shall be so modified and Tenant
shall execute whatever documents are required and deliver them to Landlord
within ten (10) days after the request.

31.15    RECORDING; MEMORANDUM OF LEASE. Except as provided in this section
31.15, neither this Lease nor any memorandum, affidavit, or other writing
relating to this Lease may be recorded by Tenant or anyone acting through,
under, or on behalf of Tenant. Recordation in violation of this provision
constitutes an act of default by Tenant. On request by Landlord or any lender or
ground lessor, Tenant shall execute a short form of Lease for recordation,
containing (among other customary provisions) the names of the parties and a
description of the Premises and the Lease Term. Tenant shall execute,
acknowledge before a notary public, and deliver that form to Landlord within ten
(10) days after the request.

31.16    LIABILITY OF LANDLORD. Except as otherwise provided in this Lease or
applicable law, for any breach of this Lease the liability of Landlord
(including all persons and entities that comprise Landlord, and any successor
landlord) and any recourse by Tenant against Landlord shall be limited to the
interest of Landlord and Landlord's successors in interest in and to the
Building and Real Property. On behalf of itself and all persons claiming by,
through, or under Tenant, Tenant expressly waives and releases Landlord from any
personal liability for breach of this Lease. Notwithstanding any other provision
of this Lease (i) Landlord shall be personally liable for the return of any
portion of the Prepaid Rent not yet due upon the early termination of the Lease
for any reason other than Tenant's default, less any offsets or credits to which
Landlord is entitled hereunder and (ii) Landlord shall be personally liable for
the return of any funds drawn by Landlord on the Letter of Credit in violation
of this Lease to the extent required under this Lease, unless drawn in good
faith and in reasonable reliance upon the advice of legal counsel.

31.17    TRANSFER OF LANDLORD'S INTEREST. Landlord has the right to transfer all
or part of its interest in the Building and Real Property and in this Lease. On
such a transfer, Landlord shall automatically be released 


                                       46
<PAGE>   51
from all liability accruing thereafter under this Lease, and Tenant shall look
solely to that transferee for the performance of Landlord's obligations under
this Lease after the date of transfer, subject to section 6.2. . Landlord shall
remain liable for any unamortized Prepaid Rent and any portion of the Security
Deposit that was drawn and not applied by Landlord in accordance with the terms
of this Lease, unless the transferee assumes liability for such sums. Landlord
may assign its interest in this Lease to a mortgage lender as additional
security. This assignment shall not release Landlord from its obligations under
this Lease, and Tenant shall continue to look to Landlord for the performance of
its obligations under this Lease

31.18    JOINT AND SEVERAL OBLIGATIONS OF TENANT. If more than one individual or
entity comprises Tenant, the obligations imposed on each individual or entity
that comprises Tenant under this Lease shall be joint and several. Landlord and
Tenant acknowledge that a corporation is a single entity.

31.19    SUBMISSION OF LEASE. Submission of this document for examination or
signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in favor
of Tenant. This document is not effective as a lease or otherwise until executed
and delivered by both Landlord and Tenant.

31.20    LEGAL AUTHORITY.

31.20.1  CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of that corporation represents and warrants that:

         (a)      The individual is authorized to execute and deliver this Lease
                  on behalf of that corporation in accordance with a duly
                  adopted resolution of the corporation's board of directors and
                  in accordance with that corporation's articles of
                  incorporation or charter and bylaws;

         (b)      This Lease is binding on that corporation in accordance with
                  its terms;

         (c)      The corporation is a duly organized and legally existing
                  corporation in good standing in the State of Delaware; and

         (d)      The execution and delivery of this Lease by that corporation
                  shall not result in any breach of or constitute a default
                  under any mortgage, deed of trust, lease loan, credit
                  agreement, partnership agreement, or other contract or
                  instrument to which that corporation is a party or by which
                  that corporation may be bound.

If Tenant is a corporation, Tenant shall, within fifteen (15) days after the
date of this Lease, deliver to Landlord a copy of a resolution of Tenant's board
of directors (or other sufficient evidence of corporate authority) authorizing
or ratifying the execution and delivery of this Lease. That resolution or
submission of other evidence must be duly certified by the secretary or
assistant secretary of the corporation.

31.20.2  PARTNERSHIP AUTHORITY. If Tenant is a partnership, each individual
executing this Lease on behalf of the partnership represents and warrants that:

         (a)      The individual is duly authorized to execute and deliver this
                  Lease on behalf of the partnership in accordance with the
                  partnership agreement, or an amendment to the partnership
                  agreement, now in effect;

         (b)      This Lease is binding on that partnership;

         (c)      The partnership is a duly organized and legally existing
                  partnership and has filed all certificates required by law;
                  and


                                       47
<PAGE>   52
         (d)      The execution and delivery of this Lease shall not result in
                  any breach of or constitute a default under any mortgage, deed
                  of trust, lease, loan, credit agreement, partnership
                  agreement, or other contract or instrument to which the
                  partnership is a party or by which the partnership may be
                  bound.

31.20.3  LIMITED LIABILITY COMPANY AUTHORITY. If Tenant is a limited liability
company, each individual executing this Lease on behalf of that company
represents and warrants that:

         (a)      The individual(s) executing this Lease on behalf of the
                  company has full power and authority under the company's
                  governing documents to execute and deliver this Lease in the
                  name of and on behalf of the company and to cause the company
                  to perform its obligations under this Lease;

         (b)      The company is a limited liability company duly organized and
                  validly existing under the laws of the State of California and
                  is duly qualified and validly existing as a foreign limited
                  liability company in California; and

         (c)      The company has the power and authority under applicable law
                  and its governing documents to execute and deliver this Lease
                  and to perform its obligations under this Lease.

31.21    RIGHT TO LEASE. Landlord reserves the absolute right to contract with
any other person or entity to be a tenant in the Building as Landlord, in
Landlord's sole business judgment, determines best to promote the interests of
the Building. Tenant does not rely on the expectation, and Landlord does not
represent, that any specific tenant or type or number of tenants will, during
the Lease Term, occupy any space in the Building.

31.22    NO AIR RIGHTS. No rights to any view from the Premises or to exterior
light or air to the Premises are created under this Lease.

31.23    BROKERS. Landlord and Tenant each represents to the other that it has
had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, except for the real estate brokers or agents
specified in Summary of Basic Lease Information section 14 (Brokers) and that
they know of no other real estate broker or agent who is entitled to a
commission or finder's fee in connection with this Lease. Each party shall
indemnify, protect, defend, and hold harmless the other party against all
claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including reasonable attorney fees) for any leasing commission,
finder's fee, or equivalent compensation alleged to be owing on account of the
indemnifying party's dealings with any real estate broker or agent other than
the Brokers. Landlord shall pay its Broker a commission in connection with this
Lease pursuant to separate agreement. The terms of this section 31.23 shall
survive the expiration or earlier termination of the Lease Term.

31.24    TRANSPORTATION MANAGEMENT. Tenant shall fully comply with all current
or future compulsory programs imposed by any public authority, intended to
manage parking, transportation, or traffic in and around the Building. In
connection with this compliance, Tenant shall take responsible action for the
transportation planning and management of all employees located at the Premises
by working directly with Landlord, any government transportation management
organization, or other transportation-related committees or entities. This
provision includes programs such as the following:

         (a)      Restrictions on the number of peak-hour vehicle trips
                  generated by Tenant;

         (b)      Encouragement of increased vehicle occupancy through
                  employer-sponsored financial or in-kind incentives;

         (c)      Implementation of an in-house or area-wide ridesharing program
                  and appointment of an employee transportation coordinator; and

         (d)      Flexible work shifts for employees.


                                       48
<PAGE>   53
Executed as of the date stated in Summary of Basic Lease Information section 1.

LANDLORD:                              TENANT:

TIFFANY M. GIN AND STANTON LOWE        QUOKKA SPORTS, INC.,
DBA:  SPEAR STREET SAPPHIRE,


/s/ TIFFANY M. GIN                     By: /s/ LES SCHMIDT
- -----------------------------------        -------------------------------------
Tiffany M. Gin                             Les Schmidt

                                       Its: Chief Financial Officer and Senior 
                                            Vice President


/s/ STANTON LOWE
- -----------------------------------
Stanton Lowe


                                       49
<PAGE>   54
                                    EXHIBIT A

                               DIAGRAM OF PREMISES


                                128 SPEAR STREET



                             [DIAGRAM OF 2ND FLOOR]







                             [DIAGRAM OF 3RD FLOOR]


<PAGE>   55
                                    EXHIBIT B

                       LEGAL DESCRIPTION OF REAL PROPERTY

                 [FIDELITY LOGO] FIDELITY NATIONAL TITLE COMPANY
                  1844 Market Street o San Francisco, CA 94102
                       (415) 552-3646 o FAX (415) 552-3640

                               PRELIMINARY REPORT

ESCROW OFFICER: CATHY GARIBALDI                            ORDER NO.:  1006515-B
TITLE OFFICER: ANY ROLLINS                                             AMENDMENT

TO:  Magna Capital Group
     310 Townsend #408
     San Francisco, CA  94107

ATTN:  Bob Stark
YOUR REFERENCE:  Gin and Low
                                                            SHORT TERM RATE: YES

PROPERTY ADDRESS:  124-134 Spear Street, San Francisco, California

EFFECTIVE DATE:  October 17, 1996, 7:30 a.m.

The form of Policy or Policies of title insurance contemplated by this report
is:

American Land Title Association Loan Policy (10-17-92)-Form 1

1.    THE ESTATE OR INTEREST IN THE LAND HEREINAFTER DESCRIBED OR REFERRED TO
      COVERED BY THIS REPORT IS:

      A Fee

2.    TITLE TO SAID ESTATE OR INTEREST AT THE DATE HEREOF IS VESTED IN:

Stanton Lowe and Tiffany M. Gin, husband and wife, as Joint Tenants.

3.    THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE CITY OF SAN
      FRANCISCO, IN THE COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA, AND IS
      DESCRIBED AS FOLLOWS:

Beginning at a point on the Southwesterly line of Spear Street, distant thereon
137 feet and 6 inches Southeasterly from the Southeasterly line of Mission
Street running thence Southeasterly along said line of Spear Street 45 feet and
10 inches; thence at a right angle Southwesterly 137 feet and 6 inches; thence
at a right angle Northwesterly 45 feet and 10 inches; thence at a right angle
Northeasterly 137 feet and 6 inches to the point of beginning.

Being a part of 100 Vara Block No. 325.

A.P.N:  LOT 2, BLOCK 3717

Assessor's Parcel No:  Lot 2, Block 3717


<PAGE>   56
                                    EXHIBIT E

                              RULES AND REGULATIONS

                               THE MAGNA BUILDING

                              RULES AND REGULATIONS

1.       Except as provided or required by Landlord, no sip, placard, picture,
         advertisement, name, notice or other graphics shall be inscribed,
         displayed printed or affixed by Tenant on or to any pan of the Building
         or exterior of the Premises or to the windows or doors thereof without
         Landlord's prior written consent, which shall not be unreasonably
         withhold and Landlord shall have the right to remove any such sign,
         placard. picture, advertisement name or notice without notice to Tenant
         and at Tenant's sole expertise.

2.       Except as consented to in writing by Landlord, no draperies, curtains,
         blinds, shades, screens or other devices shall be hung at or used by
         Tenant in connection with any window or door or doors of the Premises.

3.       The bulletin board or directory of the Building shall be used primarily
         for display of the name and location of tenants and Landlord reserves
         the right to exclude any other names therefrom. to limit the number of
         names associated with Tenant to be placed thereon and to charge for
         names associated with Tenant to be placed thereon at rates applicable
         to all tenants and to charge for changes or substitutions thereto.

4.       The sidewalks, halls, passages, exits, entrances, elevators and
         stairways of the Building shall not be obstructed by Tenant or used by
         Tenant for any purpose other than for ingress to and egress from the
         Premises. The halls, passages, exits, entrances, elevators and
         stairways of the Building are not for the use of the general public and
         Landlord in all cam reserves the right to control the same and prevent
         access thereto by all persons, other than Tenant its employees and
         invitees, whose presence, the in the judgment of Landlord, is or may be
         prejudicial to the safety, character, reputation or interest of the
         Building and its tenants. No person shall go upon the balconies or roof
         of the Building unless expressly so authorized by Landlord.

5.       Tenant shall not alter any lock nor install any new or additional locks
         or any bolts on any interior or exterior do" of the Premises.

6.       The doors, windows, lights fixtures and any lights or skylights that
         reflect or admit light into the halls or other places of the Building
         shall not be covered or obstructed. The toilet rooms, toilets, urinals,
         wash bowls and other apparatus shall not be used for any purpose other
         than that for which they were constructed and no foreign substances of
         any kind whatsoever shall be thrown or placed therein. The expense of
         any breakage, stoppage or damage resulting from the violation of this
         rule shall be borne by the tenant who, or whom employees or invitees,
         cause such expense.

7.       Tenant shall not mark, drive nails, screw or drill into the walls,
         floors, ceilings, woodwork or plaster of or in any way deface the
         Building or the Premises, except that within the Premises Tenant may
         affix to non-supporting partitions pictures, paintings and other
         similar solely decorative items, subject to Tenant's right to make
         alterations; under the lease.

8.       Furniture, freight or equipment of every kind shall be moved into or
         out of the building only at such times and in such manner as Landlord
         shall designate. Landlord may prescribe and limit the weight, size and
         position of all equipment to be used by Tenant, other than standard
         office desks, chairs and tables and portable office machines. Safes and
         other heavy equipment shall be adequately supported as Landlord or
         Landlord's engineer reasonably dams necessary. Ali damage to the
         Building or the Premises caused by moving or maintaining any property
         of Tenant shall be repaired at the expense of Tenant.


                                       1             Initials: ________ Tenants:
<PAGE>   57
9.       Tenant shall not employ any person, other than the janitor provided by
         Landlord, for the purpose of cleaning the Premises unless otherwise
         agreed to in writing by Landlord. Except with the written consent of
         Landlord no person shall be permitted to enter the Building for the
         purpose of cleaning the same. Tenant shall not cause any unnecessary
         labor by carelessness or indifference in the preservation of good order
         and cleanliness. Janitor service shall include ordinary dusting and
         cleaning, and removal of trash which shall be placed in typical office
         waste containers, and shall not include shampooing carpets or rugs,
         moving of furniture or other special services. Janitor service will not
         be furnished when rooms are occupied during the regular hours when
         janitor service is provided. Window cleaning shall be done only at the
         regular and customary times determined by Landlord for such services.

10.      Tenant shall not place any refuse or waste or sweep or throw or permit
         to be swept or thrown any dirt or other substance into any of the
         corridors, halls or elevators or out of the doors or stairways, of the
         Building; use or keep or permit to be used or kept any foul or noxious
         gas or substance; permit or suffer the Premises to be occupied or used
         in a manner offensive or objectionable to Landlord or other tenants by
         reason of noise, odors or vibrations; interfere in any way with other
         than or persons having business in the Building, or bring or keep or
         permit to be brought or kept in the Building any animal life form,
         other thin human, except seeing eye dogs when in the company of their
         masters.

11.      No cooking, except for the use of a microwave by tenants and its
         employees, shall be done or permitted in the Premises, nor shall the
         Premises be used for the stomp of merchandise, washing clothes,
         lodging, or any unlawful purposes.

12.      Tenant shall not use or keep in the Building any paint, kerosene
         gasoline or flammable or combustible fluid or material at use any
         method of heating or air-conditioning other than that supplied by
         Landlord.

13.      No boring or cutting for telephone, telegraph or electric wires shall
         be allowed without the prior written consent of Landlord and any such
         wires permitted doll be introduced at the place and in the manner
         described by Landlord. The location of telephones, speakers, fire
         extinguishers and all other office equipment affixed to the Premises
         shall be subject to Landlord's approval. Tenant shall pay all expenses
         incurred in connection with the installation and removal of its
         equipment, including any telephone, telegraph, data and electricity
         distribution equipment.

14.      Upon termination of occupancy of the Building, Tenant shall deliver to
         Landlord all keys and access cards furnished by Landlord or in tenant's
         possession to all locks on the Premises or in the Building.

15.      Tenant shall not affix any floor covering in any manner except as
         approved by the Landlord. The expense of repairing any damage caused by
         removal of any non-approved floor covering shall be borne by Tenant.

16.      No mail, furniture, packages, supplies, equipment, merchandise or
         deliveries of any kind will be received in die Building or carried up
         or down in the elevators except between such hours and in such
         elevators as shall be designated by Landlord.

17.      The Normal Business Hours, for the Building we 8:00 &m. to 6:00 p.m.
         Monday through Friday, holidays excluded. Access to the Building may be
         refused outside of Normal Business Hours unless the person seeking
         access shows proper identification in no case shall Landlord be liable
         for any loss or damage for any error with respect to the admission to
         or exclusion from the Building of any person. In case of invasion, mob,
         riot, public excitement or other commotion and at such times as
         Landlord deems necessary for the safety and protection of the Building,
         its tenants and all property located therein, Landlord may prohibit and
         prevent access to the Building by all persons by any means Landlord
         dams appropriate.

18.      Tenants shall be solely responsible to see that the exterior doors of
         its Premises are closed and securely locked when they are unattended.
         Tenant shall exercise extraordinary care and caution that all water
         faucets or water apparatus are entirely shut off each day before the
         Premises are left unoccupied and that 


                                       2             Initials: ________ Tenants:
<PAGE>   58
         all electricity or gas shall likewise be carefully shut off to a to
         prevent waste or damage to Landlord or to other tenants of the
         Building.

19.      Landlord may exclude or expel tom the Building my person who. in the
         judgment of Landlord, is intoxicated or under the influence of liquor
         or drugs, or shall in any manner do any act in violation of any of the
         rules and regulations of the Building.

20.      Tenant's service and maintenance requirements will be attended to only
         in accordance with the terms of the Law and upon application to
         Landlord at the office of the Building or such other place as Landlord
         may designate. Employees of Landlord shall not perform any work outside
         of their regular duties unless under special instructions from
         Landlord, and no employee of Landlord shall be required to admit any
         person (tenant or otherwise) to any premises in the Building.

21.      No vending or food or beverage dispensing machine or machine of any
         description shall be installed, maintained, or operated upon the
         Premises or in the Building without Landlord's prior written
         permission.

22.      Landlord, without notice and without liability to any tenant, at any
         time may change the name or the street address of the Building.

23.      Tenant shall be liable to Landlord and to each other tenant of the
         Building for any loss, cost, expense, damage or liability, Including
         attorney's fees, caused or occasioned by the failure of Tenant to
         comply with these rules, but Landlord shall have no liability for
         failure or for failing or being unable to enforce compliance therewith
         by any tenant and such failure by Landlord or non-compliance by any
         other tenant shall not be a ground for termination by Tenant of the Law
         to which these rules and regulations are attached.

24.      Landlord shall have the right to prohibit any advertising which uses
         the Building's name by any tenant which, in Landlord's opinion, tends
         to impair the reputation of the Building or its desirability as a
         building for offices, and upon written notice from Landlord, Tenant
         shall refrain from or discontinue such advertising.

25.      Tenant shall not install or operate any phonograph, musical instrument.
         radio receiver or similar device in the Building in such manner as to
         disturb or annoy other tenants of the Building or the neighborhood.
         Tenant shall not install any antennae, aerial wires or other equipment
         outside the Building without the prior written approval of Landlord.

26.      Tenant shall not allow anything to be placed an the outside window
         ledges of the Premises or to be thrown out of the windows of the
         Building. No bicycle or other. vehicle shall be brought into the
         offices, halls, corridors, elevators or any other part of the Building
         by Tenant or the agents, employees or invitees or Tenant.

27.      Tenant shall give Landlord prompt notice of any accidents to or defects
         in the Building, including, but not limited to, water pipes, gas pipes,
         electric lights mod fixtures heating apparatus, or any other service
         equipment.

28.      Landlord, in order to comply with the requirements of California
         Assembly Bill Number 13 of 1994, has designated the Building a "No
         Smoking" building which prohibits smoking in the tenants' promises and
         all common areas. Tenant agrees to make reasonable efforts to enforce
         this regulation with its employees and invitees, and to utilize the ash
         urns at the rear entrance to the Building, the designated smoking area.

29.      Tenant shall abide by all reasonable energy conservation measures
         employed by Landlord, including but not limited to requirements that
         lights be extinguished upon leaving the Premises.

30.      Tenant may not use the fire escape area nor the. roof was as its
         "outside smoking space.


                                       3             Initials: ________ Tenants:
<PAGE>   59
                                    EXHIBIT F

                           TENANT ESTOPPEL CERTIFICATE


Date:                               

Citicorp Bank
@Mr. Allan Tan, Credit Administrator
One Sansome St., 23rd Flr.,
San Francisco, CA 94103

         The undersigned, ______________________________ Tenant ("Tenant", as
tenant under a lease (the "Lease") of certain premises dated
____________________, Lease Date executed by Tenant and SPEAK STREET SAPPHIRE
("Landlord'), does hereby, state, declared, represent and warrant as follows:

         1.       The copy of the Lean attached hereto as Exhibit I is a true
and correct copy of the Lease and the Lease is in full force and effect and has
not been amended, supplemented or changed, except as follows (if none, state
so): ___________________________________________________________________________
_______________________________________________________________________________.

         2.       Tenant has accepted possession of the promises demised under
the Lease, and all items of an executory nature have bow completed under the
term of the Lease, including, but not limited to, completion of Construction of
the demised premises (and all other improvements required under the Lease) in
accordance with applicable plans and specifications and within the time periods
set forth in the Lease and otherwise in accordance with the Lease, and payments
of any improvements allowance, passthroughs or other funds owing by Landlord to
Tenant. Tenant further acknowledges that the term commenced on
____________________ and shall expire on __________ unless sooner terminated or
extended in accordance with the term of the Lease.

         3.       No default or event that with the passage of time or the
giving of notice, or both, would constitute a default (referred to herein
collectively as a "default") an the part of the undersigned exists under the
Lease in the performance of the terms, covenants and conditions of Lease
required to be performed an the part of the undersigned.

         4.       To the knowledge of the undersigned, no default an the part of
Landlord exist under the Lease in the performance of the term, covenants and
conditions of the Lease required to be performed an the part of Landlord.

         5.       Tenant has no option or right to purchase the property of
which the premises are a pan, or any part thereof.

         6.       No rentals are accrued and unpaid under the Lease.

         7.       No prepayment of rentals due under the Lease have been nude
and no security or deposits as security have bow made thereunder, except as set
forth in the Lease.


<PAGE>   60
         8.       The undersigned has no defense as to its obligations under the
Lease and claims no setoff or counterclaims against Landlord.

         9.       The undersigned has not received notice of an assignment,
hypothecation, mortgage, or pledge of Landlord's interest in the Lease or the
rents or other amounts payable thereunder.

         10.      The undersigned agrees to notify you of any default on the
part of the Landlord under the Lease which would entitle the undersigned to
cancel the Low or to abate the rent payable thereunder, and further agrees that,
notwithstanding any provisions of the Lease, no notice or cancellation thereof
shall be effective unless you have received said notice and have failed within
thirty (30) days after the expiration of the cure period provided to Landlord
under the Lease to cure or commence to cure the default which give rise to the
notice of cancellation.

         11.      The undersigned understands and acknowledges that you are
about to make a loan to Landlord and receive as part of the security for such
loan (i) a Deed of Trust, Security Agreement and fixture Filing encumbering
Landlord's fee interest in the property of which the leased premises are a
portion and the rents, issues and profits of the Lease and (ii) an Assignment
warranties contained herein in making such loan.


                  TENANT:


                  By:__________________________________


<PAGE>   61
                                    EXHIBIT G

                                LETTER OF CREDIT


IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB98IS12XX

DATE:  FEBRUARY __________, 1999

BENEFICIARY:
TIFFINY M. GIN & STANTON LOWE
SPEAR STREET SAPPHIRE
C/O THE MAGNA BUILDING
128 SPEAR STREET, 4TH FLOOR
SAN FRANCISCO, CA  94105
AS "LANDLORD"

APPLICANT:
QUOKKA SPORTS, INC.
525 BRENNAN ST., GROUND FLOOR
SAN FRANCISCO, CA  94107
AS "TENANT"

AMOUNT:  US$434,500.00 (FOUR HUNDRED THIRTY FOUR THOUSAND FIVE HUNDRED AND
00/100 U.S. DOLLARS)

EXPIRATION DATE/LOCATION:  MARCH 31, 2000/AT OUR COUNTERS AT THE ABOVE ADDRESS.

GENTLEMAN:

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB99IS12XX IN
YOUR FAVOR AVAILABLE BY YOUR DRAFTS DRAWN ON US AT SIGHT AND ACCOMPANIED BY THE
FOLLOWING DOCUMENTS:

1.       THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.

2.       A SIGNED AND DATED CERTIFICATION FROM THE BENEFICIARY STATING THE
FOLLOWING:

         (a)      "APPLICANT IS IN DEFAULT UNDER THAT CERTAIN OFFICE LEASE
                  BETWEEN BENEFICIARY AS LANDLORD AND APPLICANT AS TENANT, DATED
                  FEBRUARY --, 1999, (BEYOND ANY NOTICE AND CURE PERIODS
                  REQUIRED PURSUANT TO SECTION 22.1 OF THE LEASE) AND THE TERMS
                  AND CONDITIONS OF THE LEASE AUTHORIZE THE LANDLORD TO NOW DRAW
                  DOWN ON THE LETTER OF CREDIT."

                                       OR

         (b)      "WITHIN THIRTY (30) DAYS PRIOR TO EXPIRY DATE OF THIS LETTER
                  OF CREDIT BENEFICIARY HAS NOT RECEIVED AN EXTENSION AT LEAST
                  FOR ONE YEAR TO THE EXISTING LETTER OF CREDIT OR A REPLACEMENT
                  LETTER OF CREDIT SATISFACTORY TO THE BENEFICIARY.


                                - PAGE 1 OF 2 -
<PAGE>   62
PARTIAL DRAWINGS ARE ALLOWED. THE ORIGINAL OF THIS LETTER OF CREDIT MUST
ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL
BE RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY UTILIZED.

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD
OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE,
BUT IN ANY EVENT NOT BEYOND MARCH 31, 2005 WHICH SHALL BE THE FINAL EXPIRATION
DATE OF THIS LETTER OF CREDIT, UNLESS AT LEAST 30 DAYS PRIOR TO THE THEN CURRENT
EXPIRATION DATE WE NOTIFY YOU BY REGISTERED MAIL/OVERNIGHT COURIER SERVICE AT
THE ABOVE ADDRESS, THAT WE ELECT NOT TO RENEW THIS LETTER OF CREDIT FOR ANY
ADDITIONAL PERIOD.

ON MARCH 1, 2004 THE AMOUNT OF THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY
REDUCED TO US$217,250.00 WITHOUT AMENDMENT, PROVIDED THE UNUTILIZED BALANCE IS
NOT LESS THAN US$217,250.00.

THIS LETTER OF CREDIT MAY ONLY BE TRANSFERRED IN ITS ENTIRETY BY THE ISSUING
BANK UPON OUR RECEIPT OF THE ATTACHED "EXHIBIT A" DULY COMPLETED AND EXECUTED BY
THE BENEFICIARY AND ACCOMPANIED BY THE ORIGINAL LETTER OF CREDIT TOGETHER WITH
THE PAYMENT OF OUR TRANSFER FEE OF 1/4 OF 1% OF THE TRANSFER AMOUNT (MINIMUM
USD250.00)

DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF
CREDIT.

DOCUMENTS MUST BE FORWARDED TO US BY OVERNIGHT DELIVERY SERVICE TO: SILICON
VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA, CA 95054, ATTN: INTERNATIONAL
DIVISION.

WE HEREBY AGREE WITH THE DRAWERS, ENDORSERS AND BONA FIDE HOLDERS THAT THE
DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO THE DRAWEE, IF NEGOTIATED ON
OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.

THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMERS AND PRACTICE FOR DOCUMENTARY
CREDITS (1933 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500.


                                                     /s/ LES SCHMIDT
   --------------------                              --------------------
   AUTHORIZED SIGNATURE                              AUTHORIZED SIGNATURE


                                - PAGE 2 OF 2 -
<PAGE>   63
                                   "EXHIBIT A"

DATE:

TO:  SILICON VALLEY BANK                  RE:  STANDBY LETTER OF CREDIT         
     3003 TASMAN DRIVE                         NO. __________ ISSUED BY         
     SANTA CLARA, CA 95054                     SILICON VALLEY BANK, SANTA CLARA 
     ATTN: INTERNATIONAL DIVISION              L/C AMOUNT:                      
           STANDBY LETTERS OF CREDIT      


GENTLEMEN:

FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:

(NAME OF TRANSFEREE)
(ADDRESS)

ALL RIGHTS O THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF
CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS
TRANSFER.

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF
CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS
AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS,
WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR
HEREAFTER MADE ALL AMENDMENTS ARE TO BE ADVISED DIRECT TO THE TRANSFEREE WITHOUT
NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO
ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECT TO THE
TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.

SINCERELY,


- ------------------------------
      (BENEFICIARY NAME)


- ------------------------------
   SIGNATURE OF BENEFICIARY


- ------------------------------
    SIGNATURE AUTHENTICATED


- ------------------------------
       (NAME OF BANK)


- ------------------------------
    AUTHORIZED SIGNATURE


<PAGE>   64
                                    EXHIBIT H

                               QUOKKA SPORTS, INC.

                              STOCK GRANT AGREEMENT


         THIS STOCK GRANT AGREEMENT (the "Agreement") is made as of the ___ day
of February, 1999, by and among QUOKKA SPORTS, INC., a Delaware corporation (the
"Company"), and TIFFANY M. GIN AND STANTON LOWE (each individually and together,
the "Landlord").

         WHEREAS, in connection with the Office Lease dated of even date
herewith among the Company and Landlord (the "Lease"), the Company desires to
issue, and Landlord desires to acquire, stock of the Company as herein
described, on the terms and conditions hereinafter set forth.

         NOW, THEREFORE, IT IS AGREED among the parties as follows:

         1.       ISSUANCE OF STOCK. The Company hereby issues to Tiffany M. Gin
and Stanton Lowe an aggregate of Three Thousand and Seventy Seven (3,077) shares
of the Company's Voting Common Stock (the "Stock") in consideration of Landlord
entering into the Lease. The closing hereunder, including delivery of the Stock,
shall occur at the offices of the Company immediately following the execution of
this Agreement, or at such other time and place as the parties may mutually
agree.

         2.       LIMITATIONS ON TRANSFER. Landlord shall not assign,
hypothecate, donate, encumber or otherwise dispose of any interest in the Stock
except in compliance with the provisions herein and applicable securities laws.
The Company acknowledges that the Stock may be subject to a pledge in favor of
Citibank, Federal Savings Bank ("Citibank") pursuant to loan #2496198 among
Citibank and Landlord dated August 29, 1997, which pledge shall be deemed
permitted hereunder, and Landlord agrees to use commercially reasonable efforts
to enter into an agreement with Citibank releasing the Stock from such pledge.
Furthermore, the Stock shall be subject to any right of first refusal in favor
of the Company or its assignees that may be contained in the Company's Bylaws.
The Company shall not be required (a) to transfer on its books any shares of
Stock of the Company which shall have been transferred in violation of any of
the provisions set forth in this Agreement or (b) to treat as owner of such
shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.

         3.       RESTRICTIVE LEGENDS. All certificates representing the Stock
shall have endorsed thereon legends in substantially the following forms (in
addition to any other legend which may be required by other agreements between
the parties hereto):

                  (a)      "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY 


                                       1.
<PAGE>   65
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."

                  (b)      "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS
ASSIGNEE(S) AS PROVIDED IN THE BYLAWS OF THE COMPANY."

                  (c)      Any legend required by appropriate blue sky
officials.

         4.       INVESTMENT REPRESENTATIONS. In connection its acquisition of
the Stock, Landlord represents to the Company the following:

                  (a)      Landlord is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Stock.
Landlord is acquiring the Stock for investment for Landlord's own account only
and not with a view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Securities Act of 1933 (the "Act"). Landlord
is an accredited investor within the meaning of Regulation D under the Act.

                  (b)      Landlord understands that the Stock has not been
registered under the Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Landlord's
investment intent as expressed herein.

                  (c)      Landlord further acknowledges and understands that
the Stock must be held indefinitely unless the Stock is subsequently registered
under the Act or an exemption from such registration is available. Landlord
further acknowledges and understands that the Company is under no obligation to
register the Stock. Landlord understands that the certificate evidencing the
Stock will be imprinted with a legend which prohibits the transfer of the Stock
unless the Stock is registered or such registration is not required in the
opinion of counsel for the Company.

         Landlord is familiar with the provisions of Rule 144, under the Act, as
in effect from time to time, which, in substance, permit limited public resale
of "restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions. Rule 144 requires, among other
things: (i) the availability of certain public information about the Company and
(ii) the resale occurring following the required holding period under Rule 144
after the Landlord has purchased, and made full payment of (within the meaning
of Rule 144), the securities to be sold. The Company acknowledges that full
payment of (within the meaning of Rule 144) the Stock occurred upon the date
hereof and the Company shall not require from Landlord an opinion of counsel
with respect to whether full payment of (within the meaning of Rule 144) the
Stock has occurred.

                  (d)      Landlord further understands that at the time
Landlord wishes to sell the Stock there may be no public market upon which to
make such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information 


                                       2.
<PAGE>   66
requirements of Rule 144, and that, in such event, Landlord would be precluded
from selling the Stock under Rule 144 even if the minimum holding period
requirement had been satisfied.

                  (e)      Landlord further warrants and represents that
Landlord has either (i) preexisting personal or business relationships, with the
Company or any of its officers, directors or controlling persons, or (ii) the
capacity to protect their own interests in connection with its acquisition of
the Stock by virtue of the business or financial expertise of Landlord or of
professional advisors to Landlord who are unaffiliated with and who are not
compensated by the Company or any of its affiliates, directly or indirectly.

         5.       MARKET STAND-OFF AGREEMENT. Landlord shall not sell, dispose
of, transfer, make any short sale of, grant any option for the purchase of, or
enter into any hedging or similar transaction with the same economic effect as a
sale, any Common Stock of the Company held by Landlord, including the Stock (the
"Restricted Securities"), for a period of time specified by the underwriter(s)
(not to exceed one hundred eighty (180) days) following the effective date of a
registration statement of the Company filed under the Act. Landlord agrees to
execute and deliver such other agreements as may be reasonably requested by the
Company and/or the underwriter(s) which are consistent with the foregoing or
which are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to Landlord's Restricted Securities until the end of such period.

         6.       MISCELLANEOUS.

                  (a)      NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or sent by telegram or fax or upon deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to the other party hereto at his address hereinafter shown below its signature
or at such other address as such party may designate by ten (10) days' advance
written notice to the other party hereto.

                  (b)      SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Landlord, Landlord's
successors, and assigns.

                  (c)      ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Landlord shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees, in the event of
any breach of this Agreement by Landlord or in connection with any transfer or
proposed transfer of the Stock. The Company shall reimburse Landlord for all
costs incurred by Landlord in enforcing the performance of, or protecting its
rights under, any part of this Agreement, including reasonable costs of
investigation and attorneys' fees of a single counsel to Landlord, in the event
of any breach of this Agreement by the Company.

                  (d)      GOVERNING LAW; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
as such laws are applied to 


                                       3.
<PAGE>   67
agreements between California residents entered into and performed entirely in
California. The parties agree that any action brought by either party to
interpret or enforce any provision of this Agreement shall be brought in, and
each party agrees to, and does hereby, submit to the jurisdiction and venue of,
the appropriate state or federal court for the district encompassing the
Company's principal place of business.

                  (e)      FURTHER EXECUTION. The parties agree to take all such
further action(s) as may reasonably be necessary to carry out and consummate
this Agreement as soon as practicable, and to take whatever steps may be
necessary to obtain any governmental approval in connection with or otherwise
qualify the issuance of the securities that are the subject of this Agreement.

                  (f)      ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes and merges all prior agreements or understandings,
whether written or oral. This Agreement may not be amended, modified or revoked,
in whole or in part, except by an agreement in writing signed by each of the
parties hereto.

                  (g)      SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (i) such provision shall be excluded from this Agreement, (ii)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (iii) the balance of the Agreement shall be enforceable in
accordance with its terms.

                  (h)      COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.


                                       4.
<PAGE>   68
         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                       QUOKKA SPORTS, INC.


                                       By:______________________________________

                                       Title:___________________________________

                                       Address:_________________________________


                                       LANDLORD:



                                       _________________________________________
                                       TIFFANY M. GIN



                                       _________________________________________
                                       STANTON LOWE

                                       Address:_________________________________
                                               _________________________________


                                       5.

<PAGE>   1
                                                                   Exhibit 10.14

                            MASTER VENTURE AGREEMENT

THIS MASTER VENTURE AGREEMENT (the "Agreement") is entered into as of February
9, 1999 (the "Effective Date") by and among QUOKKA SPORTS, INC., a Delaware
corporation with its principal place of business at 525 Brannan Street, Ground
Floor, San Francisco, CA 94107 ("Quokka"); NBC OLYMPICS, INC., a Delaware
corporation with its principal place of business at 30 Rockefeller Plaza, New
York, NY 10112 ("NBC"); and NBC/QUOKKA VENTURES, LLC, a Delaware limited
liability company with its principal place of business at 30 Rockefeller Plaza,
New York, NY 10112 ("NQV").

                                    RECITALS

WHEREAS, Quokka is a digital sports media company specializing in the
development of technology for and the production of coverage of international
sporting events via the Internet and other digital media;

WHEREAS, NBC is a subsidiary of a leading television company with a major
broadcast television network, several cable television networks, and television
production facilities;

WHEREAS, NBC has acquired from the International Olympic Committee ("IOC") the
U.S. rights to broadcast the Olympic Games in 2000 and 2004, and the Winter
Olympic Games in 2002;

WHEREAS, NBC and Quokka have formed NQV for the purpose of utilizing their
respective capabilities in the creation and operation of interactive media
coverage of the Events (as defined below) via the Internet and other digital
media; and

WHEREAS, the parties desire to memorialize their obligations and undertakings in
connection with the organization and operation of NQV.

NOW THEREFORE, the parties hereby agree as follows:

                                    AGREEMENT

1.  DEFINITIONS

        The following terms used in this Agreement will have the following
meanings:

        1.1.    "CHANNEL" shall mean the specific Site (as defined below)
                developed by NQV hereunder which may include, among other
                things, Highlight Video and Other Material (as defined in the
                NBC Rights and Services Terms).

        1.2.    "CURRENT CONTENT PLAN" shall have the meaning specified in the
                Operating Agreement.

        1.3.    "EVENTS" shall mean the Games and all events (i) the Interactive
                Media rights to which are owned or otherwise controlled by a
                U.S. National Governing Body that has



                                       1.
<PAGE>   2

                controlling jurisdiction over the selection of the participants
                from a sport in an Olympic Games and (ii) which occur during the
                term of this Agreement to which NBC has broadcast television and
                Internet Medium rights (as hereinafter defined).

        1.4.    "EXPIRATION DATE" shall mean the date occurring on the
                expiration of the Extension Negotiation Period (as defined in
                Section 7.1 of this Agreement) unless the parties agree to
                extend the Agreement during such Extension Negotiation Period.

        1.5.    "GAMES" shall mean each of the international sporting events
                commonly known as the Olympic Games currently planned to be held
                in Sydney, Australia in 2000; Salt Lake City, USA in 2002;
                Athens, Greece in 2004; and such other succeeding Olympic Games
                as the parties may agree pursuant to Section 7.1.

        1.6.    "GAMES PERIOD" shall mean, with respect to each Games other than
                the 2000 Games, the period commencing sixty (60) days after the
                conclusion of the prior Games and continuing through the period
                ending sixty (60) days after the conclusion of such Games. For
                the 2000 Games, the Games Period shall commence upon the
                Effective Date and continue through the period ending sixty (60)
                days after the conclusion of such Games.

        1.7.    "INITIAL CONTENT PLAN" shall mean the first Content Plan
                developed with respect to the first Games.

        1.8.    "INTERNET MEDIUM" shall include: (i) the Internet and World Wide
                Web as are in existence as of the Effective Date and their
                successor or related networks; (ii) any Internet Protocol-based
                methods of transmission and/or delivery or any Internet
                protocol-based networks and their successors; and (iii) any
                medium involving the delivery of content (e.g., text, computer
                code, still images, audio, motion video, tactile, olfactory or
                other sensory impressions) for use by an end user by means of a
                monitor, television screen, viewing screen or other display
                device where delivery of such content occurs by any transmission
                modality (e.g., copper wire, fiber optic or coaxial cable,
                satellite or terrestrial wireless transmission systems) now or
                hereafter devised, provided that the end user has the capacity
                to manipulate the content during its use to enhance, change
                delete or otherwise alter the specific content that is being
                provided. In applying the foregoing definition, if content is
                disseminated by means of any two or more media that are intended
                primarily to be displayed to the end user concurrently and in an
                integrated way through a single display device, the two or more
                media will be considered in the aggregate as a single medium,
                which will be considered Internet Medium if the combined media
                in the aggregate satisfy the above definition.

        1.9.    "LIMITED ACTIVITIES" shall mean those areas of activity set
                forth on the Limited Activity List delivered contemporaneously
                herewith, as it may be updated from time to time in accordance
                with Section 3.2.

        1.10.   "NBC COMPETITOR" shall have the meaning specified in the
                Operating Agreement.

        1.11.   "NBC RIGHTS AND SERVICES TERMS" shall mean the terms set forth
                in Exhibit A.



                                       2.
<PAGE>   3

        1.12.   "OPERATING AGREEMENT" shall mean that certain Operating
                Agreement of NQV between NBC and Quokka of even date herewith,
                as such may be amended from time to time.

        1.13.   PRINCIPLES OF COMPENSATION" shall mean the terms set forth in
                the Principles of Compensation delivered contemporaneously
                herewith, as such may be amended from time to time.

        1.14.   "QUOKKA RIGHTS AND SERVICES TERMS" shall mean the terms set
                forth in Exhibit B.

        1.15.   "QUOKKA WARRANTS" shall mean the warrants to purchase stock in
                Quokka in the form delivered by Quokka to NBC.

        1.16.   "REDUCED SPENDING PLAN" shall have the meaning specified in the
                Operating Agreement.

        1.17.   "SITE" shall mean any collection of content which may include
                data, text, graphics, sound, video, images, photographs,
                animation or any form of content hereafter developed which is
                delivered for use by an end user to a monitor, television
                screen, viewing screen or other display device via any
                transmission modality now known or hereafter developed
                (including the Internet Medium) and which provides the end user
                with the capacity to manipulate the content during its use to
                enhance, change, delete or otherwise alter the specific content
                that is being provided.

        1.18.   "TERMINATION DATE" shall mean the effective date of any
                termination of the either the NBC Rights and Services Terms or
                the Quokka Rights and Services Terms.

2.      ADDITIONAL VENTURE AGREEMENTS

        Upon execution of this Agreement, NBC and Quokka will enter into the
        Operating Agreement. NBC and Quokka shall have the further obligation to
        negotiate in good faith to develop, for approval by a Supermajority of
        the Directors, an Initial Content Plan and the Principles of
        Compensation no later than the Drop-Dead Date (as defined in the
        Operating Agreement). When such Principles of Compensation are agreed
        upon, they shall be deemed adopted contemporaneously with this
        Agreement. In the event a Mutual Termination Event (as defined in
        Section 11.4) occurs and this Agreement, including without limitation
        Exhibits A and B, is terminated by NBC, then NBC shall reimburse Quokka
        for one half (1/2) of the reasonable costs of the services of Paul
        Gudelis, Tom Feuer, Lisa Rubarth, Kent Schacht, Bill Murray, Joe
        McQueeney and Robert Vermeolen in preparing the Content Plan and other
        work solely associated with the Channel, in each case, as conducted from
        January 1, 1999 through the Drop-Dead Date.

3.      OPERATIONS OF NQV



                                       3.
<PAGE>   4

        3.1.    NQV will, at its sole cost and expense, except as provided for
                herein, create, develop, produce, host, maintain and market the
                Channel at all times in accordance with the Current Content Plan
                with respect to such Games, as approved in accordance with the
                terms of the Operating Agreement.

        3.2.    NQV will not participate or engage in the Limited Activities
                unless NBC and Quokka mutually agree in writing to permit NQV to
                do so. Subsequent to the Effective Date, either NBC or Quokka
                may add Limited Activities to the Limited Activity List
                delivered contemporaneously herewith; provided, however, that
                neither NBC nor Quokka may add Limited Activities that would
                prevent NQV from participating in any activity reasonably
                related to exercising its rights or carrying out its obligations
                as set forth in this Agreement, the NBC Rights and Services
                Terms or the Quokka Rights and Services Terms.

4.      PROCEDURES FOR SALES OF ADVERTISEMENTS AND SPONSORSHIPS

        NQV will be entitled to sell advertisements or sponsorships on the
Channel (collectively "Advertising") only in accordance with, and subject to the
limitations set forth in, the Advertising Sales Procedures delivered
contemporaneously herewith. Moreover, NBC and Quokka shall only be entitled to
sell Advertising in accordance with such Advertising Sales Procedures.

5.      GRANT OF QUOKKA WARRANTS.

        Concurrently with the execution and delivery of this Agreement, Quokka
shall issue to NQV the Quokka Warrants and each of Quokka, NBC and NQV shall
execute and deliver a Warrant Issuance Agreement in such form as shall be agreed
among the parties.

6.      INVOLVEMENT OF OTHER PARTIES

        6.1.    For the 2000 Games only, to the extent that NQV determines to
                enter into any transaction [ * ], NQV shall make the first
                approach to [ * ] with respect to the right to enter into such
                transaction, and shall, if [ * ] is interested in such a
                transaction, negotiate exclusively with [ * ] for a period of 
                [ * ] days after making such offer.

        6.2.    The parties acknowledge and agree that it would be desirable for
                the [ * ] to have its websites located within the Channel and
                that NBC has entered into an agreement with [ * ], a copy of the
                pertinent provisions of which has been delivered to Quokka. NQV
                agrees to assume at its cost all obligations of NBC with respect
                to such hosting, design and marketing as contained in such
                agreement.

7.      RIGHTS OF FIRST NEGOTIATION

        7.1.    [ * ] NQV shall have a Right of First Negotiation with respect
                to continuation of the NBC Rights and Services Terms for the


[ * ] Confidential Treatment Requested


                                       4.
<PAGE>   5

                Games Periods after the 2004 Games (and for all Events during
                such Games Periods) for which NBC has acquired Internet Medium
                rights as of the Effective Date. The "Right of First
                Negotiation" means that prior to negotiating with any third
                party with respect to rights identical to those that NBC has
                granted to NQV pursuant to the NBC Rights and Services Terms,
                NBC shall first negotiate in good faith exclusively with NQV for
                a period of [ * ] days (the "Extension Negotiating
                Period"). Thereafter, NBC shall have no further obligation to
                NQV or Quokka with respect to such rights unless the parties
                shall otherwise agree in writing.

        7.2.    No later than June 1, 1999, NBC shall have a right of first
                negotiation with respect to conventional broadcast rights (to
                the extent Quokka secures such rights) for competitive
                "adventure" sporting events covered by Quokka, and Quokka will
                negotiate exclusively with NBC with respect to such rights for a
                period of sixty (60) days thereafter. Thereafter, Quokka shall
                have no further obligation to NBC with respect to such rights
                unless the parties shall otherwise agree in writing.

8.      BRANDING

        The parties acknowledge that one of the goals of this venture is to
        maximize the revenue of NQV. The parties also acknowledge that the
        Channel will be the official and exclusive location for NBC's Site
        coverage of the Games and will, accordingly, bear the composite
        NBC/Olympic branding, subject in each case to the restrictions contained
        in the NBC Rights and Services Terms, the terms of which are
        incorporated herein by reference. Furthermore, any brands, marks and
        logos licensed to NQV pursuant to the Quokka Rights and Services Terms,
        the terms of which are incorporated herein by reference, shall be used
        to add value to NQV in a manner to be mutually determined in accordance
        with the Current Content Plan.

9.      CONFIDENTIALITY AND NON-DISCLOSURE

        9.1.    Each party agrees that during the term of this Agreement that
                such party may come into possession of Confidential Information
                of the other party(ies). For the purposes of this Agreement,
                "Confidential Information" means any information which the party
                disclosing the information (the "Discloser") identifies orally,
                visually or in writing as confidential or which the party
                receiving the information (the "Receiver") knows or has reason
                to know is confidential to the Discloser. The terms and
                conditions of this Agreement, the Operating Agreement, the NBC
                Rights and Services Terms, the Quokka Rights and Services Terms,
                the Warrants and the Warrant Issuance Agreement shall be
                considered Confidential Information of each party. Confidential
                Information does not include information which is: (a) already
                known by the Receiver at time of disclosure; (b) is or becomes,
                through no act or fault of Receiver, publicly known; (c)
                received by Receiver from a third party without a restriction on
                disclosure or use; (d) independently developed by Receiver
                without reference to Discloser's Confidential Information; or
                (e) required or reasonably necessary to comply with laws,
                statutes, regulations, orders, and other governmental rules,
                including, without limitation, any voluntary filing under the
                Securities Act of 1933, as amended, or the Securities and
                Exchange Act of 1934, as

        [ * ]   Confidential Treatment Requested

                                       5.
<PAGE>   6

                amended. The foregoing notwithstanding, prior to making any
                filing under either the Securities Act of 1933, as amended, or
                the Securities Exchange Act of 1934, as amended, which discloses
                the existence or terms of this Agreement, the Operating
                Agreement, the NBC Rights and Services Terms, the Quokka Rights
                and Services Terms, the Warrants or the Warrant Issuance
                Agreement, Quokka shall, to the extent permitted by law,
                disclose to NBC in advance any portion of such anticipated
                filing and shall provide NBC a reasonable opportunity to review
                and comment on such portion of any such anticipated filing.

        9.2.    The Receiver shall hold the Confidential Information in
                confidence and shall not disclose the Confidential Information
                to third parties nor use the Confidential Information for any
                purpose other than as permitted in this Agreement and the other
                agreements executed contemporaneously herewith. The Receiver
                shall not, at any time during or after the term of this
                Agreement, disclose the Confidential Information to any person
                except its employees, consultants and other agents who have a
                need to know such Confidential Information and who have agreed
                to be bound by terms and conditions substantially similar to,
                and no less restrictive with respect to limitations on use and
                disclosure than, those of this Agreement. Notwithstanding the
                foregoing, Quokka may disclose the terms of Agreement to
                bankers, investment counselors and potential investors or
                acquirors in connection with any potential investment in or
                acquisition of Quokka, provided that prior to receiving such
                information such entities have agreed to limit access to only
                those persons within their organization who have a need to know
                such Confidential Information for the purpose of evaluating such
                potential investment or acquisition or similar transaction and
                who have agreed to be bound by terms and conditions
                substantially similar to, and no less restrictive with respect
                to limitations on use and disclosure than, those of this
                Agreement. Furthermore, notwithstanding the foregoing, NBC may
                disclose the terms of the Agreement to [ * ] in connection with
                [ * ] in connection with the potential acquisition of up to
                [ * ] of NBC's economic interest in the Class B Interests,
                provided that prior to receiving such information such entity
                has agreed to limit access to only those persons within their
                organization who have a need to know such Confidential
                Information for the purpose of evaluating such potential
                investment or acquisition or similar transaction and who have
                agreed to be bound by terms and conditions substantially similar
                to, and no less restrictive with respect to limitations on use
                and disclosure than, those of this Agreement.

        9.3.    Upon termination or expiration of this Agreement for any reason,
                at Discloser's direction, a Receiver shall return or destroy all
                copies of Confidential Information in its possession that is
                received exclusively from the other party.

        9.4.    NBC and Quokka agree to issue a mutually agreeable press release
                relating to the creation of NQV promptly as practicable after
                the Effective Date.


[ * ] Confidential Treatment Requested


                                       6.
<PAGE>   7

10.     LIMITATIONS OF LIABILITY

        EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN EITHER THE NBC RIGHTS AND
SERVICES TERMS OR THE QUOKKA RIGHTS AND SERVICES TERMS, AS APPLICABLE, IN NO
EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER FOR ANY CONSEQUENTIAL, SPECIAL,
INDIRECT OR INCIDENTAL DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT,
INCLUDING ITS EXHIBITS. THE FOREGOING IS NOT INTENDED TO LIMIT NQV'S
INDEMNIFICATION OBLIGATIONS AS SET FORTH IN ARTICLE 8 OF THE OPERATING
AGREEMENT.

11.     TERM AND TERMINATION

        11.1.   This Agreement, including without limitation Exhibits A and B,
                shall continue in effect from the Effective Date until the
                earlier of the Termination Date or the Expiration Date unless
                terminated earlier in accordance with Section 11.2, 11.3 or 11.4

        11.2.   This Agreement, including without limitation Exhibits A and B,
                may be terminated by: (1) either party upon the dissolution of
                NQV; (2) either NBC or Quokka due to a material breach of the
                Operating Agreement, Warrants or Warrant Issuance Agreement by
                the other party which has not been cured by such party within
                thirty (30) days of the receipt of written notice of such
                breach; (3) by NQV or Quokka due to a material breach by NBC of
                the terms hereof, including without limitations Exhibits A and
                B, which has not been cured by NBC within thirty (30) days of
                the receipt of written notice of such breach by NBC; (4) by NQV
                or NBC due to a material breach by Quokka of the terms hereof,
                including without limitation Exhibits A and B, which has not
                been cured by Quokka within thirty (30) days of the receipt of
                written notice of such breach by Quokka; or (5) by Quokka
                (solely in the case where there are two Class A Directors) or
                NBC due to a material breach by NQV of the terms hereof or of
                the Operating Agreement which has not been cured by NQV within
                thirty (30) days of the receipt of written notice of such breach
                by NQV. The foregoing notwithstanding, in each of cases (2) -
                (5) above, in the event that the breach in question is not
                curable, then the breaching party shall only be entitled to a
                forty-eight (48) hour notice period prior to termination by the
                other party.

        11.3.   NBC shall have thirty (30) days from the date it receive notice
                of approval of a Reduced Spending Plan to terminate this
                Agreement, including without limitation Exhibits A and B. Notice
                of approval of a Reduced Spending Plan shall be deemed to have
                been received by NBC on the date of approval of a Reduced
                Spending Plan if any Class B Director is present at the vote on
                approval of a Reduced Spending Plan.

        11.4.   Either NBC or Quokka shall have the right to terminate this
                Agreement, including without limitation Exhibits A and B, at any
                time within ten (10) days after a Mutual Termination Occasion. A
                "Mutual Termination Occasion" arises under either of the
                following circumstances: (i) in the event that a Supermajority
                of the Directors fails to approve an Initial Content Plan by the
                Drop-Dead Date; or (ii) in the event that a Supermajority of the
                Directors fails to approve Principles of Compensation by the
                Drop


                                       7.
<PAGE>   8


                Dead Date. Termination of this Agreement, including without
                limitation Exhibits A and B, pursuant to the terms of this
                Section 11.4 by either NBC or Quokka shall be deemed a "Mutual
                Termination Event."

12.     GENERAL PROVISIONS

        12.1.   This Master Venture Agreement, and the application of
                interpretation hereof, shall be governed exclusively by its
                terms and by the laws of the State of Delaware (without giving
                effect to principles of conflicts of laws).

        12.2.   If any provision of this Master Venture Agreement or the
                application thereof to any person or circumstance shall be held
                to be invalid, illegal or unenforceable to any extent, the
                remainder of this Master Venture Agreement and the application
                thereof shall not be affected and shall be enforceable to the
                fullest extent permitted by law.

        12.3.   The headings in this Master Venture Agreement are inserted for
                convenience only and in no way intended to describe, interpret,
                define, or limit the scope, extent or intent of this Master
                Venture Agreement or any provision hereof.

        12.4.   Any notice, demand or communication required or permitted to be
                given by any provision of this Master Venture Agreement shall be
                in writing and shall be deemed effectively given: (i) upon
                personal delivery to the party to be notified, (ii) when sent by
                confirmed telex or facsimile if sent during normal business
                hours of the recipient; if not, then on the next business day,
                (iii) five (5) days after having been sent by registered or
                certified mail, return receipt requested, postage prepaid, (iv)
                one (1) day after deposit with a nationally recognized overnight
                courier, specifying next day delivery, with written verification
                of receipt, or (v) if earlier, upon receipt. All communications
                shall be delivered to the Company's address or facsimile number
                as such appears in the Company's records as of the date hereof
                or to such other address or facsimile number as the Company may
                designate by ten (10) days advance written notice to the other
                parties hereto.

        12.5.   Each party hereby agrees to execute such other and further
                instruments necessary to comply with any laws, rules or
                regulations or in connection with perfecting or protecting or
                enforcing any provision of this Agreement including assignments
                or rights granted to such party hereunder.

        12.6.   This Agreement may not be assigned in whole or in part by any
                party without the other parties' prior written consents or as
                set forth in the Operating Agreement.

        12.7.   Whenever the singular number is used in this Master Venture
                Agreement and when required by the context, the same shall
                include the plural, and the masculine gender shall include the
                feminine and neuter genders and vice versa. This Master Venture
                Agreement is prepared and executed in the English language only
                and any translation of this Master Venture Agreement into any
                other language shall have no effect.



                                       8.
<PAGE>   9

        12.8.   The failure of any party to seek redress for violation of or to
                insist upon the strict performance of any covenant or condition
                of this Master Venture Agreement shall not prevent a subsequent
                act, which would have originally constituted a violation, from
                having the effect of an original violation.

        12.9.   The rights and remedies provided by this Master Venture
                Agreement are cumulative, and the use of any one right or remedy
                by any party shall not preclude or waive the right to use any or
                all other remedies. Such rights and remedies are given in
                addition to any other rights the parties may have by law,
                statute, ordinance or otherwise.

        12.10.  Except for the Operating Agreement for this venture, the Warrant
                Issuance Agreement, the Warrants, the NBC Rights and Services
                Terms and the Quokka Rights and Services Terms and such other
                documents referenced herein, this Agreement and the Exhibits
                attached hereto set forth the entire and exclusive understanding
                and agreement of the parties as to the subject matter hereof,
                and supersede any and all prior or contemporaneous oral or
                written agreements or understandings among the parties as to the
                subject matter of this Agreement. This Agreement may be changed
                only by a document in writing signed by both parties. Waiver by
                any party of a breach of any provision contained herein must be
                in writing, and no such waiver shall be construed as a waiver of
                any succeeding breach of such provision or a waiver of the
                provision itself.

        12.11.  This Master Venture Agreement may be executed in counterparts,
                each of which shall be deemed an original but all of which shall
                constitute one and the same instrument.



                                       9.
<PAGE>   10

        IN WITNESS WHEREOF, the parties hereto have executed this Master Venture
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

                                        QUOKKA SPORTS, INC



                                        By:  /s/ LES SCHMIDT
                                           -------------------------------------
                                           Name:  Les Schmidt
                                           Title: Chief Financial Officer


                                        NBC OLYMPICS, INC.



                                        By:  /s/ RANDEL FALCO
                                           -------------------------------------
                                           Name:  Randel Falco
                                           Title: President


                                        NQV/QUOKKA VENTURES, LLC



                                        By:  /s/ G. MICHAEL NOVELLY
                                           -------------------------------------
                                           Name:  G. Michael Novelly
                                           Title: Chief Financial Officer




                                      10.
<PAGE>   11

                                    EXHIBIT A

                        NBC RIGHTS AND SERVICES AGREEMENT

Unless otherwise defined herein, capitalized terms have the meaning ascribed to 
them in the Master Venture Agreement.

1.   DEFINITIONS:

     "Event Video" shall mean moving video and accompanying synchronous audio 
of the Events, including Opening and Closing Ceremonies, whether derived from 
the NBC Television Network feed, the host feed, or any other feeds ("Other 
Feeds") available to NBC at the Events, provided that NQV shall reimburse NBC 
for any additional costs associated with obtaining such Other Feeds.

     "Highlight Video" shall mean moving video clips and accompanying
synchronous audio of the Events, including Opening and Closing Ceremonies, which
do not exceed in the aggregate: (i) for any individual match, round of
competition, race or game substantively broadcast (i.e., more than a [*] second
clip) by the NBC Television Network in Primetime (as defined hereafter), the
lesser of [*] minutes or [*] of the duration of the particular individual match,
round of competition, race or game being reported upon; (ii) for any individual
match, round of competition, race or game substantively broadcast (i.e., more
than a [*] second clip) by NBC Television in any time period that is not
Primetime, the lesser of [*] minutes or [*] of the duration of the particular
individual match, round of competition, race or game being reported upon; and
(iii) for any individual match, round of competition, race or game not broadcast
in any substantive part (i.e., more than a [*] second clip) by NBC Television,
the lesser of [*] minutes or [*] of the duration of the particular individual
match, round of competition, race or game being reported upon; provided, that
notwithstanding the foregoing, no single clip of such video shall be more than
[*] seconds in length; and, provided, further, that NQV may not aggregate such
clips, or provide a means for end users to aggregate such clips, from any single
event in a manner which would avoid the limitations contained in this paragraph.

     "NBC Television" shall mean the NBC Television Network, CNBC, MSNBC or any
other NBC-produced coverage on a network broadcast, cable or DBS service.

     "Other Video" shall mean historical Event footage as well as any 
non-competition video consisting of segments, features and other programming 
(e.g., "Up Close and Personal") related to the Events, whether occurring prior 
to, during or after the Events.

     "Primetime" shall mean the hours of [*] p.m. to [*] a.m. in each U.S. time
zone.

     "United States Broadcast Territory" shall mean the United States and its 
territories and possessions, excluding Puerto Rico.

     [*]  Confidential Treatment Requested


                                       1.

<PAGE>   12
2.   GUIDING PRINCIPLES REGARDING EVENT VIDEO

     a)   NBC represents and warrants that it has been granted a license for the
          exclusive Internet Medium rights in the United States Broadcast
          Territory in and to the Games for at least [*] and that it has been
          granted a license for the exclusive broadcast, cable and Internet
          Medium rights in the United States Broadcast Territory in and to each
          associated U.S. Olympic Trials to which NBC has the broadcast rights
          for at least [*] and the [*] day period following each such Games. NBC
          shall use commercially reasonable efforts to extend the duration of
          the foregoing rights on either an exclusive or non-exclusive basis.
          Quokka acknowledges and agrees that notwithstanding anything to the
          contrary contained herein or in any other document or agreement
          contemplated hereby, no rights with respect to Event Video are
          conveyed herein to Quokka or NQV other than as expressly set forth in
          Sections 3 hereof, and that all rights to Event Video owned or held by
          NBC shall remain NBC's except as otherwise granted.

     b)   Quokka further acknowledges and agrees that NBC may use, promote, 
          market, sell, display, perform, distribute, incorporate interactive 
          elements in its broadcast signal for distribution by broadcast, cable 
          or DBS and otherwise exploit the Event Video, or sell, license or 
          otherwise transfer such rights to third parties other than NQV, in 
          any medium (including the Internet Medium) via any transmission 
          modality now known or hereafter developed, subject to the constraints 
          of Section 2(c) hereof. Quokka further acknowledges that NBC will 
          have the right to incorporate interactive elements within its 
          broadcast video signal for distribution through normal broadcast, 
          cable or DBS channels.

     c)   In order to protect the rights granted to NQV herein, NBC represents 
          and warrants that it has not and shall not use or distribute, nor 
          shall it license the use or distribution of, Event Video, for use 
          either in whole or in part whether including Other Material and still 
          photographs taken from Event Video or not, over the Internet Medium 
          except in such circumstance where such Event Video is used and/or 
          available to the end user solely by itself, or with limited value 
          added elements "Value Added Elements", such that the Value Added 
          Elements would be [*]

3.   RIGHTS GRANTED TO NQV

     a)   NBC grants to NQV an exclusive non-transferable license to produce, 
          distribute, promote and market the Channel as the "official" and 
          exclusive location for NBC's Site coverage of the Events.

     b)   Subject to Sections 2(b) and 2(c), NBC grants to NQV for use in the 
          creation and operation of the Channel the exclusive, non-transferable 
          license to incorporate

     [*]  Confidential Treatment Requested


                                       2.

<PAGE>   13
     into the Channel and distribute by means of the Internet Medium throughout
     the United States Broadcast Territory Highlight Video from all Event Video
     owned by NBC or licensed to NBC where NBC has the right to sublicense such
     rights to the Event Video. To the extent that during the Term NBC is
     granted a license or is otherwise permitted to distribute by means of the
     Internet Medium Highlight Video outside the United States Broadcast
     Territory, then the license granted hereunder shall automatically expand to
     match such corresponding territory. Subject to Sections 2(b) and 2(c), NBC
     further grants to NQV for use in the creation and operation of the Channel
     the exclusive, non-transferable license to incorporate into the Channel and
     distribute by means of the Internet Medium throughout the world still
     photographs and sequential still photographs taken from Highlight Video
     from all Event Video owned by NBC or licensed to NBC where NBC has the
     right to sublicense such rights to the Event Video. Notwithstanding the
     foregoing, NQV's rights hereunder with respect to the Event Video
     (including still photographs therefrom) shall be subject to the right of
     NBC, in its sole discretion, to impose restrictions on the display or other
     use of Event Video (including still photographs therefrom) due to: (i)
     NBC's inability to grant such rights to NQV as a result of contractual
     limitations or restrictions imposed by, or conflicts with any legal rights
     held by the IOC or any other person or entity possessing intellectual
     property or other rights in such Event Video; (ii) any conflicts with NBC's
     current sponsors or advertisers or the IOC's, United States Olympic
     Committee's ("USOC"), Sydney Organizing Committee of the Olympic games
     ("SOCOG"), Salt Lake Olympic Organizing Committee's ("SLOOC"), the 2004
     Games Organizing Committee's sponsors or advertisers; (iii) transactions by
     NQV or Quokka with NBC Competitors; (iv) competition with NBC's broadcast,
     cable or direct broadcast satellite ("DBS") coverage; or (v) violations of
     NBC's, NBC Sports', the IOC's, the USOC's or other Olympic organizations'
     editorial policies and practices. In the event that NBC shall be obligated
     to pay any non de minimis amounts to third parties (other than the IOC,
     USOC or any U.S. NGB with respect to the Games and U.S. Olympic Trials) by
     reason of the licensing or use of any Event Video to or by NQV, then NBC
     shall, to the extent practicable, promptly notify NQV of such amounts, and
     if NQV elects to use (or has used) such Event Video, then it shall be
     solely responsible for any such charges. NBC will use commercially
     reasonable efforts to make all Event Video available to NQV regardless of
     whether NBC uses such Event Video in any broadcast coverage of Events. NBC
     will provide NQV with reasonable and timely means of technical access to
     all Event Video, but in no event by a quality of method and/or timeliness
     no less than the quality of method and/or timeliness provided to NBC's
     local affiliates and any company which may license any Internet Medium
     rights to the Event Video.

(c)  NBC grants to NQV for use in the creation and operation of the Channel the
     non-exclusive, non-transferable license to incorporate into the Channel and
     distribute by means of the Internet Medium throughout the United States
     Broadcast Territory all Other Video owned by NBC or licensed to NBC where
     NBC has the right to sublicense such rights to the Other Video. NBC grants
     to NQV for use in




                                       3.
<PAGE>   14
     the creation and operation of the Channel the non-exclusive,
     non-transferable license to incorporate into the Channel and distribute by
     means of the Internet Medium throughout the world all research and other
     materials whether text, audio, video, still footage, written or fixed in
     any other medium owned by NBC or licensed to NBC (collectively with the
     Other Video sometimes referred to herein as the "Other Material") where NBC
     has the right to sublicense such rights to the Other Material. To the
     extent that during the Term NBC is granted a license or is otherwise
     permitted to distribute by means of the Internet Medium the Other Video
     outside the United States Broadcast Territory, then the license granted
     hereunder shall automatically expand to match such corresponding territory.
     Subject to Sections 2(b) and 2(c), NBC further grants to NQV for use in the
     creation and operation of the Channel the exclusive, non-transferable
     license to incorporate into the Channel and distribute by means of the
     Internet Medium throughout the world still photographs and sequential still
     photographs taken from Other Material owned by NBC or licensed to NBC where
     NBC has the right to sublicense such rights to the Other Material.
     Notwithstanding the foregoing, NQV's rights hereunder with respect to the
     Other Material (including still photographs therefrom) shall be subject to
     the right of NBC, in its sole discretion, to impose restrictions on the
     display or other use of Other Material (including still photographs
     therefrom) due to: (i) NBC's inability to grant such rights to NQV as a
     result of contractual limitations or restrictions imposed by, or conflicts
     with any legal rights held by the IOC or any other person or entity
     possessing intellectual property or other rights in such Other Material;
     (ii) any conflicts with NBC's current sponsors or advertisers or the IOC's,
     USOC's, SOCOG's, SLOOC's, the 2004 Games Organizing Committee's sponsors or
     advertisers; (iii) transactions by NQV or Quokka with NBC Competitors; (iv)
     competition with NBC's broadcast, cable or DBS coverage; or (v) violations
     of NBC's, NBC Sports', the IOC's, the USOC's or other Olympic
     organizations' editorial policies and practices. In the event that NBC
     shall be obligated to pay any non de minimis amounts to third parties
     (other than for the specific Event rights granted by the IOC, USOC or any
     U.S. NGB) by reason of the licensing or use of any Other Material to or by
     NQV, then NBC shall, to the extent practicable, promptly notify NQV of such
     amounts, and if NQV elects to use or has used such Other Material, then it
     shall be solely responsible for any such charges. NBC will use commercially
     reasonable efforts to make all Other Material available to NQV regardless
     of whether NBC uses such Other Material in any broadcast coverage of
     Events. NBC will provide NQV with reasonable and timely means of technical
     access to all Other Material, but in no event by a quality of method and/or
     timeliness no less than the quality of method and/or timeliness provided to
     NBC's local affiliates and any company which may license any Internet
     Medium rights to the Event Video.

d)   Recognizing the priority of its broadcast needs, NBC shall use reasonable 
     commercial efforts to provide at no additional cost to NQV the following:





                                      4.
<PAGE>   15
          (i)  Reasonable access on a twenty-four hour basis to NBC's television
               production, transmission archive and storage facilities, wherever
               located, for purposes of retrieving the Event Video and Other
               Material in a timely manner for the Channel, subject to NBC's
               reasonable rules and policies regarding such access and
               availability of space;

          (ii) Reasonable and timely access to the Commentator Information 
               System (CIS);

         (iii) Access to and timely assistance from such production personnel as
               shall be reasonably necessary to facilitate the retrieval of
               Event Video and Other Material for the Channel;

          (iv) The participation of a reasonable variety of on-air personnel,
               selected by NBC in its sole discretion, during the Games and from
               time to time prior to and after the Games, such participation to
               include appearances on the Channel on a live or delayed basis;

           (v) Reasonable access to venues, athletes, coaches, Event officials
               and spectators (to the extent NBC is able to facilitate the 
               same), for appearances on the Channel.

     (e)  NBC grants to NQV a non-exclusive, non-transferable license during the
          term of the Master Venture Agreement to use the composite NBC/Olympic
          logo on the Channel in connection with the production, operation,
          promotion, marketing and distribution of the Channel pursuant to the
          Master Venture Agreement, in all media in connection with all third
          party promotion, advertising and sponsorship of the Channel and in
          connection with Derivative Products (as herein defined). The rights
          granted herein are solely for the use of the NBC/Olympic logo and do
          not include any right to use the NBC mark (in any variation) or the
          Olympic mark (in any variation) standing alone. Notwithstanding the
          foregoing, the use of the composite NBC/Olympic logo shall be subject
          to the right of NBC, in its sole discretion, to impose restrictions
          due to: (i) NBC's inability to grant such rights to NQV as a result of
          contractual limitations or restrictions imposed by, or conflict with
          any legal rights held by the IOC, the USOC or any other person or
          entity possessing intellectual property or other rights in the
          composite NBC/Olympic logo; (ii) any conflicts, as may be applicable,
          with NBC's current sponsors or advertisers or the IOC's, USOC's,
          SOCOG's, SLOOC's, the 2004 Games Organizing Committee's sponsors or
          advertisers; (iii) transactions by NQV or Quokka with NBC Competitors;
          (iv) competition with NBC's broadcast, cable or DBS coverage; or (v)
          violations of NBC's, NBC Sports', the IOC's, the USOC's or other
          Olympic organizations' editorial policies and practices. NQV
          acknowledges that this is a license and that no ownership interest in
          and to the NBC/Olympic logo is transferred, and that the NBC/Olympic
          logo used alone or with other elements together with the goodwill
          of the entities symbolized thereby shall remain the property of NBC
          and the IOC, respectively. To the extent that any   



                                       5.
<PAGE>   16
     goodwill is generated by the activities of NQV with respect to the
     composite NBC/Olympic logo, the parties agree that all such goodwill shall
     accrue to and be owned by NBC and the IOC. NQV agrees not to challenge or
     contest NBC or the IOC's ownership interest respectively, in the NBC and
     Olympic marks, the rights of NBC and the IOC in the NBC/Olympic logo, the
     validity of the NBC and Olympic marks and the NBC/Olympic logo, and agrees
     that it will do nothing inconsistent with such ownership and all use of the
     NBC/Olympic logo shall accrue to and benefit and be on behalf of NBC and
     the IOC. NQV agrees that it will not set up any adverse claim against NBC
     or the IOC, their parents, affiliates or subsidiaries, as a result of the
     use of the NBC/Olympic logo and that it will fully cooperate with NBC in
     any and all activities necessary to maintain NBC's and IOC's rights in the
     NBC/Olympic logo, including cooperating with NBC in recording this
     agreement with appropriate governmental entities, where necessary. NQV
     shall comply with all applicable laws and regulations and shall not
     authorize use by third parties of the NBC/Olympic logo without NBC's
     permission. NQV is subject to all the restrictions imposed on the use of
     the NBC/Olympic logo mark by agreements between NBC and third parties,
     including but not limited to the IOC, the USOC, SOCOG, SLOOC, the 2004
     Games Organizing Committee or NBC's current sponsors or advertisers. All
     rights to the NBC/Olympic logo not expressly granted are hereby reserved by
     NBC. NQV's use of the composite NBC/Olympic logo will be subject to the
     prior written approval of NBC, which approval shall not be unreasonably
     withheld or delayed. NQV agrees to maintain the quality of the Channel at a
     level that meets or exceeds industry standards and is at least commensurate
     with the quality of NBC's interactive services. NQV agrees to supply NBC
     with specimens of all uses of the NBC/Olympic logo. NQV agrees to correct
     promptly, to the extent practicable, all deficiencies in its use of the
     NBC/Olympic logo and to take measures reasonably designed to correct
     objective defects in the availability and delivery of the NBC/Olympic logo
     on the Channel. NQV shall comply with all guidelines provided by NBC with
     respect to the reproduction and use of the composite NBC/Olympic logo
     including conformance with NBC's various trademark and logo guidelines
     provided to NQV which may be amended from time to time, including if
     required by the use of said guidelines use of appropriate trademark symbols
     after the first and most prominent use of the marks on each page or panel
     of materials, and inclusion of NBC's standard trademark attribution legends
     in all such materials. This license cannot be sub-licensed, assigned or
     otherwise transferred by NQV to any third person without the prior written
     consent of NBC. The license granted by NBC hereunder shall automatically
     and immediately terminate upon the expiration or termination of the Master
     Venture Agreement or this agreement, as it may be extended, provided
     however that with respect to Derivative Products only, the license granted
     by NBC hereunder shall automatically and immediately terminate on the
     earlier of the sale of the last of the remaining Derivative Products
     inventory or six (6) months after the expiration or termination of the
     Master Venture Agreement.





                                       6.
<PAGE>   17
     f)   In addition, in order to protect the rights granted to NQV herein, NBC
          represents and warrants that it has not and shall not license a
          substantial portion of the rights set forth in Section 3(c) to any
          entity for use in connection with the Internet Medium.

     g)   Subject to the reservation of rights to NBC set forth in Section 2
          hereof, NBC hereby grants to NQV an exclusive right to produce,
          promote, market, sell and distribute Derivative Products as well as a
          non-exclusive, non-transferable license to use Highlight Video as well
          as the Other Material in connection with production, marketing,
          promotion, and distribution of any Derivative Products; provided, that
          prior to engaging in any such activities, NQV must provide a notice to
          NBC describing any such Derivative Products and any marketing,
          promotion or distribution plans therefor in reasonable detail and
          obtain the prior written consent of NBC. "Derivative Products" shall
          mean goods or services derived specifically from the Channel or any
          portion thereof to which NQV can, in NBC's reasonable judgment,
          provide significant added value. In the event that NBC intends to use
          Highlight Video in any product to which NBC, in its reasonable
          judgment believes, NQV can add significant value, NBC will notify the
          Operating Venture and will discuss in good faith the possibility of
          NQV producing and distributing any such product. Nothing contained in
          this Section 3(g) shall be construed to preclude NBC from using Event
          Video or Other Material in the production, marketing or sale of
          products by NBC, provided that NBC does not use portions of the Event
          Video or Other Material that actually incorporate enhancements made by
          the Operating Entity.

4.   SERVICES TO BE PROVIDED BY NBC TO NQV

     a)   As set forth in the promotion commitment delivered by NBC to NQV, NBC
          will provide meaningful on-air promotion for the Channel on its
          broadcast and cable television networks (e.g., NBC, CNBC, MSNBC), and
          to the extent that it engages in promotional efforts on behalf of its
          broadcast or cable coverage, NBC shall use commercially reasonable
          efforts to incorporate into such promotional efforts meaningful
          promotion for the Channel other than on-air promotion which may
          include each of the following elements (to such extent as NBC shall
          determine in good faith):

               (i)    print advertisements; 

               (ii)   radio promotions;

               (iii)  preparation of promotional materials through NBC's
                      Affiliate Promotion Services Department;

               (iv)   promotion through NBC's Press Department, which may, at
                      NBC's sole discretion, include satellite feeds,
                      appearances on THE TODAY SHOW or other NBC programs.



                                       7.
<PAGE>   18
     b)  In addition to the personnel covered by Section 3(d) hereof, NBC will
         provide reasonable access to NBC personnel to provide services as
         reasonably requested by NQV. In keeping with the Principles of
         Compensation which are attached to the Master Venture Document as
         Exhibit D, NBC will charge NQV for such personnel providing services to
         NQV, and will be reimbursed for reasonable expenses of such personnel
         incurred in connection with providing services to NQV. Such amounts
         will be invoiced monthly and will be payable 30 days after receipt of
         invoice by NQV.

     c)  To the extent that NBC has any such relationships, NBC will use
         commercially reasonable efforts to provide access to NQV to its
         strategic partners and others with whom it has business relationships
         [ * ] or editorial relationships (writers, newspapers, etc.) for the
         purposes of furthering possible relationships or promotional
         opportunities between NQV and such other entities or individuals.

     d)  NBC will use reasonable commercial efforts to assist in the 
         coordination and integration of programming between its broadcast and 
         cable properties' coverage of Events and the Channel.

     e)  NBC will use reasonable commercial efforts to assist NQV with all
         Events-related operational needs and logistics at the sites of the
         Events, including but not limited to, office and work space, wiring and
         communications, transportation, housing, accreditation, clothing and
         hospitality, it being understood that NQV will be responsible for any
         incremental costs incurred in connection therewith.

5.   OTHER TERMS AND CONDITIONS

     a)  These NBC Rights and Services Terms ("Terms") will remain in effect 
         until the earlier of the Expiration Date and the Termination Date (as 
         such terms are defined in the Master Venture Agreement) unless earlier 
         terminated by any party in accordance with Sections 11.2, 11.3 or 11.4 
         of the Master Venture Agreement.

     b)  NBC warrants and represents that it has the right to grant the licenses
         granted herein, subject to all restrictions contained herein, in the
         Master Venture Agreement and in the Operating Agreement. Except with
         respect to any music, NBC will defend, indemnify and hold harmless NQV
         and Quokka, and their respective affiliates, officers, directors,
         employees and agents from and against any and all third party claims,
         actions, suits or proceedings, as well as any and all losses,
         liabilities, damages, costs and expenses (including, without
         limitation, reasonable attorneys fees) arising out of or accruing from:
         (i) with respect to Event Video only, the exercise of any of the rights
         granted hereunder by NBC to NQV infringes the copyright, trademark or
         other proprietary rights of any third party in any jurisdiction; (ii)
         the use or distribution of any Event Video is defamatory or libelous,
         or violates the rights of privacy or publicity of any third 


[ * ] Confidential Treatment Requested


                                       8.

            
<PAGE>   19
party; or (iii) relating to the breach of any warranty or representation
contained herein. Upon the assertion of any claim or the commencement of any
suit or proceeding against NQV or Quokka by any third party that may give rise
to liability of NBC hereunder, NQV and/or Quokka, as the case may be, shall
promptly notify NBC of the existence of such claim and shall give NBC reasonable
opportunity to defend and/or settle the claim at its own expense and with the
counsel of its own selection. NQV and/or Quokka shall cooperate with NBC and
shall at all times have the right to participate in, but not control, such
defense and/or settlement with its own counsel and at its own expense.




                                       9.
<PAGE>   20

                                    EXHIBIT B

                      QUOKKA RIGHTS AND SERVICES AGREEMENT

Unless otherwise defined herein, capitalized terms have the meaning ascribed to 
them in the Master Venture Agreement and the NBC Rights and Services Terms.

1.   RIGHTS GRANTED BY QUOKKA TO NQV

     a)   Quokka grants to NQV a worldwide, royalty free, non-exclusive, 
          non-transferable license to promote, and use in connection with 
          Channel, all Quokka Technology (as defined herein) and Quokka 
          Technology Improvements (as defined herein) owned by Quokka and/or 
          licensed to Quokka (where Quokka has the right to relicense without 
          payment of more than de minimis amounts to third parties); provided, 
          that Quokka shall not license any Quokka Technology or Quokka 
          Technology Improvements to any other person or entity for use in 
          connection with such portion of any Site which contains content 
          relating to the Games and which is promoted to a United States 
          audience. For purposes of clarification, the foregoing proviso shall 
          not apply to any portion of a Site which does not include content 
          related to the Games (i.e., NBA or NFL content) or which is targeted 
          to a non-United States audience and not promoted in the United States 
          (i.e., Yahoo U.K.). The term "Quokka Technology" shall mean any 
          technology now or hereafter developed, purchased, or licensed or 
          otherwise acquired by Quokka (including without limitation any idea, 
          concept, invention, device, design, research, apparatus, machine, 
          practice, process, method, product, improvement, formula, algorithm, 
          technical development or plan, production technique, schematic, block 
          diagram, flow chart, test procedure, mask work, software (including 
          all of the written materials prepared by or for Quokka for any such 
          software, including, but not limited to user manuals), software 
          systems, codes (including HTML formatting code, source code, object 
          code), utilities, design processes, program logic, interactive 
          program structures, retrieval software systems, user interface 
          designs, and any other procedures and methods or operation) which can 
          be or may be used in connection with the development and/or delivery 
          of content to an end user by means of the Internet Medium. In 
          connection with such right and license, Quokka shall provide at no 
          charge NQV with copies of all tangible materials other than hardware 
          constituting or relating to Quokka Technology necessary in order to 
          exploit such Quokka Technology.

     b)   Quokka hereby grants to NQV a non-exclusive, non-transferable license 
          to use Quokka Technology in connection with the production, 
          marketing, promotion and distribution of Derivative Products.

     c)   All improvements, alterations, and other changes to the Quokka 
          Technology made by or under the authority of Quokka ("Quokka 
          Technology Improvements"), shall be deemed assigned to and inure to 
          the sole benefit of Quokka; provided, that



                                       1
<PAGE>   21
          notwithstanding the foregoing, any improvements, alterations, and
          other changes to the Quokka Technology made by NQV ("Operating Entity
          Technology Improvements"), shall be deemed assigned to and inure to
          the sole benefit of NQV. NQV shall grant Quokka a non-exclusive,
          royalty free license to use NQV Technology Improvements during the
          term of the Master Venture Agreement.

     (d)  Quokka grants to NQV a non-exclusive, non-transferable license during 
          the term of the Master Venture Agreement to use the Quokka logo on 
          the Channel in connection with the production, operation, promotion, 
          marketing and distribution of the Channel pursuant to the Master 
          Venture Agreement, in all media in connection with all promotion, 
          advertising and sponsorship of the Channel including by authorized 
          third parties and in connection with Derivative Products (as herein 
          defined). NQV acknowledges that this is a license and that no 
          ownership interest in and to the Quokka logo is transferred, and that 
          the Quokka logo used alone or with other elements together with the 
          goodwill of the entity symbolized thereby shall remain the property 
          of Quokka. To the extent that any goodwill is generated by the 
          activities of NQV in the Quokka logo, the parties agree that all such 
          goodwill shall accrue to and be owned by Quokka. NQV agrees not to 
          challenge or contest Quokka's ownership interest in the mark, the 
          rights of Quokka in the Quokka logo, the validity of the Quokka mark 
          and the Quokka logo, and agrees that it will do nothing inconsistent 
          with such ownership and all use of the Quokka logo shall accrue to 
          and benefit and be on behalf of Quokka. NQV agrees that it will not 
          set up any adverse claim against Quokka, its parents, affiliates or 
          subsidiaries, as a result of the use of the Quokka logo and that it 
          will fully cooperate with Quokka in any and all activities necessary  
          to maintain Quokka's rights in the Quokka logo, including cooperating 
          with Quokka in recording this agreement with appropriate governmental 
          entities, where necessary. NQV shall comply with all applicable laws 
          and regulations and shall not authorize use by third parties of the 
          Quokka logo without Quokka's permission. All rights to the Quokka 
          logo not expressly granted are hereby reserved by Quokka. NQV is 
          subject to all the restrictions imposed on the use of the Quokka logo 
          mark by agreements between Quokka and third parties. NQV's use of the 
          Quokka logo will be subject to the prior written approval of Quokka, 
          which approval shall not be unreasonably withheld or delayed. NQV 
          agrees to supply Quokka with specimens of all uses of the Quokka logo 
          upon request. NQV agrees to correct promptly, to the extent 
          practicable, all deficiencies in its use of the Quokka logo and to 
          take measures reasonably designed to correct objective defects in the 
          availability and delivery of the Quokka logo on the Channel. NQV 
          shall comply with all guidelines provided by Quokka with respect to 
          the reproduction and use of the Quokka logo including conformance 
          with Quokka's various trademark and logo guidelines provided to NQV 
          which may be amended from time to time, including if required by the 
          use of said guidelines use of appropriate trademark symbols after the 
          first and most prominent use of the marks on each page or panel of 
          materials, and inclusion of Quokka's standard trademark attribution 
          legends in all such materials. This license cannot be sub-licensed, 
          assigned or otherwise transferred by NQV to any third person without 



                                       2
<PAGE>   22
          the prior written consent of Quokka. The license granted by Quokka
          hereunder shall automatically and immediately terminate upon the
          expiration or termination of the Master Venture Agreement or this
          agreement, as it may be extended, provided however that with respect
          to Derivative Products only, the license granted by Quokka hereunder
          shall automatically and immediately terminate on the earlier of the
          sale of the last of the remaining Derivative Products inventory or six
          (6) months after the expiration or termination of the Master Venture
          Agreement.

     e)   Any content created by Quokka related to the Events which is
          customarily viewed directly by the end-user (i.e., not Quokka
          Technology or Quokka Technology Improvements), including without
          limitation, text, graphics, and photos, shall be owned and retained by
          NQV.

2.   SERVICES TO BE PROVIDED BY QUOKKA TO NQV

     a)   Quokka will provide all personnel necessary to create, develop,
          operate, host and maintain the Channel in accordance with the Current
          Content Plan and NQV's annual budget, as well as all related support
          for NQV. In keeping with the "Principles of Compensation", Quokka will
          charge NQV for such personnel providing services to NQV, and will be
          reimbursed in accordance with NQV's annual budget for reasonable
          expenses of such personnel incurred in connection with providing
          services to NQV. Such amounts will be invoiced monthly and will be
          payable 30 days after receipt of invoice by NQV.

     b)   For a period of at least fourteen (14) days prior to and during the
          period of the Games, Quokka will provide meaningful Internet promotion
          for the Channel through its principal website.

     c)   To the extent that Quokka has any such relationships, Quokka will use
          commercially reasonable efforts to provide access to NQV to its
          strategic partners and others with whom it has business relationships
          or editorial relationships for the purposes of furthering possible
          relationships or promotional opportunities between NQV and such other
          entities or individuals.

3.   OTHER TERMS AND CONDITIONS

     a)   These Quokka Rights and Services Terms ("Terms") will remain in effect
          until the earlier of the Expiration Date and the Termination Date
          unless earlier terminated by any party in accordance with Sections
          11.2, 11.3 or 11.4 of the Master Venture Agreement.

     b)   Quokka warrants and represents that it has the right to grant the
          rights granted herein. Quokka will defend, indemnify and hold harmless
          NQV and NBC, and their respective affiliates, officers, directors,
          employees and agents from and 


                                       3
<PAGE>   23
against any and all third party claims, actions, suits or proceedings, as well 
as any and all losses, liabilities, damages, costs and expenses (including, 
without limitation, reasonable attorneys fees) arising out of or accruing from 
breach of any warranty or representation made by Quokka herein. Quokka will 
defend, indemnify and hold harmless NQV and NBC, and their respective 
affiliates, officers, directors, employees and agents from and against any and 
all third party claims, actions, suits or proceedings, as well as any and all 
losses, liabilities, damages, costs and expenses (including, without 
limitation, reasonable attorneys fees) arising out of any claim, suit, action 
or proceeding alleging that any Quokka Technology or Quokka Technology 
Improvements infringe any copyright, trademark, trade secret, trade dress, 
patent or other intellectual property right or proprietary right of any third 
party. In the event that some or all of the Quokka Technology or Quokka 
Technology Improvements are held by a court of competent jurisdiction to 
infringe, then Quokka shall have the option, at its expense, to (i) modify such 
Quokka Technology or Quokka Technology Improvements to be non-infringing , or 
(ii) obtain for NQV a license to continue using such Quokka Technology or 
Quokka Technology Improvements. Upon the assertion of any claim or the 
commencement of any suit or proceeding against NQV or NBC by any third party 
that may give rise to liability of Quokka hereunder, NQV and/or NBC, as the 
case may be, shall promptly notify Quokka of the existence of such claim and 
shall give Quokka reasonable opportunity to defend and/or settle the claim at 
its own expense and with the counsel of its own selection. NQV and/or NBC shall 
cooperate with Quokka and shall at all times have the right to participate in, 
but not control, such defense and/or settlement with its own counsel and at its 
own expense.







                                       4


<PAGE>   1

                                                                   Exhibit 10.15

                                    AGREEMENT


        THIS AGREEMENT (the "Agreement") is made as of January 1, 1999 (the
"Effective Date") by and between CHAMPIONSHIP AUTO RACING TEAMS, INC., a
corporation organized under the laws of Delaware, with principal offices at 755
West Big Beaver Road, Suite 800, Troy, Michigan 48084 (hereinafter referred to
as "CART") and CART DIGITAL MEDIA ENTERPRISES, LLC, a limited liability company
organized under the laws of Delaware, with principal offices at 525 Brannan
Street, San Francisco, CA. 94107 (hereinafter referred to as "CDME").

                                    RECITALS

        WHEREAS, CART, through its subsidiary CART, Inc. is the sanctioning body
of prestigious auto racing events and series currently known as the FedEx
Championship Series, the PPG Dayton Indy Lights Championship and the Kool Toyota
Atlantic Championship (hereinafter all races, practice and qualifying sessions
and all related activities and meetings thereto being collectively referred to
as the "Events");

        WHEREAS, CDME was formed by Quokka Sports, Inc. and Forsythe Racing,
Inc. to provide digital media coverage for the Events;

        WHEREAS, CART wishes to appoint CDME and CDME agrees to be appointed to
develop, construct and operate the exclusive official Site (as hereinafter
defined) in accordance with the terms and conditions of this Agreement;

        WHEREAS, CART wishes to grant to CDME Digital Media rights and various
other rights pertaining to the Events in accordance with the terms and
conditions of this Agreement.

        NOW, THEREFORE, the parties hereto agree as follows:

1.      DEFINITIONS.

As used in this Agreement:

        "CONTENT" means the articles, stories, statistics, data, photographs,
drawings, visualizations, video, audio, and other digital assets (including any
assets in an analog format) gathered or supplied by CART in connection with the
Events, including content currently in existence on CART.com.

        "DERIVATIVE PRODUCTS" means goods or services derived from the Site (as
hereafter defined) or any portion thereof which are approved by CART, in its
reasonable discretion. In order for a product to be approved as a "derivative
product", at the time of development, CART must not offer or have licensed a
directly competing product or service, and CDME, through the use of digital
assets, must be able to provide significant added value to such product (e.g.,
screen savers and posters utilizing digital assets and books about the digital
coverage of CART). For purposes of definition, significant added value means any
product which uses Original Content as its primary source. Derivative products
do not include home videos or other products which merely make use of existing
CART assets, such as video and photographs.

<PAGE>   2

        "DIGITAL MEDIA" means any communications medium as to which all of the
following are true:

               (i) The principal means by which information is transmitted from
the provider to the end user is the delivery of digitally-encoded data,
regardless of the nature of the data transmitted (e.g., text, computer code,
still images, audio, motion video) or the transmission modality or modalities
employed (e.g., copper wire, fiber optic or coaxial cable, satellite or
terrestrial wireless transmission systems);

               (ii) The principal means by which information transmitted by the
provider is displayed to the end user is transitory images, sounds or other
experiences the persistence of which requires a power source at the display
device (e.g., images and sounds displayed through intelligent or dumb terminals
(including monitors and/or television sets) but not printed pages created by the
provider or the end user); and

               (iii) The medium enables the end user to manipulate the specific
information being displayed to that end user at any particular moment to the
extent (e.g., frequency, immediacy, ease, cost) at least as great as the extent
to which present-day (as of the Effective Date) end users are able to manipulate
the information displayed to them via World Wide Web pages or push media
transmitted over the Internet.

        In applying the foregoing definition, if a provider disseminates
information by means of any two or more media-that are intended primarily to be
displayed to the end user concurrently and in an integrated way through a single
display device, the two or more media will be considered in the aggregate as a
single medium, which will be considered Digital Media only if the combined media
in aggregate satisfy the applicable tests.

        "EVENT DATA" means real-time and historical Event-related data, which
may be provided by CART for use on the Site, subject to its agreements with
third parties, or which is provided by an entity other than CART to CDME,
subject to agreements between CDME and such entity. It is anticipated that such
Event Data shall include results (e.g., times of competitors and standings),
rulings, timing data, instrument and positional data, team radio communications,
text, e-mail, audio, still photographs, video and other relevant material
collected from teams, participants, suppliers, licensees, statisticians or
officials participating in the Event or available from any other source, and any
text or written material from any official or authorized print publication or
statistical supplier. Event Data may also include all participant information,
as well as historical data containing race results and timing data and other
statistical, anecdotal and archival materials, such as timing data, results,
photos, video, e-mail, documents, etc., relating to previous Events. Exhibit A
contains those items listed above which will be made available to CDME at this
time and for the duration of this Agreement and shall be maintained in
accordance with CART's obligations hereunder.

        "INTERFACE" means the graphical user interface ("GUI") for the Site,
including without limitation the "look and feel" of the GUI and the software
programs implementing the GUI (e.g., HTML code, Java scripting and programs
created with other Web authoring tools or tools related to the use of Digital
Media).

        "INTERNET" means the global network of computer networks commonly known
as and currently understood and including the so-called "world wide web" of
computer link-ups and communications systems through which end-users can access
and communicate with other 


                                       2.
<PAGE>   3
computer users, file servers and domains and including any upgrades,
enhancements and successors thereto.

        "MARKS" means all trademarks, trade names, service marks, logos, designs
and trade dress of the Events which are owned or controlled by CART whether
registered or unregistered, set forth in the attached Exhibit B which is
incorporated herein by reference.

        "ORIGINAL CONTENT" means any material or work created by CDME or its
agent(s) for CDME, whether in analog or digital format, in which copyright,
design, (registered or unregistered) trade mark, service mark, or other similar
rights subsist or will subsist and which is incorporated into or synchronized
with or otherwise forms part of or is used in or in connection with the Site and
which is not the Interface or the Software (e.g., narrative text, graphs,
visualizations, still photos, video, etc.).

        "SITE" means coverage of the Events hereunder by CDME consisting of
analog and digital assets, Event Data, Original Content, and Content, as well as
historical and background data and information, which are distributed via a host
site on the Internet and/or via Digital Media. The Site shall include language
substantially similar to that contained in Exhibit C.

        "SOFTWARE" means the executable software programs relating to the Site
and any part thereof other than the Interface.

        "TERM" means the term of this Agreement as defined in Section 4.

2.      GRANT OF RIGHTS.

        2.1 CART hereby grants to CDME during the Term the exclusive worldwide
Digital Media rights to the Events as well as any additional properties, events
or series owned and sanctioned by CART during the Term. Any rights for any
additional properties, events, or series owned and sanctioned by CART during the
Term shall be subject to any pre-existing agreements such properties, events, or
series may have. All other rights granted by this Agreement shall be subject to
CART's pre-existing agreements with third parties, which agreements are
referenced herein. Notwithstanding the foregoing, this Agreement [*] In the
event that CART makes available to CDME the rights to any additional properties,
events or series, CDME shall cover such events in accordance with all the terms
and obligations hereof. CART further appoints and CDME accepts the appointment
to develop, construct and operate during the Term the exclusive officially
authorized Site for Digital Media coverage of the Events on the terms and
conditions of this Agreement. Notwithstanding the foregoing, the exclusive
rights to the PPG Dayton Indy Lights Championship and the Kool Toyota Atlantic
Championship shall commence on the date of expiration (without extension) of
their current agreements for coverage on the Internet, which date shall be no
later than December 31, 1999. In connection with such appointment and grant,
CART hereby grants to CDME the exclusive worldwide rights and license to:

               2.1.1 Use, reproduce and exploit during the Term the Marks on the
Internet, via Digital Media and in connection with the Site, as well as the
rights to use, reproduce and exploit the 


[*] Confidential Treatment Requested.

                                       3.
<PAGE>   4
Marks in any medium in connection with the promotion, marketing, advertisement
or publicity of the Site. Notwithstanding the foregoing, CDME shall not register
the name "CART Digital Media Enterprises" for trademark protection or other
similar registration. CDME shall enter into a royalty-free license agreement
with CART for the use of the mark "CART" in connection with its company name,
"CART Digital Media Enterprises". All use of the aforementioned name, and any
other name or any mark or logo utilizing the Marks shall inure to the exclusive
benefit of CART. Nothing herein shall prevent CDME from changing its company
name.

               2.1.2 Subject to the restrictions in Section 2.1.9, use,
reproduce and exploit during the term the Marks on any Derivative Products, as
well as the rights to use, reproduce and exploit the marks in any medium in
connection with the promotion, marketing, advertisement or publicity of any
Derivative Product. Notwithstanding the foregoing, in connection with the sale
of any Derivative Product, it is understood that CDME shall bear any additional
third party costs of repurposing third party photographs, videotape or other
material.

               2.1.3 Use for the Site Event Data and Content, whether owned,
licensed or sanctioned by CART, on a real time or other basis on the Internet,
and/or via Digital Media. All use of Event Data and Content as it relates to
site structure, architecture, navigation and branding issues shall be approved
in advance by CART, or if such approval is not practicable, shall be subject to
CART's editorial policies existing at the time of use. Content may also be used
in connection with the promotion, marketing, advertisement or publicity of the
Site or any Derivative Product.

               2.1.4 CART and CDME shall work together to establish editorial
standards for the Site which are consistent with the highest standards of
journalistic integrity, and CART shall have full editorial control over the
Site.

               2.1.5 Subject to Section 9 below, sell commercial partnerships
and advertising opportunities in connection with the Site.

               2.1.6 Sell official Event merchandise and other e-commerce
products and services (subject to the execution of such individual promoter
agreements as may be necessary) to third parties on the Site via the Internet
and/or via Digital Media. CART agrees to use reasonable efforts to facilitate
the execution of such promoter agreements.

               2.1.7 Syndicate Content and Original Content to third parties for
promotional use. All agreements for syndication must be approved in advance, in
writing, by CART. Such approval will include the right and license to use some
or all of the Marks, and shall not be unreasonably withheld, or withheld in a
manner which would result in the frustration of the purposes of this Agreement.
Nothing in this paragraph shall preclude CDME from receiving compensation for
such syndication, with such compensation to be subject to the terms of this
Agreement.

               2.1.8 Sell official Event photographs to third parties via the
Internet and/or via Digital Media. It is understood by the parties that the sale
to the public of any official Event photographs shall be subject to agreement
and payment of a fee to Allsport Photography or CART's then existing Official
Photographer.

               2.1.9 Create, advertise, sell and distribute through any channels
or mediums any Derivative Product. Notwithstanding the foregoing, all derivative
products (including the use of any Marks in connection therewith) must be
licensed by CART Licensed Products to CDME in a separate licensing agreement.
CART agrees not to treat CDME any differently than similarly 


                                       4.
<PAGE>   5
situated CART Licensed Product Licensees with respect to each such product.
CDME's right to distribute, advertise and sell Derivative Products shall expire
180 days after the expiration or termination of this Agreement unless otherwise
provided in the Licensing Agreement for such Derivative Product(s).

               2.1.10 Sell official CART and CART Licensed Products
merchandise, products, and services to third parties on the Site via the
Internet and/or via Digital Media through December 31, 1999 subject to a license
agreement to be executed with CART Licensed Products, Inc. where a sliding scale
commission shall be paid by CART Licensed Products to CDME as set forth in
attached Exhibit D. CDME will work with CART Licensed Products to identify and
implement a phased approach to incorporate CART Licensed Products merchandise
into the site. CART Licensed Products shall promote and market the CART.com
store as the place to purchase CART associated merchandise in CART Licensed
Product's marketing activities. CART and CDME agree to work together to develop
a long term plan for handling e-commerce, it being understood and agreed that
CDME shall be included in any plan. To that end, by September 1, 1999, the
parties shall work together to develop such plan and business model, including
the addition of third party(ies), if any, as part of such long term plan.

               2.1.11 Include branding and promotion for Quokka Sports, Inc. in
connection with the Site substantially equivalent to that utilized by ESPN in
connection with its broadcast coverage of sporting events, provided that any
branding shall be subject to CART's prior written approval, which approval shall
not be unreasonably delayed or withheld.

        2.2 As between CDME and CART, CART shall retain all rights to the domain
name CART.com. Notwithstanding the foregoing, promptly upon execution of this
Agreement and during the Term CART shall cause control of the aforementioned
domain to be transferred to CDME, and CDME shall maintain the domain and all
corresponding domain entries. If CART ceases to have rights to the domain
CART.com (for instance, following a registration dispute), the parties will use
their best efforts to provide a new address and cooperate to ensure that there
shall be minimal interruption in service for the Site.


3.      CONTRIBUTIONS OF THE PARTIES.

        3.1 CDME agrees to utilize the following technology, intellectual
property, and hardware and software resources in connection with coverage of the
Events: Quokka Sports Immersion(TM) tools, technologies, rights, and know-how
including, but not limited to, the Quokka Replication System, race viewers,
Quokka Sports Feed, and production processes. CART shall have no rights to use
the foregoing for any purpose, nor shall CART acquire any rights in the
foregoing, and all rights therein shall remain with CDME or Quokka Sports, Inc.

        3.2 CDME shall be responsible for constructing at its own expense and
risk the Site, including the design of the Interface, construction of the Site
infrastructure and production of Original Content. A delivery schedule is
attached as Exhibit E. If the Site has not been launched by April 1, 1999, CDME
shall pay all expenses for CART to continue its current contract for CART.com
with U.N. Productions from April 1, 1999 through the date of launch.

               3.2.1 Subject to Section 2.1.3 and 2.1.4, CDME shall maintain
responsibility for all editorial, design and content aspects of the Site and
CDME shall utilize the best efforts of its creative, editorial, engineering,
technical, operations and production staff to improve the level of the current
CART digital interactive media coverage from its present state so as to remain a

                                       5.
<PAGE>   6
leader in digital interactive media involving the Internet as well as successor
or future interactive networks.

               3.2.2 As a part of the Site, CDME will provide a corporate
relations section as well as a restricted access section for press relations.
Upon request of CART, additional non-revenue generating sections will also be
added, which may result in a charge to CART. Such charge, if any, shall be based
upon actual costs to CDME. CDME shall provide to CART a quote for the provision
of such services. If CART finds a third party which will provide such services
at less cost, then CART may contract with such third party, except that prior to
such contract, CDME shall be given the opportunity to match the offer from the
third party. In the event that CDME matches the third party pricing, CART shall
use CDME for the provision of such service. The parties shall mutually agree to
the overall image for the website which in all cases shall be consistent with
CART's overall marketing strategies, branding characteristics and creative look
in the marketplace.

               3.2.3 CDME will provide its QSI infrastructure (including
interfaces into the venue management system for results and scoring, remote
publishing, telemetry, QSI information system, etc.) in connection with the
Site.

               3.2.4 CDME will provide full and complete management of and
operations of hosting infrastructure (T3, hardware, software, 24X7 support,
etc.) for the Site. At CDME's request, CART shall continue its current contract
with U.N. Productions with respect to CART.com from January 1, 1999 to March 31,
1999. CDME shall reimburse CART for such expense at a total sum for such period
not to exceed $[*] per month.

               3.2.5 CDME will provide all customer service functions (web
master, etc.) associated with the Site, except for corporate relations, press
customer service functions, and other requested non-revenue generation section
functions which will be handled directly by CART and for which CART shall
generate all content. CDME will provide templates, remote publishing tools and
support for CART to manage these areas expeditiously and autonomously. CDME
shall perform all functions in conjunction with its role as host server for the
Site, consistent with those services normally provided by web Site servers. CDME
will use its best efforts to provide continuous, uninterrupted operation of the
Site. CDME will provide comprehensive Site maintenance, changes, additions and
any other steps reasonably necessary to maintain the integrity, quality and
performance of the Site. All major changes to the Site shall be made in a timely
manner pursuant to an agreed upon review process, before being made available to
the general public.

               3.2.6 CDME will specify and manage all traffic verification as
well as analysis and research services for the Site through I-Pro, or such other
recognized independent verification group as the parties may agree upon, with
respect to mutually agreed upon audience metrics.

               3.2.7 CDME will use best efforts to integrate into the Site
reciprocal links between the Site and the web sites of the racing teams,
drivers, Events and CART official sponsors (e.g. Omega and Federal Express), and
all reasonable efforts related to other major motorsport sites.

               3.2.8 CDME will provide on-line Site promotion and marketing
subject to CART approval, which shall not be unreasonably withheld or delayed,
and will work closely with CART Marketing. CDME shall provide to CART the
details for such proposed efforts, it being understood that these efforts shall
be commensurate with the activities undertaken in conjunction 


[*] Confidential Treatment Requested.

                                       6.
<PAGE>   7
with the Whitbread Race Around the World or the Around Alone Race, whichever
shall be greater.

               3.2.9 CART shall provide a full-time liaison, based at the CART
office, to coordinate with CART, at CDME's expense. The liaison shall be subject
to the parties' periodic mutual approval. The amount CDME shall provide under
this paragraph shall not exceed $[*] annually, plus annual increases not to
exceed [*] per annum.

               3.2.10 CDME agrees to consider providing on the Site an
additional section covering the 29th Car Concept. In connection therewith, CDME
shall study such concept and present a proposal to CART no later than September
30, 1999 with respect to inclusion of such concept in the Site during the 2000
season. In the event that CDME, in its reasonable judgment, determines that any
such section is not technically feasible or financially sustainable for 2000,
then the parties shall mutually agree upon a plan for reconsidering the concept.
Any revenues from such concept shall be included within Gross Revenues
hereunder. In addition to the [*] percent [*] set forth in Section 6.1, an
additional [*] percent [*] of any subscription revenues [*] shall be paid to
CART, [*].

               3.2.11 CDME also agrees to consider providing on the Site
additional sections suggested by CART. Any revenues from such sections shall be
included within Gross Revenues hereunder. In the event that CDME, in its
reasonable judgment, determines that any such section is technically feasible
and financially sustainable, but nevertheless elects not to undertake such
section, then CART shall be free to pursue such project with any third party or
in its own name, provided (1) that CDME is the systems integrator and takes
primary responsibility for integrating such section into the Site and (2) that
there shall be no use of Original Content without the payment of a mutually
acceptable sum to CDME which shall be comparable to then-existing industry
charges, but at a minimum will cover all actual costs to CDME.

        3.3 As between CDME and CART, CDME shall retain all rights to the
technology, intellectual property, and resources contributed solely by CDME as
well as any Software, Interface and Original Content developed by it or its
agent(s) for CDME in connection with the Events.

        3.4 Each party shall provide the other during the Term a non-exclusive,
royalty free license to use and access all content developed by it as well as
all third party content licensed by it, to the extent permitted by such third
parties, solely for use in connection with any publicity and promotion of the
Events or Site.

        3.5 In connection with CDME's efforts hereunder, to the extent such
rights are available for CART to provide, CART shall provide the following at no
cost to CDME:

               3.5.1 Real-time access and ability to use all audio feeds and
communications associated with the Events (e.g., CART Radio Network; driver/pit
crew; and track announcer).

               3.5.2 Subject to Section 5.2.3 below, real-time access and
ability to use real-time results, timing and scoring systems and feeds. During
1999, and as long as Omega/Swiss Timing is CART's official timekeeper, access to
timing and scoring feeds [*] Omega/Swiss Timing and [*] Omega/Swiss Timing
receiving appropriate branding recognition on the Site. Thereafter, any
successor CART timing and scoring provider 


[*] Confidential Treatment Requested.

                                       7.
<PAGE>   8
shall receive appropriate branding recognition on the Site, which shall be
comparable to that provided as of the effective date of this Agreement.

               3.5.3 Real-time access and ability to use official CART/Event
photographs in connection with the Site and for promotion purposes only, it
being understood that any specific sale of such photographs shall be subject to
Section 2.1.8.

               3.5.4 Reasonable efforts with Event participants (e.g. teams,
drivers, crews) to provide Event Data which CART does not own, control, or have
the rights to utilize. CART may include in future participant agreements various
additional assets to be made available to CDME for the Site.

               3.5.5 Access to and ability to use all historical and other
relevant information, photographs, video, audio, statistics and data under the
control or license of CART.

               3.5.6 Reasonable efforts to promote the Site URL to the widest
extent possible, such reasonable efforts to include placement of the URL in TV
and radio advertisements and in broadcasts on the CART Radio Network and in
broadcasts outside the United States and placement of the URL on the starter
vest, letterhead, business cards, advertisements and other forms of printed
matter, electronic material, or broadcast material distributed by CART. CART
will also use reasonable efforts to assist CDME to secure placement of banners
or signs with the URL on high visibility spots (for spectators and broadcast
cameras) at the venues and in such other locations as may be mutually agreed, it
being understood that such additional exposure may be at an incremental cost to
CDME.

               3.5.7 Subject to CART's existing agreement [*], CART will
exercise reasonable efforts with [*] to permit CDME access to and use of [*] on
the Site and for promotion of the URL. To the extent that [*] are available,
CART will use reasonable efforts to provide access to [*]. CDME recognizes that
there may be some restrictions on the use of such assets.

               3.5.8 Reasonable efforts to assist CDME in obtaining a reasonable
number of preferred venue credentials, Event tickets, parking passes and
hospitality access passes (to the extent available) for its employees, sponsors
and guests, at the expense of CDME. 

               3.5.9 Annual all access credentials for working CDME personnel
and will exercise reasonable efforts to provide parking passes for such CDME
personnel, subject to availability.

               3.5.10 Reasonable efforts to assist CDME in meeting its logistics
and venue operations needs, it being understood that, depending on the size and
amount of equipment to be utilized, a fee, in certain circumstances, may be
payable to the event promoter. CART shall use reasonable efforts to assist CDME
in its negotiations of such fees with the promoter. At least ten (10) days prior
to an Event, CDME shall provide details regarding its proposed requirements.

               3.5.11 Unrestricted access to CART venues with cameras,
microphones and other equipment as necessary for CDME to acquire digital assets
and set up venue operations, subject to the provisions and restrictions in this
Agreement, including but not limited to CART's existing contractual obligations
to [*].


[*] Confidential Treatment Requested.


                                       8.
<PAGE>   9
               3.5.12 Reasonable access to CART's current on-line database, fan
club database and affinity database as well as all marketing demographics,
surveys, television ratings, and other information which may assist CDME in its
marketing and sales efforts hereunder.

4.      TERM.

        The Term of this Agreement shall commence on January 1, 1999, and shall
continue through and until December 31, 2003, unless extended as set forth
herein. The parties shall negotiate in good faith for the extension of this
Agreement, such negotiations to commence on or around July 1, 2002, and to
continue for at least ninety (90) days thereafter or until an agreement is
reached if sooner. If the parties are unable to reach an agreement for such an
extension, CART shall be free to enter into negotiations with third parties
regarding the rights which are the subject of this Agreement, [*].

5.      RIGHT TO TERMINATE.

        5.1 CART shall have the right to terminate this Agreement for the
reasons set forth below:

               5.1.1 If CDME fails to maintain state of the art quality and
technological enhancements, subject to notice and an opportunity to cure as set
forth below. CART shall notify CDME in writing with respect to any alleged
failure and the parties shall meet within one (1) week thereafter to discuss
such notification. Thereafter, CDME shall have thirty (30) days in which to cure
any failure. If the default cannot be cured within thirty (30) days, but
reasonable good faith efforts have been undertaken to cure the default within
that time period, a reasonable extension of time in which to cure the default
shall be given and agreed upon between the parties.

               5.1.2 If CDME fails to attain the minimum Site traffic level in
any quarter as set forth in the attached Exhibit F, subject to notice and an
opportunity to cure as set forth below. CART shall notify CDME in writing with
respect to any such failure and the parties shall meet within one (1) week
thereafter to discuss such notification. Thereafter, CDME shall have ninety (90)
days in which to increase traffic to the Site to the required level. If the Site
traffic cannot be restored within ninety (90) days, but reasonable good faith
efforts have been undertaken to cure the default within that time period, a
reasonable extension of time in which to increase the Site traffic to levels as
required by Exhibit F shall be given and agreed upon between the parties.

               5.1.3 In the event that CDME or Quokka Sports, Inc. provides
similar services to an open wheel professional auto racing sanctioning body,
league or series currently domiciled in the United States which promotes
products or services competitive with those of CART.

               5.1.4 If more than forty nine percent (49%) of the ownership or
other beneficial interest in CDME or Quokka Sports, Inc. is transferred, sold,
or otherwise assigned, either voluntarily or by operation of law, in one or more
transactions, to an individual or entity whose products or services are
competitive or in conflict with those of CART. Such right of termination shall
be exercised, if at all, by CART within thirty (30) days of such change in
ownership.


[*] Confidential Treatment Requested.

                                       9.
<PAGE>   10
        5.2 CDME shall have the right to terminate this Agreement for the
reasons set forth below:

               5.2.1 The failure of the parties to reach a mutually acceptable
manner in which to incorporate e-commerce revenue opportunities within the Site
following the conclusion of the discussions provided for in Section 2.1.10
above.

               5.2.2 If more than forty nine percent (49%) of the ownership or
other beneficial interest in CART is transferred, sold, or otherwise assigned,
either voluntarily or by operation of law, in one or more transactions, to an
individual or entity whose products or services are competitive or in conflict
with those of CDME or Quokka Sports, Inc. Such right of termination shall be
exercised, if at all, by CDME within thirty (30) days of such change in
ownership.


               5.2.3 [*].

        5.3 Either party shall have the right to terminate this Agreement upon
the material breach of any term of this Agreement which is not cured within
sixty (60) days after notice of such breach to the other party.

        5.4 Upon termination or expiration of this Agreement, all intellectual
property rights shall revert to their owners, as determined by this Agreement.

               5.4.1 Upon the request of CART, CDME shall ensure that the Site
shall remain active and be serviced by CDME for up to 180 days following
termination or expiration of this Agreement, which shall allow CART sufficient
time to obtain another provider. Upon the expiration of 180 days, or CART's
notice to CDME, servicing of the Site by CDME shall cease. If CART opts to
exercise this option, a fee payment from CART to CDME shall be mutually agreed
upon.

6.      REVENUES.

        6.1 As a license fee for all rights and services herein, CDME shall pay
to CART [*] percent [*] of all Gross Receipts generated hereunder over the Term
with a minimum guarantee of [*], which minimum guarantee shall be payable as
follows: Year 1-$[*] shall be payable upon execution of this Agreement; Year
2-$[*]; Year 3-$[*]; Year 4-$[*]; and Year 5-$[*]. The guaranteed sums for years
2, 3, 4 and 5 shall be paid in two (2) equal installments, not later January 1
and July 1 of each such year. Gross Receipts shall mean all revenue (including
value in-kind) actually received by CDME, including, but not limited to revenue
from [*], and [*]. Gross receipts shall not include any sums received by CDME
which are returned for any reason at law or equity. Value in-kind will be valued
based upon best customer pricing, as determined by the applicable vendor. No
commercial partnerships or advertising shall be sold by CDME in conjunction with
other Quokka Sports' projects unless the following procedure has transpired. All
sales shall be subject to the restrictions of Section 7. At any time, CDME or
CART may [*]. CART shall have the right for a period of twenty one (21) days
thereafter to [*] 

[*] Confidential Treatment Requested.


                                      10.
<PAGE>   11
[*]. Having purchased a category, CART or Quokka Sports would be free to resell
such packages at a higher price if it so chooses without any duty to account for
or otherwise share revenues over and above the agreed price.

        6.2 In addition to the sums set forth in Section 6.1, CDME shall also
pay a Referral Fee of [*] percent [*] of the first years' Net Sales Price (as
defined below) to CART, the CART racing teams, the CART drivers or CART event
promoters, as the case may be, for the successful referral of any commercial
partner to CDME for the Site for the first year of any deal. Thereafter, in the
case of any multi-year deal, the Referral Fee shall be [*] percent [*] of the
Net Sales Price for each such additional year of such agreement, including any
option periods exercised as provided for in such agreement. Net Sales Price
shall mean the gross sales price of the contract less any applicable agency
commission or fee. For an entity or person to qualify for a Referral Fee, that
person or entity must have provided substantial and material assistance and
ongoing support in obtaining a binding contract. Substantial and material
assistance shall mean the introduction of CDME to the person who ultimately
agrees to the binding contract or an employee of the contracting company, or an
agent who was involved in the sales process. For a Referral Fee to be paid to a
person or entity, a commercial partner must enter into a binding contract with
CDME. Only one Referral Fee shall be payable on any contract. Any Referral Fee
shall only be computed on a quarterly basis and shall be due and payable only on
any sums actually received in connection with such contract.

        6.3 CDME shall compute its Gross Receipts on a quarterly basis in
accordance with generally accepted accounting principles and shall distribute to
CART any excess sums due over and above the minimum guaranteed license fee with
a statement thereof within ninety (90) days after the conclusion of each
calendar year. CART shall have the right to examine CDME's books and records
with respect to any statements rendered. Except as stated below, such
examination shall be at CART's sole expense and shall be commenced not earlier
than ten (10) days after the date of such notice by any independent accountant
designated by CART provided any such person shall sign a standard
confidentiality agreement reasonably acceptable to CDME. If the examination
reveals that CDME failed to account for and properly pay fees due to CART
hereunder in an amount exceeding five percent (5%) of the fees actually paid and
accounted for, then CDME shall pay CART such past due amounts with interest at
the Prime Rate as determined by the Wall Street Journal, and reimburse CART for
the total cost of the examination. Such examinations shall be made during CDME's
usual business hours and CDME shall make available to CART for inspection any
and all books and records reasonably requested in the format maintained with
respect to such statements. CART shall have the right to audit CDME's books and
records no more than once in any twelve (12) month period. CART agrees that it
shall not have any right to audit any item more than two (2) years old and may
not seek information on or dispute any items not included within the audit
period.

7.      COMMERCIAL PARTNERSHIPS AND SITE ADVERTISING.

        CDME will provide for all [*] in connection with the Site, subject to
the terms and conditions contained in this Agreement. In connection with the
sale of commercial partnership opportunities and advertising on the Site,[*]: 
(1) [*]

[*] Confidential Treatment Requested.


                                      11.
<PAGE>   12
[*]; (2) [*], which approval would not be unreasonably withheld; (3) [*], which
approval would not be unreasonably withheld; (4) [*] would meet on such regular
basis as is necessary in order to ensure that there is substantial communication
and continuity between the parties with respect to their individual endeavors to
secure [*] and [*]; it is understood that the parties will work together in good
faith to assist each other in [*], and if necessary, the parties will each agree
to [*]; and (5) [*]. All commercial partnership and advertising sales shall, to
CART's reasonable satisfaction, be in good taste.

8.      EQUITY CONSIDERATION.

        Concurrently with the execution and delivery of this Agreement, CDME
will cause Quokka Sports, Inc. to issue to CART the Quokka Warrants as set forth
in Exhibit G.

9.      CART SPONSOR PROTECTION.

        CDME will provide for all advertising and commercial partnership sales
in connection with the Site, subject to the following conditions: (i) CART will
identify a limited number of categories where CDME will only approach one
company designated by CART about a commercial partnership. These companies shall
be designated in a list of current CART official sponsors to be appended hereto
as Exhibit K such list to identify the expiration dates of such Sponsor
relationships. Once a current CART sponsor agreement expires, then such company
will be handled in accordance with the procedures set forth in subsection (iii)
hereof If CDME were unable to sell such company any commercial partnership
packages, then CDME will not approach any competitors; (ii) CART will use all
appropriate efforts to introduce the CDME sales team to key personnel at the
companies designated under (i) above; (iii) As to other important CART
customers, CDME will negotiate first with such companies for such packages. If
CDME is unable to reach an agreement with such companies, then CDME is free to
approach and sell a package to any competitor; (iv) CART and CDME shall have the
opportunity to purchase one or more of the categories at a predetermined price.
Having purchased a category, CDME or CART is free to resell such packages at a
higher price if it so chooses without any duty to account for or otherwise share
revenues with the other party; and (v) Notwithstanding the foregoing, it is
understood that as to sponsor negotiations currently in progress by CART,
website involvement already committed by CART shall be honored and shall not be
considered as advertising and commercial partnership sales for purposes of this
Agreement. Subject to the terms stated above, CART releases all categories of
commercial partnership to CDME (except for tobacco and subject to the other
constraints described in this Agreement) for the duration of this Agreement.
CDME will agree not to sell site commercial partnerships competitive with CART
sponsors identified in Exhibit H until the current respective agreement
terminates, at which time the specific category would be released by CART to
CDME, as provided above. Prior to the release of the category, CDME will agree
to continue all applicable brand identification on the site in no less
prominence than currently exists.

[*] Confidential Treatment Requested.

                                      12.
<PAGE>   13

10.     SANCTIONING.

        CART warrants that the Events are CART sanctioned and will be conducted
in accordance with all applicable rules and regulations and all international,
foreign, federal, state, and local laws.


11.     NAME AND LIKENESS.

        To the extent that CART owns or licenses such rights, CDME and any of
its licensees shall have the right and, to the extent provided for in this
Agreement, may grant to others the right to reproduce, print, publish or
disseminate in any medium the names, likenesses, voice and biographical material
of CART, the participants in the Events, including their sponsors, or any person
appearing in or connected with the Events as news or information, for use on the
Site or for Site advertising purposes (including without limitation
institutional advertising) and including but not limited to the advertising and
promotion of the coverage hereunder and in connection therewith the products or
services of any advertiser or commercial partner thereof, provided, however,
that there shall be no direct or implied endorsement by any such persons of any
product or service without such person's prior written consent.

12.     WARRANTIES OF CART.

        CART warrants, represents and undertakes to CDME as follows:

        12.1 that it is a company duly incorporated under the laws of the State
of Delaware and that it has the power and authority to enter into and to perform
all obligations under this Agreement;

        12.2 that nothing in the Event Data, the Marks, the Content or the
other data and information which is provided to CDME hereunder by CART shall
infringe the copyright, trade marks or other intellectual property rights of any
person or entity;

        12.3 that CART has the right to grant to CDME all of the rights granted
in this Agreement, that CART is not presently a party to any Agreement which
conflicts with the rights and terms hereof and that CART will not grant any
rights which might interfere or derogate the rights granted herein;

        12.4 that CART shall conduct a minimum of 18 Events pursuant to an
annually published schedule;

        12.5 that the participants in the Events shall be of comparable ability
to those participating in previous versions of the Events;

        12.6 that all representations to CDME by CART and all representations
made by CART to third parties about any and all elements of the Events are and
shall be accurate and true in every respect.

        12.7 that all publicity which it issues or disseminates or otherwise
makes available concerning all elements of the Events will be accurate and true
in all respects, to the best of CART's own knowledge.


                                      13.
<PAGE>   14

13.     WARRANTIES OF CDME.

        CDME warrants, represents and undertakes to CART as follows:

        13.1 that it is a company duly organized under the laws of the state of
Delaware and that it has the power and authority to enter into and to perform
all obligations under this Agreement;

        13.2 that nothing generated by CDME with respect to coverage of the
Events shall infringe the copyright, trade marks or other intellectual property
right of any person or entity.

        13.3 that all representations to CART by CDME and all representations
made by CDME to third parties about any and all elements of the Site are and
shall be accurate and true in every respect.

14.     DISCLAIMER.

        THE WARRANTIES SET FORTH IN SECTIONS 12 AND 13 OF THIS AGREEMENT ARE THE
SOLE AND EXCLUSIVE WARRANTIES OF THE PARTIES HERETO IN CONNECTION WITH THIS
AGREEMENT, AND THE PARTIES HEREBY EXPRESSLY DISCLAIM ANY OTHER WARRANTIES
WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT, LIMITATION THE WARRANTIES OF
TITLE,, NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY.

15.     INDEMNIFICATION.

        15.1 CART shall indemnify and hold harmless CDME, its members and
employees and any person, firm or corporation deriving rights from CDME from and
against any and all claims, damages, liabilities, costs and expenses (including
reasonable counsel fees), arising out of (1) any use of the coverage as
permitted hereunder (including without limitation the Event Data); and (2) a
breach of any warranty, representation or undertaking made by or undertaken by
CART herein. CDME shall promptly notify CART of any claim to which the above
indemnity applies and CART shall defend the same at its own expense. CDME will
cooperate in the defense of any such claim at the reasonable request and at the
expense of CART. Notwithstanding the foregoing, CART shall not indemnify CDME to
the extent that the foregoing would not have occurred but for the actions of
CDME.

        15.2 CDME shall indemnify and hold harmless CART and its employees and
any person, firm or corporation deriving rights from CART from and against any
and all claims, damages, liabilities, costs and expenses (including reasonable
counsel fees), arising out of (1) CDME's actual coverage of the Events; or (2) a
breach of any warranty, representation or undertaking made by or undertaken by
CDME herein. CART shall promptly notify CDME of any claim to which the above
indemnity applies and CDME shall defend the same at its own expense. CART will
cooperate in the defense of any such claim at the reasonable request and at the
expense of CDME. Notwithstanding the foregoing, CDME shall not indemnify CART to
the extent that the foregoing would not have occurred but for the actions of
CART.


                                      14.
<PAGE>   15

16.     COPYRIGHT AND OTHER RIGHTS.

        16.1 Each Party shall own all worldwide copyright and other intellectual
property interests in the content it has provided to the Site; i.e., CDME shall
retain its rights in all Original Content, Interfaces and Software as stated in
Section 3.3 above, and CART shall retain its rights in all Content. Each party
shall have the unrestricted and unencumbered right to use and reuse or to
assign, license, sell or otherwise exploit, the copyright and other property
right interests which it owns hereunder except as otherwise provided in this
Agreement. The copyright notice on the Site shall include the following
notation: "(C) (year) CART Digital Media Enterprises, L.L.C.; Material provided
by CART (C) (year) Championship Auto Racing Teams, Inc.," with a link to a page
which will describe in reasonable detail the copyrighted and other contributions
of the parties.

        16.2 CDME shall own all rights to the information about and access to
the people who visit or register with the Site, to the extent that it may
lawfully own such rights. Notwithstanding the foregoing, certain information as
listed hereafter shall be jointly owned by CDME and CART. Such jointly owned
information shall consist solely of information sent to or coming through
[email protected] <mailto:[email protected]>, [email protected] <mailto:[email protected]>,
subscriber information with respect to the CART Newsletter, CART Winners Circle
Club, CART Kids Coloring Contest, individuals purchasing through the CART Store
and such other areas of the Site as may be mutually agreed, as well as mutually
agreed Site traffic information. Such Site traffic information may be published
by CART. All other information provided by CDME to CART is for internal CART use
and may only be distributed with the prior written approval of CDME. Any usage
of subscriber information shall be subject to the limitations of the Site's
Privacy Policy which shall be mutually agreed upon by the parties.

16.3 Unless otherwise agreed, CART and CDMEs' suppliers and providers will
retain all worldwide copyright and other intellectual property interest in the
content they provide to the Site and CDME shall include an appropriate notice.

17.     FORCE MAJEURE.

        17.1 If CDME's coverage of any of the Events is prevented or omitted in
its entirety because of acts of God; accident; fire; lockout; strike or other
labor dispute; riot or civil commotion; act of public enemy; enactment, rule,
order or act of any government or any governmental authority or instrumentality
(whether federal, state, local or foreign); failure of technical facilities
beyond the reasonable control of CDME; or other cause of a similar or different
nature beyond CDME's control ("Force Majeure Event"); it shall not be, and shall
not be deemed to be, a breach of this Agreement by CDME to perform its
obligations hereunder during the duration of a Force Majeure Event, and
performance of CDME's obligations in connection with the affected Events shall
be excused for the duration of the Force Majeure Event and for a reasonable
period thereafter; provided that CDME shall use reasonable efforts to minimize
the extent of the delay in performance caused by the Force Majeure Event.

        17.2 Notwithstanding anything to the contrary in Section 17.1, if for
any reason beyond CART's control (including without limitation adverse weather
conditions) any of the Events are not held on the scheduled dates, CART shall
immediately notify CDME of the rescheduled date(s) of the Events, if any, and
CDME, at its sole election, shall have the right either (i) to continue with
coverage of the Events on the rescheduled date(s) pursuant to the terms and
conditions hereof, or (ii) to choose not to cover any such delayed Event. In the
event that CDME 


                                      15.
<PAGE>   16
chooses option (ii) above, such choice shall not be, and shall not be deemed to
be, a breach of this Agreement, and the terms and conditions of this Agreement
otherwise shall remain in full force and effect.

18.     INDEPENDENT CONTRACTORS.

        Nothing herein contained shall constitute or be construed as the
creation of any agency, partnership or joint venture relationship between the
parties hereto. Neither party shall have the right to obligate or bind the other
in any manner whatsoever, and nothing herein contained shall give or is intended
to give any rights of any kind to any third persons. The relationship of the
parties shall be as independent contractors.

19.     CONFIDENTIALITY.

        The parties acknowledge that this Agreement and its terms shall be
confidential, except as required or reasonably necessary to comply with laws,
statutes, regulations, orders, and other governmental rules, including, without
limitation, any voluntary filing under the Securities Act of 1933, as amended,
or the Securities and Exchange Act of 1934, as amended. The parties further
acknowledge that, in the course of performing duties under this Agreement, each
party may obtain from the other party data or information of a confidential or
proprietary nature, including know-how and trade secrets, relating to the
business, the affairs, the development projects, or current or future products
or services of such party ("Confidential Information"). Confidential Information
may be disclosed to a party in writing, in other tangible form (including
e-mails), orally, or visually. Neither party will at any time either ~i)
publish, disclose or otherwise divulge any of the other party's Confidential
Information to any person, except its officers and employees under a contractual
duty to maintain the confidentiality of such information consistent with the
obligations imposed hereunder; or (ii) permit its officers or employees to
divulge any of the other party's Confidential Information without the express
prior written consent of the other party. Neither party shall use the other
party's Confidential Information except in the course of performing its duties
under this Agreement. Upon the other party's request or expiration or
termination of this Agreement for any reason, each party will immediately return
to the other party all of the other party's Confidential Information in its
possession, custody or control. The foregoing obligations will not apply to any
Confidential Information that (1) is already known to the receiving party; (2)
is or becomes publicly known through no wrongful act of the receiving party; (3)
is independently developed by the receiving party without use or benefit of the
disclosing party's Confidential Information or personnel who had access to the
same; (4) is received from a third party without similar restriction and without
breach of any obligation of confidentiality; or (5) is required to be disclosed
pursuant to a statutory or regulatory provision or court order, to the demanding
body and to the extent of such required disclosure only following notification
by the receiving party to the disclosing party of the request and notification
to the court or regulatory body of the confidential nature of the information.
Additionally, neither party shall be prohibited from disclosing the terms and
conditions of this agreement for any financing purposes if such is subject to
confidentiality agreements as protective as this Section 19. This paragraph
shall survive the termination or expiration of this Agreement.

20.     NOTICE.

        All notices, approvals, consents, waivers, and other communications
intended to have legal effect with regard to this Agreement must be given in
writing and delivered to the other party at the address set forth below by (a)
postage pre-paid, certified mail (return receipt requested); (b) Federal
Express; or (c)facsimile transmission (receipt confirmed, with a copy sent by
postage pre-


                                      16.
<PAGE>   17

breach of this Agreement, and the terms and conditions of this Agreement
otherwise shall remain in full force and effect.

18.     INDEPENDENT CONTRACTORS.

        Nothing herein contained shall constitute or be construed as the
creation of any agency, partnership or joint venture relationship between the
parties hereto. Neither party shall have the right to obligate or bind the other
in any manner whatsoever, and nothing herein contained shall give or is intended
to give any rights of any kind to any third persons. The relationship of the
parties shall be as independent contractors.

19.     CONFIDENTIALITY.

        The parties acknowledge that this Agreement and its terms shall be
confidential, except as required or reasonably necessary to comply with laws,
statutes, regulations, orders, and other governmental rules, including, without
limitation, any voluntary filing under the Securities Act of 1933, as amended,
or the Securities and Exchange Act of 1934, as amended. The parties further
acknowledge that, in the course of performing duties under this Agreement, each
party may obtain from the other party data or information of a confidential or
proprietary nature, including know-how and trade secrets, relating to the
business, the affairs, the development projects, or current or future products
or services of such party ("Confidential Information"). Confidential Information
may be disclosed to a party in writing, in other tangible form (including
e-mails), orally, or visually. Neither party will at any time either ~i)
publish, disclose or otherwise divulge any of the other party's Confidential
Information to any person, except its officers and employees under a contractual
duty to maintain the confidentiality of such information consistent with the
obligations imposed hereunder; or (ii) permit its officers or employees to
divulge any of the other party's Confidential Information without the express
prior written consent of the other party. Neither party shall use the other
party's Confidential Information except in the course of performing its duties
under this Agreement. Upon the other party's request or expiration or
termination of this Agreement for any reason, each party will immediately return
to the other party all of the other party's Confidential Information in its
possession, custody or control. The foregoing obligations will not apply to any
Confidential Information that (1) is already known to the receiving party; (2)
is or becomes publicly known through no wrongful act of the receiving party; (3)
is independently developed by the receiving party without use or benefit of the
disclosing party's Confidential Information or personnel who had access to the
same; (4) is received from a third party without similar restriction and without
breach of any obligation of confidentiality; or (5) is required to be disclosed
pursuant to a statutory or regulatory provision or court order, to the demanding
body and to the extent of such required disclosure only following notification
by the receiving party to the disclosing party of the request and notification
to the court or regulatory body of the confidential nature of the information.
Additionally, neither party shall be prohibited from disclosing the terms and
conditions of this agreement for any financing purposes if such is subject to
confidentiality agreements as protective as this Section 19. This paragraph
shall survive the termination or expiration of this Agreement.

                                      17.
<PAGE>   18


paid, certified mail), and will be effective upon receipt. Each party
may change its address for receipt of notices by giving notice of the new
address to the other party.

21.     FURTHER ASSURANCES.

        Each party agrees to execute and provide all such assurances, acts,
documents and things (including, without limitation, further or other legal or
beneficial assignments, transfers, grants, charges, copyright registrations and
any formalities required by any jurisdiction in any part of the universe) in
such location and such manner as the other party may from time to time
reasonably require in connection with perfecting or protecting or enforcing any
provision of this Agreement including assignments or rights granted to such
party hereunder.

22.     LIMITATION IN LIABILITY; REMEDIES.

        Neither party shall be liable to the other party for any incidental,
indirect, consequential, special, or punitive damages of any kind or nature
arising under or relating to this Agreement, whether such liability is asserted
on the basis of contract, tort (including negligence or strict liability), or
otherwise, even if either party has warned or been warned of the possibility of
any such loss or damage. This Section 22 is not intended to limit the
indemnification obligation of the parties with respect to third party claims
pursuant to Section 15 hereof.

23.     GENERAL PROVISIONS.

        23.1 This Agreement is the entire agreement of the parties. All prior
understandings, oral or written, if any, including but not limited to that
certain Letter of Agreement executed by the parties on January 4, 1999, have
been merged herein, or, if not merged, are hereby canceled. No representations
have been made except those expressly set forth herein.

        23.2 Any amendment or discharge of this Agreement must be in writing and
signed by an officer of the party.

        23.3 This Agreement may not be assigned in whole nor in part by either
party without the other party's prior written consent, which consent shall not
be unreasonably withheld. This agreement shall be binding upon both CART and
CDME and their successors and permitted assignees.

        23.4 Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any material statute, law,
ordinance, rule or regulation, the latter shall prevail, but in such event, any
provisions of this Agreement so affected shall be curtailed and limited only to
the extent necessary to bring them within the applicable requirements, and the
remainder of this Agreement shall continue in full force and effect. The parties
hereby agree that they shall comply with the requirements of the U.S. Foreign
Corrupt Practices Act (the "Act") and shall refrain from any payments to third
parties which would cause either party to violate the Act.

        23.5 Any dispute arising under this Agreement shall be promptly
submitted to and heard and determined by the American Arbitration Association
pursuant to its commercial arbitration rules in effect at the time of any
dispute. The determination of the arbitrator shall be binding on the parties,
shall not be appealable, and judgment on the award rendered may be entered in
any court having jurisdiction on the matter. The prevailing party (as determined
by the 


                                      17.
<PAGE>   19


arbitrator) shall be entitled to recover from the other party all costs
and expenses (including but not limited to attorney fees) incurred in enforcing
its rights under the arbitration process.

        23.6 A waiver by either party of any term or condition of this Agreement
in any instance shall not be deemed or construed as a waiver of such term or
condition for the future or any subsequent breach thereof. All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall be
cumulative and none of them shall be in limitation of any other right, remedy,
undertaking, obligation or agreement of either party.

        23.7 The headings hereunder are for ease of reference only and are not
part of this Agreement.

        IN WITNESS WHEREOF, the parties hereto have signed this Agreement this
20th day of March 1999.

                                          CHAMPIONSHIP AUTO RACING TEAMS, INC.



                                          By: [SIGNATURE ILLEGIBLE]
                                            ---------------------------------
                                          Name: ILLEGIBLE 
                                               ------------------------------
                                          Title: Chairman and CEO
                                                -----------------------------


                                          CART DIGITAL MEDIA
                                          ENTERPRISES, LLC, by its
                                          members:


                                          By: /s/ R. H. WILLIAMS
                                            ---------------------------------
                                                 R. H. Williams, Manager

                                          Dated: 3-20-99
                                               ------------------------------

                                          By: /s/ GERALD R. FORSYTHE
                                            ---------------------------------
                                                 Gerald R. Forsythe, Manager

                                          Dated: 3-20-99
                                                -----------------------------



                                      18.

<PAGE>   20


                                    EXHIBIT A

                   LIST OF ASSETS TO BE PROVIDED AS EVENT DATA

                        (subject to editorial guidelines)


Official Radio Broadcaster Audio (subject to CART Radio Network Agreement)

Pace Car Communications (CDME shall be responsible for compliance with all
applicable laws, rules and regulations, including FCC compliance)

Driver/Pit Crew (Team Radio) Communications (subject to agreement with each
team; CDME shall be responsible for compliance with all applicable laws, rules
and regulations, including FCC compliance)

Track Announcer Audio (subject to informing and agreement by CART's race
promoters)

Results and Scoring Feeds and Data [*]

Timing Data in its final form

Statistical Data

Historical Information, Data, and Statistics (including Photographs, video and
audio) related to the events and the racers

Official Rulings

Circuit Data

Official Still Photographs [*]

Written materials in which CART owns the copyright

Participant Biographical Information

Event Access



[*] Confidential Treatment Requested.

<PAGE>   21



                                    EXHIBIT B

                                   TRADEMARKS


CART - name & logo

FEDEX CHAMPIONSHIP SERIES - name & logo

INDY LIGHTS SERIES - name & logo

TOYOTA ATLANTIC SERIES - name & logo

CART KIDS - name & logo

CART WINNER'S CIRCLE CLUB - name & logo

CHAMP CARS

CHAMPIONSHIP CARS

FEEL THE SPEED

Future Event-related marks will be provided subject to mutual agreement.



<PAGE>   22



                                    EXHIBIT C

COPYRIGHT AND TRADEMARK NOTICES

All contents of this Web site are: (C)1999 CART Digital Media Enterprises, LLC;
Material provided by CART (C)1999 Championship Auto Racing Teams, Inc. All
rights reserved.

[list from exhibit] are trademarks or registered trademarks of Championship Auto
Racing Teams, Inc. Other product and company names mentioned herein may be the
trademarks of their respective owners.

USE LIMITATIONS

This Web Site is for the User's personal, non-commercial use. User may not
modify, copy, distribute, transmit, display, perform, reproduce, publish,
license, create derivative works from, transfer, or sell any information,
software, products or services obtained from this Web Site. As a condition of
use of this Web Site, User warrants to CDME and CART that User will not use this
Web Site for any purpose that is unlawful or prohibited by these terms,
conditions, and notices.

LIABILITY DISCLAIMER

THE INFORMATION SOFTWARE, PRODUCTS, AND SERVICES PUBLISHED ON THIS WEB SITE MAY
INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS. CHANGES ARE PERIODICALLY ADDED TO
THE INFORMATION HEREIN. CART DIGITAL MEDIA ENTERPRISES, LLC (CDME) AND
CHAMPIONSHIP AUTO RACING TEAMS, INC. (CART) MAY MAKE IMPROVEMENTS AND/OR CHANGES
IN THIS WEB SITE AT ANY TIME.

CDME AND CART MAKE NO REPRESENTATIONS ABOUT THE SUITABILITY OF THE INFORMATION,
SOFTWARE, PRODUCTS, AND SERVICES CONTAINED ON THIS WEB SITE FOR ANY PURPOSE. ALL
SUCH INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES ARE PROVIDED "AS IS" WITHOUT
WARRANTY OF ANY KIND. CDME AND CART HEREBY DISCLAIM ALL WARRANTIES AND
CONDITIONS WITH REGARD TO THIS INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES,
INCLUDING ALL IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT. IN NO EVENT SHALL CDME OR CART
BE LIABLE FOR AND DIRECT, INDIRECT, PUNITIVE, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE USE OF
THIS WEB SITE OR WITH THE DELAY OR INABILITY TO USE THIS WEB SITE, OR OTHERWISE
ARISING OUT OF THE USE OF THIS WEB SITE, WHETHER BASED ON CONTRACT, TORT, STRICT
LIABILITY, OR OTHERWISE, EVEN IF CDME OR CART HAS BEEN ADVISED OF THE
POSSIBILITY OF DAMAGES. BECAUSE SOME STATES/JURISDICTIONS DO NOT ALLOW THE
EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES,
THE ABOVE LIMITATION MAY NOT APPLY TO YOU.

[privacy policy  to be added]



<PAGE>   23



                                   EXHIBIT D

                             CART LICENSED PRODUCTS
                       SLIDING SCALE COMMISSION FOR 1999

[*] Base -- $[*]
<TABLE>
<CAPTION>

        If Gross Sales Exceed the Base by                 Commission  to be paid on all  Gross
                                                          Sales shall be

<S>                                                       <C> 
        0-50%......................................       [*]

        51%-100%...................................       [*]

        101% - 150% ...............................       [*]

        151% - 200%................................       [*]

        201%+ .....................................       [*]
</TABLE>

Commissions shall be paid on a quarterly basis. Based upon the annual Gross
Sales figures, CART Licensed Products shall provide any incremental commission
payment to CDME by February 2000.

[*] Confidential Treatment Requested.

<PAGE>   24



                                    EXHIBIT E

                                DELIVERY SCHEDULE


cart.com Phase I
*Basic site
*Key QSI elements
*CART business section

Assemble Team December, 1998

Start Production January 1, 1999

Initial Creative Complete January 15, 1999

Alpha Site February 15, 1999

Beta/Preview Site March 3, 1999

Go Live March 16, 1999



<PAGE>   25



                                    EXHIBIT F

                                  SITE TRAFFIC
<TABLE>
<CAPTION>

     YEAR           1998          1999         2000          2001          2002         2003
- --------------- ------------- ------------- ------------ ------------- ------------- ------------
<S>             <C>           <C>           <C>          <C>            <C>          <C>
Visits              [*]           [*]           [*]          [*]            [*]           [*]
(millions)

% Change year     Approx.         [*]           [*]          [*]            [*]           [*]           
on year             [*]
</TABLE>


[*] Confidential Treatment Requested.

<PAGE>   26
                                    WARRANTS



<PAGE>   27
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR 
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE 
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY 
APPLICABLE STATE SECURITIES LAWS.

                         WARRANT TO PURCHASE [*] SHARES
                         OF SERIES C PREFERRED STOCK OF
                              QUOKKA SPORTS, INC.
                          (Void after March 19, 2004)



This certifies that CHAMPIONSHIP AUTO RACING TEAMS, INC.  or its assigns (the
"Holder"), for value received, is entitled to purchase from QUOKKA SPORTS, INC.,
a Delaware corporation (the "Company") having a place of business at 525 Brannan
Street, San Francisco, California, a maximum of [*] fully paid and nonassessable
shares of Warrant Stock (as defined below) for cash at such time(s) as set forth
below and at a purchase price of $[*] per share (the "Stock Purchase Price")
up to and including 5:00 p.m. (Pacific time) on the date five (5) years from the
date of this Warrant, such date being referred to herein as the "Expiration
Date," upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and, if applicable, upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. The term "Warrant Stock"
refers to the Company's Series C Preferred Stock and any other securities at any
time receivable or issuable upon exercise of this Warrant.

Notwithstanding anything contained herein to the contrary, in the event the 
Agreement (the "Agreement"), dated effective as of January 1, 1999, between the 
Holder and CART DIGITAL MEDIA ENTERPRISES, LLC ("CDME"), or any other agreement 
entered into among the Holder, the Company and CDME (or any combination thereof)
pursuant to the Agreement, is terminated, either by the Company or CDME as a 
result of uncured material breach by Holder or by Holder for other than an 
uncured material breach by the Company or CDME, such an event (the "Termination 
Event") will cause this Warrant to become immediately void and the date of such 
Termination Event (the "Termination Date") will be deemed the "Expiration Date" 
for purposes hereof.  Notwithstanding anything contained herein to the contrary 
however, upon a Termination Event, the Holder will have ninety (90) days from 
the Termination Date to exercise this Warrant to the extent of the Vested 
Portion as of the Termination Date (as determined under Section 1.1 below).


[*] Confidential Treatment Requested.
<PAGE>   28
     This Warrant is subject to the following terms and conditions:

     1.   VESTING; EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. 

          1.1  VESTING.  The portion of this Warrant that is exercisable at any 
given time is determined by the chart below and is referred to as the "Vested 
Portion."

<TABLE>
<CAPTION>
                                VESTING DATE:
                               DATE SHARES ARE         STOCK
          VESTED PORTION      FIRST EXERCISABLE    PURCHASE PRICE 
          --------------      -----------------    --------------
          <S>                 <C>                  <C>
             [*]                 [*]                   [*]
</TABLE>


          1.2  EXERCISE.  The Vested Portion of this Warrant is exercisable at 
the option of the Holder, at any time or from time to time up to the Expiration 
Date for all or any part of the shares of Warrant Stock (but not for a fraction 
of a share) which may be purchased hereunder. The Company agrees that the 
shares of Warrant Stock purchased under this Warrant shall be and are deemed to 
be issued to the Holder hereof as the record owner of such shares as of the 
close of business of the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and 
payment made for such shares. Certificates for the shares of Warrant Stock so 
purchased; together with any other securities or property to which the Holder 
hereof is entitled upon such exercise, shall be delivered to the Holder hereof 
by the Company at the Company's expense within a reasonable time after the 
rights represented by this Warrant have been so exercised. In case of a 
purchase of less than all the shares which may be purchased under this Warrant, 
the Company shall cancel this Warrant and execute and deliver a new Warrant or 
Warrants of like tenor for the balance of the shares purchasable under the 
Warrant surrendered upon such purchase to the Holder hereof within a reasonable 
time. Each stock certificate so delivered shall be in such denominations of 
Warrant Stock as may be requested by the Holder hereof and shall be registered 
in the name of such Holder.

          1.3  NET ISSUE EXERCISE.  Notwithstanding any provisions herein to 
the contrary, if the fair market value of one share of the Company's Warrant 
Stock is greater than the Stock Purchase Price (at the date of calculation as 
set forth below), in lieu of exercising this Warrant for cash, the Holder may 
elect to receive shares equal to the value (as determined below) of this 
Warrant (or the portion thereof being canceled) by surrender of this Warrant at 
the principal office of the Company together with the properly endorsed Form of 
Subscription and notice of such election in which event the Company shall issue 
to the Holder a number of shares of Warrant Stock computed using the following 
formula:



               X = Y (A-B)
                   -------
                       A

               Where X =  the number of shares of Warrant Stock to be issued to 
the Holder


[*] Confidential Treatment Requested.


                                       2.

<PAGE>   29
               Y  =  the number of shares of Warrant Stock purchasable under the
                     Warrant or, if only a portion of the Warrant is being
                     exercised, the portion of the Warrant being canceled (at
                     the date of such calculation)

               A  =  the fair market value of one share of the Company's Warrant
                     Stock (at the date of such calculation)

               B  =  Stock Purchase Price (as adjusted to the date of such
                     calculation)

For purposes of the above calculation, fair market value of one share of Warrant
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock (the "Initial Public Offering") the fair market
value per share shall be the product of (i) the per share offering price to the
public of the Initial Public Offering if the exercise occurs upon the closing of
the Company's Initial Public Offering or, if later, the closing price of the
Company's Common Stock on the date of exercise, and (ii) the number of shares of
Common Stock into which each share of Warrant Stock is convertible at the time
of such exercise.

     2.  SHARES TO BE FULLY PAID; RESERVATION OF SHARES.  The Company covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of the rights represented by this Warrant (and shares of its Common
Stock for issuance on conversion of such Warrant Stock) will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Warrant Stock and Common Stock, or other securities and property, when
and as required to provide for the exercise of the rights represented by this
Warrant. The Company will take all such action as may be necessary to assure
that such shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Warrant Stock or Common Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or State securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Stock Purchase
Price (as set forth in Section 3 hereof) (i) if the total number of shares of
Warrant Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Warrant Stock then outstanding and all
shares of Warrant Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Warrant Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Warrant Stock, together with all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all such shares of Warrant
Stock, together with


                                       3.
<PAGE>   30
all shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all           
convertible securities then outstanding would exceed the total number of shares
of Common Stock then authorized by the Company's Certificate of Incorporation. 
                                                                               
     3.   ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock   
Purchase Price and the number of shares purchasable upon the exercise of this  
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock  
Purchase Price, the Holder of this Warrant shall thereafter be entitled to     
purchase (subject to the other provisions hereof), at the Stock Purchase Price 
resulting from such adjustment, the number of shares obtained by multiplying   
the Stock Purchase Price in effect immediately prior to such adjustment by the 
number of shares purchasable pursuant hereto immediately prior to such         
adjustment, and dividing the product thereof by the Stock Purchase Price       
resulting from such adjustment.                                                
                                                                               
          3.1  SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall  
at any time subdivide its outstanding shares of Warrant Stock into a greater   
number of shares, the Stock Purchase Price in effect immediately prior to such 
subdivision shall be proportionately reduced, and conversely, in case the      
outstanding shares of Warrant Stock of the Company shall be combined into a    
smaller number of shares, the Stock Purchase Price in effect immediately prior 
to such combination shall be proportionately increased.                        
                                                                               
          3.2  DIVIDENDS IN WARRANT STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Warrant
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this warrant) shall have received or become entitled to receive,
without payment therefor,

               (a)  Warrant Stock or any shares of stock or other securities   
which are at any time directly or indirectly convertible into or exchangeable 
for Warrant Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
                                                                               
               (b)  any cash paid or payable otherwise than as a cash dividend,
or                                                                             
                                                                               
               (c)  Warrant Stock or additional stock or other securities or   
property (including cash) by way of spinoff, split-up, reclassification,       
combination of shares of similar corporate rearrangement, (other than shares of
Warrant Stock issued as a stock split or adjustments in respect of which shall 
be covered by the terms of Section 3.1 above), then and in each such case, the 
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Warrant Stock receivable thereupon, and 
without payment of any additional consideration therefor, the amount of stock  
and other securities and property (including cash in the cases referred to in  
clause (b) above and this clause (c)) which such Holder would hold on the date 
of such exercise had he been the holder of record of such Warrant Stock as of  
the date on which holders of Warrant Stock received or became entitled to      
receive such shares of all other additional stock and other securities and     
property.                                                                      
                                                                               
                                                                               
                                       4.
<PAGE>   31
     3.3  REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.  If
any recapitalization, reclassification or reorganization of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Warrant Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter (subject to the other provisions hereof) have the right to purchase
and receive (in lieu of the shares of the Warrant Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Warrant Stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby; provided, however, that in the event the value
of the stock, securities or other assets or property (determined in good faith
by the Board of Directors of the Company) issuable or payable with respect to
one share of the Warrant Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby is
in excess of the Stock Purchase Price hereof effective at the time of a merger
and securities received in such reorganization, if any, are publicly traded,
then this Warrant shall expire unless exercised prior to such Organic Change. In
the event of any Organic Change, appropriate provision shall be made by the
Company with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Stock Purchase Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect any
such consolidation, merger or sale unless, prior to the consummation thereof,
the successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory in form and substance to the Holders of a
majority of the warrants to purchase Warrant Stock then outstanding, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.

     3.4  CONVERSION OF WARRANT STOCK.  In case all or any portion of the
authorized and outstanding shares of Warrant Stock of the Company are redeemed
or converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Warrant Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Warrant Stock is so
redeemed or converted, reclassified or ceases to exist (the "Triggering Date"),
shall receive, in lieu of the number of shares of Warrant Stock that would have
been issuable upon such exercise immediately prior to the Triggering Date, the
shares of Common Stock of the Company that would have been received if this
Warrant had been exercised in full and the Warrant Stock received thereupon had
been simultaneously converted immediately prior to the Triggering Date, all
subject to further adjustment as provided in this Warrant. Additionally, the
Stock Purchase Price shall be immediately adjusted to equal the quotient
obtained by dividing (x)



                                       5.
<PAGE>   32
the aggregate Stock Purchase Price of the maximum number of shares of Warrant
Stock for which this Warrant was exercisable immediately prior to the Triggering
Date by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Triggering Date, all subject to
further adjustment as provided herein.

          3.5  CERTAIN EVENTS. If any change in the outstanding Warrant Stock of
the Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Stock
Purchase Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.

          3.6  NOTICES OF CHANGES. Immediately upon any adjustment in the number
or class of shares subject to this Warrant and of the Stock Purchase Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.

     4.   ISSUE TAX. The issuance of certificates for shares of Warrant Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.

     5.   CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Warrant Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.

     6.   NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Warrant Stock, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such Holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.

     7.   TRANSFER. Subject to compliance with applicable federal and state
securities laws, this Warrant and all rights hereunder are transferable, in
whole or in part, without charge to the holder hereof (except for transfer
taxes), upon surrender of this Warrant properly endorsed.

                                       6.
<PAGE>   33
Each taker and holder of this Warrant, by taking or holding the same, consents
and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the
contrary notwithstanding; but until such transfer on such books, the Company may
treat the registered owner hereof as the owner for all purposes.

The Holder, by acceptance hereof, agrees that, absent an effective registration
statement filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "1933 Act"), covering the disposition or sale of
this Warrant or the Warrant Stock, and registration or qualification under
applicable state securities laws, such Holder will not sell, transfer, pledge or
hypothecate any or all such Warrants or Warrant Stock, unless either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
is made pursuant to Rule 144 of the 1993 Act. Notwithstanding the foregoing, the
Company hereby confirms its intent, after delivery of the opinion described
above, to consent to the sale, transfer, pledge or hypothecation of this Warrant
to holders of membership interest in the Holder.

The Holder, by acceptance hereof, agrees that, it will not transfer or dispose
of any Warrant Stock or Common Stock (or other securities) that it may acquire
upon exercise of rights under this Warrant for a period specified by the
representatives of the underwriters of Common Stock (or other securities) of the
Company not to exceed one hundred eighty (180) days following the effective date
of the Company's Initial Public Offering.

     8.   RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Warrant Stock, shall survive the exercise of this Warrant.

     9.   MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

     10.  NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.

     11.  BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Warrant Stock issuable upon the exercise of this Warrant
shall survive the exercise and

                                       7.
<PAGE>   34
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the holder hereof.

     12.  DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.

     13.  LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

     14.  FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.

     15.  INVESTORS' RIGHTS AGREEMENT. Promptly following the date hereof, the
Company shall seek the necessary stockholder approval to amend and restate the
Amended and Restated Investors' Rights Agreement dated December 23, 1998 (the
"Investors' Rights Agreement") to include this Warrant (and any other Warrants
issued to Holder) as a Warrant (as such term is defined in the Investors' Rights
Agreement) (such amendment and restatement being referred to hereinafter as the
"Amended and Restated Investors' Rights Agreement"). Promptly following such
stockholder approval, each of the Company and the Holder shall execute and
deliver to the other an Amended and Restated Investors' Rights Agreement.

                                       8.
<PAGE>   35
     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 20th day of March, 1999.

                                        QUOKKA SPORTS, INC.
                                        a Delaware corporation


                                        By: /s/ R. H. WILLIAMS
                                           ---------------------------
                                        Name: R. H. Williams
                                             -------------------------
                                        Title: Chairman
                                              ------------------------


ATTEST:


/s/ [Signature Illegible]
- --------------------------------
Secretary
<PAGE>   36
                                   EXHIBIT A
                                        
                               SUBSCRIPTION FORM

                                                           Date:__________, 19__

Quokka Sports, Inc.
525 Brannan Street
Ground Floor
San Francisco, CA 94107

Attn: President

Ladies and Gentlemen:

[ ]  The undersigned hereby elects to exercise Warrant No. PWC-8 (the "Warrant")
     issued to it by Quokka Sports, Inc. (the "Company") and dated  ___________,
     1999 and to purchase thereunder _____________ shares of the Warrant Stock 
     of the Company (the "Shares") at a purchase price of _____________ per 
     Share or an aggregate purchase price of ___________________________ Dollars
     ($________) (the "Purchase Price").

[ ]  The undersigned hereby elects to convert __________________________ percent
     (______%) of the value of the Warrant pursuant to the provisions of Section
     1.3 of the Warrant.

     Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer. 
     
                                          Very truly yours,

                                          CHAMPIONSHIP AUTO RACING TEAMS, INC.

                                          By: __________________________________

                                          Name: ________________________________

                                          Title: _______________________________

<PAGE>   37
                                                                       NO. PWC-9

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR 
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY 
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE 
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY 
APPLICABLE STATE SECURITIES LAWS.

                         WARRANT TO PURCHASE [*] SHARES
                         OF SERIES C PREFERRED STOCK OF
                              QUOKKA SPORTS, INC.
                          (VOID AFTER MARCH 19, 2004)

This certifies that CHAMPIONSHIP AUTO RACING TEAMS, INC. or its assigns (the
"Holder"), for value received, is entitled to purchase from QUOKKA SPORTS, INC.,
a Delaware corporation (the "Company") having a place of business at 525 Brannan
Street, San Francisco, California, a maximum of [*] fully paid and nonassessable
shares of Warrant Stock (as defined below) for cash at such time(s) as set forth
below and at a purchase price of $[*] per share (the "Stock Purchase Price") up
to and including 5:00 p.m. (Pacific time) on the date five (5) years from the
date of this Warrant, such date being referred to herein as the "Expiration
Date," upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and, if applicable, upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. The term "Warrant Stock"
refers to the Company's Series C Preferred Stock and any other securities at any
time receivable or issuable upon exercise of this Warrant.

Notwithstanding anything contained herein to the contrary, in the event the 
Agreement (the "Agreement"), dated effective as of January 1, 1999, between the 
Holder and CART DIGITAL MEDIA ENTERPRISES, LLC ("CDME"), or any other agreement 
entered into among the Holder, the Company and CDME (or any combination 
thereof) pursuant to the Agreement, is terminated, either by the Company or 
CDME as a result of uncured material breach by Holder or by Holder for other 
than an uncured material breach by the Company or CDME, such an event (the 
"Termination Event") will cause this Warrant to become immediately void and the 
date of such Termination Event (the "Termination Date") will be deemed the 
"Expiration Date" for purposes hereof. Notwithstanding anything contained 
herein to the contrary however, upon a Termination Event, the Holder will have 
ninety (90) days from the Termination Date to exercise this Warrant to the 
extent of the Vested Portion as of the Termination Date (as determined under 
Section 1.1 below).


[*] Confidential Treatment Requested.
<PAGE>   38
     This Warrant is subject to the following terms and conditions:

     1.   VESTING; EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

          1.1  VESTING. The portion of this Warrant that is exercisable at any 
given time is determined by the chart below and is referred to as the "Vested 
Portion."

<TABLE>
<CAPTION>
          <S>                <C>                                 <C>
                             Vesting Date:
          Vested Portion     Date Shares are First Exercisable   Stock Purchase Price
          --------------     ---------------------------------   --------------------
            [*]                [*]                                 [*]
</TABLE>

          1.2  EXERCISE. The Vested Portion of this Warrant is exercisable at
the option of the Holder, at any time or from time to time up to the Expiration
Date for all or any part of the shares of Warrant Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Warrant Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Warrant Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Warrant Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder.

          1.3  NET ISSUE EXERCISE. Notwithstanding any provisions herein to the 
contrary, if the fair market value of one share of the Company's Warrant Stock 
is greater than the Stock Purchase Price (at the date of calculation as set 
forth below), in lieu of exercising this Warrant for cash, the Holder may elect 
to receive shares equal to the value (as determined below) of this Warrant (or 
the portion thereof being canceled) by surrender of this Warrant at the 
principal office of the Company together with the properly endorsed Form of 
Subscription and notice of such election in which event the company shall issue 
to the Holder a number of shares of Warrant Stock computed using the following 
formula;

              X=Y(A-B)
                ------
                  A

              Where X=  the number of shares of Warrant Stock to be issued to
                        the Holder


[*] Confidential Treatment Requested.


                                       2.
<PAGE>   39
                   Y=   the number of shares of Warrant Stock purchasable under
                        the Warrant or, if only a portion of the Warrant is
                        being exercised, the portion of the Warrant being
                        canceled (at the date of such calculation)

                   A=   the fair market value of one share of the Company's
                        Warrant Stock (at the date of such calculation)

                   B=   Stock Purchase Price (as adjusted to the date of such 
                        calculation)

For purposes of the above calculation, fair market value of one share of 
Warrant Stock shall be determined by the Company's Board of Directors in good 
faith; provided, however, that in the event the Company makes an initial public 
offering of its Common Stock (the "Initial Public Offering") the fair market 
value per share shall be the product of (i) the per share offering price to the 
public of the Initial Public Offering if the exercise occurs upon the closing 
of the Company's Initial Public Offering or, if later, the closing price of the 
Company's Common Stock on the date of exercise, and (ii) the number of shares 
of Common Stock into which each share of Warrant Stock is convertible at the 
time of such exercise.

     2.   SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of the rights represented by this Warrant (and shares of its Common
Stock for issuance on conversion of such Warrant Stock) will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Warrant Stock and Common Stock, or other securities and property, when
and as required to provide for the exercise of the rights represented by this
Warrant. The Company will take all such action as may be necessary to assure
that such shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Warrant Stock or Common Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or State securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Stock Purchase
Price (as set forth in Section 3 hereof) (i) if the total number of shares of
Warrant Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Warrant Stock then outstanding and all
shares of Warrant Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Warrant Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Warrant Stock, together with all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all such shares of Warrant
Stock, together with

                                       3.
<PAGE>   40
all shares of Common Stock then outstanding and all shares of Common Stock then 
issuable upon exercise of all options and upon the conversion of all 
convertible securities then outstanding would exceed the total number of shares 
of Common Stock then authorized by the Company's Certificate of Incorporation.

     3.   ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock 
Purchase Price and the number of shares purchasable upon the exercise of this 
Warrant shall be subject to adjustment from time to time upon the occurrence of 
certain events described in this Section 3. Upon each adjustment of the Stock 
Purchase Price, the Holder of this Warrant shall thereafter be entitled to 
purchase (subject to the other provisions hereof), at the Stock Purchase Price 
resulting from such adjustment, the number of shares obtained by multiplying 
the Stock Purchase Price in effect immediately prior to such adjustment by the 
number of shares purchasable pursuant hereto immediately prior to such 
adjustment, and dividing the product thereof by the Stock Purchase Price 
resulting from such adjustment.

          3.1  SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall 
at any time subdivide its outstanding shares of Warrant Stock into a greater 
number of shares, the Stock Purchase Price in effect immediately prior to such 
subdivision shall be proportionately reduced, and conversely, in case the 
outstanding shares of Warrant Stock of the Company shall be combined into a 
smaller number of shares, the Stock Purchase Price in effect immediately prior 
to such combination shall be proportionately increased.

          3.2  DIVIDENDS IN WARRANT STOCK, OTHER STOCK, PROPERTY, 
RECLASSIFICATION. If at any time or from time to time the Holders of Warrant 
Stock (or any shares of stock or other securities at the time receivable upon 
the exercise of this Warrant) shall have received or become entitled to 
receive, without payment therefor.

               (a)  Warrant Stock or any shares of stock or other securities 
which are at any time directly or indirectly convertible into or exchangeable 
for Warrant Stock, or any rights or options to subscribe for, purchase or 
otherwise acquire any of the foregoing by way of dividend or other distribution,

               (b)  any cash paid or payable otherwise than as a cash dividend, 
or

               (c)  Warrant Stock or additional stock or other securities or 
property (including cash) by way of spinoff, split-up, reclassification, 
combination of shares or similar corporate rearrangement, (other than shares of 
Warrant Stock issued as a stock split or adjustments in respect of which shall 
be covered by the terms of Section 3.1 above), then and in each such case, the 
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, 
in addition to the number of shares of Warrant Stock receivable thereupon, and 
without payment of any additional consideration therefor, the amount of stock 
and other securities and property (including cash in the cases referred to in 
clause (b) above and this clause (c)) which such Holder would hold on the date 
of such exercise had he been the holder of record of such Warrant Stock as of 
the date on which holders of Warrant Stock received or became entitled to 
receive such shares or all other additional stock and other securities and 
property.

                                       4.
<PAGE>   41
        3.3     REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR 
SALE.  If any recapitalization, reclassification or reorganization of the 
capital stock of the Company, or any consolidation or merger of the Company 
with another corporation, or the sale of all or substantially all of its assets 
or other transaction shall be effected in such a way that holders of Warrant 
Stock shall be entitled to receive stock, securities, or other assets or 
property (an "Organic Change"), then, as a condition of such Organic Change, 
lawful and adequate provisions shall be made by the Company whereby the Holder 
hereof shall thereafter (subject to the other provisions hereof) have the right 
to purchase and receive (in lieu of the shares of the Warrant Stock of the 
Company immediately theretofore purchasable and receivable upon the exercise of 
the rights represented hereby) such shares of stock, securities or other assets 
or property as may be issued or payable with respect to or in exchange for a 
number of outstanding shares of such Warrant Stock equal to the number of 
shares of such stock immediately theretofore purchasable and receivable upon 
the exercise of the rights represented hereby; provided, however, that in the 
event the value of the stock, securities or other assets or property 
(determined in good faith by the Board of Directors of the Company) issuable 
or payable with respect to one share of the Warrant Stock of the Company 
immediately theretofore purchasable and receivable upon the exercise of the 
rights represented hereby is in excess of the Stock Purchase Price hereof 
effective at the time of a merger and securities received in such 
reorganization, if any, are publicly traded, then this Warrant shall expire 
unless exercised prior to such Organic Change. In the event of any Organic 
Change, appropriate provision shall be made by the Company with respect to the 
rights and interests of the Holder of this Warrant to the end that the 
provisions hereof (including, without limitation, provisions for adjustments of 
the Stock Purchase Price and of the number of shares purchasable and receivable 
upon the exercise of this Warrant) shall thereafter be applicable, in relation 
to any shares of stock, securities or assets thereafter deliverable upon the 
exercise hereof. The Company will not effect any such consolidation, merger or 
sale unless, prior to the consummation thereof, the successor corporation (if 
other than the Company) resulting from such consolidation or the corporation 
purchasing such assets shall assume by written instrument reasonably 
satisfactory in form and substance to the Holders of a majority of the warrants 
to purchase Warrant Stock then outstanding, executed and mailed or delivered to 
the registered Holder hereof at the last address of such Holder appearing on 
the books of the Company, the obligation to deliver to such Holder such shares 
of stock, securities or assets as, in accordance with the foregoing provisions, 
such Holder may be entitled to purchase.

        3.4     CONVERSION OF WARRANT STOCK.  In case all or any portion of the 
authorized and outstanding shares of Warrant Stock of the Company are redeemed 
or converted or reclassified into other securities or property pursuant to the 
Company's Certificate of Incorporation or otherwise, or the Warrant Stock 
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon 
exercise hereof at any time after the date on which the Warrant Stock is so 
redeemed or converted, reclassified or ceases to exist (the "Triggering Date"), 
shall receive, in lieu of the number of shares of Warrant Stock that would have 
been issuable upon such exercise immediately prior to the Triggering Date, the 
shares of Common Stock of the Company that would have been received if this 
Warrant had been exercised in full and the Warrant Stock received thereupon had 
been simultaneously converted immediately prior to the Triggering Date, all 
subject to further adjustment as provided in this Warrant. Additionally, the 
Stock Purchase Price shall be immediately adjusted to equal the quotient 
obtained by dividing (x)


                                       5.
<PAGE>   42
the aggregate Stock Purchase Price of the maximum number of shares of Warrant 
Stock for which this Warrant was exercisable immediately prior to the 
Triggering Date by (y) the number of shares of Common Stock of the Company for 
which this Warrant is exercisable immediately after the Triggering Date, all 
subject to further adjustments as provided herein.

        3.5     CERTAIN EVENTS.  If any change in the outstanding Warrant Stock 
of the Company or any other event occurs as to which the other provisions of 
this Section 3 are not strictly applicable or if strictly applicable would not 
fairly protect the purchase rights of the Holder of the Warrant in accordance 
with such provisions, then the Board of Directors of the Company shall make an 
adjustment in the number and class of shares available under the Warrant, the 
Stock Purchase Price or the application of such provisions, so as to protect 
such purchase rights as aforesaid. The adjustment shall be such as will give 
the Holder of the Warrant upon exercise for the same aggregate Stock Purchase 
Price the total number, class and kind of shares as he would have owned had the 
Warrant been exercised prior to the event and had he continued to hold such 
shares until after the event requiring adjustment.

        3.6     NOTICES OF CHANGE.  Immediately upon any adjustment in the 
number or class of shares subject to this Warrant and of the Stock Purchase 
Price, the Company shall give written notice thereof to the Holder, setting 
forth in reasonable detail and certifying the calculation of such adjustment.

   4.   ISSUE TAX.  The issuance of certificates for shares of Warrant Stock 
upon the exercise of the Warrant shall be made without charge to the Holder of 
the Warrant for any issue tax (other than any applicable income taxes) in 
respect thereof; provided, however, that the Company shall not be required to 
pay any tax which may be payable in respect of any transfer involved in the 
issuance and delivery of any certificate in a name other than that of the then 
Holder of the Warrant being exercised.

   5.   CLOSING OF BOOKS.  The Company will at no time close its transfer 
books against the transfer of any warrant or of any shares of Warrant Stock 
issued or issuable upon the exercise of any warrant in any manner which 
interferes with the timely exercise of this Warrant.

   6.   NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.  Nothing 
contained in this Warrant shall be construed as conferring upon the Holder 
hereof the right to vote or to receive notice as a shareholder of the Company 
or any other matters or any rights whatsoever as a shareholder of the Company. 
No dividends or interest shall be payable or accrued in respect of this Warrant 
or the interest represented hereby or the shares purchasable hereunder until, 
and only to the extent that, this Warrant shall have been exercised. No 
provisions hereof, in the absence of affirmative action by the holder to 
purchase shares of Warrant Stock, and no mere enumeration herein of the rights 
or privileges of the holder hereof, shall give rise to any liability of such 
Holder for the Stock Purchase Price or as a shareholder of the Company, whether 
such liability is asserted by the Company or by its creditors.

   7.   TRANSFER.  Subject to compliance with applicable federal and state 
securities laws, this Warrant and all rights hereunder are transferable, in 
whole or in part, without charge to the holder hereof (except for transfer 
taxes), upon surrender of this Warrant properly endorsed.


                                       6.
<PAGE>   43
Each taker and holder of this Warrant, by taking or holding the same, consents
and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

The Holder, by acceptance hereof, agrees that, absent an effective registration
statement filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "1993 Act"), covering the disposition or sale of
this Warrant or the Warrant Stock, and registration or qualification under
applicable state securities laws, such Holder will not sell, transfer, pledge or
hypothecate any or all such Warrants or Warrant Stock, unless either (i) the
Company has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required in connection with such disposition or (ii) the sale of such securities
is made pursuant to Rule 144 of the 1933 Act. Notwithstanding the foregoing, the
Company hereby confirms its intent, after delivery of the opinion described
above, to consent to the sale, transfer, pledge or hypothecation of this Warrant
to holders of membership interests in the Holder.

The Holder, by acceptance hereof, agrees that, it will not transfer or dispose 
of any Warrant Stock or Common Stock (or other securities) that it may acquire 
upon exercise of rights under this Warrant for a period specified by the 
representatives of the underwriters of Common Stock (or other securities) of 
the Company not to exceed one hundred eighty (180) days following the effective 
date of the Company's Initial Public Offering.

     8.   RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and 
obligations of the Company, of the holder of this Warrant and of the holder of 
shares of Warrant Stock, shall survive the exercise of this Warrant.

     9.   MODIFICATION AND WAIVER. This Warrant and any provision hereof may be 
changed, waived, discharged or terminated only by an instrument in writing 
signed by the party against which enforcement of the same is sought.

     10.  NOTICES. Any notice, request or other document required or permitted 
to be given or delivered to the holder hereof or the Company shall be delivered 
or shall be sent by certified mail, postage prepaid, to each such holder at its 
address as shown on the books of the Company or to the Company at the address 
indicated therefor in the first paragraph of this Warrant or such other address 
as either may from time to time provide to the other.

     11.  BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any 
corporation succeeding the Company by merger, consolidation or acquisition of 
all or substantially all of the Company's assets. All of the obligations of the 
Company relating to the Warrant Stock issuable upon the exercise of this 
Warrant shall survive the exercise and 



                                       7.
<PAGE>   44
termination of this Warrant. All of the covenants and agreements of the Company 
shall inure to the benefit of the successors and assigns of the holder hereof.

     12.  DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of 
the several sections and paragraphs of this Warrant are inserted for 
convenience only and do not constitute a part of this Warrant. This Warrant 
shall be construed and enforced in accordance with, and the rights of the 
parties shall be governed by, the laws of the State of California.

     13.  LOST WARRANTS. The Company represents and warrants to the Holder 
hereof that upon receipt of evidence reasonably satisfactory to the Company of 
the loss, theft, destruction, or mutilation of this Warrant and, in the case of 
any such loss, theft or destruction, upon receipt of an indemnity reasonably 
satisfactory to the Company, or in the case of any such mutilation upon 
surrender and cancellation of such Warrant, the Company, at its expense, will 
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, 
destroyed or mutilated Warrant.

     14.  FRACTIONAL SHARES. No fractional shares shall be issued upon exercise 
of this Warrant. The Company shall, in lieu of issuing any fractional share, 
pay the holder entitled to such fraction a sum in cash equal to such fraction 
multiplied by the then effective Stock Purchase Price.

     15.  INVESTORS' RIGHTS AGREEMENT. Promptly following the date hereof, the 
Company shall seek the necessary stockholder approval to amend and restate the 
Amended and Restated Investors; Rights Agreement dated December 23, 1998 (the 
"Investors' Rights Agreement") to include this Warrant (and any other Warrants 
issued to Holder) as a Warrant (as such term is defined in the Investors' 
Rights Agreement) (such amendment and restatement being referred to hereinafter 
as the "Amended and Restated Investors' Rights Agreement"). Promptly following 
such stockholder approval, each of the Company and the Holder shall execute and 
deliver to the other an Amended and Restated Investors' Rights Agreement.


                     [THIS SPACE INTENTIONALLY LEFT BLANK]


                                       8.
<PAGE>   45
     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly 
executed by its officers, thereunto duly authorized this 20th day of March, 
1999.



                              QUOKKA SPORTS, INC.
                              a Delaware corporation



                              By: /s/  R. H. WILLIAMS
                                 --------------------------------

                              Name: R. H. Williams
                                 --------------------------------

                              Title: Chairman
                                 --------------------------------



ATTEST:

/s/  [Signature Illegible]
- ---------------------------
Secretary
<PAGE>   46
                                   EXHIBIT A

                               SUBSCRIPTION FORM

                                                          Date: __________, 19__

Quokka Sports, Inc.
525 Brannan Street
Ground Floor
San Francisco, CA 94107

Attn: President

Ladies and Gentlemen:

[ ]  The undersigned hereby elects to exercise Warrant No. PWC-9 (the "Warrant")
     issued to it by Quokka Sports, Inc. (the "Company") and dated __________,
     1999 and to purchase thereunder ________________ shares of the Warrant
     Stock of the Company (the "Shares") at a purchase price of
     _____________________ per Share or an aggregate purchase price of
     __________ Dollars ($ __________) (the "Purchase Price").

[ ]  The undersigned hereby elects to convert ____________ percent (____%) of 
     the value of the Warrant pursuant to the provisions of Section 1.3 of the 
     Warrant.

Pursuant to the terms of the Warrant the undersigned has delivered the Purchase
Price herewith in full in cash or by certified check or wire transfer.


                              Very truly yours,


                              CHAMPIONSHIP AUTO RACING TEAMS, INC.


                              By: 
                                 --------------------------------

                              Name:
                                 --------------------------------

                              Title: 
                                 --------------------------------
<PAGE>   47

                                                                      No. PWC-10

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

                         WARRANT TO PURCHASE [*] SHARES
                         OF SERIES C PREFERRED STOCK OF
                              QUOKKA SPORTS, INC.
                          (Void after March 19, 2004)

This certifies that CHAMPIONSHIP AUTO RACING TEAMS, INC. or its assigns (the
"Holder"), for value received, is entitled to purchase from QUOKKA SPORTS, INC.,
a Delaware corporation (the "Company") having a place of business at 525 Brannan
Street, San Francisco, California, a maximum of [*] fully paid and nonassessable
shares of Warrant Stock (as defined below) for cash at such time(s) as set forth
below and a purchase price of $[*] per share (the "Stock Purchase Price") up to
and including 5:00 p.m. (Pacific time) on the date five (5) years from the date
of this Warrant, such date being referred to herein as the "Expiration Date,"
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and, if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. The term "Warrant Stock"
refers to the Company's Series C Preferred Stock and any other securities at any
time receivable or issuable upon exercise of this Warrant.

Notwithstanding anything contained herein to the contrary, in the event the
Agreement (the "Agreement"), dated effective as of January 1, 1999, between the
Holder and CART DIGITAL MEDIA ENTERPRISES, LLC ("CDME"), or any other agreement
entered into among the Holder, the Company and CDME (or any combination thereof)
pursuant to the Agreement, is terminated, either by the Company or CDME as a
result of uncured material breach by Holder or by Holder for other than an
uncured material breach by the Company or CDME, such an event (the "Termination
Event") will cause this Warrant to become immediately void and the date of such
Termination Event (the "Termination Date") will be deemed the "Expiration Date"
for purposes hereof. Notwithstanding anything contained herein to the contrary
however, upon a Termination Event, the Holder will have ninety (90) days from
the Termination Date to exercise this Warrant to the extent of the Vested
Portion as of the Termination Date (as determined under Section 1.1 below).


[*] Confidential Treatment Requested.
<PAGE>   48
     This Warrant is subject to the following terms and conditions:

     1.   VESTING; EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

          1.1  VESTING.  The portion of this Warrant that is exercisable at any 
given time is determined by the chart below and is referred to as the "Vested 
Portion."

<TABLE>
<CAPTION>
                                VESTING DATE:
                               DATE SHARES AND         STOCK
          VESTED PORTION      FIRST EXERCISABLE    PURCHASE PRICE 
          --------------      -----------------    --------------
          <S>                 <C>                  <C>
             [*]                 [*]                   [*]
</TABLE>

          1.2  EXERCISE.  The Vested Portion of this Warrant is exercisable at 
the option of the Holder, at any time or from time to time up to the Expiration 
Date for all or any part of the shares of Warrant Stock (but not for a fraction 
of a share) which may be purchased hereunder. The company agrees that the 
shares of Warrant Stock purchased under this Warrant shall be and are deemed to 
be issued to the Holder hereof as the record owner of such shares as of the 
close of business on the date on which this Warrant shall have been 
surrendered, properly endorsed, the completed, executed Form of Subscription 
delivered and payment made for such shares. Certificates for the shares of 
Warrant Stock so purchased, together with any other securities or property to 
which the Holder hereof is entitled upon such exercise, shall be delivered to 
the Holder hereof by the Company at the Company's expense within a reasonable 
time after the rights represented by this Warrant have been so exercised. In 
case of a purchase of less than all the shares which may be purchased under 
this Warrant, the Company shall cancel this Warrant and execute and deliver a 
new Warrant or Warrants of like tenor for the balance of the shares purchasable 
under the Warrant surrendered upon such purchase to the Holder hereof within a 
reasonable time. Each stock certificate so delivered shall be in such 
denominations of Warrant Stock as may be requested by the Holder hereof and 
shall be registered in the name of such Holder.

          1.3  NET ISSUE EXERCISE.  Notwithstanding any provisions herein to 
the contrary, if the fair market value of one share of the Company's Warrant 
Stock is greater than the Stock Purchase Price (at the date of calculation as 
set forth below), in lieu of exercising this Warrant for cash, the Holder may 
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the 
principal office of the company together with the properly endorsed Form of 
Subscription and notice of such election in which event the Company shall issue 
to the Holder a number of shares of Warrant Stock computed using the following 
formula:


               X = Y (A-B)
                   -------
                       A

               Where X =  the number of shares of Warrant Stock to be issued to 
                          the Holder
             

[*] Confidential Treatment Requested.


                                       2.
<PAGE>   49
                         Y = the number of shares of Warrant Stock purchasable
                             under the Warrant or, if only a portion of the
                             Warrant is being exercised, the portion of the
                             Warrant being canceled (at the date of such
                             calculation)

                         A = the fair market value of one share of the 
                             Company's Warrant Stock (at the date of such 
                             calculation)

                         B = Stock Purchase Price (as adjusted to the date of 
                             such calculation)

For purposed of the above calculation, fair market value of one share of 
Warrant Stock shall be determined by the Company's Board of Directors in good 
faith; provided, however, that in the event the Company makes an initial 
public offering of its Common Stock (the "Initial Public Offering") the fair 
market value per share shall be the product of (i) the per share offering price 
to the public of the Initial Public Offering if the exercise occurs upon the 
closing of the Company's Initial Public Offering or, if later, the closing 
price of the Company's Common Stock on the date of exercise, and (ii) the 
number of shares of Common Stock into which each share of Warrant Stock is 
convertible at the time of such exercise.

     2.   SHARES TO BE FULLY PAID; RESERVATION OF SHARES.  The Company 
covenants and agrees that all shares of Warrant Stock which may be issued upon 
the exercise of the rights represented by this Warrant (and shares of its 
Common Stock for issuance on conversion of such Warrant Stock) will, upon 
issuance, be duly authorized, validly issued, fully paid and nonassessable and 
free from all preemptive rights of any shareholder and free of all taxes, liens 
and charges with respect to the issue thereof. The Company further covenants 
and agrees that, during the period within which the rights represented by this 
Warrant may be exercised, the Company will at all times have authorized and 
reserved, for the purpose of issue or transfer upon exercise of the 
subscription rights evidenced by this Warrant, a sufficient number of shares of 
authorized but unissued Warrant Stock and Common Stock, or other securities and 
property, when and as required to provide for the exercise of the rights 
represented by this Warrant. The Company will take all such action as may be 
necessary to assure that such shares may be issued as provided herein without 
violation of any applicable law or regulation, or of any requirements of any 
domestic securities exchange upon which the Warrant Stock or Common Stock may 
be listed; provided, however, that the Company shall not be required to effect 
a registration under Federal or State securities laws with respect to such 
exercise. The Company will not take any action which would result in any 
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) (i) 
if the total number of shares of Warrant Stock issuable after such action upon 
exercise of all outstanding warrants, together with all shares of Warrant Stock 
then outstanding and all shares of Warrant Stock then issuable upon exercise of 
all options and upon the conversion of all convertible securities then 
outstanding, would exceed the total number of shares of Warrant Stock then 
authorized by the Company's Certificate of Incorporation, or (ii) if the total 
number of shares of Common Stock issuable after such action upon the conversion 
of all such shares of Warrant Stock, together with all shares of Common Stock 
then issuable upon exercise of all options and upon the conversion of all such 
shares of Warrant Stock, together with 



                                       3.
<PAGE>   50
all shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding would exceed the total number of shares of Common
Stock then authorized by the Company's Certificate of Incorporation.

     3.   ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES.  The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase (subject to the other provisions hereof), at the Stock Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.

          3.1  SUBDIVISION OR COMBINATION OF STOCK.  In case the Company shall
at any time subdivide its outstanding shares of Warrant Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Warrant Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.

          3.2  DIVIDENDS IN WARRANT STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION.  If at any time or from time to time the Holders of Warrant
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

               (a)  Warrant Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Warrant Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,

               (b)  any cash paid or payable otherwise than as a cash dividend,
or

               (c)  Warrant Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Warrant Stock issued as a stock split or adjustments in respect of which shall
be covered by the terms of Section 3.1 above), then and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Warrant Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
clause (b) above and this clause (c)) which such Holder would hold on the date
of such exercise had he been the holder of record of such Warrant Stock as of
the date on which holders of Warrant Stock received or became entitled to
receive such shares or all other additional stock and other securities and
property.



                                       4.



<PAGE>   51
          3.3  REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OF SALE.
If any recapitalization, reclassification or reorganization of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Warrant Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof
shall thereafter (subject to the other provisions hereof) have the right to
purchase and receive (in lieu of the shares of the Warrant Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Warrant Stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby; provided, however, that in the event the value
of the stock, securities or other assets or property (determined in good faith
by the Board of Directors of the Company) issuable or payable with respect to
one share of the Warrant Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby is
in excess of the Stock Purchase Price hereof effective at the time of a merger
and securities received in such reorganization, if any, are publicly traded,
then this Warrant shall expire unless exercised prior to such Organic Change. In
the event of any Organic Change, appropriate provision shall be made by the
Company with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Stock Purchase Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect any
such consolidation, merger or sale unless, prior to the consummation thereof,
the successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory in form and substance to the Holders of a
majority of the warrants to purchase Warrant Stock then outstanding, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.

          3.4  CONVERSION OF WARRANT STOCK.  In case all or any portion of the
authorized and outstanding shares of Warrant Stock of the Company are redeemed
or converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Warrant Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Warrant Stock is so
redeemed or converted, reclassified or ceases to exist (the "Triggering Date"),
shall receive, in lieu of the number of shares of Warrant Stock that would have
been issuable upon such exercise immediately prior to the Triggering Date, the
shares of Common Stock of the Company that would have been received if this
Warrant had been exercised in full and the Warrant Stock received thereupon had
been simultaneously converted immediately prior to the Triggering Date, all
subject to further adjustment as provided in this Warrant. Additionally, the
Stock Purchase Price shall be immediately adjusted to equal the quotient
obtained by dividing (x)



                                       5.
<PAGE>   52
the aggregate Stock Purchase Price of the maximum number of shares of Warrant 
Stock for which this Warrant was exercisable immediately prior to the 
Triggering Date by (y) the number of shares of Common Stock of the Company for 
which this Warrant is exercisable immediately after the Triggering Date, all 
subject to further adjustment as provided herein.

          3.5  CERTAIN EVENTS.  If any change in the outstanding Warrant Stock 
of the Company or any other event occurs as to which the other provisions of 
this Section 3 are not strictly applicable or if strictly applicable would not 
fairly protect the purchase rights of the Holder of the Warrant in accordance 
with such provisions, then the Board of Directors of the Company shall make an 
adjustment in the number and class of shares available under the Warrant, the 
Stock Purchase Price or the application of such provisions, so as to protect 
such purchase rights as aforesaid. The adjustment shall be such as will give 
the Holder of the Warrant upon exercise for the same aggregate Stock Purchase 
Price the total number, class and kind of shares as he would have owned had the 
Warrant been exercised prior to the event and had he continued to hold such 
shares until after the event requiring adjustment.

          3.6  NOTICES OF CHANGE.  Immediately upon any adjustment in the 
number or class of shares subject to this Warrant and of the Stock Purchase 
Price, the Company shall give written notice thereof to the Holder, setting 
forth in reasonable detail and certifying the calculation of such adjustment.

     4.   ISSUE TAX.  The issuance of certificates for shares of Warrant Stock 
upon the exercise of the Warrant shall be made without charge to the Holder of 
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.

     5.   CLOSING OF BOOKS.  The Company will at no time close its transfer 
books against the transfer of any warrant or of any shares of Warrant Stock 
issued or issuable upon the exercise of any warrant in any manner which 
interferes with the timely exercise of this Warrant.

     6.   NO VOTING OR DIVIDEND RIGHTS, LIMITATION OF LIABILITY.  Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder the
Company or any other matters or any rights whatsoever as a shareholder of the
Company. No dividends or interest shall be payable or accrued in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until, and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the holder to
purchase shares of Warrant Stock, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
Holder for the Stock Purchase Price or as a shareholder of the Company, whether
such liability is asserted by the Company or by its creditors.

     7.   TRANSFER.  Subject to compliance with applicable federal and state 
securities laws, this Warrant and all rights hereunder are transferable, in 
whole or in part, without charge to the holder hereof (except for transfer 
taxes), upon surrender of this Warrant properly endorsed.


                                       6.

<PAGE>   53
Each taker and holder of this Warrant, by taking or holding the same, consents 
and agrees that this Warrant, when endorsed in blank, shall be deemed 
negotiable, and that the holder hereof, when this Warrant shall have been so 
endorsed, may be treated by the Company, at the Company's option, and all other 
persons dealing with this Warrant as the absolute owner hereof for any purpose 
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

The Holder, by acceptance hereof, agrees that, absent an effective registration 
statement filed with the Securities and Exchange Commission under the 
Securities Act of 1933, as amended (the "1933 Act"), covering the disposition 
or sale of this Warrant or the Warrant Stock, and registration or qualification 
under applicable state securities laws, such Holder will not sell, transfer, 
pledge or hypothecate any or all such Warrants or Warrant Stock, unless either 
(i) the Company has received an opinion of counsel, in form and substance 
reasonably satisfactory to the Company, to the effect that such registration is 
not required in connection with such disposition or (ii) the sale of such 
securities is made pursuant to Rule 144 of the 1933 Act. Notwithstanding the 
foregoing, the Company hereby confirms its intent, after delivery of the 
opinion described above, to consent to the sale, transfer, pledge or 
hypothecation of this Warrant to holders of membership interests in the Holder.

The Holder, by acceptance hereof, agrees that, it will not transfer or dispose 
of any Warrant Stock or Common Stock (or other securities) that it may acquire 
upon exercise of rights under this Warrant for a period specified by the 
representatives of the underwriters of Common Stock (or other securities) of 
the Company not to exceed one hundred eighty (180) days following the effective 
date of the Company's Initial Public Offering.

     8.   RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and 
obligations of the Company, of the holder of this Warrant and of the holder of 
shares of Warrant Stock, shall survive the exercise of this Warrant.

     9.   MODIFICATION AND WAIVER. This Warrant and any provision hereof may be 
changed, waived, discharged or terminated only by an instrument in writing 
signed by the party against which enforcement of the same is sought.

     10.  NOTICES. Any notice, request or other document required or permitted 
to be given or delivered to the holder hereof or the Company shall be delivered 
or shall be sent by certified mail, postage prepaid, to each such holder at its 
address as shown on the books of the Company or to the Company at the address 
indicated therefor in the first paragraph of this Warrant or such other address 
as either may from time to time provide to the other.

     11.  BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any 
corporation succeeding the Company by merger, consolidation or acquisition of 
all or substantially all of the Company's assets. All of the obligations of the 
Company relating to the Warrant Stock issuable upon the exercise of this 
Warrant shall survive the exercise and 

                                       7.
<PAGE>   54
termination of this Warrant. All of the covenants and agreements of the Company 
shall inure to the benefit of the successors and assigns of the holders hereof.

     12.  DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description of headings 
of the several sections and paragraphs of this Warrant are inserted for 
convenience only and do not constitute a part of this Warrant. This Warrant 
shall be construed and enforced in accordance with, and the rights of the 
parties shall be governed by, the laws of the State of California.

     13.  LOST WARRANTS. The Company represents and warrants to the Holder 
hereof that upon receipt of evidence reasonably satisfactory to the Company of 
the loss, theft, destruction, or mutilation of this Warrant and, in the case of 
any such loss, theft or destruction, upon receipt of an indemnity reasonably 
satisfactory to the Company, or in the case of any such mutilation upon 
surrender and cancellation of such Warrant, the Company, at its expense, will 
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, 
destroyed or mutilated Warrant.

     14.  FRACTIONAL SHARES. No fractional shares shall be issued upon exercise 
of this Warrant. The Company shall, in lieu of issuing any fractional share, 
pay the holder entitled to such fraction a sum in cash equal to such fraction 
multiplied by the then effective Stock Purchase Price.

     15.  INVESTORS' RIGHTS AGREEMENT. Promptly following the date hereof, the 
Company shall seek the necessary stockholder approval to amend and restate the 
Amended and Restated Investors' Rights Agreement dated December 23, 1998 (the 
"Investors' Rights Agreement") to include this Warrant (and any other Warrants 
issued to a Holder) as a Warrant (as such term is defined in the Investors' 
Rights Agreement) (such amendment and restatement being referred to hereinafter 
as the "Amended and Restated Investors' Rights Agreement"). Promptly following 
such stockholder approval, each of the Company and the Holder shall execute and 
deliver to the other an Amended and Restated Investors' Rights Agreement.

                     [THIS SPACE INTENTIONALLY LEFT BLANK]


                                       8.
<PAGE>   55
     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 20th day of March, 1999.

                                        QUOKKA SPORTS, INC.
                                        a Delaware corporation


                                        By: /s/ R. H. Williams
                                           ---------------------------
                                        Name: R. H. Williams
                                             -------------------------
                                        Title: Chairman
                                              ------------------------


ATTEST:


[signature illegible]
- --------------------------------
Secretary
<PAGE>   56
                                   EXHIBIT A
                                        
                               SUBSCRIPTION FORM

                                                           Date:__________, 19__

Quokka Sports, Inc.
525 Brannan Street
Ground Floor
San Francisco, CA 94107

Attn: President

Ladies and Gentlemen:

[ ]  The undersigned hereby elects to exercise Warrant No. PWC-10 (the 
     "Warrant") issued to it by Quokka Sports, Inc. (the "Company") and 
     dated  ___________, 1999 and to purchase thereunder _____________ shares
     of the Warrant Stock of the Company (the "Shares") at a purchase price of
     _____________ per Share or an aggregate purchase price of
     ___________________________ dollars ($________) (the "Purchase Price").

[ ]  The undersigned hereby elects to convert __________________________ percent
     (______%) of the value of the Warrant pursuant to the provisions of Section
     1.3 of the Warrant.

     Pursuant to the terms of the Warrant the undersigned has delivered the 
     Purchase Price herewith in full in cash or by certified check or wire 
     transfer. 
     
                                          Very truly yours,

                                          CHAMPIONSHIP AUTO RACING TEAMS, INC.

                                          By: __________________________

                                          Name: ________________________

                                          Title: _______________________

<PAGE>   57
                                                                      NO. PWC-11

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

                         WARRANT TO PURCHASE [*] SHARES
                         OF SERIES C PREFERRED STOCK OF
                              QUOKKA SPORTS, INC.
                          (VOID AFTER MARCH 19, 2004)

This certifies that CHAMPIONSHIP AUTO RACING TEAMS, INC. or its assigns (the
"Holder"), for value received, is entitled to purchase from QUOKKA SPORTS, INC.,
a Delaware corporation (the "Company") having a place of business at 525 Brannan
Street, San Francisco, California, a maximum of [*] fully paid and nonassessable
shares of Warrant Stock (as defined below) for cash at such time(s) as set forth
below and at a purchase price of $[*] per share (the "Stock Purchase Price") up
to and including 5:00 p.m. (Pacific time) on the date five (5) years from the
date of this Warrant, such date being referred to herein as the "Expiration
Date," upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and, if applicable, upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. The term "Warrant Stock"
refers to the Company's Series C Preferred Stock and any other securities at any
time receivable or issuable upon exercise of this Warrant.

Notwithstanding anything contained herein to the contrary, in the event the
Agreement (the "Agreement"), dated effective as of January 1, 1999, between the
Holder and CART DIGITAL MEDIA ENTERPRISES, LLC ("CDME"), or any other agreement
entered into among the Holder, the Company and CDME (or any combination thereof)
pursuant to the Agreement, is terminated, either by the Company or CDME as a
result of uncured material breach by Holder or by Holder for other than an
uncured material breach by the Company or CDME, such an event (the "Termination
Event") will cause this Warrant to become immediately void and the date of such
Termination Event (the "Termination Date") will be deemed the "Expiration Date"
for purposes hereof. Notwithstanding anything contained herein to the contrary
however, upon a Termination Event, the Holder will have ninety (90) days from
the Termination Date to exercise this Warrant to the extent of the Vested
Portion as of the Termination Date (as determined under Section 1.1 below).


[*] Confidential Treatment Requested.
<PAGE>   58
     This Warrant is subject to the following terms and conditions:

     1.   VESTING; EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

          1.1  VESTING. The portion of this Warrant that is exercisable at any
given time is determined by the chart below and is referred to as the "Vested
Portion."

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------
                      VESTING DATE:
     VESTED PORTION   DATE SHARES ARE FIRST EXERCISABLE   STOCK PURCHASE PRICE
     -------------------------------------------------------------------------
     <S>              <C>                                 <C>
     [*]              [*]                                 [*]
     -------------------------------------------------------------------------
</TABLE>

     1.2  EXERCISE. The Vested Portion of this Warrant is exercisable at the
option of the Holder, at any time or from time to time up to the Expiration Date
for all or any part of the shares of Warrant Stock (but not for a fraction of a
share) which may be purchased hereunder. The Company agrees that the shares of
Warrant Stock purchased under this Warrant shall be and are deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered, properly
endorsed, the completed, executed Form of Subscription delivered and payment
made for such shares. Certificates for the shares of Warrant Stock so purchased,
together with any other securities or property to which the Holder hereof is
entitled upon such exercise, shall be delivered to the Holder hereof by the
Company at the Company's expense within a reasonable time after the rights
represented by this Warrant have been so exercised. In case of a purchase of
less than all the shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver a new Warrant or Warrants of
like tenor for the balance of the shares purchasable under the Warrant
surrendered upon such purchase to the Holder hereof within a reasonable time.
Each stock certificate so delivered shall be in such denominations of Warrant
Stock as may be requested by the Holder hereof and shall be registered in the
name of such Holder.

     1.3  NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Warrant Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Warrant Stock computed using the following
formula:

          X = Y(A-B)
              ------
                 A

          Where X = the number of shares of Warrant Stock to be issued to
                    the Holder


[*] Confidential Treatment Requested.

                                       2.
<PAGE>   59
          Y = the number of shares of Warrant Stock purchasable under the
              Warrant or, if only a portion of the Warrant is being exercised,
              the portion of the Warrant being canceled (at the date of such
              calculation)

          A = the fair market value of one share of the Company's Warrant Stock
              (at the date of such calculation)

          B = Stock Purchase Price (as adjusted to the date of such calculation)

For purposes of the above calculation, fair market value of one share of Warrant
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock (the "Initial Public Offering") the fair market
value per share shall be the product of (i) the per share offering price to the
public of the Initial Public Offering if the exercise occurs upon the closing of
the Company's Initial Public Offering or, if later, the closing price of the
Company's Common Stock on the date of exercise, and (ii) the number of shares of
Common Stock into which each share of Warrant Stock is convertible at the time
of such exercise.

     2.   SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of the rights represented by this Warrant (and shares of its Common
Stock for issuance on conversion of such Warrant Stock) will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Warrant Stock and Common Stock, or other securities and property, when
and as required to provide for the exercise of the rights represented by this
Warrant. The Company will take all such action as may be necessary to assure
that such shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Warrant Stock or Common Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or State securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Stock Purchase
Price (as set forth in Section 3 hereof) (i) if the total number of shares of
Warrant Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Warrant Stock then outstanding and all
shares of Warrant Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Warrant Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Warrant Stock, together with all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all such shares of Warrant
Stock, together with

                                       3.
<PAGE>   60
all shares of Common Stock then outstanding and all shares of Common Stock then 
issuable upon exercise of all options and upon the conversion of all 
convertible securities then outstanding would exceed the total number of shares 
of Common Stock then authorized by the Company's Certificate of Incorporation.

     3.   ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock 
Purchase Price and the number of shares purchasable upon the exercise of this 
Warrant shall be subject to adjustment from time to time upon the occurrence of 
certain events described in this Section 3. Upon each adjustment of the Stock 
Purchase Price, the Holder of this Warrant shall thereafter be entitled to 
purchase (subject to the other provisions hereof), at the Stock Purchase Price 
resulting from such adjustment, the number of shares obtained by multiplying 
the Stock Purchase Price in effect immediately prior to such adjustment by the 
number of shares purchasable pursuant hereto immediately prior to such 
adjustment, and dividing the product thereof by the Stock Purchase Price 
resulting from such adjustment.

          3.1  SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall 
at any time subdivide its outstanding shares of Warrant Stock into a greater 
number of shares, the Stock Purchase Price in effect immediately prior to such 
subdivision shall be proportionately reduced, and conversely, in case the 
outstanding shares of Warrant Stock of the Company shall be combined into a 
smaller number of shares, the Stock Purchase Price in effect immediately prior 
to such combination shall be proportionately increased.

          3.2  DIVIDENDS IN WARRANT STOCK, OTHER STOCK, PROPERTY, 
RECLASSIFICATION. If at any time or from time to time the Holders of Warrant 
Stock (or any shares of stock or other securities at the time receivable upon 
the exercise of this Warrant) shall have received or become entitled to 
receive, without payment therefor.

               (a)  Warrant Stock or any shares of stock or other securities 
which are at any time directly or indirectly convertible into or exchangeable 
for Warrant Stock, or any rights or options to subscribe for, purchase or 
otherwise acquire any of the foregoing by way of dividend or other distribution,

               (b)  any cash paid or payable otherwise than as a cash dividend, 
or

               (c)  Warrant Stock or additional stock or other securities or 
property (including cash) by way of spinoff, split-up, reclassification, 
combination of shares or similar corporate rearrangement, (other than shares of 
Warrant Stock issued as a stock split or adjustments in respect of which shall 
be covered by the terms of Section 3.1 above), then and in each such case, the 
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, 
in addition to the number of shares of Warrant Stock receivable thereupon, and 
without payment of any additional consideration therefor, the amount of stock 
and other securities and property (including cash in the cases referred to in 
clause (b) above and this clause (c)) which such Holder would hold on the date 
of such exercise had he been the holder of record of such Warrant Stock as of 
the date on which holders of Warrant Stock received or became entitled to 
receive such shares or all other additional stock and other securities and 
property.

                                       4.
<PAGE>   61
        3.3     REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR 
SALE.  If any recapitalization, reclassification or reorganization of the 
capital stock of the Company, or any consolidation or merger of the Company 
with another corporation, or the sale of all or substantially all of its assets 
or other transaction shall be effected in such a way that holders of Warrant 
Stock shall be entitled to receive stock, securities, or other assets or 
property (an "Organic Change"), then, as a condition of such Organic Change, 
lawful and adequate provisions shall be made by the Company whereby the Holder 
hereof shall thereafter (subject to the other provisions hereof) have the right 
to purchase and receive (in lieu of the shares of the Warrant Stock of the 
Company immediately theretofore purchasable and receivable upon the exercise of 
the rights represented hereby) such shares of stock, securities or other assets 
or property as may be issued or payable with respect to or in exchange for a 
number of outstanding shares of such Warrant Stock equal to the number of 
shares of such stock immediately theretofore purchasable and receivable upon 
the exercise of the rights represented hereby; provided, however, that in the 
event the value of the stock, securities or other assets or property 
(determined in good faith by the Board of Directors of the Company) issuable 
or payable with respect to one share of the Warrant Stock of the Company 
immediately theretofore purchasable and receivable upon the exercise of the 
rights represented hereby is in excess of the Stock Purchase Price hereof 
effective at the time of a merger and securities received in such 
reorganization, if any, are publicly traded, then this Warrant shall expire 
unless exercised prior to such Organic Change. In the event of any Organic 
Change, appropriate provision shall be made by the Company with respect to the 
rights and interests of the Holder of this Warrant to the end that the 
provisions hereof (including, without limitation, provisions for adjustments of 
the Stock Purchase Price and of the number of shares purchasable and receivable 
upon the exercise of this Warrant) shall thereafter be applicable, in relation 
to any shares of stock, securities or assets thereafter deliverable upon the 
exercise hereof. The Company will not effect any such consolidation, merger or 
sale unless, prior to the consummation thereof, the successor corporation (if 
other than the Company) resulting from such consolidation or the corporation 
purchasing such assets shall assume by written instrument reasonably 
satisfactory in form and substance to the Holders of a majority of the warrants 
to purchase Warrant Stock then outstanding, executed and mailed or delivered to 
the registered Holder hereof at the last address of such Holder appearing on 
the books of the Company, the obligation to deliver to such Holder such shares 
of stock, securities or assets as, in accordance with the foregoing provisions, 
such Holder may be entitled to purchase.

        3.4     CONVERSION OF WARRANT STOCK.  In case all or any portion of the 
authorized and outstanding shares of Warrant Stock of the Company are redeemed 
or converted or reclassified into other securities or property pursuant to the 
Company's Certificate of Incorporation or otherwise, or the Warrant Stock 
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon 
exercise hereof at any time after the date on which the Warrant Stock is so 
redeemed or converted, reclassified or ceases to exist (the "Triggering Date"), 
shall receive, in lieu of the number of shares of Warrant Stock that would have 
been issuable upon such exercise immediately prior to the Triggering Date, the 
shares of Common Stock of the Company that would have been received if this 
Warrant had been exercised in full and the Warrant Stock received thereupon had 
been simultaneously converted immediately prior to the Triggering Date, all 
subject to further adjustment as provided in this Warrant. Additionally, the 
Stock Purchase Price shall be immediately adjusted to equal the quotient 
obtained by dividing (x)


                                       5.
<PAGE>   62
the aggregate Stock Purchase Price of the maximum number of shares of Warrant 
Stock for which this Warrant was exercisable immediately prior to the 
Triggering Date by (y) the number of shares of Common Stock of the Company for 
which this Warrant is exercisable immediately after the Triggering Date, all 
subject to further adjustment as provided herein.

          3.5  CERTAIN EVENTS. If any change in the outstanding Warrant Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to project
such purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the 
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.

         3.6  NOTICES OF CHANGE. Immediately upon any adjustment in the number
or class of shares subject to this Warrant and of the Stock Purchase Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.

     4.   ISSUE TAX. the issuance of certificates for shares of Warrant Stock 
upon the exercise of the Warrant shall be made without charge to the Holder of 
the Warrant for any issue tax (other than any applicable income taxes) in 
respect thereof; provided, however, that the Company shall not be required to 
pay any tax which may be payable in respect of any transfer involved in the 
issuance and delivery of any certificate in a name other than that of the then 
Holder of the Warrant being exercised.

     5.   CLOSING OF BOOKS. The Company will at no time close its transfer 
books against the transfer of any warrant or of any shares of Warrant Stock 
issued or issuable upon the exercise of any warrant in any manner which 
interferes with the timely exercise of this Warrant.

     6.        NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing 
contained in this Warrant shall be construed as conferring upon the Holder 
hereof the right to vote or to consent or to receive notice as a shareholder of 
the Company or any other matters or any rights whatsoever as a shareholder of 
the Company. No dividends or interest shall be payable or accrued in respect of 
this Warrant or the interest represented hereby or the shares purchasable 
hereunder until, and only to the extent that, this Warrant shall have been 
exercised. No provisions hereof, in the absence of affirmative action by the 
holder to purchase shares of Warrant Stock, and no mere enumeration herein of 
the rights or privileges of the holder hereof, shall give rise to any liability 
of such Holder for the Stock Purchase Price or as a shareholder of the Company, 
whether such liability is asserted by the Company or by its creditors.

     7.   TRANSFER. Subject to compliance with applicable federal and state 
securities laws, this Warrant and all rights hereunder are transferable, in 
whole or in part, without charge to the holder hereof (except for transfer 
taxes), upon surrender of this Warrant properly endorsed.


                                       6.
<PAGE>   63
Each taker and holder of this Warrant, by taking or holding the same, consents 
and agrees that this Warrant, when endorsed in blank, shall be deemed 
negotiable, and that the holder hereof, when this Warrant shall have been so 
endorsed, may be treated by the Company, at the Company's option, and all other 
persons dealing with this Warrant as the absolute owner hereof for any purpose 
and as the person entitled to exercise the rights represented by this Warrant, 
or to the transfer hereof on the books of the Company any notice to the 
contrary notwithstanding; but until such transfer on such books, the Company 
may treat the registered owner hereof as the owner for all purposes.

The Holder, by acceptance hereof, agrees that, absent an effective registration 
statement filed with the Securities and Exchange Commission under the 
Securities Act of 1933, as amended (the "1993 Act"), covering the disposition 
or sale of this Warrant or the Warrant Stock, and registration or qualification 
under applicable state securities laws, such Holder will not sell, transfer, 
pledge or hypothecate any or all such Warrants or Warrant Stock, unless either 
(i) the Company has received an opinion of counsel, in form and substance 
reasonably satisfactory to the Company, to the effect that such registration is 
not required in connection with such disposition or (ii) the sale of such 
securities is made pursuant to Rule 144 of the 1933 Act. Notwithstanding the 
foregoing, the Company hereby confirms its intent, after delivery of the 
opinion described above, to consent to the sale, transfer, pledge or 
hypothecation of this Warrant to holders of membership interests in the Holder.

The Holder, by acceptance hereof, agrees that, it will not transfer or dispose 
of any Warrant Stock or Common Stock (or other securities) that it may acquire 
upon exercise of rights under this Warrant for a period specified by the 
representatives of the underwriters of Common Stock (or other securities) of 
the Company not to exceed one hundred eighty (180) days following the effective 
date of the Company's Initial Public Offering.

     8.   RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and 
obligations of the Company, of the holder of this Warrant and of the holder of 
shares of Warrant Stock, shall survive the exercise of this Warrant.

     9.   MODIFICATION AND WAIVER. This Warrant and any provision hereof may be 
changed, waived, discharged or terminated only by an instrument in writing 
signed by the party against which enforcement of the same is sought.

     10.  NOTICES. Any notice, request or other document required or permitted 
to be given or delivered to the holder hereof or the Company shall be delivered 
or shall be sent by certified mail, postage prepaid, to each such holder at its 
address as shown on the books of the Company or to the Company at the address 
indicated therefor in the first paragraph of this Warrant or such other address 
as either may from time to time provide to the other.

     11.  BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any 
corporation succeeding the Company by merger, consolidation or acquisition of 
all or substantially all of the Company's assets. All of the obligations of the 
Company relating to the Warrant Stock issuable upon the exercise of this 
Warrant shall survive the exercise and 



                                       7.
<PAGE>   64
termination of this Warrant. All of the covenants and agreements of the Company 
shall inure to the benefit of the successors and assigns of the holder hereof.

     12.  DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of 
the several sections and paragraphs of this Warrant are inserted for 
convenience only and do not constitute a part of this Warrant. This Warrant 
shall be construed and enforced in accordance with, and the rights of the 
parties shall be governed by, the laws of the State of California.

     13.  LOST WARRANTS. The Company represents and warrants to the Holder 
hereof that upon receipt of evidence reasonably satisfactory to the Company of 
the loss, theft, destruction, or mutilation of this Warrant and, in the case of 
any such loss, theft or destruction, upon receipt of an indemnity reasonably 
satisfactory to the Company, or in the case of any such mutilation upon 
surrender and cancellation of such Warrant, the Company, at its expense, will 
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, 
destroyed or mutilated Warrant.

     14.  FRACTIONAL SHARES. No fractional shares shall be issued upon exercise 
of this Warrant. The Company shall, in lieu of issuing any fractional share, 
pay the holder entitled to such fraction a sum in cash equal to such fraction 
multiplied by the then effective Stock Purchase Price.

     15.  INVESTORS' RIGHTS AGREEMENT. Promptly following the date hereof, the 
Company shall seek the necessary stockholder approval to amend and restate the 
Amended and Restated Investors' Rights Agreement dated December 23, 1998 (the 
"Investors' Rights Agreement") to include this Warrant (and any other Warrants 
issued to Holder) as a Warrant (as such term is defined in the Investors' 
Rights Agreement) (such amendment and restatement being referred to hereinafter 
as the "Amended and Restated Investors' Rights Agreement"). Promptly following 
such stockholder approval, each of the Company and the Holder shall execute and 
deliver to the other an Amended and Restated Investors' Rights Agreement.


                     [THIS SPACE INTENTIONALLY LEFT BLANK]


                                       8.
<PAGE>   65
     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 20th day of March, 1999.

                                        QUOKKA SPORTS, INC.
                                        a Delaware corporation


                                        By: /s/ R. H. WILLIAMS
                                           ---------------------------
                                        Name: R. H. Williams
                                             -------------------------
                                        Title: Chairman
                                              ------------------------


ATTEST:


[signature illegible]
- --------------------------------
Secretary
<PAGE>   66
                                   EXHIBIT A
                                        
                               SUBSCRIPTION FORM

                                                           Date:__________, 19__

Quokka Sports, Inc.
525 Brannan Street
Ground Floor
San Francisco, CA 94107

Attn: President

Ladies and Gentlemen:

[ ]  The undersigned hereby elects to exercise Warrant No. PWC-11 (the 
     "Warrant") issued to it by Quokka Sports, Inc. (the "Company") and dated
     ___________, 1999 and to purchase thereunder _____________ shares of the 
     Warrant Stock of the Company (the "Shares") at a purchase price of
     _____________ per Share or an aggregate purchase price of 
     ___________________________ dollars ($________) (the "Purchase Price").

[ ]  The undersigned hereby elects to convert __________________________ percent
     (______%) of the value of the Warrant pursuant to the provisions of Section
     1.3 of the Warrant.

     Pursuant to the terms of the Warrant the undersigned has delivered the 
     Purchase Price herewith in full in cash or by certified check or wire 
     transfer. 
     
                                          Very truly yours,

                                          CHAMPIONSHIP AUTO RACING TEAMS, INC.

                                          By: __________________________

                                          Name: ________________________

                                          Title: _______________________

<PAGE>   67

                                                                      No. PWC-12

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

                         WARRANT TO PURCHASE [*] SHARES
                         OF SERIES C PREFERRED STOCK OF
                              QUOKKA SPORTS, INC.
                          (VOID AFTER MARCH 19, 2004)

This certifies that CHAMPIONSHIP AUTO RACING TEAMS, INC. or its assigns (the
"Holder"), for value received, is entitled to purchase from QUOKKA SPORTS, INC.,
a Delaware corporation (the "Company") having a place of business at 525 Brannan
Street, San Francisco, California, a maximum of [*] fully paid and nonassessable
shares of Warrant Stock (as defined below) for cash at such time(s) as set forth
below and a purchase price of $[*] per share (the "Stock Purchase Price") up to
and including 5:00 p.m. (Pacific time) on the date five (5) years from the date
of this Warrant, such date being referred to herein as the "Expiration Date,"
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and, if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. The term "Warrant Stock"
refers to the Company's Series C Preferred Stock and any other securities at any
time receivable or issuable upon exercise of this Warrant.

Notwithstanding anything contained herein to the contrary, in the event the
Agreement (the "Agreement"), dated effective as of January 1, 1999, between the
Holder and CART DIGITAL MEDIA ENTERPRISES, LLC ("CDME"), or any other agreement
entered into among the Holder, the Company and CDME (or any combination thereof)
pursuant to the Agreement, is terminated, either by the Company or CDME as a
result of uncured material breach by Holder or by Holder for other than an
uncured material breach by the Company or CDME, such an event (the "Termination
Event") will cause this Warrant to become immediately void and the date of such
Termination Event (the "Termination Date") will be deemed the "Expiration Date"
for purposes hereof. Notwithstanding anything contained herein to the contrary
however, upon a Termination Event, the Holder will have ninety (90) days from
the Termination Date to exercise this Warrant to the extent of the Vested
Portion as of the Termination Date (as determined under Section 1.1 below).



[*] Confidential Treatment Requested.

<PAGE>   68
     This Warrant is subject to the following terms and conditions:

     1.   VESTING; EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

          1.1  VESTING. The portion of this Warrant that is exercisable at any 
given time is determined by the chart below and is referred to as the "Vested 
Portion."

<TABLE>
<CAPTION>
                             VESTING DATE:
          VESTED PORTION     DATE SHARES ARE FIRST EXERCISABLE   STOCK PURCHASE PRICE
          --------------     ---------------------------------   --------------------
          <S>                <C>                                 <C>
          [*]                [*]                                 [*]
</TABLE>

          1.2  EXERCISE. The Vested Portion of this Warrant is exercisable at
the option of the Holder, at any time or from time to time up to the Expiration
Date for all or any part of the shares of Warrant Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Warrant Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Warrant Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Warrant Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder.

          1.3  NET ISSUE EXERCISE. Notwithstanding any provisions herein to the 
contrary, if the fair market value of one share of the Company's Warrant Stock 
is greater than the Stock Purchase Price (at the date of calculation as set 
forth below), in lieu of exercising this Warrant for cash, the Holder may elect 
to receive shares equal to the value (as determined below) of this Warrant (or 
the portion thereof being canceled) by surrender of this Warrant at the 
principal office of the Company together with the properly endorsed Form of 
Subscription and notice of such election in which event the Company shall issue 
to the Holder a number of shares of Warrant Stock computed using the following 
formula:

              X=Y(A-B)
                ------
                  A

              Where X=  the number of shares of Warrant Stock to be issued to
                        the Holder


[*] Confidential Treatment Requested.


                                       2.
<PAGE>   69
                   Y=   the number of shares of Warrant Stock purchasable under
                        the Warrant or, if only a portion of the Warrant is
                        being exercised, the portion of the Warrant being
                        canceled (at the date of such calculation)

                   A=   the fair market value of one share of the Company's
                        Warrant Stock (at the date of such calculation)

                   B=   Stock Purchase Price (as adjusted to the date of such 
                        calculation)

For purposes of the above calculation, fair market value of one share of 
Warrant Stock shall be determined by the Company's Board of Directors in good 
faith; provided, however, that in the event the Company makes an initial public 
offering of its Common Stock (the "Initial Public Offering") the fair market 
value per share shall be the product of (i) the per share offering price to the 
public of the Initial Public Offering if the exercise occurs upon the closing 
of the Company's Initial Public Offering or, if later, the closing price of the 
Company's Common Stock on the date of exercise, and (ii) the number of shares 
of Common Stock into which each share of Warrant Stock is convertible at the 
time of such exercise.

     2.   SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of the rights represented by this Warrant (and shares of its Common
Stock for issuance on conversion of such Warrant Stock) will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Warrant Stock and Common Stock, or other securities and property, when
and as required to provide for the exercise of the rights represented by this
Warrant. The Company will take all such action as may be necessary to assure
that such shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Warrant Stock or Common Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or State securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Stock Purchase
Price (as set forth in Section 3 hereof) (i) if the total number of shares of
Warrant Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Warrant Stock then outstanding and all
shares of Warrant Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of the total number of shares of Warrant Stock then authorized by
the Company's Certificate of Incorporation, or (ii) if the total number of
shares of Common Stock issuable after such action upon the conversion of all
such shares of Warrant Stock, together with all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all such shares
of Warrant Stock, together with

                                       3.
<PAGE>   70
all shares of Common Stock then outstanding and all shares of Common Stock then 
issuable upon exercise of all options and upon the conversion of all 
convertible securities then outstanding would exceed the total number of shares 
of Common Stock then authorized by the Company's Certificate of Incorporation.

     3.   ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock 
Purchase Price and the number of shares purchasable upon the exercise of this 
Warrant shall be subject to adjustment from time to time upon the occurrence of 
certain events described in this Section 3. Upon each adjustment of the Stock 
Purchase Price, the Holder of this Warrant shall thereafter be entitled to 
purchase (subject to the other provisions hereof), at the Stock Purchase Price 
resulting from such adjustment, the number of shares obtained by multiplying 
the Stock Purchase Price in effect immediately prior to such adjustment by the 
number of shares purchasable pursuant hereto immediately prior to such 
adjustment, and dividing the product thereof by the Stock Purchase Price 
resulting from such adjustment.

          3.1  SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall 
at any time subdivide its outstanding shares of Warrant Stock into a greater 
number of shares, the Stock Purchase Price in effect immediately prior to such 
subdivision shall be proportionately reduced, and conversely, in case the 
outstanding shares of Warrant Stock of the Company shall be combined into a 
smaller number of shares, the Stock Purchase Price in effect immediately prior 
to such combination shall be proportionately increased.

          3.2  DIVIDENDS IN WARRANT STOCK, OTHER STOCK, PROPERTY, 
RECLASSIFICATION. If at any time or from time to time the Holders of Warrant 
Stock (or any shares of stock or other securities at the time receivable upon 
the exercise of this Warrant) shall have received or become entitled to 
receive, without payment therefor,

               (a)  Warrant Stock or any shares of stock or other securities 
which are at any time directly or indirectly convertible into or exchangeable 
for Warrant Stock, or any rights or options to subscribe for, purchase or 
otherwise acquire any of the foregoing by way of dividend or other distribution,

               (b)  any cash paid or payable otherwise than as a cash dividend, 
or

               (c)  Warrant Stock or additional stock or other securities or 
property (including cash) by way of spinoff, split-up, reclassification, 
combination of shares or similar corporate rearrangement, (other than shares of 
Warrant Stock issued as a stock split or adjustments in respect of which shall 
be covered by the terms of Section 3.1 above), then and in each such case, the 
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, 
in addition to the number of shares of Warrant Stock receivable thereupon, and 
without payment of any additional consideration therefor, the amount of stock 
and other securities and property (including cash in the cases referred to in 
clause (b) above and this clause (c)) which such Holder would hold on the date 
of such exercise had he been the holder of record of such Warrant Stock as of 
the date on which holders of Warrant Stock received or became entitled to 
receive such shares or all other additional stock and other securities and 
property.

                                       4.
<PAGE>   71
        3.3     REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR 
SALE.  If any recapitalization, reclassification or reorganization of the 
capital stock of the Company, or any consolidation or merger of the Company 
with another corporation, or the sale of all or substantially all of its assets 
or other transaction shall be effected in such a way that holders of Warrant 
Stock shall be entitled to receive stock, securities, or other assets or 
property (an "Organic Change"), then, as a condition of such Organic Change, 
lawful and adequate provisions shall be made by the Company whereby the Holder 
hereof shall thereafter (subject to the other provisions hereof) have the right 
to purchase and receive (in lieu of the shares of the Warrant Stock of the 
Company immediately theretofore purchasable and receivable upon the exercise of 
the rights represented hereby) such shares of stock, securities or other assets 
or property as may be issued or payable with respect to or in exchange for a 
number of outstanding shares of such Warrant Stock equal to the number of 
shares of such stock immediately theretofore purchasable and receivable upon 
the exercise of the rights represented hereby; provided, however, that in the 
event the value of the stock, securities or other assets or property 
(determined in good faith by the Board of Directors of the Company) issuable 
or payable with respect to one share of the Warrant Stock of the Company 
immediately theretofore purchasable and receivable upon the exercise of the 
rights represented hereby is in excess of the Stock Purchase Price hereof 
effective at the time of a merger and securities received in such 
reorganization, if any, are publicly traded, then this Warrant shall expire 
unless exercised prior to such Organic Change. In the event of any Organic 
Change, appropriate provision shall be made by the Company with respect to the 
rights and interests of the Holder of this Warrant to the end that the 
provisions hereof (including, without limitation, provisions for adjustments of 
the Stock Purchase Price and of the number of shares purchasable and receivable 
upon the exercise of this Warrant) shall thereafter be applicable, in relation 
to any shares of stock, securities or assets thereafter deliverable upon the 
exercise hereof. The Company will not effect any such consolidation, merger or 
sale unless, prior to the consummation thereof, the successor corporation (if 
other than the Company) resulting from such consolidation or the corporation 
purchasing such assets shall assume by written instrument reasonably 
satisfactory in form and substance to the Holders of a majority of the warrants 
to purchase Warrant Stock then outstanding, executed and mailed or delivered to 
the registered Holder hereof at the last address of such Holder appearing on 
the books of the Company, the obligation to deliver to such Holder such shares 
of stock, securities or assets as, in accordance with the foregoing provisions, 
such Holder may be entitled to purchase.

        3.4     CONVERSION OF WARRANT STOCK.  In case all or any portion of the 
authorized and outstanding shares of Warrant Stock of the Company are redeemed 
or converted or reclassified into other securities or property pursuant to the 
Company's Certificate of Incorporation or otherwise, or the Warrant Stock 
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon 
exercise hereof at any time after the date on which the Warrant Stock is so 
redeemed or converted, reclassified or ceases to exist (the "Triggering Date"), 
shall receive, in lieu of the number of shares of Warrant Stock that would have 
been issuable upon such exercise immediately prior to the Triggering Date, the 
shares of Common Stock of the Company that would have been received if this 
Warrant had been exercised in full and the Warrant Stock received thereupon had 
been simultaneously converted immediately prior to the Triggering Date, all 
subject to further adjustment as provided in this Warrant. Additionally, the 
Stock Purchase Price shall be immediately adjusted to equal the quotient 
obtained by dividing (x)


                                       5.
<PAGE>   72
the aggregate Stock Purchase Price of the maximum number of shares of Warrant 
Stock for which this Warrant was exercisable immediately prior to the 
Triggering Date by (y) the number of shares of Common Stock of the Company for 
which this Warrant is exercisable immediately after the Triggering Date, all 
subject to further adjustment as provided herein.

          3.5  CERTAIN EVENTS.  If any change in the outstanding Warrant Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.

          3.6  NOTICES OF CHANGE.  Immediately upon any adjustment in the 
number or class of shares subject to this Warrant and of the Stock Purchase 
Price, the Company shall give written notice thereof to the Holder, setting 
forth in reasonable detail and certifying the calculation of such adjustment.

     4.   ISSUE TAX.  The issuance of certificates for shares of Warrant Stock 
upon the exercise of the Warrant shall be made without charge to the Holder of 
the Warrant for any issue tax (other than any applicable income taxes) in 
respect thereof; provided, however, that the Company shall not be required to 
pay any tax which may be payable in respect of any transfer involved in the 
issuance and delivery of any certificate in a name other than that of the then 
Holder of the Warrant being exercised.

     5.   CLOSING OF BOOKS.  The Company will at no time close its transfer 
books against the transfer of any warrant or of any shares of Warrant Stock 
issued or issuable upon the exercise of any warrant in any manner which 
interferes with the timely exercise of this Warrant.

     6.   NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.  Nothing 
contained in this Warrant shall be construed as conferring upon the Holder 
hereof the right to vote or to consent or to receive notice as a shareholder of 
the Company or any other matters or any rights whatsoever as a shareholder of 
the Company. No dividends or interest shall be payable or accrued in respect of 
this Warrant or the interest represented hereby or the shares purchasable 
hereunder until, and only to the extent that, this Warrant shall have been 
exercised. No provisions hereof, in the absence of affirmative action by the 
Holder to purchase shares of Warrant Stock, and no mere enumeration herein of 
the rights or privileges of the holder hereof, shall give rise to any liability 
of such Holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.

     7.   TRANSFER.  Subject to compliance with applicable federal and state 
securities laws, this Warrant and all rights hereunder are transferable, in 
whole or in part, without charge to the holder hereof (except for transfer 
taxes), upon surrender of this Warrant properly endorsed.


                                       6.
<PAGE>   73
Each taker and holder of this Warrant, by taking or holding the same, consents 
and agrees that this Warrant, when endorsed in blank, shall be deemed 
negotiable, and that the holder hereof, when this Warrant shall have been so 
endorsed, may be treated by the Company, at the Company's option, and all other 
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

The Holder, by acceptance hereof, agrees that, absent an effective registration 
statement filed with the Securities and Exchange Commission under the 
Securities Act of 1933, as amended (the "1933 Act"), covering the disposition 
or sale of this Warrant or the Warrant Stock, and registration or qualification 
under applicable state securities laws, such Holder will not sell, transfer, 
pledge or hypothecate any or all such Warrants or Warrant Stock, unless either 
(i) the Company has received an opinion of counsel, in form and substance 
reasonably satisfactory to the Company, to the effect that such registration is 
not required in connection with such disposition or (ii) the sale of such 
securities is made pursuant to Rule 144 of the 1933 Act. Notwithstanding the 
foregoing, the Company hereby confirms its intent, after delivery of the 
opinion described above, to consent to the sale, transfer, pledge or 
hypothecation of this Warrant to holders of membership interests in the Holder.

The Holder, by acceptance hereof, agrees that, it will not transfer or dispose 
of any Warrant Stock or Common Stock (or other securities) that it may acquire 
upon exercise of rights under this Warrant for a period specified by the 
representatives of the underwriters of Common Stock (or other securities) of 
the Company not to exceed one hundred eighty (180) days following the effective 
date of the Company's Initial Public Offering.

     8.   RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and 
obligations of the Company, of the holder of this Warrant and of the holder of 
shares of Warrant Stock, shall survive the exercise of this Warrant.

     9.   MODIFICATION AND WAIVER. This Warrant and any provision hereof may be 
changed, waived, discharged or terminated only by an instrument in writing 
signed by the party against which enforcement of the same is sought.

     10.  NOTICES. Any notice, request or other document required or permitted 
to be given or delivered to the holder hereof or the Company shall be delivered 
or shall be sent by certified mail, postage prepaid, to each such holder at its 
address as shown on the books of the Company or to the Company at the address 
indicated therefor in the first paragraph of this Warrant or such other address 
as either may from time to time provide to the other.

     11.  BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any 
corporation succeeding the Company by merger, consolidation or acquisition of 
all or substantially all of the Company's assets. All of the obligations of the 
Company relating to the Warrant Stock issuable upon the exercise of this 
Warrant shall survive the exercise and 

                                       7.
<PAGE>   74
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the holder hereof.

     12.  DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of 
the several sections and paragraphs of this Warrant are inserted for 
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the 
parties shall be governed by, the laws of the State of California.

     13.  LOST WARRANTS. The Company represents and warrants to the Holder 
hereof that upon receipt of evidence reasonably satisfactory to the Company of 
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably 
satisfactory to the Company, or in the case of any such mutilation upon 
surrender and cancellation of such Warrant, the Company, at its expense, will 
make and deliver a new Warrant, of like tenor, in lieu of the lost stolen, 
destroyed or mutilated Warrant.

     14.  FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction 
multiplied by the then effective Stock Purchase Price.

     15.  INVESTORS' RIGHTS AGREEMENT. Promptly following the date hereof, the
Company shall seek the necessary stockholder approval to amend and restate the
Amended and Restated Investors' Rights Agreement dated December 23, 1998 (the
"Investors' Rights Agreement") to include this Warrant) and any other Warrants
issued to Holder) as a Warrant (as such term is defined in the Investors' Rights
Agreement) (such amendment and restatement being referred to hereinafter as the
"Amended and Restated Investors' Rights Agreement"). Promptly following such
stockholder approval, each of the Company and the Holder shall execute and
deliver to the other an Amended and Restated Investors' Rights Agreement.


                     [THIS SPACE INTENTIONALLY LEFT BLANK]



                                       8.
<PAGE>   75
     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 20th day of March, 1999.

                                        QUOKKA SPORTS, INC.
                                        a Delaware corporation


                                        By: /s/ R. H. WILLIAMS
                                           ---------------------------
                                        Name: R. H. Williams
                                             -------------------------
                                        Title: Chairman
                                              ------------------------


ATTEST:


[signature illegible]
- --------------------------------
Secretary
<PAGE>   76
                                   EXHIBIT A
                                        
                               SUBSCRIPTION FORM

                                                           Date:__________, 19__

Quokka Sports, Inc.
525 Brannan Street
Ground Floor
San Francisco, CA 94107

Attn: President

Ladies and Gentlemen:

[ ]  The undersigned hereby elects to exercise Warrant No. PWC-12 (the 
     "Warrant") issued to it by Quokka Sports, Inc. (the "Company") and 
     dated  ___________, 1999 and to purchase thereunder _____________ shares
     of the Warrant Stock of the Company (the "Shares") at a purchase price 
     of _____________ per Share or an aggregate purchase price of 
     ___________________________ dollars ($________) (the "Purchase Price").

[ ]  The undersigned hereby elects to convert __________________________ percent
     (______%) of the value of the Warrant pursuant to the provisions of Section
     1.3 of the Warrant.

     Pursuant to the terms of the Warrant the undersigned has delivered the 
     Purchase Price herewith in full in cash or by certified check or wire 
     transfer. 
     
                                          Very truly yours,

                                          CHAMPIONSHIP AUTO RACING TEAMS, INC.

                                          By: __________________________

                                          Name: ________________________

                                          Title: _______________________

<PAGE>   77
                             SPONSORSHIP CATEGORIES

<TABLE>
<CAPTION>
                                                   YEARS OF CONTRACT
                              ----------------------------------------------------------------
OFFICIAL SPONSOR              1998  1999  2000      2001      2002  CATEGORY
- ----------------              ----  ----  --------  --------  ----  --------------------------
<S>                           <C>   <C>   <C>       <C>       <C>   <C>
Anheuser-Busch                                                      Official Beer
Sears Craftsman*                                                    Official Tools and Battery     
Featherlite                                                         Official Trailer & Coach
Federal Express                                                     (1) 
Ford SVO                                                            Official Safety
                                                                    Technological Supplier
Holmatro                                                    
Honda*                                                              Official
                                                                    Motorcycle/Power
                                         [*]                        Equipment
K&K Insurance*                                              
MCI                                                                 Official Communications
                                                                    Company(2)
Mercedes-Benz                                                       Official Car
Racing Radios/Motorola*                                             Official Two Way Radio
                                                                    Communications Provider
Swiss Timing/Omega                                                  Official Timekeeper
PPG                                                                 Co-Series Sponsor or Co-
                                                                    Title Sponsor
Toyota*                                                             Official Truck
Valvoline                                                           Official Fuel
                                                                    Supplier/Motor Oil
</TABLE>

[*]

- -------------
(1) Sponsor category means the movement of packages, documents and freight,
utilizing logistics, electronic and integrated air/ground networks, [*] when
such companies may associate with race teams competing in the series. [*]

(2) Official communications company encompasses long distance calling services;
local calling services; calling cards; prepaid calling cards; and wireless
services (including cellular and paging services), and is subject to CART's
agreement [*].

                                       26

[*] Confidential Treatment Requested.

<PAGE>   1
                               OPERATING AGREEMENT         Exhibit 10.16

                                       OF

                            NBC/QUOKKA VENTURES, LLC




<PAGE>   2
<TABLE>
<CAPTION>
                                            TABLE OF CONTENTS
                                                                                          PAGE



<S>            <C>                                                                       <C>
ARTICLE 1         DEFINITIONS................................................................1

        1.1    Definitions...................................................................1

ARTICLE 2         FORMATION OF COMPANY.......................................................8

        2.1    Formation.....................................................................9

        2.2    Name..........................................................................9

        2.3    Principal Place of Business...................................................9

        2.4    Registered Office and Registered Agent........................................9

        2.5    Term..........................................................................9

ARTICLE 3         PURPOSES OF COMPANY........................................................9

        3.1    Company Purposes..............................................................9

ARTICLE 4         MANAGEMENT OF COMPANY......................................................9

        4.1    Generally.....................................................................9

        4.2    Number of Directors; Classification of Directors.............................10

        4.3    Tenure, Election and Qualifications..........................................10

        4.4    Resignation..................................................................10

        4.5    Removal......................................................................10

        4.6    Vacancies....................................................................11

        4.7    Meetings.....................................................................11

        4.8    Quorum and Transaction of Business...........................................12

        4.9    Directors Have No Exclusive Duty to Company..................................12

        4.10   Salaries.....................................................................12

ARTICLE 5         POWERS OF AND RESTRICTIONS ON THE DIRECTORS...............................12

        5.1    Management...................................................................12

        5.2    Adherence to Current Content Plan............................................13

        5.3    Content Plan, Long-term Strategic Plan and Annual Operating Plan.............13

        5.4    Additional Capital...........................................................14

        5.5    Actions Requiring Simple Majority Approval...................................15

        5.6    Actions Requiring Supermajority Approval.....................................16

        5.7    Actions Requiring Approval of Only One Class of Directors....................18

        5.8    Certain Powers of Directors..................................................19

        5.9    Reports to Members ..........................................................20

                                                  i

</TABLE>



<PAGE>   3





<TABLE>
<CAPTION>
                                            TABLE OF CONTENTS
                                               (CONTINUED)
                                                                                          PAGE



<S>            <C>                                                                       <C>
        5.10   Independent Public Accountants...............................................20

        5.11   Litigation...................................................................20

ARTICLE 6         OFFICERS; COMMITTEES......................................................20

        6.1    Appointment of Officers......................................................20

        6.2    Tenure and Duties of Officers................................................21

ARTICLE 7         RIGHTS AND OBLIGATIONS OF MEMBERS.........................................22

        7.1    Limitation of Liability......................................................22

        7.2    Nature of Rights and Obligations.............................................22

        7.3    Member Access to Records.....................................................22

        7.4    Certain Actions Requiring Special Approval...................................22

        7.5    Outside Activities...........................................................23

ARTICLE 8         CERTAIN MATTERS CONCERNING MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS......23

        8.1    Liability of Directors and Officers; Indemnification.........................23

        8.2    Other Matters Concerning the Directors and Officers of the Company...........24

ARTICLE 9         MEETINGS OF MEMBERS.......................................................25

        9.1    Annual and Special Meetings..................................................25

        9.2    Place of Meetings............................................................25

        9.3    Notice of Meetings...........................................................25

        9.4    Meeting of all Members.......................................................25

        9.5    Record Date..................................................................25

        9.6    Quorum.......................................................................26

        9.7    Manner of Acting.............................................................26

        9.8    Proxies......................................................................26

        9.9    Action by Members Without a Meeting..........................................26

        9.10   Waiver of Notice.............................................................27

ARTICLE 10        CONTRIBUTIONS TO THE COMPANY, CAPITAL UNITS AND CAPITAL ACCOUNTS..........27

        10.1   Capital Contributions........................................................27

        10.2   Units........................................................................27

        10.3   Capital Accounts ............................................................27


                                                    ii.
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        10.4   Withdrawal or Reduction of Members, Contributions to Capital.................27

        10.5   Unit Certificates............................................................28

ARTICLE 11        ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS............................28

        11.1   Allocation of Profits and Losses from Operations.............................28

        11.2   Special Allocations..........................................................29

        11.3   Distributions................................................................30

        11.4   Limitation Upon Distributions................................................32

        11.5   Accounting Principles........................................................32

        11.6   Interest on and Return of Capital Contributions..............................32

        11.7   Records and Reports..........................................................32

        11.8   Returns and Other Elections..................................................33

        11.9   Tax Matters Partner..........................................................33

ARTICLE 12        TRANSFERABILITY...........................................................33

        12.1   Restrictions on Transferability..............................................34

        12.2   No Effect to Transfers in Violation of Operating Agreement...................34

Article 13        Additional And Substitute Members.........................................34

        13.1   Admission of Additional Members and Substitute Members.......................34

        13.2   Allocations to Additional Members and Substitute Members.....................35

        13.3   Effect of Transfer...........................................................35

ARTICLE 14        DISSOLUTION AND TERMINATION...............................................35

        14.1   Dissolution..................................................................35

        14.2   Effect of Filing of Certificate of Cancellation..............................35

        14.3   Distribution of Assets Upon Dissolution......................................35

        14.4   Winding Up...................................................................36

        14.5   Filing of Certificate of Cancellation........................................36

ARTICLE 15        MERGER OR CONSOLIDATION...................................................36

        15.1   Merger or Consolidation......................................................36

        15.2   Vote Relating to Merger or Consolidation.....................................37

        15.3   Exchange Relating to Merger or Consolidation.................................37

        15.4   Filing and Effect of Certificate of Merger or Consolidation..................37

        15.5   Amendment of Old or Adoption of New Operating Agreement .....................37


                                              iii.
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        15.6   Assumption of Assets and Liabilities.........................................37

ARTICLE 16        MISCELLANEOUS PROVISIONS..................................................37

        16.1   Notices......................................................................37

        16.2   Application of Delaware Law..................................................38

        16.3   Waiver of Action for Partition...............................................38

        16.4   Amendments...................................................................38

        16.5   Execution of Additional Instruments..........................................38

        16.6   Construction.................................................................38

        16.7   Headings.....................................................................38

        16.8   Waivers......................................................................38

        16.9   Rights and Remedies Cumulative...............................................38

        16.10  Severability.................................................................38

        16.11  Heirs, Successors and Assigns................................................39

        16.12  Creditors....................................................................39

        16.13  Counterparts.................................................................39

        16.14  No Third Party Beneficiaries.................................................39


                                                 iv.
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<PAGE>   6




                            NBC/QUOKKA VENTURES, LLC

                               OPERATING AGREEMENT



        THIS OPERATING AGREEMENT is made as of the 9th day of February 1999 (the
"Effective Date"), by and between NBC OLYMPICS, INC., a Delaware corporation
("NBC"), and QUOKKA SPORTS, INC., a Delaware corporation ("Quokka"), with
respect to the operation of NBC/QUOKKA VENTURES, LLC, a Delaware limited
liability company (the "Company").

        WHEREAS, the Company was formed under the name "NBC/QUOKKA VENTURES,
LLC" pursuant to the provisions of the Delaware Limited Liability Company Act,
upon the filing of a certificate of formation (the "Certificate of Formation")
with the Delaware Secretary of State on February 5, 1999; and

        WHEREAS, NBC and Quokka (together, the "Initial Members") desire to set
forth their respective ownership interests in the Company and the principles by
which the Company will be operated and governed;

        NOW, THEREFORE, in consideration of mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:


                                    ARTICLE 1

                                   DEFINITIONS

        1.1 DEFINITIONS. The following terms used in this Operating Agreement
shall have the following meanings (unless otherwise expressly provided herein):

               (a) "ACCOUNTING PERIOD" shall be (i) the Company's Fiscal Year if
there are no changes in the Members' respective interests in Company income,
gain, loss or deductions during such Fiscal Year except on the first day
thereof, or (ii) any other period beginning on the first day of a Fiscal Year,
or any other day during a Fiscal Year, upon which occurs a change in such
respective interests, and ending on the last day of a Fiscal Year, or on the day
preceding an earlier day upon which any change in such respective interest shall
occur.

               (b) "ADDITIONAL MEMBER" shall mean any Person who or which is
admitted to the Company as an Additional Member pursuant to Article 13 hereof.

               (c) "ADJUSTED ASSET VALUE" with respect to any asset shall be the
asset's adjusted basis for federal income tax purposes, except as follows:

                        (1) The initial Adjusted Asset Value of any asset (other
than money) contributed by a Member to the Company shall be the gross fair
market value of such asset at the time of contribution, as determined by the
contributing Member and a Supermajority of the Directors; provided, however,
that the initial Adjusted Asset Value (which is the initial fair value as agreed
by the Members) of the assets contributed by the Members to the Company shall be
as set forth on Schedule A attached hereto.


                                      1.
<PAGE>   7





                        (2) The Adjusted Asset Values of all Company assets
shall be adjusted to equal their respective gross fair market values, as
determined by a Supermajority of the Directors, and the resulting unrecognized
profit or loss allocated to the Capital Accounts of the Members pursuant to
Articles 10 and 11, as of the following times: (i) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for
more than a de minimis capital contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company assets, unless
all Members receive simultaneous distributions of either undivided interests in
the distributed property or identical Company assets in proportion to their
interests in Company distributions as provided in Section 11.3; and (iii) the
liquidation of the Company within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g).

               (d) "ADVERTISER CATEGORY" shall have the meaning specified in the
Master Venture Agreement.

               (e) "AFFILIATE" with respect to any Person other than an entity
subject to the reporting requirements of the Security Exchange Act of 1934, as
amended, shall mean (i) any Person which beneficially holds, directly or
indirectly, or otherwise controls, ten percent (10%) or more of such Person's
outstanding securities, (ii) any Person, ten percent (10%) or more of which
Person's outstanding securities are beneficially held, directly or indirectly,
or are otherwise controlled, by such a Person and (iii) any Person, ten percent
(10%) or more of which Person's outstanding securities are beneficially held,
directly or indirectly, or are otherwise controlled, by a Person described in
(i) above. "Affiliate" with respect to any entity subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, shall mean (i)
any Person which beneficially holds, directly or indirectly, or otherwise
controls, fifteen percent (15%) or more of such entity's outstanding securities,
(ii) any Person, fifteen percent (15%) or more of which Person's outstanding
securities are beneficially held, directly or indirectly, or are otherwise
controlled, by such an entity and (iii) any Person, fifteen percent (15%) or
more of which Person's outstanding securities are beneficially held, directly or
indirectly, or are otherwise controlled, by a Person described in (i) above.

               (f) "ANNUAL OPERATING PLAN" shall have the meaning specified in
Section 5.3(c).

               (g) "BANKRUPTCY" of a Person shall mean (i) the filing by a
Person of a voluntary petition seeking liquidation, reorganization, arrangement
or readjustment, in any form, of its debts under the U.S. Bankruptcy Code (or
corresponding provisions of future laws) or any other federal, state or foreign
insolvency law, or a Person's filing an answer consenting to or acquiescing in
any such petition; (ii) the making by a Person of any assignment for the benefit
of its creditors or the admission by a Person of its inability to pay its debts
as they mature; or (iii) the expiration of 60 days after the filing of an
involuntary petition under the Bankruptcy Code (or corresponding provisions of
future laws) seeking an application for the appointment of a receiver for the
assets of a Person, or an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts under any other
federal, state or foreign insolvency law, unless the same shall have been
vacated, set aside or stayed within such 60-day period.

               (h) "BOARD OF DIRECTORS" shall have the meaning specified in
Section 4.1.


                                       2.
<PAGE>   8




               (i) "CAPITAL ACCOUNT" as of any given date shall mean, with
respect to any Member, the account maintained for such Member in accordance with
the provisions of Section 10.3.

               (j) "CAPITAL CONTRIBUTION" shall mean the amount of money and the
initial Adjusted Asset Value of any property contributed to the Company by a
Member whenever made. Any reference to a capital contribution of a Member shall
include the Capital Contribution made by a predecessor holder of any Units held
by such Member with respect to such Units.

               (k) "CAUSE" shall mean, with respect to any Person, fraud, gross
negligence, willful misconduct, embezzlement or a material breach of such
Person's obligations under this Operating Agreement or any contract between such
Person and the Company.

               (l) "CHAIRMAN OF THE BOARD" shall mean that director who is
elected by the other members of the Board of Directors to serve as Chairman of
the Board of Directors of the Company.

               (m) "CHANNEL" shall have the meaning specified in the Master
Venture Agreement.

               (n) "CLASS A ACQUISITION DATE" shall mean the date on which any
Person, or any group of Persons that are Affiliated with each other, (i)
acquires or otherwise beneficially holds or controls fifty percent (50%) or more
of the outstanding voting securities of any Class A Member; (ii) acquires or
otherwise beneficially holds or controls thirty percent (30%) or more of the
outstanding voting securities of any Class A Member that is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, where
such 30% or greater voting block represents the largest voting block held by
stockholders of such Class A Member; (iii) controls the appointment of a
majority of the members of the board of directors of such Class A Member; (iv)
acquires all or substantially all the assets of any Class A Member; or (v)
merges or otherwise consolidates with any Class A Member in a transaction where
the Class A Member is not the surviving entity.

               (o) "CLASS A INTEREST" shall mean the proportion that a Class A
Member's Class A Units bear to the aggregate outstanding Class A Units of all
Class A Members.

               (p) "CLASS A DIRECTOR" shall mean any Director classified as a
"Class A Director" and elected or designated by the Class A Members in
accordance with Section 4.3(a) of this Operating Agreement.

               (q) "CLASS A MEMBER" shall mean any Member holding Class A Units.

               (r) "CLASS A TRIGGER DATE" shall mean the date on which any NBC
Competitor (i) merges or otherwise consolidates with any Class A Member in a
transaction where the Class A Member is not the surviving entity, (ii) shall
have become the beneficial owner (as defined in the Securities Exchange Act of
1934) of fifteen percent (15%) or more of the outstanding equity securities of a
Class A Member, (iii) becomes entitled to elect, appoint or replace a member or
members of the board of directors of a Class A Member unless NBC shall also be
granted the same right to elect, appoint or replace a member or members of the
board of directors of such Class A Member or (iv) acquires all or substantially
all the assets of a Class A Member.


                                       3.
<PAGE>   9







               (s) "CLASS A UNIT" shall mean any Unit denominated "Class A."

               (t) "CLASS B INTEREST" shall mean the proportion that a Class B
Member's Class B Units bear to the aggregate outstanding Class B Units of all
Class B Members.

               (u) "CLASS B DIRECTOR" shall mean any Director classified as a
"Class B Director" and elected or designated by the Class B Members in
accordance with Section 4.3(b) of this Operating Agreement.

               (v) "CLASS B MEMBER" shall mean any Member holding Class B Units.

               (w) "CLASS B TRIGGER DATE" shall mean the date on which any
Quokka Competitor (i) merges with any Class B Member in a transaction where the
Class B Member is not the surviving entity, (ii) shall have become the
beneficial owner (as defined in the Securities Exchange Act of 1934) of fifteen
percent (15%) or more of the outstanding equity securities of a Class B Member,
(iii) becomes entitled to elect a member or members of the board of directors of
a Class B Member unless Quokka shall also be granted the same right to elect,
appoint or replace a member or members of the board of directors of such Class B
Member or (iv) acquires all or substantially all the assets of a Class B Member.

               (x) "CLASS B UNIT" shall mean any Unit denominated "Class B."

               (y) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent superseding federal revenue
laws.

               (z) "COMPANY PROPERTY" means any tangible and intangible personal
property now owned or hereafter acquired by the Company, including, without
limitation, all cash, cash equivalents, deposits, accounts receivable,
work-in-progress, inventory, equipment, materials, supplies, prototypes,
vehicles, real property, fixtures, permits, approvals, licenses, patents,
consents, contracts, agreements, applications for permits, approvals, licenses,
development rights, development agreements, trade names and warranties, or any
other property.

               (aa) "CONTENT PLAN" shall mean with respect to the first Games
the Initial Content Plan and with respect to the later Games the content plan
developed in accordance with Section 5.3(a).

               (bb) "CONTENT PLAN DEADLINE" shall mean the date one hundred
twenty (120) days following the conclusion of the Games prior to the Games with
respect to which such Content Plan applies.

               (cc) "CURRENT CONTENT PLAN" shall have the meaning specified in
Section 5.2.

               (dd) "DELAWARE ACT" shall mean the Delaware Limited Liability
Company Act at 6 Del. C. Sections 18-101, et seq., as amended.

               (ee) "DIRECTORS" shall mean the directors designated or elected
by the Members pursuant to the terms of this Operating Agreement. For purposes
of the Delaware Limited Liability Company Act and for all other purposes, the
term "Director" as used in this Operating Agreement shall mean "manager."
Consequently the parties intend that any restriction


                                       4.
<PAGE>   10





on the authority of a Director set forth in this Operating Agreement shall also
be read as a restriction on such person's authority as a manager.

               (ff) "DISTRIBUTABLE CASH" shall mean for any period the Operating
Cash Flow (as defined below) for such period plus depreciation and amortization
to the extent reflected in Operating Cash Flow for such period minus (i) the
capital expenditures of the Company for such period determined in accordance
with U.S. generally accepted accounting principles, (ii) any net working capital
requirements to be met from Operating Cash Flow for such period as determined by
the Board of Directors and (iii) all amounts distributed by the Company pursuant
to Section 11.3(a) of this Operating Agreement; and where "Operating Cash Flow"
shall mean for any period the gross revenues of the Company for such period less
all operating and nonoperating expenses of the Company for such period,
including all charges of a proper character (including provision for taxes, if
any, which charges shall be limited to current taxes, and provision for current
additions to reserves), all determined in accordance with GAAP applied on a
basis consistent with the Company's prior corresponding periods, if any.

               (gg) "DROP-DEAD DATE" shall mean March 15, 1999.

               (hh) "EQUITABLE CLAIM REGARDING CONTENT" shall have the meaning
specified in Section 5.7(c).

               (ii) "EVENTS" shall have the meaning specified in the Master
Venture Agreement.

               (jj) "EXCESS CAPITAL CONTRIBUTION" shall mean the amount, if any,
by which the sum of Quokka's Initial Capital Contribution and all Quokka
Quarterly Capital Contributions exceeds [*] dollars $[*].

               (kk) "FISCAL YEAR" shall mean the Company's fiscal year. The
Company's fiscal year shall be January 1 through December 31 unless a different
taxable year is required by Section 706 of the Code, in which event the
Company's fiscal year shall be the taxable year required by Section 706 of the
Code.

               (ll) "FUNDS FROM A SALE OF THE COMPANY" means all Distributable
Cash held by the Company which results from a Sale of the Company.

               (mm) "FUNDS FROM OPERATIONS" means all Distributable Cash held by
the Company which results from the operation of the business of the Company from
whatever source, except for Funds From a Sale of the Company and Capital
Contributions.

               (nn) "GAMES" shall have the meaning specified in the Master
Venture Agreement.

               (oo) "INITIAL CAPITAL CONTRIBUTION" shall mean a Member's initial
contribution to the Capital of the Company pursuant to this Operating Agreement
in connection with the initial issuance of Units by the Company, as set forth on
Schedule A hereto.

               (pp) "INITIAL CONTENT PLAN" shall have the meaning specified in
Section 5.3(a).

               (qq) "INITIAL MEMBERS" shall mean NBC and Quokka.


[*] Confidential Treatment Requested

                                       5.
<PAGE>   11




               (rr) "INTEREST" shall mean the proportion that a Member's Units
bears to the aggregate outstanding Units of all Members.

               (ss) "INTEREST INCOME" shall mean all interest income, including
without limitation, income received from commercial paper, certificates of
deposit, United States treasury bills and other money market investments.

               (tt) "LONG-TERM STRATEGIC PLAN" shall have the meaning specified
in Section 5.3(b).

               (uu) "MASTER VENTURE AGREEMENT" shall mean that certain Master
Venture Agreement of even date herewith among NBC, Quokka and the Company.

               (vv) "MEMBER" shall mean each of Quokka, NBC, any Additional
Member and any Substituted Member which is, as of a given time, a member of the
Company.

               (ww) "MUTUAL TERMINATION EVENT" shall have the meaning specified
in the Master Venture Agreement.

               (xx) "NBC COMPETITOR" shall mean [*].

               (yy) "NBC SERVICES AGREEMENT" shall mean that certain NBC Rights
and Services Terms attached as Exhibit A to the Master Venture Agreement.

               (zz) "NET PROFIT OR NET LOSS" shall be an amount computed for
each Accounting Period as of the last day thereof that is equal to the Company's
taxable income or loss for such Accounting Period, determined in accordance with
Section 703(a) of the Code (for this purpose, all items of income, gain, loss,
or deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:

                        (1) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing Net Profit
or Net Loss pursuant to this Section 1.1(zz) shall be added to such taxable
income or loss;

                        (2) Any expenditures of the Company described in Code
Section 705(a)(2)(b) or treated as Code Section 705(a)(2)(b) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Net Profit or Net Loss pursuant to this Section
1.1(zz) shall be subtracted from such taxable income or loss; and


[*] Confidential Treatment Requested

                                       6.
<PAGE>   12






                        (3) Items that are specially allocated pursuant to
Section 11.2 hereof shall not be taken into account in computing Net Profit or
Net Loss.

Notwithstanding anything to the contrary contained in this definition of Net
Profit or Net Loss, income, gain or loss resulting from the disposition of,
distribution to a Member of, or depreciation, amortization or other cost
recovery deductions with respect to, any Company asset shall be computed by
reference to the book value of the asset disposed of, distributed or
depreciated, amortized or otherwise recovered, notwithstanding that the adjusted
tax basis of such asset differs from its book value.

               (aaa) "OPERATING AGREEMENT" shall mean this Operating Agreement
as originally executed and as amended from time to time in accordance with the
terms of this Operating Agreement.

               (bbb) "PERMITTED PLEDGE" shall mean a pledge by a Member of its
interest in the Company in connection with a debt financing transaction creating
an encumbrance on all or substantially all the assets of such Member, which
assets include such Member's interest in the Company.

               (ccc) "PERSON" shall mean any individual or corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or other entity, including any
government or political subdivision or any agency or instrumentality thereof and
the heirs, executors, administrators, legal representatives, successors, and
permitted assigns of such "Person" where the context so admits.

               (ddd) "QUARTERLY CAPITAL NEEDS" shall have the meaning specified
in Section 5.3(c).

               (eee) "QUOKKA COMPETITOR" shall mean any Person significantly
engaged in the business of providing coverage, promotion or advertising of
sports or sporting events over the Internet Medium (as such term is defined in
the NBC Services Agreement).

               (fff) "QUOKKA QUARTERLY CAPITAL CONTRIBUTION" shall have the
meaning specified in Section 5.4(a).

               (ggg) "QUOKKA SERVICES AGREEMENT" shall mean that certain Quokka
Rights and Services Terms attached as Exhibit B to the Master Venture Agreement.

               (hhh) "QUOKKA WARRANTS" shall have the meaning specified in the
Master Venture Agreement.

               (iii) "REDUCED ACTIVITY PERIOD" shall mean any six month period
following the expiration or termination of the Master Venture Agreement (as such
terms are defined in the Master Venture Agreement) during which the Company has
not either accrued expenditures of at least $[*] or recognized revenues of at
least $[*].

               (jjj) "REDUCED SPENDING PLAN" shall have the meaning specified in
Section 5.3(b).


[*] Confidential Treatment Requested

                                       7.
<PAGE>   13







               (kkk) "RESTRICTED ADVERTISER CATEGORY" shall have the meaning
specified in the Master Venture Agreement.

               (lll) "SALE OF COMPANY PROPERTY" shall mean the sale,
disposition, assignment, transfer, lease, pledge, hypothecation or encumbrance
of, or the granting of any security interest in, any Company Property that, when
considered with any other Company Property so transferred or otherwise treated
outside the ordinary course of business, has an aggregate fair market value
greater than 20% of the fair market value of all Company Property (including
without limitation any Sale of the Company).

               (mmm) "SALE OF THE COMPANY" shall mean the sale or disposition of
all or substantially all the Company Property.

               (nnn) "SERVICES AGREEMENTS" shall mean the NBC Services Agreement
and the Quokka Services Agreement.

               (ooo) "SUBSIDIARY" of any Person shall mean any entity of which
such Person beneficially holds, directly or indirectly, fifty percent (50%) or
more of such entities outstanding securities.

               (ppp) "SUBSTITUTE MEMBER" shall mean any Person who or which is
admitted to the Company as a Substitute Member pursuant to Articles 12 and 13 of
this Operating Agreement.

               (qqq) "SUPERMAJORITY OF THE DIRECTORS" shall mean the vote of
three (3) or more Directors, including at least one (1) Class A Director and at
least one (1) Class B Director. Every act or decision done or made by three (3)
or more Directors, including at least one (1) Class A Director and at least one
(1) Class B Director, at a meeting duly held and at which a quorum is present
shall be the act of a Supermajority of the Directors. Additionally, any act or
decision done or made pursuant to a written consent executed by all five (5)
Directors (or, in the event of a reduction in the number of Directors pursuant
to Section 4.2, all four (4) Directors) in accordance with the terms of Section
4.7(g) shall be the act of a Supermajority of the Directors. Votes by a Director
shall be as a representative of the Members electing such Director and not as a
fiduciary of the Company or all of its Members.

               (rrr) "TREASURY REGULATIONS" shall mean the Income Tax
Regulations, including temporary regulations, promulgated under the Code, as
amended from time to time.

               (sss) "UNITS" shall mean the capital units issued by the Company
to its Members, in exchange for contributions, which represent the Member's
interest in the Company.

               (ttt) "WARRANT ISSUANCE AGREEMENT" shall mean that certain
Warrant Issuance Agreement dated of even date herewith among Quokka, NBC and the
Company.

                                    ARTICLE 2

                              FORMATION OF COMPANY

        2.1 FORMATION. On February 5, 1999, the Company was organized as a
Delaware limited liability company under and pursuant to the Delaware Act.


                                       8.
<PAGE>   14




        2.2 NAME. The name of the Company is NBC/Quokka Ventures, LLC.

        2.3 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be in the State of New York.

        2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's registered
office in the state of Delaware shall be at the office of its registered agent,
and the name and address of its initial registered agent shall be The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801. The Corporation Trust Company is located in the
County of Newcastle.

        2.5 TERM. The Company's existence commenced February 5, 1999 upon the
filing with the Secretary of the State of Delaware of the Company's Certificate
of Formation and shall continue indefinitely, unless the Company is earlier
dissolved in accordance with either the provisions of this Operating Agreement
or the Delaware Act.

                                    ARTICLE 3

                               PURPOSES OF COMPANY

        3.1 COMPANY PURPOSES. The purpose of the Company is to (a) design,
develop, produce and market the Channel in accordance with the Master Venture
Agreement, the Services Agreements and the Content Plans, (b) sell advertising
on, or sponsorships of, the Channel in accordance with the Master Venture
Agreement and the Services Agreements, (c) design, develop, manufacture, market
and sell derivative products relating to the Channel in accordance with the
Master Venture Agreement and the Services Agreements, (d) engage in such other
activities as contemplated by the Master Venture Agreement, the Services
Agreements and the Content Plans and (e) engage in any lawful act or activity
for which a limited liability company may be organized under the laws of the
State of Delaware, incident, necessary, advisable or desirable to carry out the
foregoing. The Company shall have all powers available to limited liability
companies under the Delaware Act to make and perform all contracts and to engage
in all actions and transactions necessary or advisable to carry out the purposes
of the Company.

                                    ARTICLE 4

                              MANAGEMENT OF COMPANY

        4.1 GENERALLY. Except as specifically set forth in this Operating
Agreement, the Members hereby delegate all power and authority to manage the
business and affairs of the Company to the Directors, who shall act as the
managers of the Company subject to and in accordance with the terms of this
Operating Agreement (including, without limitation, Section 5.1). Such five (5)
(or, as provided in Section 4.2 below, four (4)) Directors shall constitute the
"Board of Directors" and such term may be used in this Operating Agreement to
refer to such five (5) (or, as provided in Section 4.2 below, four (4))
Directors. Such term is used for convenience only and is not intended by the
parties to confer to the Board of Directors any additional power or authority
other than that expressly and specifically conferred pursuant to and in
accordance with the terms of this Operating Agreement.

        4.2 NUMBER OF DIRECTORS; CLASSIFICATION OF DIRECTORS. The number of
Directors of the Company shall be fixed at five (5) Directors. Three (3)
Directors shall be classified as Class


                                       9.
<PAGE>   15





         A Directors and two (2) Directors shall be classified as Class B
Directors. Notwithstanding the foregoing however, if within thirty (30) days
following the date the Class B Directors receive written notice from the Class A
Directors that a Class A Acquisition Date has occurred (a "Class A Acquisition
Date Notice"), the holders of a majority of the Class B Interests elect to
reduce the number of Class A Directors, the number of Directors of the Company
shall be fixed at four (4) Directors. In such event two (2) Directors shall be
classified as Class A Directors and two (2) Directors shall be classified as
Class B Directors. The Class A Directors shall provide a Class A Acquisition
Date Notice promptly following a Class A Acquisition Date.

        4.3 TENURE, ELECTION AND QUALIFICATIONS.

               (a) The initial Class A Directors shall be Richard H. Williams,
Alan Ramadan and Les Schmidt. Each Class A Director shall serve until the
earlier of (i) the election of such Class A Director's successor by Class A
Members holding a majority of the Class A Interests, (ii) the removal of such
Class A Director in accordance with the terms of this Operating Agreement, (iii)
such Class A Director's resignation and (iv) such Class A Director's death.

               (b) The initial Class B Directors shall be Bob Myers and Gary
Zenkel. Each Class B Director shall serve until the earlier of (i) the election
of such Class B Director's successor by Class B Members holding a majority of
the Class B Interests, (ii) the removal of such Class B Director in accordance
with the terms of this Operating Agreement, (iii) such Class B Director's
resignation and (iv) such Class B Director's death.

               (c) At the time of his appointment and at all times during his
service as a Director, a Director must be an officer, director or employee of a
Member. In the event a Director shall cease to be an officer, director or
employee of a Member, such Director shall be deemed to have resigned as a
Director effective upon such cessation date. In addition, at least one (1) Class
B Director shall be an officer, director or employee of NBC.

        4.4 RESIGNATION. A Director may resign at any time by giving written
notice to the Members. The resignation of a Director shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.

        4.5 REMOVAL.

               (a) A Class A Director may be removed at any time, with or
without Cause, by the affirmative vote of Class A Members holding a majority of
the Class A Interests. Without limiting the generality of the foregoing, in the
event of a reduction in the number of Directors classified as Class A Directors
pursuant to Section 4.2, the Class A Members holding a majority of the Class A
Interests shall determine which Class A Director shall be removed as a result of
such reduction.

               (b) A Class B Director may be removed at any time, with or
without Cause, by the affirmative vote of Class B Members holding a majority of
the Class B Interests.

               (c) Notwithstanding the foregoing, upon the affirmative vote of
any two Directors, any other Director may be removed for Cause.

        4.6 VACANCIES.



                                      10.
<PAGE>   16







               (a) Any vacancy occurring in the office of a Class A Director
shall be filled by the affirmative vote of Class A Members holding a majority of
the Class A Interests.

               (b) Any vacancy occurring in the office of a Class B Director
shall be filled by the affirmative vote of Class B Members holding a majority of
the Class B Interests.

        4.7 MEETINGS.

               (a) Subject to the notice provisions set forth in this Section
4.7, regular meetings of the Board of Directors shall be held at such times and
dates as determined by the Board of Directors. The Board of Directors shall hold
at least four (4) regular meetings annually, which meetings shall be held in
such locations as determined pursuant to this Section 4.7. The officers and
other executives of the Company, if any, may attend meetings of the Board of
Directors with the prior approval of the Board of Directors. The Board of
Directors shall meet with the officers and other senior executives of the
Company, if any, at least two (2) times annually.

               (b) Directors may participate in a meeting through use of
conference telephone or similar communication equipment, so long as all
Directors participating in such meeting can hear one another. Such participation
constitutes presence in person at such meeting.

               (c) Special meetings of the Board of Directors for any purpose
may be called by the Chairman of the Board or by any two Directors.

               (d) Each Director shall receive notice of the date, time and
place of all meetings of the Board of Directors at least thirty (30) days before
the meeting. Such notice shall be delivered in writing (which may be by
facsimile or by telegraph) to each Director. Such notice may be given by the
Chairman of the Board, the Secretary of the Company or by the person or persons
who called the meeting. Such notice shall specify the purpose of the meeting.
Notice of any meeting of the Board of Directors shall not be required to be
given to any Director who signs a waiver of notice of such meeting or a consent
to holding the meeting, either before or after the meeting, or who attends the
meeting without protesting prior to such meeting or at the commencement thereof.
No meeting of the Board of Directors shall be considered a valid meeting of the
Board of Directors unless notice as required pursuant to this Section 4.7 has
been given. All such waivers, consents and approvals shall be filed with the
corporate records of the Company.

               (e) Regular meetings of the Board of Directors shall be held
alternatively in San Francisco, California and New York, New York, or in such
other places as the Directors who desire to attend such meeting may collectively
determine. Special meetings of the Board of Directors shall be held in New York,
New York, or in such other places as the Directors who desire to attend such
meeting may collectively determine, with respect to special meetings called by
the Class A Directors and shall be held in San Francisco, California, or in such
other places the Directors who desire to attend such meeting may collectively
determine, with respect to special meetings called by the Class B Directors. The
location of any meeting of the Board of Directors shall be designated in the
notice of the meeting.

               (f) Any meeting of the Board of Directors, whether or not a
quorum is present, may be adjourned to another time and place by the affirmative
vote of a majority of the Directors present. If the meeting is adjourned for
more than twenty-four (24) hours, notice of



                                      11.
<PAGE>   17

such adjournment to another time or place shall be given prior to the time of
the adjourned meeting to the Directors who were not present at the time of the
adjournment.

               (g) Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting of the Board of Directors, if all the
Directors individually or collectively consent in writing to such action. Such
written consent or consents shall be filed with the corporate records of the
Company. Such action by written consent shall have the same force and effect as
a unanimous vote of the Directors.

        4.8 QUORUM AND TRANSACTION OF BUSINESS. The number of Directors that
constitutes a quorum for the transaction of business at a properly noticed
meeting of the Board of Directors shall be three (3); provided, however, that if
a vote requiring a Supermajority of the Directors shall be taken at such
meeting, a Supermajority of the Directors shall constitute a quorum. Except as
required by the Delaware Act or as otherwise set forth in this Operating
Agreement, every act or decision done or made by three (3) or more Directors at
a meeting duly held and at which a quorum is present shall be the act of the
Board of Directors.

        4.9 DIRECTORS HAVE NO EXCLUSIVE DUTY TO COMPANY. The Directors shall not
be required to manage the Company as their sole and exclusive function, and the
Directors may have other business interests and may engage in other activities
in addition to those relating to the Company. Neither the Company nor any Member
shall have any right, by virtue of this Operating Agreement or otherwise, to
share or participate in such other investments or activities of the Directors or
to the income or proceeds derived therefrom.

        4.10 SALARIES. The Directors shall receive no salary or other
compensation from the Company; provided, however, the foregoing shall not
prevent any employee of or consultant to the Company from receiving salary or
other compensation from the Company with respect to his services as an employee
or consultant.

                                    ARTICLE 5

                   POWERS OF AND RESTRICTIONS ON THE DIRECTORS

        5.1 MANAGEMENT. The Directors shall in all cases act as a group and
shall have no authority to act individually. The Board of Directors may appoint
one (1) or more officers to manage the day-to-day operations of the Company. The
initial officers shall be as designated in Section 6.1 below and shall have the
respective duties set forth in Section 6.2 below. The Board of Directors may
adopt such rules and regulations for the management of the Company not
inconsistent with this Operating Agreement or the Delaware Act. Except as
otherwise provided in the Delaware Act or authorized pursuant to the terms of
this Operating Agreement, no debt shall be contracted or liability incurred by
or on behalf of the Company except by the Company's Board of Directors.

5.2 ADHERENCE TO CURRENT CONTENT PLAN. Except as approved by a Supermajority of
the Directors, the Board of Directors shall operate the Company, and the Company
shall operate the Channel, in a manner in all ways consistent with and in
accordance with the Content Plan as in effect with respect to a Games at any
given time (the "Current Content Plan"). Amendments to the Current Content Plan
shall require approval by a Supermajority of the Directors.


                                      12.
<PAGE>   18





         Notwithstanding any provision herein to the contrary, approval of any
Content Plan shall not constitute approval of the raising of additional capital
for the Company.

        5.3 CONTENT PLAN, LONG-TERM STRATEGIC PLAN AND ANNUAL OPERATING PLAN.

               (a) Until the Drop-Dead Date, the Members shall negotiate in good
faith to develop, for approval by a Supermajority of the Directors, an initial
content plan (the "Initial Content Plan") with respect the first Games,
provided, however, in conducting such negotiations, it will not be NBC's
intention to acquire "participating rights" as defined in EITF 96-16. Nothing
contained in the foregoing proviso, however, will affect the enforceability of
the Initial Content Plan once it has been approved by a Supermajority of the
Directors. Thereafter, no later than thirty (30) days prior to each Content Plan
Deadline, the officers of the Company shall prepare and submit to the Board of
Directors for approval by a Supermajority of the Directors, a content plan (the
"Content Plan") covering with respect to the next upcoming Games the types of
items covered in the Initial Content Plan with respect to the first Games. The
Members shall cause the Directors of the Company to work together in good faith
to develop and approve by such Supermajority of the Directors a Content Plan
with respect to each Games by the Content Plan Deadline; provided, however, in
the event a Supermajority of the Directors do not approve a Content Plan with
respect to the next upcoming Games on or before the Content Plan Deadline, the
Content Plan with respect to the next upcoming Games shall be the Content Plan
for the prior Games as updated by the General Manager and Production
Coordinating Producer of the Company to adjust for (i) the different sports
occurring during such Games (e.g. figure skating shall be substituted for
gymnastics), (ii) changes in technology and (iii) the current competitive
landscape. In the event that the General Manager and the Production Coordinating
Producer cannot agree on the updates necessary to create the Content Plan, the
General Manager shall have final authority to approve such Content Plan.

               (b) From time to time as requested by the Board of Directors, but
at least one hundred twenty (120) days prior to the beginning of every other
Fiscal Year (beginning with the Fiscal Year commencing January 1, 2001), the
officers of the Company shall prepare and submit to the Board of Directors for
approval a long-term strategic plan for the Company (the "Long-term Strategic
Plan") for the period commencing with such Fiscal Year (or, the current Fiscal
Year in the event the Long-term Strategic Plan is not being considered by the
Board of Directors within sixty (60) days prior to the beginning of a Fiscal
Year) and ending with the Fiscal Year following the completion of the last Games
with respect to which the Company has rights under the NBC Services Agreement.
Notwithstanding the foregoing however, the first Long-term Strategic Plan shall
be prepared and submitted to the Board of Directors for approval no later than
ninety (90) days from the date hereof. Each Long-term Strategic Plan shall
include for each Fiscal Year covered by such Long-term Strategic Plan the
financial goals of the Company for each such Fiscal Year including a summary of
target operating revenues and expenses, capital expenditures and sources and
uses of funds and shall set forth an estimate of the additional capital needs,
if any, of the Company during each quarter of each such Fiscal Year, provided,
however, that such information need not be as detailed as the information
provided in the Annual Operating Plan. The Long-term Strategic Plan shall be
prepared on a basis in all respects consistent with the Current Content Plan. In
the event that there are three (3) Class A Directors and the Board of Directors
approves a Long-term Strategic Plan that provides for disbursement of (x) with
respect to the first Games, less than [*] dollars ([*]), (y) with respect to the
second Games, less than the amount equal to [*] dollars ([*]) multiplied by the
NBC Budget Discount, if any, or (z) with


[*] Confidential Treatment Requested


                                      13.
<PAGE>   19




respect to the third Games, less than the amount equal to [*] dollars ([*])
multiplied by the NBC Budget Discount, if any, such Long-term Strategic Plan
shall be deemed a "Reduced Spending Plan." If at any time NBC substantially
reduces its overall television network budget with respect to any Games (other
than the 2000 Games) for reasons relating solely to an adverse change in general
economic conditions in the United States, then the "NBC Budget Discount" shall
mean the percentage by which NBC has reduced such budget. The foregoing
notwithstanding, nothing contained in this Section 5.3(b) shall obligate NBC to
provide Quokka or the Company with any written materials relating to NBC's
television network budget for any Games.

               (c) From time to time as requested by the Board of Directors, but
at least one hundred twenty (120) days prior to the beginning of each Fiscal
Year, the officers of the Company shall prepare and submit to the Board of
Directors for approval an annual operating plan for the Company (the "Annual
Operating Plan") for such Fiscal Year. Notwithstanding the foregoing however,
the first Annual Operating Plan shall be prepared and submitted to the Board of
Directors for approval no later than ninety (90) days from the date hereof. The
Annual Operating Plan shall include the budget of the Company for such fiscal
year including estimates of operating revenues and expenses, capital
expenditures and sources and uses of funds and shall set forth an estimate of
the additional capital needs, if any, of the Company during each quarter of each
such Fiscal Year (the "Quarterly Capital Needs"). The Annual Operating Plan
shall be prepared on a basis in all respects consistent with the Current Content
Plan and the Long-term Strategic Plan. In the event that there are only two (2)
Class A Directors as a result of an election by the Class B Directors pursuant
to Section 4.2 and the Board of Directors is unable to approve an Annual
Operating Plan by the date one hundred (100) days prior to the beginning of a
Fiscal Year, the Annual Operating Plan for the upcoming Fiscal Year shall be the
Annual Operating Plan for the prior Fiscal Year increased by five percent (5%)
in each category.

        5.4 ADDITIONAL CAPITAL.

               (a) From time to time, Quokka shall make additional contributions
(the "Quokka Quarterly Capital Contribution") to the capital of the Company in
such amounts necessary to fund the Company's operations on an on-going basis in
accordance with the current Long-term Strategic Plan and the Annual Operating
Plan. Each Quokka Quarterly Capital Contribution, if any, shall be made at the
beginning of each quarter and shall equal the Quarterly Capital Needs for the
subsequent commencing quarter; provided, however, that in the event that a Games
commences during any particular quarter, then (x) the Quokka Quarterly Capital
Contribution that would have otherwise been due at the beginning of the quarter
in which the Games commence shall instead be due at the beginning of the
previous quarter, (y) the Quokka Quarterly Capital Contribution that would have
otherwise been due at the beginning of the quarter subsequent to the quarter in
which the Games commence shall instead be due at the beginning of the quarter in
which the Games commence and (z) no capital contribution shall be required at
the beginning of the quarter subsequent to the quarter in which the Games
commence because the amount that otherwise would have been contributed at such
time was contributed a quarter earlier (e.g., by way of example only, Quokka
shall make a Quokka Quarterly Capital Contribution at the beginning of the first
quarter of the year in an amount equal to the Quarterly Capital Needs during the
second quarter; provided, however, in the event that a Games commences during
the second quarter, the Quokka Quarterly Capital Contribution that would have
otherwise been payable at the beginning of the second quarter (i.e. the
Quarterly Capital Needs during the third quarter) shall also be paid at the
beginning of the first quarter). Quokka


[*] Confidential Treatment Requested

                                      14.
<PAGE>   20





shall not receive additional Units in exchange for such Quokka Quarterly Capital
Contributions. Additionally, for so long as Quokka shall not have completed an
initial public offering of its equity or other securities, Quokka shall provide
the Board of Directors with (1) Quokka's unaudited quarterly report including a
consolidated balance sheet as at the end of the most recently completed quarter,
and an unaudited consolidated statement of income and an unaudited statement of
cash flows for such quarter, all prepared in accordance with U.S. generally
accepted accounting principles consistently applied (other than for accompanying
notes and changes resulting from year-end audit adjustments) within forty-five
(45) days of the end of each quarter of Quokka's fiscal year and (2) a
consolidated balance sheet of Quokka as at the end of the most recently
completed fiscal year, and a consolidated statement of income and a consolidated
statement of cash flows of Quokka for such year, all prepared in accordance with
U.S. generally accepted accounting principles consistently applied, together
with a report and opinion thereon by independent public accountants of national
standing selected by Quokka's board of directors, within ninety (90) days after
the end of each fiscal year of Quokka.

               (b) From time to time, pursuant to the provisions of Section
5.7(b), the Class B Directors, in their sole discretion, may direct the Company
to exercise all or a portion of the Quokka Warrants. Concurrently therewith, NBC
shall contribute to the capital of the Company an amount equal to the exercise
price of the Quokka Warrants being exercised at such time (except in the event
of a "net issuance exercise" in accordance with the terms of the Quokka Warrants
pursuant to which a portion of the Quokka Warrants shall be canceled in
satisfaction of the applicable exercise price). Until such amount has been
contributed to the capital of the Company, the Company shall take no action with
respect to such requested exercise of the Quokka Warrants (except in the event
of a "net issuance exercise" in accordance with the terms of the Quokka Warrants
pursuant to which a portion of the Quokka Warrants shall be canceled in
satisfaction of the applicable exercise price). NBC shall not receive additional
Units in exchange for such additional capital contributions.

               (c) Except as set forth in Section 5.4(a) and 5.4(b) above, the
Company shall not raise additional capital (or, in connection therewith, issue
additional units of the Company or admit Additional Members) without the
approval of a Supermajority of the Directors.

               (d) Except in the event the Class B Directors elect pursuant to
Section 5.4(b) to exercise the Quokka Warrants for cash or in the event the
Class B Directors elect to control Equitable Claim Regarding Content pursuant to
Section 5.7(c), the Class B Members shall have no obligation to contribute cash
to the Company.

        5.5 ACTIONS REQUIRING SIMPLE MAJORITY APPROVAL. As set forth in Section
4.8, except as required by the Delaware Act or as otherwise set forth in this
Operating Agreement (including, without limitation, Section 5.6), every act or
decision done or made by three (3) or more Directors at a meeting duly held and
at which a quorum is present shall be the act of the Board of Directors. Without
limiting the generality of Section 4.8 or Section 5.1 or the obligation of the
Board of Directors to operate the Company in accordance with the Current Content
Plan as set forth in Section 5.2, the Members desire to affirmatively set forth
certain actions which may be taken by a simple majority of the Board of
Directors in accordance with Section 4.7. Such actions are as follows:

               (a) Election of the Chairman of the Board, who shall preside at
all meetings of the Board of Directors;


                                      15.
<PAGE>   21







               (b) Approval and amendment of the Annual Operating Plan and
Long-term Strategic Plan (as set forth in Section 5.3);

               (c) The appointment or removal of the General Manager and other
officers of the Company; provided, however, that the appointment of the
Production Coordinating Producer shall require the approval of a Supermajority
of the Directors;

               (d) The hiring, firing and compensation of the Company's
personnel; provided, however, that the hiring of the Production Coordinating
Producer shall require the approval of a Supermajority of the Directors;

               (e) Selection of the equipment and production processes of the
Company in the ordinary course of business;

               (f) Directing and controlling claims and litigation against or
involving third parties, other than claims or litigation (i) subject to approval
by a Supermajority of the Directors pursuant to Section 5.6, (ii) Equitable
Claims Regarding Content subject to the direction and control of the Class B
Directors pursuant to Section 5.7(c) or (iii) which any Person (other than the
Company) has a contractual right to control and direct; and

               (g) Negotiation and approval of agreements with third parties,
other than agreements subject to approval by a Supermajority of the Directors
pursuant to Section 5.6.

        5.6 ACTIONS REQUIRING SUPERMAJORITY APPROVAL. Notwithstanding any other
provision in this Operating Agreement to the contrary, every act or decision
outside the ordinary course of business shall require the approval of a
Supermajority of the Directors. For purposes of this Operating Agreement,
"outside the ordinary course of business" shall mean acts or decisions regarding
matters of a type (as opposed to matters involving an amount) that is not
consistent with those normally expected to be addressed in directing and
carrying out the purposes of the Company as set forth in Section 3.1, regardless
of whether the events or transactions that would necessitate such decisions are
expected to occur in the near term or in the long term. Operation of the Company
in any way inconsistent with the Current Content Plan is considered "outside the
ordinary course of business" for purposes hereof. In addition, the following
shall require the approval of a Supermajority of the Directors:

               (a) Any agreement, arrangement or understanding with any Member,
Director or any holder of Units or any Affiliate, employee or relative of any
such Member, Director or holder, or any amendment, renewal or extension of any
such agreement, arrangement or understanding (other than employment contracts
between any such natural person and the Company); provided, however, that the
Master Venture Agreement and the Warrant Issuance Agreement as executed and
delivered as of the date hereof shall be deemed to be approved by a
Supermajority of the Directors as of the date hereof for purposes of this
Section 5.6(a);

               (b) Amendments of the Current Content Plan of the Company (as set
forth in Section 5.2) and approval of new Content Plans (as set forth in Section
5.3(a));

               (c) Any redemption of any Unit or other interest in the Company;

               (d) Distributions pursuant to Section 11.3(b), Section 11.3(d)
and Section 11.3(f);


                                      16.
<PAGE>   22







               (e) Acquisitions of assets representing at least twenty percent
(20%) of the net book value of the assets of the Company in any single
transaction or series of related transactions or any Sale of Company Property;
provided, however, that the approval of a Supermajority of Directors shall not
be required if such transaction or transactions represents less than [*] in
any single year and less than [*] in the aggregate;

               (f) Hiring and appointing the Production Coordinating Producer;
providing, however, that the initial appointment of the Production Coordinating
Producer set forth in Section 6.1 shall be deemed approved by a Supermajority of
the Directors as of the date hereof for purposes of this Section 5.6(i);

               (g) Decisions to put the Company into Bankruptcy;

               (h) To prepare and file all tax returns on behalf of the Company,
and to make such tax elections and determinations as a Supermajority of the
Directors deems appropriate;

               (i) Approving certain indemnifications of Persons by the Company
(as set forth in Section 8.1);

               (j) Directing and controlling claims and litigation against or
involving third parties with respect to which NBC is not entitled to complete
indemnification and has been named as a co-defendant or in connection with which
the Company could face criminal penalties or negotiating or approving any
settlement with respect to any such claims or litigation;

               (k) Transfers of Units by the Members (in accordance with Article
12), the admission of any Additional Member or any Substitute Member (in
accordance with Section 13.1) or the issuance of any equity in the Company or
any security convertible into equity in the Company; and

               (l) Borrowing money for the Company from banks or other Persons,
or hypothecating, encumbering or granting any security interests in the assets
of the Company to repay borrowed funds until such time that the sum of Quokka's
Initial Capital Contribution and Quarterly Capital Contributions has exceeded
[*]; provided, however, that notwithstanding that the sum of Quokka's Initial
Capital Contribution and Quarterly Capital Contributions has exceeded [*], the
Company may not pledge its rights under the NBC Services Agreement or any
content owned by the Company without the consent of a Supermajority of the
Directors.

        Notwithstanding any provision to the contrary contained in this
Operating Agreement, the approval rights set forth in this Section 5.6 shall
continue to be applicable following a Dissolution Event pursuant to Article 14
until the filing of a Certificate of Cancellation.

        In voting on any matter requiring approval of a Supermajority of the
Directors, a Director shall vote as a representative of the Members electing
such Director and not as a fiduciary of the Company or all of its Members.

        5.7 ACTIONS REQUIRING APPROVAL OF ONLY ONE CLASS OF DIRECTORS.

               (a) Notwithstanding any other provision in this Operating
Agreement to the contrary but subject to any fiduciary duties a Director owes to
the Company and its Members


[*] Confidential Treatment Requested.


                                      17.

<PAGE>   23





under Delaware law, (i) the Class A Directors shall have the exclusive right to
direct and control, on behalf of the Company, any claim by the Company against
NBC or any Affiliate of NBC, including, without limitation, exercising all
rights and remedies of the Company in the event any such party breaches the
Master Venture Agreement, the NBC Services Agreement or the Warrant Issuance
Agreement and (ii) the Class B Directors shall have the exclusive right to
direct and control, on behalf of the Company, any claim by the Company against
Quokka or any Affiliate of Quokka, including, without limitation, exercising all
rights and remedies of the Company in the event any such party breaches the
Master Venture Agreement, the Quokka Services Agreement, the Quokka Warrants or
the Warrant Issuance Agreement.

               (b) Notwithstanding any other provision in this Operating
Agreement to the contrary but subject to the provisions of Section 5.4(b), the
Class B Directors shall have sole authority to direct the Company to distribute
the Quokka Warrants and any shares issued to the Company upon exercise of the
Quokka Warrants (the "Warrant Shares") to NBC in accordance with the terms of
this Operating Agreement and subject to the terms of the Quokka Warrants,
exercise the Quokka Warrants, vote the Warrant Shares, sell the Warrant Shares,
distribute any proceeds from the sale of any Warrant Shares, any dividends
(whether in cash or otherwise) or other distributions received by the Company in
respect of the Warrant Shares in accordance with the terms of this Operating
Agreement or exercise any other rights available to the Company in respect of
the Warrant Shares. The Class B Directors acknowledge and agree that the Quokka
Warrants and Warrant Shares may not be distributed in kind prior to the earlier
of (i) the initial public offering of equity securities of Quokka; (ii) three
(3) years from the initial issuance of the Quokka Warrants; and (iii) the
dissolution of the Company. Any transfer taxes or other fees and expenses (other
than applicable income taxes) arising from any distribution of the Quokka
Warrants or Warrant Shares shall be borne as set forth in the Quokka Warrants.
Additionally, notwithstanding the foregoing, in the event that the Class B
Members transfer any Class B Units pursuant to Section 12.1(a)(ii), the Class B
Directors shall not be entitled to distribute any of the Quokka Warrants or any
of the Warrant Shares (or any securities issued upon conversion thereof) to such
transferee without the consent of the Class A Members, which consent shall not
be unreasonably withheld, and in such event shall only be entitled to distribute
cash dividends or other distributions in respect of the Warrant Shares or any
proceeds from the sale of the Warrant Shares (or any securities issued upon
conversion thereof) to such transferee in accordance with the terms of this
Operating Agreement; provided, however, that this restriction shall not apply in
the event of a dissolution of the Company.

               (c) Notwithstanding any other provision in this Operating
Agreement to the contrary, in the event the Company faces any claim involving
equitable remedies which may limit the Company's ability to exploit content
provided to it by NBC pursuant to the NBC Rights and Services Agreement and NBC
wishes to contest such potential limitation ("Equitable Claim Regarding
Content"), the Class B Directors may elect to direct and control such Equitable
Claim Regarding Content, provided, however, that the Company shall not enter
into any settlement or other agreement restricting the activities of the Company
without the approval of the Class A Directors if such settlement or other
agreement would have a greater negative impact on the Company than would have
been the case had NBC exercised its rights to withhold the content in question
pursuant to any of clauses (i) through (v) of Sections 3(b), 3(c) or 3(e) of the
NBC Services Agreement, as the case may be. In the event that the Class B
Directors elect to direct and control such Equitable Claim Regarding Content,
the Class B Members shall be required pro rata based on Class B Interests to
contribute additional capital to the Company to cover the


                                      18.
<PAGE>   24





expenses and costs relating to such litigation, including without limitation
attorney's fees. No additional Units shall be issued in connection with such
additional capital contributions.

        5.8 CERTAIN POWERS OF DIRECTORS. Without limiting the generality of
Section 5.1 or the obligation of the Board of Directors to operate the Company
in accordance with the Current Content Plan as set forth in Section 5.2, and
subject to any limitation set forth in this Operating Agreement (including,
without limitation, Sections 5.6 and 5.7), the Board of Directors shall have
power and authority on behalf of the Company:

               (a) To acquire property from any Person as the Board of Directors
may determine in accordance with the terms of this Operating Agreement;

               (b) To purchase liability and other insurance to protect the
Company's property and business of a type maintained by companies in a similar
business to that of the Company, it being understood that it shall be reasonable
to maintain insurance providing at least $[*] in coverage and that companies in
a similar business to that of the Company may maintain, without limitation,
director and officer, commercial general liability, umbrella, workers'
compensation, foreign workers compensation and liability, satellite
transmission, errors and omissions and DICE (documentary, industrial, commercial
and educational films);

               (c) To hold and own any Company real and/or personal properties
in the name of the Company;

               (d) To invest any Company funds temporarily in time deposits,
short-term governmental obligations, commercial paper or other similar low-risk
investments;

               (e) Subject to the approval of Members holding a majority of the
Class A Interests and a majority of the Class B Interests, to effect a Sale of
the Company;

               (f) To execute on behalf of the Company all instruments and
documents necessary, in the opinion of the Board of Directors, to the business
of the Company in accordance with the terms of this Operating Agreement;

               (g) To open bank accounts from time to time in the name of the
Company;

               (h) To employ accountants from nationally-recognized accounting
firms, legal counsel, or other experts to perform services for the Company and
to compensate them from Company funds;

               (i) To enter into any and all other agreements on behalf of the
Company, with any other Person for any purpose, in such forms as the Board of
Directors may approve in accordance with the terms of this Operating Agreement;

               (j) To establish and enforce limits of authority and internal
controls with respect to all personnel and functions;

               (k) To develop or cause to be developed accounting procedures for
the maintenance of the Company's books of account; and


                                      19.

[*] Confidential Treatment Requested
<PAGE>   25







               (l) To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business.

        5.9 REPORTS TO MEMBERS. As soon as practicable after the end of any
quarter but in any event within thirty (30) days thereafter, the Board of
Directors shall provide to each of the Class A Members and Class B Members a
balance sheet, statement of income, statement of operations and statement of
cash flows (including the amount, if any, of the Quokka Quarterly Capital
Contribution made during such quarter) for such period and for the Fiscal Year
to date, prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, with the exception that no notes need be
attached to such statements and year-end audit adjustments may not have been
made. As soon as practicable after the end of any Fiscal Year but in any event
within ninety (90) days thereafter, the Board of Directors shall provide to each
of the Class A Members and Class B Members (i) a balance sheet, statement of
income, statement of operations and statement of cash flows for such Fiscal
Year, prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, and accompanied by a report and opinion thereon by the
Company's independent public accountants and (ii) a statement of the Capital
Account of each of the Class A Members and Class B Members prepared in
accordance with the terms of this Operating Agreement. Additionally, the Board
of Directors shall provide each Member with such other information as shall be
required to support such Member's public reporting obligations as well as such
other information as such Member shall reasonably request from the Board of
Directors.

        5.10 INDEPENDENT PUBLIC ACCOUNTANTS. Pricewaterhouse Coopers or such
other nationally-recognized accounting firm selected by the board of directors
of Quokka to serve as Quokka's independent public accountants shall be the
Company's independent public accountants. The Company's independent public
accountant shall complete its audit of the Company in a timely fashion each
Fiscal Year so as to provide each Member with reasonable opportunity to include
the results therefrom, as required, in documents required to be filed by such
Member under the Securities Exchange Act of 1934 as amended.

        5.11 LITIGATION. In the event that the Company and any Member are named
in third-party litigation and such Member is not entitled to complete
indemnification in connection therewith, the Board of Directors shall cooperate
with such Member in directing and controlling such litigation on behalf of the
Company in order to coordinate a common defense as appropriate.

                                    ARTICLE 6

                              OFFICERS; COMMITTEES

        6.1 APPOINTMENT OF OFFICERS. The Board of Directors may appoint officers
of the Company which may include, but shall not be limited to: (a) General
Manager; (b) one or more positions similar to the position of vice president of
a Delaware corporation as set forth below; (c) secretary; and (d) treasurer or
chief financial officer; provided, however, that the appointment of the
Production Coordinating Producer shall be subject to the approval of a
Supermajority of the Directors. The Board of Directors may delegate their
day-to-day management responsibilities to any such officers, and such officers
shall have the authority to contract for, negotiate on behalf of and otherwise
represent the interests of the Company as authorized by the Board of Directors
pursuant to this Operating Agreement in any job description created by


                                      20.
<PAGE>   26





the Board of Directors. As of the effective date of this Operating Agreement,
Paul Gudelis shall be designated Technical Coordinating Producer and Tom Feuer
shall be designated Production Coordinating Producer, Mike Novelly shall be
designated Chief Financial Officer and Mike Novelly shall be designated
Secretary. At the time of his appointment and at all times during his service as
an officer of the Company, each officer must be an officer, director or employee
of a Member or the Company. In the event an officer shall cease to be an
officer, director or employee of a Member or the Company, such officer shall be
deemed to have resigned as an officer effective upon such cessation date.

        6.2 TENURE AND DUTIES OF OFFICERS. All officers shall hold office at the
pleasure of the Board of Directors and until their successors shall have been
duly elected and qualified, unless sooner removed. Any officer may be removed at
any time by the Board of Directors, with or without Cause. Additionally, any
officer may be removed at any time by any two Directors for Cause. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors; provided, however, that the appointment of the Production
Coordinating Producer shall be subject to the approval of a Supermajority of the
Directors.

               (a) DUTIES OF THE GENERAL MANAGER. The General Manager (the
"General Manager") shall preside at all meetings of the Members, unless the
Board of Directors shall have appointed another person to so preside and such
person is present. The General Manager shall be the Chief Executive Officer of
the Company and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
Company. The General Manager shall perform other duties commonly incident to a
president of a Delaware corporation and shall also perform such other duties and
have such other powers as the Board of Directors shall designate from time to
time.

               (b) DUTIES OF VICE PRESIDENTIAL LEVEL OFFICERS. The Technical
Coordinating Producer, Production Coordinating Producer and other officers
holding positions designated by the Board of Directors as being similar to the
position of vice president of a Delaware corporation (together, the "Senior
Officers"), in the order of their seniority, may assume and perform the duties
of the General Manager in the absence or disability of the General Manager or
whenever the office of General Manager is vacant. The Senior Officers shall
perform other duties commonly incident to a vice president of a Delaware
corporation and shall also perform such other duties and have such other powers
as the Board of Directors shall designate from time to time.

               (c) DUTIES OF SECRETARY. The secretary (the "Secretary") shall
attend all meetings of the Members, and shall record all acts and proceedings
thereof in the minute book of the Company. The Secretary shall give notice in
conformity with this Operating Agreement of all meetings of the Members
requiring notice. The Secretary shall perform all other duties given him or her
in this Operating Agreement and other duties commonly incident to a secretary of
a Delaware corporation and shall also perform such other duties and have such
other powers as the Board of Directors shall designate from time to time. The
General Manager may direct any Assistant Secretary to assume and perform the
duties of the Secretary in the absence or disability of the Secretary, and each
Assistant Secretary shall perform other duties commonly incident to the office
of assistant secretary in a Delaware corporation and shall also perform such
other duties and have such other powers as the Board of Directors or the General
Manager shall designate from time to time.


                                      21.
<PAGE>   27







               (d) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The chief
financial officer (the "Chief Financial Officer") or treasurer (the "Treasurer")
shall keep or cause to be kept the books of account of the Company in a thorough
and proper manner, and shall render statements of the financial affairs of the
Company in such form and as often as required by this Operating Agreement, the
Board of Directors or the General Manager. The Chief Financial Officer or
Treasurer, subject to the order of the Board of Directors, shall have the
custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to the office
of Chief Financial Officer or Treasurer in a Delaware corporation and shall also
perform such other duties and have such other powers as the Board of Directors
or the General Manager shall designate from time to time. The General Manager
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to the office the Chief Financial Officer or Treasurer
of a Delaware corporation and shall also perform such other duties and have such
other powers as the Board of Directors or the General Manager shall designate
from time to time.

                                    ARTICLE 7

                        RIGHTS AND OBLIGATIONS OF MEMBERS

        7.1 LIMITATION OF LIABILITY. Each Member's liability shall be limited as
set forth in the Delaware Act and other applicable law. Except as otherwise
provided by the Delaware Act, the debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be the debts,
obligations and liabilities solely of the Company, and the Members of the
Company shall not be obligated personally for any of such debts, obligations or
liabilities solely by reason of being a Member of the Company.

        7.2 NATURE OF RIGHTS AND OBLIGATIONS. Except as otherwise expressly
provided herein, nothing contained in this Operating Agreement shall be deemed
to constitute a Member an agent or legal representative of the other Members. A
Member shall not have any authority to act for, or to assume any obligation or
responsibility on behalf of, any other Member or the Company.

        7.3 MEMBER ACCESS TO RECORDS. Upon advance notice, each Member shall
have the right, during regular business hours, to inspect and copy the Company
documents set forth in Section 11.7 at the Member's expense.

        7.4 CERTAIN ACTIONS REQUIRING SPECIAL APPROVAL. Notwithstanding any
other provision in this Operating Agreement to the contrary, the following shall
require the approval of Members holding a majority of the Class A Interests and
a majority of the Class B Interests:

               (a) the merger (or any conversion of the Company from a limited
liability company to another type of entity), consolidation, liquidation or
dissolution of the Company;

               (b) any Sale of the Company; and

               (c) any amendment of this Operating Agreement or the Certificate
of Formation.


                                      22.
<PAGE>   28







        7.5 OUTSIDE ACTIVITIES. Subject to the terms of the Master Venture
Agreement and Services Agreements, each Member and each Affiliate of each Member
shall be entitled to and may have business interests and engage in business
activities in addition to those relating to the Company, and may engage in the
ownership, operation and management of businesses and activities, for its own
account and for the account of others, and may own interests in the same
properties, as those in which the Company or the other Members own an interest,
without having or incurring obligation to offer any interest in such properties,
businesses or activities to the Company or any other Member, and no other
provision of this Operating Agreement shall be deemed to prohibit any such
Person from conducting such other businesses or activities. Subject to the terms
of the Master Venture Agreement and the Services Agreements, no provision of
this Operating Agreement shall be construed to preclude any Member or any of
their respective Affiliates from engaging in or possessing an interest in any
other business ventures of any nature or description, independently or with
others, whether presently existing or hereafter created, and neither the Company
nor any Member shall have any rights in or to such independent ventures or the
income or profits derived therefrom.

                                    ARTICLE 8

                           CERTAIN MATTERS CONCERNING
                    MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS

        8.1 LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION.

               (a) No Director or Officer of the Company shall be liable, in
damages or otherwise, to the Company or any Member for any act or omission
performed or omitted to be performed by it in good faith pursuant to the
authority granted to such Director or officer of the Company by this Operating
Agreement or by the Delaware Act.

               (b) To the fullest extent permitted by the laws of Delaware, the
Company shall indemnify and hold harmless each Member, Director and its
respective Affiliates, officers, directors, shareholders, members or partners
and each Officer of the Company (each, an "Indemnitee"), from and against any
and all losses, claims, demands, costs, damages, liabilities (joint or several),
expenses of any nature (including reasonable attorneys' fees and disbursements),
judgments, fines, settlements and other amounts ("Damages") arising from any and
all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which an Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the business of the Company, regardless of whether an Indemnitee continues to
be a Member, Director or an Affiliate, officer, director, shareholder, member or
partner of such Member or Director or an officer of the Company at the time any
such liability or expense is paid or incurred, except (i) for any Damages based
upon, arising from or in connection with any act or omission of an Indemnitee
committed without authority granted pursuant to this Operating Agreement or in
bad faith or otherwise constituting willful misconduct, (ii) Damages arising
from any obligation of such Indemnitee to indemnify any Person pursuant to the
Master Venture Agreement or Services Agreement or (iii) to the extent that all
Damages with respect to which the Company has provided indemnification hereunder
exceed [*], unless specifically approved by a Supermajority of the Directors.

               (c) Expenses (including reasonable attorneys' fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal,


                                      23.

[*] Confidential Treatment Requested.
<PAGE>   29





administrative or investigative, subject to Section 8.1(b) hereof, may be paid
(or caused to be paid) by the Company in advance of the final disposition of
such claim, demand, action, suit or proceeding upon receipt of an undertaking by
or on behalf of the Indemnitee to repay such amount if it shall ultimately be
determined, by a court of competent jurisdiction from which no further appeal
may be taken or the time for any appeal has lapsed (or otherwise, as the case
may be), that the Indemnitee is not entitled to be indemnified by the Company as
authorized hereunder or is not entitled to such expense reimbursement.

               (d) The indemnification provided by Section 8.1(b) hereof shall
be in addition to any other rights to which an Indemnitee may be entitled under
any agreement properly approved by or vote properly taken by the Members or
Board of Directors (after taking into effect any related party nature of such
agreement or vote), as a matter of law or otherwise, both (i) as to action in
the Indemnitee's capacity as a Member, Director or as an Affiliate, officer,
director, shareholder, member or partner of a Member or Director or as an
Officer of the Company, and (ii) as to action in another capacity, and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns, administrators and
personal representatives of the Indemnitee.

               (e) Any indemnification hereunder shall be satisfied only out of
the assets of the Company, and the Members shall not be subject to personal
liability by reason of these indemnification provisions.

               (f) In order to facilitate meeting its obligations under this
Section 8.1, the Company may purchase and maintain a customary director and
officer insurance policy. The Company may purchase and maintain such other
insurance policies of a type maintained by companies in a similar business to
that of the Company, it being understood that it shall be reasonable to maintain
insurance providing at least $[*] in coverage and that companies in a similar
business to that of the Company may maintain, without limitation, director and
officer, commercial general liability, umbrella, workers' compensation, foreign
workers compensation and liability, satellite transmission, errors and omissions
and DICE (documentary, industrial, commercial and educational films).

               (g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 8.1 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Operating Agreement.

               (h) The provisions of this Section 8.1 are for the benefit of
each Indemnitee and its heirs, successors, assigns, administrators and personal
representatives, and shall not be deemed to create any rights for the benefit of
any other Persons.

        8.2 OTHER MATTERS CONCERNING THE DIRECTORS AND OFFICERS OF THE COMPANY.

               (a) Each Director and officer of the Company may rely on, and
shall be protected in acting or refraining from acting upon, any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties.


[*] Confidential Treatment Requested

                                      24.
<PAGE>   30







               (b) For purposes of this Operating Agreement, each Director and
officer of the Company may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers, other consultants and advisers
selected by it and any written advice or written opinion of any such Person as
to matters which such Director and Officer of the Company reasonably believes to
be within such Person's professional or expert competence, and any act or
omission, if done or omitted to be done in good faith reliance upon any such
advice or opinion, will be conclusively presumed not to constitute fraud, gross
negligence or willful or wanton misconduct.

                                    ARTICLE 9

                               MEETINGS OF MEMBERS

        9.1 ANNUAL AND SPECIAL MEETINGS. Meetings of the Members shall be held
at such date and time as the Board of Directors may fix from time to time.
Additionally, unless otherwise prescribed by statute, a special meeting may be
called by any Member or Members holding at least a majority of the Class A
Interests or a majority of the Class B Interests. No annual or regular meetings
of Members are required.

        9.2 PLACE OF MEETINGS. The Board of Directors may designate any place,
either within or outside the State of Delaware, as the place of meeting for any
meeting of the Members; provided however that if a special meeting is called by
the holders of a majority of the Class A Interests, the meeting shall be held in
New York, New York and if a special meeting is called by the holders of the
Class B Interests, the meeting shall be held in San Francisco, California. If no
designation is made by the Board of Directors or pre-determined pursuant to this
Section 9.2, the place of meeting shall be the principal executive office of the
Company.

        9.3 NOTICE OF MEETINGS. Except as provided in Section 9.6, written
notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than thirty
(30) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the Board of Directors or
person calling the meeting, to each Member entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered as provided in Section 16.1.

        9.4 MEETING OF ALL MEMBERS. If all of the Members shall meet at any time
and place, either within or outside of the State of Delaware, and consent to the
holding of a meeting at such time and place, such meeting shall be valid without
call or notice, and at such meeting lawful action may be taken.

        9.5 RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to receive payment of any distribution, or in order to make a
determination of Members for any other purpose, the date on which notice of the
meeting is mailed or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section 9.5, such
determination shall apply to any adjournment thereof.


                                      25.
<PAGE>   31







        9.6 QUORUM. Members holding a majority of the Class A Interests and a
majority of the Class B Interests, present in person or represented by proxy,
shall constitute a quorum at any meeting of Members. Notwithstanding the
foregoing, if the action to be taken by the Members is to be taken only by one
class of Members (such as the election of a Class A Director), Members holding a
majority of the Interests represented by such class shall constitute a quorum.
In the absence of a quorum at any such meeting, Members holding a majority of
the Interests so represented may adjourn the meeting from time to time for a
period not to exceed sixty (60) days without further notice. However, if the
adjournment is for more than sixty (60) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Member of record entitled to vote at the meeting.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted that might have been transacted at the meeting as
originally noticed. The Members present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal during
such meeting of Members holding Interests whose absence would cause less than a
quorum.

        9.7 MANNER OF ACTING. If a quorum is present, the affirmative vote of
Members entitled to vote holding a majority of the Class A Interests and a
majority of the Class B Interests shall be the act of the Members, unless the
vote of a greater or lesser proportion or number is otherwise required by the
Delaware Act, by the Certificate of Formation or by this Operating Agreement.

        9.8 PROXIES. At all meetings of Members, a Member may vote in person or
by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Board of Directors of the
Company before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy.

        9.9 ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted to
be taken at a meeting of Members may be taken without a meeting if the action is
evidenced by one (1) or more written consents describing the action taken,
signed and delivered to the Board of Directors within sixty (60) days of the
record date for that action, by Members having not less than the minimum number
of votes that would be necessary to authorize or take that action at a meeting
at which all Members entitled to vote on that action were present and voted. All
such consents shall be delivered to the Board of Directors of the Company for
inclusion in the minutes or for filing with the Company records. Action taken
under this Section 9.9 is effective when the number of consents required to
authorize the proposed action shall have been received by the Board of
Directors, unless the consent specifies a different effective date. Any Member
giving a written consent may revoke the consent by a writing received by the
Board of Directors before written consents representing the number of votes
required to authorize the proposed action have been received by the Board of
Directors. The record date for determining Members entitled to take action
without a meeting shall be the date the first Member signs a written consent.

        9.10 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at or after the time stated therein, shall be equivalent
to the giving of such notice.

                                   ARTICLE 10



                                      26.
<PAGE>   32






                          CONTRIBUTIONS TO THE COMPANY,
                       CAPITAL UNITS AND CAPITAL ACCOUNTS

        10.1 CAPITAL CONTRIBUTIONS. Concurrently with the execution and delivery
of this Operating Agreement, Quokka made an Initial Capital Contribution to the
Company in the amount as shown on Schedule A hereto, in exchange for the number
of Class A Units held by Quokka as shown on Schedule A. As reflected on Schedule
A, NBC made [*] in exchange for the number of Class B Units held by NBC as shown
on Schedule A.

        10.2 UNITS. Each Member's interest in the Company shall be represented
by Units of membership interest, denoted "Class A" or "Class B" as set forth on
Schedule A. Concurrently with the execution and delivery of this Operating
Agreement, the Initial Members received the number and type of Units set forth
on Schedule A.

        10.3 CAPITAL ACCOUNTS.

               (a) A separate Capital Account will be maintained for each
Member.

                        (1) To each Member's Capital Account there shall be
credited (a) such Member's Capital Contributions, (b) such Member's distributive
share of Net Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 11.2 hereof, and (c) the amount of any
Company liabilities assumed by such Member or which are secured by any Property
distributed to such Member.

                        (2) To each Member's Capital Account there shall be
debited (a) the amount of money and the Adjusted Asset Value of any Company
asset distributed to such Member pursuant to any provision of this Operating
Agreement, (b) such Member's distributive share of Net Losses and any items in
the nature of expenses or losses which are specially allocated pursuant to
Section 11.2 hereof, and (c) the amount of any liabilities of such Member
assumed by the Company or which are secured by any property contributed by such
Member to the Company.

               (b) In the event of a permitted assignment, sale or exchange of
all or part of a Member's interest in the Company, the Capital Account of the
transferor shall become the Capital Account of the transferee to the extent it
relates to the transferred interest.

               (c) The manner in which Capital Accounts are to be maintained
pursuant to this Section 10.3 is intended, and shall be construed and applied so
as, to comply with the requirements of Code Section 704(b) and the Treasury
Regulations promulgated thereunder.

        10.4 WITHDRAWAL OR REDUCTION OF MEMBERS, CONTRIBUTIONS TO CAPITAL.

               (a) A Member shall not receive out of the Company's property any
part of its contributions to capital until all liabilities of the Company,
except liabilities to Members on account of their contributions to capital, have
been paid or there remains property of the Company sufficient to pay them.



[*] Confidential Treatment Requested

                                      27.
<PAGE>   33







               (b) A Member shall not be entitled to demand or receive from the
Company the liquidation of his interest in the Company until the Company is
dissolved in accordance with the provisions hereof and other applicable
provisions of the Delaware Act.

        10.5 UNIT CERTIFICATES. The Company shall issue certificates evidencing
the Units issued by the Company. Such certificates shall indicate whether the
Units represented thereby are Class A Units or Class B Units and shall (in
addition to any legend required under applicable state securities laws) bear the
following legends:

        THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.

        THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
HOLDER HEREOF OR ITS PREDECESSOR IN INTEREST. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY.

                                   ARTICLE 11

                 ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS

        11.1 ALLOCATION OF PROFITS AND LOSSES FROM OPERATIONS.

               (a) ALLOCATION OF NET PROFITS. The Net Profits of the Company for
each Accounting Period shall be allocated among the Members as follows:

                        (i) First, to all Class A Members in proportion to their
respective Class A Interests until the Capital Accounts of the Class A Members
are equal to the Excess Capital Contributions of the Class A Members less all
distributions to the Class A Members;

                        (ii) Second, to all Members in proportion to their
respective Interests.

               (b) ALLOCATION OF NET LOSSES. The Net Losses of the Company for
each Accounting Period shall be allocated among the Members as follows:

                        (i) First, to all Members to the extent of and in
proportion to the Net Profits previously allocated to them pursuant to Section
11.1(a)(ii);

                        (ii) Second, to all Class A Members in proportion to
their respective Class A Interests until there have been allocated Net Losses
under this Section 11.1(b)(ii) in an amount equal to the Excess Capital
Contribution of the Class A Members;

                        (iii) Third, to all Class A Members in proportion to
their respective Class A Interests until there have been allocated Net Losses
under this Section 11.1(b)(iii) in an


                                      28.
<PAGE>   34





amount equal to the Capital Contribution of the Class A Members less the Excess
Capital Contribution of the Class A Members;

                        (iv) Fourth, to all Members in proportion to their
respective Interests.

       11.2 SPECIAL ALLOCATIONS. Notwithstanding Section 11.1,

               (a) INTEREST INCOME. All Interest Income earned on Capital
Contributions made by the Class A Members (until such Capital Contributions have
either been distributed or utilized to fund the Company's operations) shall be
allocated solely to the Class A Members pro rata in proportion to their
respective Class A Interests.

               (b) QUOKKA WARRANTS. The parties agree that, for federal and
state tax purposes, NBC shall be treated as having received ownership of the
Quokka Warrants on the date of grant of the Quokka Warrants to the Company.
Therefore, any profits or losses (including the initial value of the Quokka
Warrants upon receipt by the Company) realized on the receipt by the Company of
or a taxable disposition (including exercise) of, an adjustment of the Adjusted
Asset Values of, or a distribution in kind of the Quokka Warrants or any
securities issued upon exercise thereof (including, without limitation, the
Warrant Shares) shall be allocated solely to NBC. Any transfer taxes or other
costs or expenses (other than applicable income taxes) arising from any
distribution to NBC of the Quokka Warrants shall be borne as set forth in the
Quokka Warrants.

               (c) EQUITABLE CLAIM REGARDING CONTENT. Any costs or expenses
connected to any Equitable Claim Regarding Content subject to the direction and
control of the Class B Directors in accordance with Section 5.7(c) shall be
allocated solely to the Class Members in proportion to their respective Class B
Interests. Any profits received by the Company from a final judgment in
connection with, or final settlement of, an Equitable Claim Regarding Content
shall first be allocated to the Class B Members in proportion to their
respective Class B Interests until there have been allocated profits under this
Section 11.2(c) in the current Accounting Period and all prior Accounting
Periods in an amount equal to the costs or expenses previously allocated to the
Class B Members under this Section 11.2.

               (d) SUBSTANTIAL ECONOMIC EFFECT. The Members agree that they
shall take such other actions and make such other allocations as are necessary
to ensure that the allocations described in this Article 11 have substantial
economic effect within the meaning of Regulations Section 1.704-1(b)(2).

               (e) QUALIFIED INCOME OFFSET. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in Section
1.704-l(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items of
Company income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficit balance of the Capital Account of such Member
as quickly as possible, provided that an allocation pursuant to this Section
11.2(c) shall only be made if and to the extent such Member would have a deficit
balance in its Capital Account after all other allocations provided for in
Section 11.1 and Section 11.2 have been made as if this Section 11.2(c) were not
in this Operating Agreement.

               (f) SECTION 754 ELECTION. At the request of any Member (or
Members) holding not less than twenty-five percent (25%) of the Interests, the
Company shall elect,


                                      29.
<PAGE>   35





pursuant to Section 754 of the Code, to adjust the basis of the Company assets
as permitted and provided in Sections 734 and 743 of the Code, in which case
Capital Accounts shall be maintained and allocations shall be made in accordance
with Regulations Section 1.704-1(b)(2)(iv)(m).

               (g) TAX ALLOCATIONS. Except as otherwise permitted in this
Agreement, the Company's ordinary income and losses, and capital gains income
and losses, as determined for federal income tax purposes (and each item of
income, gain, loss or deduction entering into the computation thereof) shall be
allocated to the Members in the same proportion as the corresponding items are
allocated for Capital Account maintenance purposes. Notwithstanding the
foregoing, federal income tax items relating to assets that have an Adjusted
Asset Value that is not equal to their tax basis shall be allocated in
accordance with Section 704(c) of the Code, and the Company shall adopt the
traditional method under Section 704(c) for purposes of such allocation.

        11.3 DISTRIBUTIONS.

               (a) MANDATORY DISTRIBUTIONS.

                        (i) Subject to applicable law and any limitations
contained elsewhere in this Operating Agreement and provided that the Company is
being taxed as a partnership, the Board of Directors shall distribute cash to
the Members in an amount equal to the product of (i) the Tax Percentage and (ii)
the Company's taxable income for such Fiscal Year determined in accordance with
Section 703(a) of the Code as reflected on the Schedule K-1's in respect of each
Unit. For purposes hereof, "Tax Percentage" shall mean initially forty percent
(40%) and shall be adjusted from time to time by the Board of Directors in
response to changes in the tax rates applicable to corporations under the Code
and under the state income tax laws of the State of California and the State of
New York and in response to any other factors which cause the distributions
under this Section 11.3(a) to be less than a Member's tax liability in respect
of each Unit.

                        (ii) In the event of a Reduced Activity Period, the
Board of Directors shall establish reasonable reserves for purposes of
satisfaction of all liabilities and obligations of the Company (other than those
to Members on account of their Capital Contributions) and shall distribute the
remaining cash of the Company (x) first, to the Class A Members pro rata in
proportion to their Class A Interests on the record date of such distribution
until the Class A Members shall have received total distributions pursuant to
this Article 11 in an amount equal to the Excess Capital Contribution of the
Class A Members and (y) second, to the Members pro rata in proportion to their
respective Interests on the record date of such distribution.

               (b) DISTRIBUTIONS OF FUNDS FROM OPERATIONS. Subject to applicable
law and any limitations contained elsewhere in this Operating Agreement
(including, without limitation, Section 5.6), the Board of Directors may elect
from time to time to distribute Funds From Operations (x) first, to the Class A
Members pro rata in proportion to their Class A Interests on the record date of
such distribution until the Class A Members shall have received total
distributions pursuant to this Article 11 in an amount equal to the Excess
Capital Contribution of the Class A Members and (y) second, to the Members pro
rata in proportion to their respective Interests on the record date of such
distribution.


                                      30.
<PAGE>   36







               (c) DISTRIBUTIONS RELATING TO THE QUOKKA WARRANTS. The Class B
Directors may elect from time to time to distribute the Quokka Warrants, the
Warrant Shares, any other securities or other rights with respect to the
Warrants or the Warrant Shares or any cash obtained by any sale of the Warrant
Shares to NBC, subject to the terms of the Quokka Warrants. The Class B
Directors acknowledge and agree that the Quokka Warrants and Warrant Shares may
not be distributed in kind prior to the earlier of (i) the initial public
offering of equity securities of Quokka; (ii) three (3) years from the initial
issuance of the Quokka Warrants; and (iii) the dissolution of the Company. The
Class B Directors further acknowledge the additional restrictions set forth in
Section 5.4(b) in the event of any transfer of the Class B Units.

               (d) DISTRIBUTIONS OF FUNDS FROM A SALE OF THE COMPANY. Subject to
applicable law and any limitations contained elsewhere in this Operating
Agreement, the Board of Directors may elect from time to time to distribute
Funds From a Sale of the Company to the Members. Any distribution of Funds From
a Sale of the Company made under this Section 11.3(d) shall be made (x) first,
to the Class A Members pro rata in proportion to their Class A Interests on the
record date of such distribution until the Class A Members shall have received
total distributions pursuant to this Article 11 in an amount equal to the Excess
Capital Contribution of the Class A Members and (y) second, to the Members pro
rata in proportion to their respective Interests on the record date of such
distribution.

               (e) DISTRIBUTIONS UPON DISSOLUTION OF THE COMPANY. Upon
dissolution of the Company, after satisfaction of the liabilities of the Company
in accordance with Section 14.3(a), the remaining assets of the Company shall be
distributed to the Members pro rata in proportion to their respective Capital
Account balances; provided, however, that any securities or other property
issued upon exercise of the Quokka Warrants shall be distributed to NBC and that
such distribution shall be reflected in the Capital Account balances of NBC
prior to making or determining the amount of any other distribution pursuant to
this Section 11.3(e).

               (f) OTHER DISTRIBUTIONS. All other distributions of cash or other
property shall be made (x) first, to the Class A Members in proportion to their
Class A Interests on the record date of such distribution until the Class A
Members shall have received total distributions pursuant to this Article 11 in
an amount equal to the Excess Capital Contribution of the Class A Members and
(y) second, to the Members in proportion to their respective Interests on the
record date of such distribution.

               (g) TAX WITHHOLDING. The Company shall comply with withholding
requirements under federal, state and local law and shall remit amounts withheld
to, and file required forms with, the applicable jurisdictions. To the extent
the Company is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Member, the amount withheld
shall be treated as a distribution in the amount of the withholding to that
Member. If the amount of withholding tax paid by the Company was not withheld
from actual distributions, the Company may, at its option, (i) require the
Member to promptly reimburse the Company for such withholding or (ii) reduce any
subsequent distributions by the amount of such withholding. Each Member agrees
to furnish the Company with any representations and forms as shall reasonably be
requested by the Company to assist it in minimizing or eliminating and in
determining the extent of, and in fulfilling, its withholding obligations.

       11.4 LIMITATION UPON DISTRIBUTIONS.


                                      31.
<PAGE>   37







               (a) No distribution shall be declared and paid to a Member in
violation of the Delaware Act.

               (b) A Member who receives a distribution in violation of the
Delaware Act, and who knew at the time of the distribution that the distribution
violated the Delaware Act, shall be liable to the Company for the amount of the
distribution. A Member who receives a distribution in violation of the Delaware
Act, and who did not know at the time of the distribution that such distribution
violated the Delaware Act and shall have made a good faith effort to return as
much as possible of the improper distribution shall not be liable for the amount
of the distribution.

               (c) A Member who receives a distribution from the Company shall
have no liability under the Delaware Act or other applicable law for the amount
of the distribution after the expiration of three (3) years from the date of the
distribution unless an action to recover the distribution from such Member is
commenced prior to the expiration of the said three (3) year period and an
adjudication of liability against such Member is made in the said action.

        11.5 ACCOUNTING PRINCIPLES. The profits and losses of the Company shall
be determined in accordance with United States generally accepted accounting
principles applied on a consistent basis under the accrual method of accounting.

        11.6 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Member shall be
entitled to interest on its Capital Contribution or to return of its Capital
Contribution. In addition, no Member shall have the right to withdraw any
portion of such member's Capital Account. No Member shall be personally liable
to any other Member for the return of any Capital Contributions (or any
additions thereto), it being agreed that any distribution as may be made from
time to time shall be made solely from the assets of the Company and only in
accordance with the terms of this Operating Agreement.

        11.7 RECORDS AND REPORTS. At the expense of the Company, the Directors
shall maintain records and accounts of all operations and expenditures of the
Company for a period of five (5) years from the end of the Fiscal Year during
which the last entry was made on such record, the first two (2) years in the
principal office of the Company. At a minimum the Company shall keep the
following records:

               (a) A current list of the full name and last known business
address of each Director and each Member;

               (b) A copy of the Certificate of Formation and all amendments
thereto, together with executed copies of any written powers of attorney
pursuant to which the Operating Agreement and any certificate and all amendments
thereto have been executed;

               (c) Copies of the Company's federal, foreign, state and local
income tax returns and reports, if any, for all years of the Company's
existence, except for those years for which all applicable statures of
limitation, as they may apply to any Member, may have run;

               (d) Copies of the Operating Agreement and all amendments thereto;


                                      32.
<PAGE>   38







               (e) True and full information regarding the status of the
business and financial condition of the Company, including financial statements
of the Company for the five (5) most recent years;

               (f) Information regarding expenses incurred by a Member and
reimbursed by the Company; and

               (g) True and full information regarding the amount of cash and a
description and statement of the agreed value of any other property or services
contributed by each Member and which each Member has agreed to contribute in the
future, and the date on which each became a Member.

        11.8 RETURNS AND OTHER ELECTIONS. The Company shall be treated as a
partnership for federal income tax purposes and, to the extent possible, state
and local income tax purposes. The Board of Directors shall cause the
preparation and timely filing of all tax returns required to be filed by the
Company pursuant to the Code and all other tax returns deemed necessary and
required in each jurisdiction in which the Company does business. Copies of such
returns, or pertinent information therefrom, shall be furnished to the Members
within a reasonable time after the end of the Company's Fiscal Year. All
elections permitted to be made by the Company under federal or state laws shall
be made by the Board of Directors in its discretion.

        11.9 TAX MATTERS PARTNER. Quokka is hereby designated the "tax matters
partner" of Company for purposes of Chapter 63 of the Code and the Treasury
Regulations thereunder. During any Company income tax audit or other income tax
controversy with any governmental agency, the tax matters partner shall keep the
Members informed of all material facts and developments on a timely basis, shall
provide each Member with a copy of each of the Company's tax filings at least
thirty (30) days prior to the filing thereof and shall consult with the Members
upon the request of any Member. The tax matters partner shall not be authorized
to enter into any settlement, agreement or arrangement which binds the Members
or the Company or take any other action with respect to taxes which could
adversely impact any of the Members without the advance consent of such Members
which consent may not be unreasonably withheld. The tax matters partner may be
changed by the Board of Directors.

                                   ARTICLE 12

                                 TRANSFERABILITY

        12.1 RESTRICTIONS ON TRANSFERABILITY.

               (a) No Member shall sell, assign, pledge, mortgage, or otherwise
encumber, dispose of or transfer its interest in the Company without the prior
approval of a Supermajority of the Directors.

                        (i) Notwithstanding the foregoing, a Member shall be
entitled to effect a Permitted Pledge, provided that any pledgee of an Interest
shall, in the event of foreclosure, hold such Interest subject to the
restrictions of this Operating Agreement, including the provisions of this
Article 12.

                        (ii) Furthermore, notwithstanding the foregoing, NBC
shall be entitled to transfer its Interests in the Company to any Affiliate
which assumes NBC's obligations under

                                      33.
<PAGE>   39
the Master Venture Agreement and NBC Rights and Services Agreement and which
assumes NBC's obligations, and is the permitted transferee of NBC's rights with
respect to the IOC (as such term is defined in the Master Venture Agreement).
Furthermore, notwithstanding the foregoing, NBC shall be entitled to transfer up
to [*] of the Class B Interests originally issued to NBC to [*], or any
combination thereof. Furthermore, notwithstanding the foregoing, NBC shall be
entitled to transfer to [*] up to [*] of NBC's economic interest in the Class B
Interests excluding the Quokka Warrants (the effect of any transfer of an
economic interest being that the transferee shall be only an assignee of NBC's
rights to allocations and distributions with respect to the Class B Interests
subject to such transfer of economic interest but shall not become a Member and
shall have no voting rights or other rights of a Member, which non-economic
rights shall be retained by NBC). Notwithstanding any provision in this
Operating Agreement to the contrary, in the event of any transfer of Class B
Interests or any transfer of economic interest with respect to Class B
Interests, any allocations or distributions made pursuant to this Operating
Agreement with respect to the Quokka Warrants shall remain with NBC and shall
not be transferred to such transferee (and shall not be reflected in the Capital
Account of any such transferee).

               (b) In addition to other restrictions on transfer contained
herein, each Member agrees that it will not make any disposition of all or any
part of its interest in the Company which will result in the violation by it or
by the Company of the Securities Act of 1933 or any other applicable securities
laws.

        12.2 NO EFFECT TO TRANSFERS IN VIOLATION OF OPERATING AGREEMENT. Any
purported transfer in violation of this Article 12 shall be null and void and
the purported transferee shall become neither a Member nor a holder of any
interest in the Company whatsoever.

                                   ARTICLE 13

                        ADDITIONAL AND SUBSTITUTE MEMBERS

        13.1 ADMISSION OF ADDITIONAL MEMBERS AND SUBSTITUTE MEMBERS.

               (a) From the date of the formation of the Company, any Person
acceptable to the Board of Directors may, subject to the terms and conditions of
this Operating Agreement and with the approval of a Supermajority of the
Directors, become an Additional Member of the Company by the purchase of new
Units for such consideration as a Supermajority of the Directors shall determine
in accordance with the terms of this Operating Agreement. Except as set forth in
this Section 13.1(a), the Company shall not admit or agree to admit any
Additional Member in connection with the issuance of any additional Units or
other equity interests in the Company, including without limitation, any options
or warrants.

               (b) Prior to recognizing any assignment of a Member's Interest
that has been transferred in accordance with this Operating Agreement, the Board
of Directors will require the transferring Member to execute and acknowledge a
written instrument of assignment in form and substance satisfactory to the Board
of Directors, and will require the assignee to execute an agreement to be bound
by all of the terms and provisions of this Operating Agreement. The


[*] Confidential Treatment Requested.

                                      34.
<PAGE>   40





assignee (except any assignee of economic interests only) will become a
Substitute Member upon satisfaction of the requirements of Article 12 and this
Section 13.1. Unless otherwise approved by a Supermajority of the Directors, a
transfer shall be deemed effective as of the last day of the calendar month in
which such transfer is effected.

        13.2 ALLOCATIONS TO ADDITIONAL MEMBERS AND SUBSTITUTE MEMBERS. No
Additional or Substitute Member shall be entitled to any retroactive allocation
of losses, income or expense deductions incurred by the Company. The Net Profits
and Net Losses of the Company for each Accounting Period shall be allocated
among the Members in proportion to their respective Interests, with the
Accounting Period being subject to adjustment pursuant to Section 1.1(a) upon
the addition of an Additional or Substitute Member.

        13.3 EFFECT OF TRANSFER. The transfer of a Member's Interest or any part
thereof and the admission of a Substituted Member in accordance with the
provisions of this Operating Agreement will not be cause for dissolution of the
Company.

                                   ARTICLE 14

                           DISSOLUTION AND TERMINATION

        14.1 DISSOLUTION. The Company shall be dissolved upon the occurrence of
any of the following events (a "Dissolution Event"):

               (a) the unanimous written agreement of all Members;

               (b) upon or following the Class B Trigger Date, upon the written
request of Class A Members holding a majority of the Class A Interests;

               (c) upon or following the Class A Trigger Date, upon the written
request of Class B Members holding a majority of the Class B Interests;

               (d) upon a Mutual Termination Event;

               (e) the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act; and

               (f) the Bankruptcy of the Company, Quokka or NBC.

        14.2 EFFECT OF FILING OF CERTIFICATE OF CANCELLATION. The Company shall
cease to carry on its business, except insofar as may be necessary for the
winding up of its business, upon the occurrence of a final dissolution event,
but its separate existence shall continue until a Certificate of Cancellation
has been filed with the Secretary of State or until a decree dissolving the
Company has been entered by a court of competent jurisdiction.

        14.3 DISTRIBUTION OF ASSETS UPON DISSOLUTION. In settling accounts after
dissolution, the liabilities of the Company shall be entitled to payment in the
following order:

               (a) those to creditors, in the order of priority as provided by
law in satisfaction of all liabilities and obligations of the Company whether by
payment or the establishment of

                                      35.
<PAGE>   41





reasonable reserves therefor, except those to Members of the Company on account
of their Capital Contributions;

               (b) those to Members of the Company in accordance with Section
11.3(e).

        14.4 WINDING UP. Except as provided by law, upon dissolution, each
Member shall look solely to the assets of the Company for the return of its
Capital Contribution. If the Company Property remaining after the payment or
discharge of the debts and liabilities of the Company is insufficient to return
the Capital Contribution of each Member, such Member shall have no recourse
against any other Member. The winding up of the affairs of the Company and the
distribution of its assets shall be conducted exclusively by the Board of
Directors, who subject to the terms of this Operating Agreement (including,
without limitation, applicable requirements that the Board of Directors act by a
Supermajority of the Directors), are hereby authorized to take all actions
necessary to accomplish such distribution, including without limitation, selling
any Company assets the Board of Directors deems necessary or appropriate to
sell.

        14.5 FILING OF CERTIFICATE OF CANCELLATION.

               (a) When all debts, liabilities and obligations have been paid
and discharged or adequate provisions have been made therefor and all of the
remaining property and assets have been distributed to the Members, a
Certificate of Cancellation shall be executed in duplicate and verified by the
person signing the certificate, which certificate shall set forth the
information required by the Delaware Act. Duplicate originals of such
Certificate of Cancellation shall be delivered to the Delaware Secretary of
State.

               (b) Upon the acceptance of the Certificate of Cancellation, the
existence of the Company shall cease, except for the purpose of suits, other
proceedings and appropriate action as provided in the Delaware Act. The Board of
Directors shall thereafter be trustees for the Members and creditors of the
Company and, subject to the terms of this Operating Agreement (including,
without limitation, applicable requirements that the Board of Directors act by a
Supermajority of the Directors), as such shall have authority to distribute any
Company property discovered after dissolution, convey real estate and take such
other action as may be necessary on behalf of and in the name of the Company.

                                   ARTICLE 15

                             MERGER OR CONSOLIDATION

        15.1 MERGER OR CONSOLIDATION. The Company may, upon the approval of the
Board of Directors and a vote of the Members of the Company holding a majority
of the Class A Interests and a majority of the Class B Interests, merge or
consolidate pursuant to an agreement of merger or consolidation with or into one
or more entities formed or organized under the laws of the State of Delaware or
any other state of the United States or any foreign country or other foreign
jurisdiction, with such entity as the agreement shall provide being the
surviving or resulting entity.

        15.2 VOTE RELATING TO MERGER OR CONSOLIDATION. A merger or consolidation
by the Company and any other entity shall be approved by the Board of Directors
in accordance with

                                      36.
<PAGE>   42





the provisions of Section 5.6 and by the Members holding a majority of the Class
A Interests and a majority of the Class B Interests.

        15.3 EXCHANGE RELATING TO MERGER OR CONSOLIDATION. Rights or securities
of, or interests in, the Company or other entity that is a constituent party to
the merger or consolidation may be exchanged for or converted into cash,
property, rights or securities of, or interests in, the surviving or resulting
entity or, in addition to or in lieu thereof, may be exchanged for or converted
into cash, property, rights or securities of, or interests in, an entity which
is not the surviving or resulting entity in the merger or consolidation.

        15.4 FILING AND EFFECT OF CERTIFICATE OF MERGER OR CONSOLIDATION. If the
Company enters into an agreement of merger or consolidation, the surviving
entity shall file a Certificate of Merger or Consolidation in the Office of the
Secretary of State of the State of Delaware containing the information required
by Section 18-209(c) of the Delaware Act. Unless a future date is provided for
in such Certificate of Merger or Consolidation, the effective date shall be the
date of filing with the Secretary of State of the State of Delaware. Such
Certificate of Merger or Consolidation shall act as a Certificate of
Cancellation for the Company if it is not the surviving or resulting entity in
the merger or consolidation.

        15.5 AMENDMENT OF OLD OR ADOPTION OF NEW OPERATING AGREEMENT. An
agreement of merger or consolidation approved in accordance with Section 15.2
may effect any amendment to the Company's Operating Agreement or effect the
adoption of a new Operating Agreement for the Company or the surviving entity,
as the case may be. Any amendment of the Operating Agreement or adoption of a
new Operating Agreement shall be effective at the effective time or date of the
merger or consolidation.

        15.6 ASSUMPTION OF ASSETS AND LIABILITIES. When any merger or
consolidation shall have become effective under this Article 15, for all
purposes of the laws of the State of Delaware, all of the rights, privileges and
powers of the Company and each of the other entities that have merged or
consolidated, and all property, real, personal and mixed, and all debts due or
incurred to or by any of the constituent parties, as well as all other things
and causes of action belonging to each of such parties to the merger or
consolidation, shall be vested in the surviving or resulting entity, and shall
thereafter be the property or obligation of the surviving or resulting entity,
and the title to any real property vested by deed or otherwise shall not revert
or be in any way impaired.

                                   ARTICLE 16

                            MISCELLANEOUS PROVISIONS

        16.1 NOTICES. Any notice, demand or communication required or permitted
to be given by any provision of this Operating Agreement shall be in writing and
shall be deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day, (iii)
five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt, or (v) if earlier, upon receipt. All
communications shall be delivered to a Director, a Member or the Company, as
appropriate, to such Director's, such Member's or the Company's address or
facsimile number as


                                      37.
<PAGE>   43





such appears in the Company's records as of the date hereof or to such other
address or facsimile number as such Member, such Director or the Company may
designate by ten (10) days advance written notice to the other parties hereto.

        16.2 APPLICATION OF DELAWARE LAW. This Operating Agreement, and the
application and interpretation hereof, shall be governed exclusively by its
terms and by the laws of the State of Delaware (without giving effect to
principles of conflicts of laws).

        16.3 WAIVER OF ACTION FOR PARTITION. Each Member irrevocably waives
during the term of the Company any right that it may have to maintain any action
for partition with respect to the property of the Company.

        16.4 AMENDMENTS. Any amendment to this Operating Agreement may be
proposed to the Members by Members holding at least a majority of the Class A
Interests or a majority of the Class B Interests. A vote on an amendment to this
Operating Agreement shall be taken within sixty (60) days after notice thereof
has been given to the Members unless such period is otherwise extended by
applicable laws, regulations, or agreement of the Members. A proposed amendment
shall become effective at such time as it has been approved by Members holding a
majority of the Class B Interests and a majority of the Class A Interests.

        16.5 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.

        16.6 CONSTRUCTION. Whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include the
plural, and the masculine gender shall include the feminine and neuter genders
and vice versa. This Operating Agreement is prepared and executed in the English
language only and any translation of this Operating Agreement into any other
language shall have no effect.

        16.7 HEADINGS. The headings in this Operating Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent or intent of this Operating Agreement or any provision
hereof.

        16.8 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.

        16.9 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Operating Agreement are cumulative, and the use of any one right or remedy
by any party shall not preclude or waive the right to use any or all other
remedies. Such rights and remedies are given in addition to any other rights the
parties may have by law, statute, ordinance or otherwise.

        16.10 SEVERABILITY. If any provision of this Operating Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.


                                      38.
<PAGE>   44







        16.11 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors
and assigns.

        16.12 CREDITORS. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditor of the Company.

        16.13 COUNTERPARTS. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

        16.14 NO THIRD PARTY BENEFICIARIES. It is understood and agreed among
the parties that this Operating Agreement and the covenants made herein are made
expressly and solely for the benefit of the parties hereto, and that no other
Person, other than an Indemnitee under Article 8 hereof (but only in respect of
the rights under such Article 8), shall be entitled or be deemed to be entitled
to any benefits or rights hereunder, nor be authorized or entitled to enforce
any rights, claims or remedies hereunder or by reason hereof.





                              [INTENTIONALLY BLANK]


                                      39.
<PAGE>   45







        IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

                                                   QUOKKA SPORTS, INC.



                                                By: /s/ Les Schmidt          
                                                   -----------------------------
                                                   Name: Les Schmidt
                                                   Title: Senior Vice President
                                                    and Chief Financial Officer

                                                   NBC OLYMPICS, INC.



                                                By: /s/ Randel Falco         
                                                   -----------------------------
                                                          Name: Randel Falco
                                                          Title: President






                                      40.
<PAGE>   46





                                   SCHEDULE A

                          INITIAL CAPITAL CONTRIBUTION


<TABLE>
<CAPTION>

                                                INITIAL CAPITAL       NUMBER AND TYPE OF UNITS
        NAME AND ADDRESS OF MEMBER                CONTRIBUTION               OF MEMBERSHIP

<S>                                             <C>                   <C>  
Quokka Sports, Inc.                                    [*]                    [*]
Ground Floor
525 Brannan Street
San Francisco, CA  94107
Attention: Chief Financial Officer

With a copy to:

Cooley Godward LLP
20th Floor
One Maritime Plaza
San Francisco, CA  94111
Attn: Isobel A. Jones


NBC Olympics, Inc.                                     [*]                    [*]
30 Rockefeller Plaza
New York, NY 10112
Attn: Gary Zenkel, Sr. VP, Olympic
Marketing

With a copy to:

NBC Law Dept.
30 Rockefeller Plaza
New York, NY 10112
Attn: Corporate & Transactions Group Head

</TABLE>


[*] Confidential Treatment Requested.


<PAGE>   1
                                                                   EXHIBIT 16.01

April 23, 1999


Securities and Exchange Commission
Washington, D.C. 20549


Ladies and Gentlemen:

We were previously principal accountants for Quokka Sports, Inc. We have not
issued an audit report on the financial statements of Quokka Sports, Inc. with
respect to the years ended December 31, 1997 or 1998.  In March 1998, our
appointment as principal accountants was terminated.  We have read Quokka
Sports, Inc.'s statements included under "Change in Principal Accountants" of
its Form S-1 dated April 23, 1999, and we agree with such statements, except we
are not in a position to agree or disagree with Quokka Sports, Inc.'s statement
that the selection of PricewaterhouseCoopers LLP as their independent auditors
was ratified by the board of directors.

Very truly yours,

KPMG LLP

<PAGE>   1
                                                                   EXHIBIT 23.02











We consent to the inclusion in this registration statement on Form S-1 of our
report dated January 22, 1999, except as to Note 12 for which the date is
February 9, 1999 and April 22, 1999, on our audits of the financial statements
and financial statement schedules of Quokka Sports, Inc. We also consent to the
references to our firm under the caption "Experts."



/s/ PricewaterhouseCoopers
- --------------------------
PricewaterhouseCoopers LLP
San Francisco, California
April 22, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<TABLE> <S> <C>

<ARTICLE> 5
       
<S>                             <C>                             <C>
<PERIOD-TYPE>                   12-MOS                          3-MOS
<FISCAL-YEAR-END>                          DEC-31-1998                     DEC-31-1999
<PERIOD-START>                             JAN-01-1998                     JAN-01-1999
<PERIOD-END>                               DEC-31-1998                     MAR-31-1999 
<CASH>                                      23,994,355                      15,262,901
<SECURITIES>                                         0                               0
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<INTEREST-EXPENSE>                              44,009                          20,430
<INCOME-PRETAX>                            (9,538,324)                     (7,847,600)
<INCOME-TAX>                                         0                               0
<INCOME-CONTINUING>                        (9,538,324)                     (7,847,600)
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