Technology Development and License Agreement - Sega Enterprises Ltd and 3dfx Interactive Inc.


 TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT

         This Technology Development and License Agreement (the "AGREEMENT") is
made and entered into as of February 28, 1997 (the "EFFECTIVE DATE"), by and
between Sega Enterprises, Ltd., a Japanese corporation having its principal
place of business at 212, Haneda 1-Chome, Ohta-ku, Tokyo 194, Japan ("SEGA")
and 3Dfx Interactive, Inc. ("3DFX"), a California corporation having its
principal place of business at 4435 Fortran Drive, San Jose, California 95134.

                                    RECITALS

         WHEREAS, Sega is in the business of developing, marketing, and
distributing video games for both coin-operated arcade and consumer markets,
video game consoles, peripherals and various other products and services,
throughout the world;

         WHEREAS, 3Dfx is in the business of creating advanced 3D graphics
accelerators, including semiconductor chips, hardware, and software, for both
coin-operated arcade and consumer video game markets throughout the world;

         WHEREAS, Sega desires that 3Dfx develop for Sega a semiconductor 3D
graphics accelerator [*], and that 3Dfx license to Sega on a limited
exclusive basis the manufacturing rights thereto, including without limitation
for Sega's use with, and distribution in, Sega's forthcoming consumer video
game console product, [*]

         WHEREAS, 3Dfx is willing to promote the [*] Console video game
architecture in connection with 3Dfx's 3D graphics technology;

         WHEREAS, Sega desires that 3Dfx provide assistance to qualify 3Dfx and
Sega designated foundries to produce the 3D accelerator [*] in commercial
quantities;

         WHEREAS, Sega desires to obtain certain licenses from 3Dfx for certain
interface software for the 3Dfx graphic accelerator [*] and certain
hardware to enable manufacturing and support; and

         WHEREAS, 3Dfx is willing to perform the development, grant the
licenses, and provide the other assistance required by Sega in connection with
such 3Dfx graphics accelerator [*]:






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         IT IS THEREFORE AGREED AS FOLLOWS:

1.       DEFINITIONS

         Unless otherwise defined or stated, "days" shall mean calendars days,
"including" shall mean "including without limitation", and the following terms
shall have the meanings stated below:

         1.1     "ALPHA VERSION [*]" means a preliminary version of the [*]
Graphics [*] with functionality sufficiently complete and usable to enable
hardware and software engineers to operate, test and evaluate for further
production, and integration, as further set forth in the Specifications.

         1.2     "ARCADE TOOL BOX" means 3Dfx's proprietary arcade game
developer software toolbox.

         1.3     [*]

         1.4     "BETA VERSION [*]" means a preliminary version of the [*]
Graphics [*] with functionality complete and usable in all material
respects, but which is not in a form intended for production in commercial
volumes, as further set forth in the Specifications.

         1.5     [*]

         1.6     "[*] GRAPHICS [*]" means the 3D graphic accelerator
[*] as provided to Sega for use in the [*] Console, as set forth in the
Specifications, [*]

         1.7     "[*] GRAPHICS [*] TECHNOLOGY" means any and all
inventions, works of authorship, technology, know-how, algorithms, methods,
processes, procedures, work-arounds and Intellectual Property Rights relating
to the [*] Graphics [*], exclusive of the Sega Deliverables, Sega Foundry
Deliverables, the [*] Console Technology, and all associated documentation
and all related modifications and derivative works and all Intellectual
Property Rights related thereto.





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         1.8     "[*] MASK DATA SET" means the manufacturing database and mask
level information to be delivered by 3Dfx to a Sega Foundry or the 3Dfx Foundry
to allow such foundry to manufacture the [*] Graphics [*], as further set
forth in Schedule 1.8.

         1.9     [*]

         1.10    "DELIVERABLES" means the deliverable items specified for each
Milestone on the Development Schedule.

         1.11    "DEVELOPMENT SCHEDULE" means the schedule for the completion
of the Milestones and acceptance of Deliverables as set forth in Schedule 1.10.

         1.12    [*]

         1.13    "[*] CONSOLE" means a video game console code-named [*],
under development by Sega, including all components, enhancements, plug-ins,
attachments, controllers, input and output devices, cables, connectors,
peripherals and upgrades as further defined in Schedule 1.12.

         1.14    "[*] CONSOLE TECHNOLOGY" means any and all inventions, works
of authorship, technology, know-how, algorithms, methods, processes,
procedures, work-arounds and Intellectual Property Rights relating to the [*]
Console.

         1.15    "[*] CONSOLE UNIT" means each [*] Graphics [*] purchased
by Sega from the 3Dfx Foundry or a Sega Foundry for use by Sega in a [*]
Console, [*]

         1.16    "FOUR CORNER MANUFACTURING PROCESS TEST" means the industry
standard four corner testing process to be used to test the Production Version
[*] produced by the Sega Foundry as further specified in Schedule 1.15.

         1.17    "INTELLECTUAL PROPERTY RIGHTS" means any and all rights
existing now or in the future under patent law, copyright law, industrial
design rights law, semiconductor chip and mask work protection law, moral
rights law, trade secret law, trademark law, unfair competition law, publicity
rights law, privacy rights law, and any and all similar proprietary rights, and
any and all renewals, extensions, and restorations thereof, now or




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hereafter in force and effect worldwide, including, without limitation, in the
United States and Japan.

         1.18    "MILESTONE" means an individual task or set of tasks to be
completed by a certain date as described in the Development Schedule.

         1.19    "NET ROYALTIES" means: (i) with respect to per unit royalties,
nondefective per unit amounts reduced by two percent (2%) to take into account
demonstration, internal use, free or sample products, any defective products,
returns, credits, costs of collection; and (ii) with respect to royalties based
on Reference Cost, per unit royalties, net of any royalties which would be due
on (A) a reasonable number of demonstration, free, or sample products, and (B)
returns of defective products; all of the foregoing net of Japanese or other
withholding taxes.

         1.20    [*]

         1.21    "PRODUCTION VERSION [*]" means the [*] Graphics [*] in
the form intended for production in commercial volume by a 3Dfx Foundry or by a
Sega Foundry utilizing the [*] Mask Data Set provided by 3Dfx.

         1.22    "SEGA ACCEPTANCE DATE" means the date that Sega first accepts
the Production Version [*] manufactured by the initial Sega Foundry
pursuant to Section 2.3(a)(iii).

         1.23    "SEGA FOUNDRY" means a Sega-designated semiconductor
manufacturing foundry approved by the parties to manufacture the [*] Graphics
[*] in commercial volume in accordance with the provisions of Section 2.3.

         1.24    "SEGA FOUNDRY CELL LIBRARIES" means the cell libraries and
other design information of a proposed Sega Foundry, required by 3Dfx to
qualify the fabrication process used at a proposed Sega Foundry and to create
the 3Dfx Mask Data Set to be provided to such Sega Foundry, as further set
forth in Schedule 1.24. The Sega Foundry Cell Libraries must relate to a
fabrication process sufficiently advanced and sophisticated to manufacture the
[*] Graphics [*].

         1.25    "SEGA FOUNDRY DELIVERABLES" means, collectively, the Sega
Foundry Design Rules and Sega Foundry Cell Libraries.

         1.26    "SEGA FOUNDRY DESIGN RULES" means the specifications,
including (but not limited to) design rules, spice models, and process
parameters of a proposed Sega Foundry, reasonably required by 3Dfx pursuant to
Section 2.3 below, to qualify the




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fabrication process used at a proposed Sega Foundry and to create the 3Dfx Mask
Data Set, as further set forth in Schedule 1.26. The Sega Foundry Design Rules
must relate to a fabrication process sufficiently advanced and sophisticated to
manufacture the [*] Graphics [*].

         1.27    "SEGA PRODUCTS" [*]

         1.28    "SOURCE CODE" means computer programs, instructions and
related material written in a human-readable source language in form capable of
serving as the input to a compiler or assembler program, and in form capable of
being modified, supported and enhanced by programmers reasonably familiar with
the source language.

         1.29    "SPECIFICATIONS" or "PRO FORMA SPECIFICATIONS" means the
descriptions of the technical requirements, component parts, features,
functionality, performance criteria, operating conditions, interfaces, data
transfer, processing parameters, and protocols, associated with the [*]
Graphics [*], as set forth in Schedule 1.29.

         1.30    "TEST VECTORS" means the test vectors to be supplied by 3Dfx
and approved by Sega (such approval not to be withheld unreasonably) and used
to test specific functionality of the Alpha, Beta, and Production Version
[*]s, as set forth in the Specifications, Schedule 1.30.

         1.31.   "VERIFICATION TEST GAMES" means the sample games used to test
the Alpha, Beta, and Production Version [*], as set forth in the
Specifications, Schedule 1.31.

         1.32    "3DFX FOUNDRY" means the semiconductor manufacturing facility
designated by 3Dfx in Schedule 1.32 to manufacture the [*] Graphics [*]
under this Agreement.

         1.32    "3DFX GLIDE API" means 3Dfx's proprietary graphics accelerator
API, as set forth on Schedule 1.33.

         1.33    "3DFX GLIDE INTERNALS" means the 3Dfx Glide Software exclusive
of the 3Dfx Glide API.

         1.34    "3DFX GLIDE SOFTWARE" means 3Dfx's graphics accelerator driver
software, together with all associated documentation provided by 3Dfx
including, but not limited to, the [*] Glide Programming Manual.




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2.       DEVELOPMENT AND PROCESS QUALIFICATION PHASE

         2.1     DEVELOPMENT. In accordance with the terms of this Section 2,
3Dfx shall develop the [*] Graphics [*] for manufacture in commercial
volume by the 3Dfx Foundry and the Sega Foundry on Sega's behalf, and to
complete all Milestones specified in the Development Schedule. Subject to 3Dfx
completing the Milestones set forth in the Development Schedule, and Sega's
acceptance thereof, Sega shall pay 3Dfx the engineering services charges as
provided in Section 2.8.

         2.2     [*] GRAPHICS [*] MANUFACTURED BY THE 3DFX FOUNDRY.

                 (a)      DELIVERY OF MILESTONE DELIVERABLES. 3Dfx shall
complete and deliver to Sega, in accordance with the Development Schedule, the
Alpha Version [*], the Beta Version [*] and the Production Version
[*], all manufactured by the 3Dfx Foundry under the direction of 3Dfx, for
Sega's acceptance testing in accordance with the acceptance procedure set forth
in Section 2.2(b) below. Prior to each delivery, 3Dfx shall have completed all
required testing applicable to such Deliverables to ensure material compliance
with all applicable Specifications.

                 (b)      ACCEPTANCE TESTING.

                          (i)     ACCEPTANCE STANDARDS. Following receipt of
the Deliverables for each Milestone, Sega shall have twenty-one (21) calendar
days (the "VERIFICATION PERIOD") in which to use commercially reasonable
efforts to review, examine and verify such Deliverables and notify 3Dfx of any
material failure thereof to meet the applicable Specifications (a "DELIVERABLE
FAILURE").

                                  (A)      ALPHA AND BETA VERSION ACCEPTANCE
STANDARDS. The Alpha and Beta Version [*]s will each be deemed to have met
the applicable Specifications and be accepted by Sega if (i) the Verification
Test Games run successfully with each of the Alpha and the Beta Version
[*]s in a Sega-approved personal computer test environment, [*], which 
shall be tested on the [*] Console; and (ii) the applicable set of the Test 
Vectors runs successfully with each of the Alpha and the Beta Version [*]s.

                                  (B)      PRODUCTION VERSION ACCEPTANCE
STANDARDS. The Production Version will be deemed to have met the applicable
Specifications and be accepted by Sega if it satisfies the Beta Version
Acceptance Standard set forth above and performs in accordance with the
Specifications as verified by the Four Corner Manufacturing Process Test.




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                          (ii)    ACCEPTANCE PROCEDURE. Sega agrees to use
commercially reasonable efforts to detect any Deliverable Failure during the
Verification Period, and if Sega discovers any Deliverable Failure, it shall
promptly provide 3Dfx with written notice of such Deliverable Failure,
including all information reasonably available regarding such Deliverable
Failure. Upon receipt of such notice, 3Dfx shall use best efforts, at 3Dfx's
sole cost and expense, to correct any such Deliverable Failure and to resubmit
the corrected applicable Deliverables to Sega as soon as commercially and
technically practicable, but in all cases within one hundred (100) days
following Sega's notification of a Deliverable Failure. If Sega does not
provide 3Dfx with notice of a Deliverable Failure within the Verification
Period, the applicable Deliverable shall be deemed accepted by Sega. Subject to
Sections 2.2(b)(iii) and 2.2(b)(iv) below, 3Dfx shall repeat the process of
correction and resubmission of an applicable Deliverable, subject to additional
Verification Periods, until Sega's acceptance. The parties agree that any
failure by Sega to discover and notify 3Dfx of defects within any Verification 
Period shall not negate any of 3Dfx's representations or warranties, nor waive
any of Sega's rights or remedies.

                          (iii)   EXCLUSIVE REMEDIES FOR ALPHA VERSION [*]
DELAY.

                                  (A)      PLACEMENT OF SEGA ENGINEERS. In the
event that (1) 3Dfx fails to deliver the Alpha Version [*]  (the "ALPHA DELIVERY
DATE" as scheduled in accordance with the Development Schedule) and has not
shipped the [*] Mask Data Set for the Alpha Version [*] to the 3Dfx Foundry
within sixty (60) days of the Alpha Delivery Date, or (2) 3Dfx delivers the
Alpha Version [*] on or before the Alpha Delivery Date, Sega has informed 3Dfx
of a Deliverable Failure, and 3Dfx has not shipped the [*] Mask Data Set for the
corrected Alpha Version [*] to the 3Dfx Foundry within sixty (60) days of such
notification, then Sega may require 3Dfx to allow a team of Sega engineers to
assist the 3Dfx * Graphics [*] design team. 3Dfx will, however, retain the
control of the management of the development obligations under this Agreement.
[*] Sega engineers may be placed on-site at the [*] development team location
(the "3DFX FACILITIES") until the Production Version [*] for the Sega Foundry is
accepted by Sega in accordance with Section 2.3(a)(iii), unless otherwise
requested by 3Dfx and agreed to by Sega. 3Dfx shall cooperate regarding the
placement of Sega engineers at the 3Dfx Facilities, including, but not limited
to, the provision at 3Dfx's expense of sufficient office and lab facilities,
personal computers, and workstations.  Sega shall be responsible for salary or
other compensation of such Sega engineers.

                                  (B)      3DFX HOUSE RULES. While working at
the 3Dfx Facilities, all Sega engineers and other personnel shall: (i) at all
times comply with all of 3Dfx's safety, security and mutually agreed
confidentiality policies and procedures; and




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(ii) limit their activities solely to assisting 3Dfx in the development of the
[*] Graphics [*]. Sega will maintain its standard general liability
insurance to protect against covered damages, costs or fees (including
reasonable attorney's fees) arising out of or relating to any property damage,
bodily injury, sickness, disease or death, caused directly by any negligent act
or omission of any Sega personnel while on premises at the 3Dfx Facility, and
will name 3Dfx as an additional insured under such issuance. All such Sega
personnel shall execute confidentiality agreements reasonably acceptable to
Sega and 3Dfx.

                                  (C)      ALPHA TERMINATION REMEDY. In the
event that 3Dfx fails to deliver the Alpha Version [*], in compliance with
the Specifications and acceptance criteria thereof, within one hundred (100)
days of the Alpha Delivery Date, then Sega in its sole discretion may: (i)
terminate the requirement that 3Dfx develop the Alpha Version [*]; or (ii)
determine that 3Dfx should continue its efforts to correct the Alpha Version
[*] by a date determined by Sega. In the event that Sega elects to
terminate the Alpha Version development as provided above, [*]. Provided that
throughout the Alpha Version [*] development, until completed or terminated
as provided above, 3Dfx provides commercially reasonable efforts to complete
such development, the remedies set forth in this Section 2(b)(iii) shall be
Sega's exclusive remedy for delays in Alpha Version [*] development.

                          (iv)    ADDITIONAL REMEDIES: BETA VERSION [*]. If
Sega does not accept the Beta Version [*] pursuant to the procedure set
forth in Section 2.2(b)(ii) by [*] then Sega shall have additional remedies 
as follows:

                                  (A)      RECOUPMENT OF EXPENSES. Sega may
recoup out of any advances or royalties owed to 3Dfx Sega's expenses incurred
in relation to 2.2(b)(iii)(A); and

                                  (B)      REDUCTION OF MANUFACTURING ROYALTY.
Sega may reduce the Manufacturing Royalty to be paid by Sega to 3Dfx for the
first [*] Console Units under Section 4.1 hereof, such reduction to be in 
the amount of [*] U.S. for each [*] Console Unit; and

                                  (C)      FREE COST REDUCTION PROJECT. Sega
may require 3Dfx to perform, at no cost or expense to Sega, the work necessary
to complete the first "Cost Reduction Project", as defined in Section 2.4
hereof; and


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                                  (D)      PLACEMENT OF SEGA ENGINEERS. Subject
to the conditions of Section 2.2(b)(iii)(B), Sega may require 3Dfx to allow a
team of Sega engineers to assist the [*] [*] [*] [*] design team,
whether or not Sega has done so previously pursuant to Section 2.2(b)(iii).
3Dfx will, however, retain the control of the management of the development
obligations under this Agreement. [*] such Sega engineers may be placed
on-site at the [*] Facilities until the Production Version [*] for the
Sega Foundry is accepted by Sega in accordance with Section 2.3(a)(iii), unless
otherwise requested by 3Dfx and agreed to by Sega. 3Dfx shall cooperate
regarding the placement of Sega engineers at the 3Dfx Facilities, including,
but not limited to, the provision at 3Dfx's expense of sufficient office and
lab facilities, personal computers, and workstations. Sega shall be responsible
for salary or other compensation of such Sega engineers.

                                  (E)      TERMINATION FOR BETA DELAY. In the
event that Sega has not accepted the Beta Version [*] by [*], [*] 
then Sega may terminate the Agreement without obligation to make any further
payments of any kind to 3Dfx and seek recovery of damages caused to Sega by the
delay in the delivery of the Beta Version [*], provided, however, that any
term of this Agreement notwithstanding, 3Dfx's liability to Sega for such
damages shall not exceed [*] the engineering services charges paid by Sega to
3Dfx under this Agreement. In addition, if Sega terminates the Agreement as
provided above, Sega may exercise the rights described in Section 3.2(e).
Provided that throughout the Beta Version [*] development, until completed
or terminated as provided above, 3Dfx provides commercially reasonable efforts,
including without limitation, that 3Dfx makes no reductions in staffing or
other resources, to complete such development, the remedies set forth in this
Section 2.2(b)(iv) shall be Sega's exclusive remedy for delays in Beta version
[*] development. In the event that 3Dfx does not provide commercially
reasonable efforts, by (for example) reducing staffing or other resources, or
otherwise, to complete such development, the remedies set forth in this Section
2.2(b)(iv) shall cease to be exclusive.

         2.3     DEVELOPMENT TARGETED FOR SEGA FOUNDRY.

                 (a)      SEGA FOUNDRY QUALIFICATION. Sega shall have the right
to designate a Sega Foundry to manufacture the [*] Graphics [*], subject
only to such Sega Foundry satisfying reasonable requirements for qualification
to manufacture. As set forth in this Section 2.3, 3Dfx shall timely evaluate,
in accordance with the Development Schedule, or as otherwise agreed in writing
by the parties, the reasonable requirements for the proposed Sega Foundry to
manufacture the [*] Graphics [*] on a commercial basis, and, 3Dfx will
promptly review and reasonably qualify the Sega Foundry to manufacture the [*]
Graphics [*].

                          (i)     EVALUATION OF PROPOSED SEGA FOUNDRY
DELIVERABLES.






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Within a reasonable time after the Effective Date, Sega shall cause the proposed
Sega Foundry to deliver to 3Dfx the Sega Foundry Deliverables.  Within a
reasonable time of receipt thereof, subject to the Development Schedule, 3Dfx
shall commence evaluating the fabrication process set forth in the Sega Foundry
Design Rules to determine whether such process is adequate to manufacture the
[*] Graphics [*] in a form that functions in conformance with the
Specifications. 3Dfx shall complete the evaluation of the fabrication and
quality assurance process [*] provided that 3Dfx receives reasonable cooperation
from the proposed Sega Foundry. As part of such evaluation process, 3Dfx may
require, at 3Dfx's expense, (A) that the proposed Sega Foundry allow 3Dfx to
send its personnel to visit the proposed Sega Foundry facilities (subject to
3Dfx's agreement to reasonable confidentiality and security procedures), and (B)
that the proposed Sega Foundry manufacture and provide to 3Dfx for evaluation
certain 3Dfx specified semiconductor chips. If qualification of the proposed
Sega Foundry is feasible, 3Dfx shall use reasonable efforts to assist the
proposed Sega Foundry achieving qualification. If qualification of the proposed
Sega Foundry is not feasible, Sega shall propose an alternative Sega Foundry,
and the parties shall repeat the foregoing evaluation process (including, if
necessary Sega's proposal of additional Sega Foundries), until, with 3Dfx's
reasonable assistance, a proposed Sega Foundry is deemed qualified.

                          (ii)    PORT OF [*] GRAPHICS [*] TO PROPOSED SEGA
FOUNDRY. Within a reasonable time of 3Dfx providing written notice to Sega that
it is probable that the proposed Sega Foundry will be able to manufacture the
[*] Graphics [*] in a form that functions in conformance with the
Specifications, 3Dfx shall commence porting the [*] Graphics [*] to the
manufacturing process specified in the Sega Foundry Design Rules for the
proposed Sega Foundry. Such porting may include 3Dfx, at its sole discretion,
incorporating the Sega Foundry Cell Libraries into the * Mask Data Set to be
used by the proposed Sega Foundry.

                          (iii)   ACCEPTANCE OF PRODUCTION VERSION. Upon
completion of such port, 3Dfx shall deliver the [*] Mask Data Set directly to
the proposed Sega Foundry for the sole purpose of allowing such proposed Sega
Foundry to fabricate the Production Version [*] on a trial basis. No [*]
Mask Data Set will be provided to Sega. Sega will use commercially reasonable
efforts to cause the proposed Sega Foundry to provide samples of the Production
Version [*] to 3Dfx no later than the date specified in the Development
Schedule for the Production Version acceptance testing in accordance with
Section 2.2(b) above. Upon Sega's providing written notice to 3Dfx of Sega's
acceptance of such Production Version [*] manufactured by such proposed
Sega Foundry, the proposed Sega Foundry shall be deemed a Sega Foundry.

                          (iv)    FOUNDRY AGREEMENT. As part of the
qualification process, 3Dfx will require and Sega will cause each proposed Sega
Foundry to execute confidentiality and/or foundry manufacturing agreements in a
form to be negotiated in good faith between Sega and 3Dfx, covering the
proposed Sega Foundry's use of the


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[*] Mask Data Set and other 3Dfx Confidential Information, and the
manufacturing of the [*] Graphics [*]. Such agreements shall contain terms
at least as protective of 3Dfx's Intellectual Property Rights as the terms and
conditions of this Agreement, and shall include a term allowing 3Dfx reasonable
rights to audit the Sega Foundry's records of units of the [*] Graphics [*]
shipped to Sega.

                 (e)      PROPOSED SEGA FOUNDRY DELAYS. Any delay, except for
delays caused by 3Dfx, in a proposed Sega Foundry delivering the Sega Foundry
Deliverables or other evaluation materials, or the Production Version [*]s,
to 3Dfx, shall, at 3Dfx's discretion and upon written notice to Sega, result in
an extension of all directly affected Milestone completion dates set forth on
the Development Schedule by a period of time less than or equal to such delay.

                 (f)      ADDITIONAL SEGA FOUNDRY OR PROCESS QUALIFICATION.

                          (i)     SEGA REQUEST, PAYMENT AND PERFORMANCE. Sega
may request in writing that the parties arrange for [*] Sega Foundry
to manufacture the [*] Graphics [*]. In such event, Sega shall pay 3Dfx an
engineering services charge, to be negotiated in good faith by the parties, for
3Dfx to perform an evaluation and qualification of such proposed Sega Foundry
(such engineering services charge to be at least as favorable to Sega as the
lowest amount charged by 3Dfx for similar work, and not to exceed a reasonable
price). All such evaluation and qualification work shall be performed in
accordance with the provisions of this Section 2.3. [*]

                          (ii)    QUALIFICATION OF NEW PROCESS AS A COST
REDUCTION PROJECT. If the manufacturing process set for the in the Sega Foundry
Design Rules for the proposed Sega Foundry is reasonably considered by 3Dfx to
be a new process generation from either (A) the current fabrication process in
use at the 3Dfx Foundry for the manufacture of the [*] Graphics [*]s, or
(B) the fabrication process described in the Sega Foundry Design Rules for the
initial Sega Foundry, then any such additional evaluation and qualification
work performed by 3Dfx under this subsection (f) shall be counted as a Cost
Reduction Project under Section 2.4 below.

         2.4     COST REDUCTION DESIGN EFFORTS. [*]



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[*]

         2.5     DOCUMENTATION FOR [*] GRAPHICS CHIPSET. 3Dfx hereby agrees to
prepare and deliver to Sega, in accordance with Schedule 2.5 ("Documentation
Requirements") and the Milestones set forth on the Development Schedule for
3Dfx's draft and final versions of the [*] Glide Programming Reference Manual.
3Dfx shall be responsible and bear all costs for translating the [*] Glide
Programming Reference Manual from English to Japanese. 3Dfx shall deliver the
final English version of the [*] Glide Programming Reference Manual
simultaneously to both Sega and 3Dfx's Japanese translator. Sega shall be
responsible for the English to Japanese tranlsations of all other documents
(including the Specifications) that 3Dfx is obligated to deliver to Sega under
this Agreement. At no additional cost to Sega, 3Dfx shall review for accuracy
the first version of the first Japanese translation Sega prepares of the
Specifications, and 3Dfx shall make timely, written recommendations to Sega
regarding changes and corrections to be made thereto. Subject to the licenses
granted by 3Dfx to Sega, 3Dfx shall be the owner of all such derivative works
of all documents provided to Sega under this Agreement (including the [*] Glide
Programming Reference Manual and the Specifications), including any such
derivative works prepared by Sega. For the duration of the license granted to
Sega in Section 3.2, 3Dfx grants a non-exclusive, royalty-free license to Sega
(i) to use, reproduce, modify, and create derivative works of the [*] Glide
Programming Reference Manual and Specifications for all permitted uses under
this Agreement in connection with the licenses granted to Sega under Section 3,
and (ii) to distribute with Sega Products the [*] Glide Programming Reference
Manual and derivative works thereof prepared by Sega.  Sega herby assigns to
3Dfx all right, title, and


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interest in and to any derivative works prepared by Sega of the [*] Glide
Programming Reference Manual and the Specifications, and agrees to execute all
documents and assist 3Dfx in all actions necessary to implement such
assignment.

         2.6     [*] DEVELOPMENT BOARDS. Upon Sega's order and request, and
subject to 3Dfx's standard sales terms and conditions, 3Dfx shall supply Sega,
within sixty (60) days of Sega's order, up to [*] at a cost of the lesser of:
(i) [*] per board or (ii) the lowest 3Dfx customer price irrespective of volume.
All such [*] shall contain [*] and shall otherwise meet or exceed the
specifications listed in Schedule 2.6.

         2.7     SPECIFICATIONS AND DESIGN REVIEW. The Pro Forma Specifications
shall be attached hereto as Schedule 1.29 as of the Effective Date of this
Agreement. Within five (5) days following the Effective Date, 3Dfx shall deliver
to Sega the Specifications, which shall in all material respects be consistent
with the Pro Forma Specifications. No changes to the Specifications shall be
made unless agreed to in writing by the parties. On or before [*], the parties
shall meet to discuss any proposed changes to the Specifications for Beta
Version production (the "BETA DESIGN REVIEW"). During the Beta Design Review and
for seven (7) days thereafter, the parties agree to negotiate in good faith any
changes to be made to the Specifications which would not reasonably cause any
material increase in the cost or difficulty of, or the time required to
complete, 3Dfx's development effort; and (iii) 3Dfx and Sega shall negotiate in
good faith to reach agreement regarding any increase in cost (based upon
most-favored pricing) or schedule (based upon commercial best efforts) arising
from changes not covered by Subsection (ii) above.

         2.8     PAYMENT OF ENGINEERING SERVICES CHARGES FOR DEVELOPMENT PHASE.
As full and complete consideration (except for any contingent payments under
Section 2.9) for the development by 3Dfx of the [*] Graphics [*],
completion by 3Dfx of all of its development tasks and obligations under this
Agreement, Sega shall pay to 3Dfx interim payments totaling the sum of [*] in
engineering services charges according to the following Milestone schedule:









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MILESTONE                                                    INTERIM PAYMENT
Signing of Agreement between Sega and 3Dfx                   $ 1,550,000 U.S.

                [*]                                                [*]

                [*]                                                [*]

                [*]                                                [*]

                [*]                                                [*]

All interim payments above shall be due within twenty-one (21) days following
the date of Sega's acceptance of each Milestone. Sega and 3Dfx agree that the
above payments include full compensation to 3Dfx for the production and delivery
to Sega, both at 3Dfx's expense, following Sega's acceptance of the relevant
Deliverables, of all Alpha, Beta, and Production Version [*] samples, [*]
The Alpha, Beta, and Production Version [*] Samples may be manufactured by
either the Sega or 3Dfx Foundry and shall be delivered according to the
development Schedule. Sega may order additional Alpha, Beta, or Production
Version [*] samples from any remaining prototype wafers, at a cost not to
exceed 3Dfx's actual costs. [*]

         2.9     ON-TIME DELIVERY BONUS. With respect to each of the specified
versions of the [*] Graphics [*] listed below, Sega shall pay 3Dfx a bonus
for on-time delivery ("On-Time Delivery Bonus"), in the amounts listed below,
provided that: (a) 3Dfx delivers all Deliverables relating to such versions in
acceptable form on or before the Milestone delivery data specified in the
Development Schedule; and (b) Sega accepts such Deliverables upon the initial
submission and testing of such Deliverables under Section 2.2.



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         DELIVERABLE                                     ON-TIME DELIVERY BONUS
                                                                        [*]
         [*]                                                            [*]
                                                                        [*]
Any On-Time delivery Bonuses earned by 3Dfx shall be paid to 3Dfx within
twenty-one (21) days of Sega's acceptance of each Deliverable.

3.       LICENSES TO [*] GRAPHICS CHIPSET AND RELATED SOFTWARE

         3.1     OWNERSHIP. As between the parties hereto, and subject to the
licenses granted to Sega herein, 3Dfx shall retain ownership of all of its
existing 3D graphics technology, the 3Dfx Glide Software, [*], and the Arcade
Toolbox, in existence as of the Effective Date of this Agreement, the [*]
Graphics [*] Technology, the Alpha, Beta, and Production Versions, the [*]
Graphics [*] Technology, the Alpha, Beta, and Production Versions, the [*]
Graphics [*], the Specifications, the [*] Mask Data Set (exclusive of the Sega
Foundry Deliverables), and all associated documentation and all related
modifications and derivative works, and all Intellectual Property Rights related
thereto (the "3Dfx Technology"). Subject to 3Dfx's rights to the 3Dfx
Technology, Sega shall retain all rights to the [*] Console Technology, the Sega
Deliverables (as defined in Section 3.4(a)), and all associated documentation
and all related modifications and derivative works, and all Intellectual
Property Rights related thereto. Sega grants 3Dfx no license of any kind in or
to the [*] Console Technology.

         3.2     [*] GRAPHICS [*] LICENSE

                 (a)      GRANT OF LICENSE. 3Dfx hereby grants to Sega, and
Sega hereby accepts, a royalty-bearing, worldwide license, including a license
under, all Intellectual Property Rights owned or licensable by 3Dfx; [*] 

                 (b)      LIMITATIONS AND RESERVATION OF RIGHTS. Sega shall
not, and shall not cause or authorize any third party, including but not
limited to a Sega Foundry, to sell, lease, license, sublicense, or otherwise
provide the [*] Graphics [*] as stand-



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alone components. Sega shall not reverse engineer, nor authorize a third party
to reverse engineer, the [*] Graphics [*] or * Mask Data Set to determine
the internal functioning of the [*] Graphics [*]. No license or right is
granted, by implication or otherwise to Sega, under any Intellectual Property
Rights now or hereafter owned or controlled by 3Dfx except for licenses and
rights expressly granted in this Agreement.

                 (c)      LIMITED EXCLUSIVITY CONFERRED ON SEGA. [*] 

                 (d)      LIMITED EXCLUSIVITY CONFERRED ON 3DFX. Sega hereby
agrees that, for a period of three (3) years following the Sega Acceptance
Date, provided that 3Dfx is not in breach of its obligations under this
Agreement, Sega will not incorporate any 3D video graphics accelerator other
than the [*] Graphics [*] into the [*] Console.

                 (e)      LIMITED COVENANT OF NONASSERTION.

                          (i)     COVENANT. 3Dfx will not assert against Sega
any claim of infringement or misappropriation of its Intellectual Property
Rights embodied in the technical information concerning how the [*] Graphics
[*] communicates with the [*] Console or other Sega products, such as
external communications protocols or bus specifications, [*] 

                          (ii)    LIMITATION. Without limitation of the
licenses granted by 3Dfx to Sega, and as provided under this Section 3.2(e),
3Dfx reserves and retains the right to assert against Sega claims of
infringement or misappropriation of any of 3Dfx's Intellectual Property Rights
(including Intellectual Property Rights in the [*] Interface


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Information). The covenant of non-assertion set forth in this Section 3.2(e)
does not constitute a license to Sega or any third party of any 3Dfx
Intellectual Property Rights in the [*] Graphics [*] or the individual [*] or
[*], except as otherwise provided in this Section 3.2.

         3.3     SOFTWARE LICENSES.

                 (a)      3DFX GLIDE AND [*] SOFTWARE.

                          (i)     LICENSE GRANTS BY 3DFX. 3Dfx hereby grants to
Sega, and Sega hereby accepts, a nonexclusive, royalty-free, worldwide license
including a license under all Intellectual Property Rights owned or licensable
by 3Dfx: (i) to use and copy the Source Code of the 3Dfx Glide Software and 
[*] for internal use solely in the development, manufacture and support of Sega
Products, (ii) to use, copy, distribute, and sublicense to third parties, under
a standard form software license agreement at least as protective of 3Dfx's
rights in the Driver Software as the terms and conditions of this Agreement, the
rights to use, copy, and distribute the Driver Software in binary form solely
for use in connection with Sega Products; and (iii) to adapt, modify, customize,
or otherwise transform the 3Dfx Glide Internals solely for use with Sega
Products; provided that (A) no such adaptations, customizations, modifications
or transformations alter, change, modify, or otherwise affect the operation or
functioning of the 3Dfx Glide API, and (B) that Sega agrees to make such
adaptations, customizations, modifications and transformations available to 3Dfx
as provided under subsection (ii)(C) below.

                          (ii)    LIMITATIONS.

                                  (A)      Sega may not use, and may not
authorize a third party to use, the Source Code of the 3Dfx Glide Software to
reverse engineer the [*] Graphics [*];

                                  (B)      Sega shall have no right to
transfer, sublicense or otherwise convey the Source Code of the 3Dfx Glide
Software to any third party; and

                                  (C)      Sega agrees that, provided 3Dfx is
not in breach of this Agreement, Sega shall deliver to 3Dfx on an "as is" basis
copies of Source Code for all adaptations, customization, modifications,
transformations, or derivative works of the 3Dfx Glide API developed by Sega
with 3Dfx's consent; and Sega grants, and 3Dfx hereby accepts, a nonexclusive,
nontransferable, license to use, copy, modify, distribute and make derivative
works from any adaptations, modifications, or other changes to the 3Dfx Glide
API, made by Sega. The parties agree to negotiate in good faith regarding the
possibility of delivery by Sega and licensing to 3Dfx of any adaptations,
modifications, or other changes to the 3Dfx Glide Internals, made by Sega.


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                 (b)      ARCADE TOOL BOX. 3Dfx hereby grants to Sega, and Sega
hereby accepts, a nonexclusive, royalty-free, unrestricted, worldwide license
to adapt, modify, customize, or otherwise transform, and to distribute and
sublicense the Arcade Tool Box, including without limitation, the Source Code
thereof. Except as otherwise agreed in writing, 3Dfx will have no obligation to
provide Sega or any sublicensee of Sega with support for the Arcade Tool Box or
any enhancements, improvements or modifications to the Arcade Tool Box.

                 (c)      EVALUATION OF 3DFX GLIDE API FOR [*] CONSOLE. Sega
agrees to promptly evaluate the 3Dfx Glide API after delivery thereof for use
as a standard graphics API for use with the [*] Graphics [*] in the [*]
Console. Sega shall advise 3Dfx of its decision regarding the Glide API no
latter than the date specified on the Development Schedule.

[*]
                 (d)      DRIVER SOFTWARE SUPPORT. For a period [*]
Sega's acceptance of the Production Version, 3Dfx, at no
additional cost to Sega, will provide Sega with maintenance and technical
support for the unmodified Driver Software to enable Sega to support its [*]
Console customers in accordance with the Driver Software Support Profile
attached as Schedule 3.3(d). Such maintenance and support shall include: all
changes, upgrades, or enhancements to the Driver Software developed


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and made available in the ordinary course of business by 3Dfx and 3Dfx's prompt
correction of all material errors known by 3Dfx or brought to its attention by
Sega or third parties. 3Dfx shall have no obligation to support Sega customers
directly.

         3.4     SEGA DELIVERABLES AND SEGA FOUNDRY DELIVERABLES.

                 (a)      OWNERSHIP AND LICENSE TO SEGA DELIVERABLES. As
between the parties hereto, Sega shall retain ownership of all Sega technology,
designs, specifications, code, interfaces and protocols (collectively, "SEGA
DELIVERABLES") it supplies to 3Dfx for development of the [*] Graphics [*],
including all Intellectual Property Rights related thereto, whether or not
embodied in the [*] Console, [*] Console Technology, or Sega Foundry
Deliverables. Sega grants, and 3Dfx accepts, a limited, non-exclusive license
solely during the term of this Agreement, to use internally the Sega
Deliverables solely to develop and support the [*] Graphics [*] for Sega,
and otherwise perform its obligations hereunder.

                 (b)      SEGA FOUNDRY DELIVERABLE LICENSE. Subject to the
terms and conditions of this Agreement and a Foundry Agreement as specified in
Section 2.3(a)(iv), Sega agrees to cause the Sega Foundry to grant 3Dfx a
worldwide, non-exclusive, non-transferable, royalty-free license to (i) use the
Sega Foundry Deliverables solely to qualify the Sega Foundry under Section 2.3,
and (ii) incorporate the Sega Foundry Deliverables into the [*] Graphics
[*] and resulting [*] Mask Data set solely to provide same to the Sega
Foundry to manufacture such [*] Graphics [*] on behalf of Sega.

                 (c)      LICENSE RELATING TO SEGA ENGINEERS. With respect to
any developments, improvements, inventions, enhancements or discoveries
("FIXES") made by Sega engineers at the 3Dfx Facilities pursuant to Section
2.2(b)(iii)(A) or Section 2.2(b)(iv)(D), which are provided to 3Dfx and reduced
to a writing, Sega hereby grants to 3Dfx a limited, non-exclusive, worldwide,
royalty-free, perpetual, irrevocable license including a license under all
Intellectual Property Rights owned by Sega and embodied in the Fixes (i) to
use, reproduce, modify, and make derivative works of such Fixes, (ii) subject
to the restrictions of this Agreement, to manufacture, have manufactured,
distribute, and sublicense the Fixes, and derivatives thereof, as embodied in
the * Graphics [*] or derivatives thereof; and (iii) the unlimited right
to sublicense to third parties (with the right to further sublicense to any
level of tiers) all of the rights set forth in subsections (i) and (ii)
immediately above.

         3.5     PROPRIETARY MARKS AND MARKING REQUIREMENTS. Subject to Sega's
prior written approval as to form, size and location, which approval shall not
be unreasonably withheld, Sega will not delete or alter in any material manner
the Intellectual Property Rights markings of 3Dfx, and its suppliers, if any,
appearing on or in any 3Dfx product delivered to Sega. Sega agrees to (i)
reproduce and display such markings on each copy it


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makes of any 3Dfx product, and (ii) place in the documentation accompanying the
[*] Console the phrase: "3D graphics accelerated by 3Dfx."

4.       [*] MANUFACTURING ROYALTIES

         4.1     [*] CONSOLE MANUFACTURING ROYALTIES. As consideration for
the license to manufacture and distribute the [*] Graphics [*] as a
component of the [*] Console, Sega shall pay Net Royalties to 3Dfx, based
upon the cumulative volume of [*] Units ("MANUFACTURING ROYALTIES"),
according to the following schedule:

NUMBER OF [*] UNITS
MANUFACTURING ROYALTY
[*]

[*]

         4.2     [*] CONSOLE ROYALTY PREPAYMENT. Within thirty (30) days
following the Sega Acceptance Date, Sega shall pay to 3Dfx a royalty advance in
the amount of [*] U.S. (the "FIRST ADVANCE"), to be credited against the
Manufacturing Royalties due in the aggregate under Sections 4.1 and 4.4.
Thereafter, on the first anniversary of the Sega Acceptance Date, if the
aggregate amount of the First Advance plus all additional Manufacturing
Royalties payable by Sega to 3Dfx under Sections 4.1 and 4.4 combined is less
than a total of [*] U.S., then Sega shall pay 3Dfx an additional royalty
advance (the "SECOND ADVANCE") in an amount such that the total of the First
Advance, the Manufacturing Royalties paid as of the first anniversary of the
Sega Acceptance Date, and the Second Advance is equal to [*] U.S. If the
applicable per unit Manufacturing Royalty is reduced pursuant to Section
2.2(b)(iv) for late delivery by 3Dfx of the Beta Version, then the First
Advance required under this Section 4.2 shall be reduced to [*] U.S., and the
threshold amount for purposes of any Second Advance shall be reduced to [*]
U.S.

         4.3     3DFX REFERENCE COSTS. 3Dfx shall publish, not less than once
each calendar quarter, a reference cost [*] such reference cost to be based on
the then-current lowest purchase price that 3Dfx pays to the 3Dfx Foundry or
that 3Dfx is quoted from the Sega Foundry (the "REFERENCE COST"). For a period
of three (3) years from the date of Sega's acceptance of the Production Version


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[*], 3Dfx shall establish the Reference Cost once each calendar quarter,
based upon the lowest purchase price paid by any third party to 3Dfx [*]


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[*]

         4.5     PAYMENT TERMS, REPORTING, AND AUDITS

                 (a)      PAYMENT TERMS.

                          (i)     [*] CONSOLE ROYALTIES. Sega shall make all
payments due to 3Dfx under Section 4.1 within forty-five (45) days of the end
of each calendar quarter based on the number of [*] Units purchased and
accepted by Sega during each calendar quarter.

[*]

                          (iii)   INTEREST. Payments made after the due date
shall bear interest at one percent (1%) over the prime rate offered by the Bank
of America.

                 (b)      PAYMENT REPORTS AND RECORDS. Within forty-five (45)
days after the close of each quarter ending March 31, June 30, September 30 and
December 31, Sega will deliver to 3Dfx a report which will provide all
information reasonably necessary for computation and/or confirmation of (i) the
payments, if any, due or credited to 3Dfx for such quarterly period, and (ii)
the number of [*] Consoles manufactured in such quarterly period and the
number of [*] Graphics [*]s incorporated into [*] Games. Sega will
maintain reasonable records to support payments required under this Agreement,
regarding purchases of the [*] Units and manufacture of [*] Consoles and
the use of [*] Graphics [*]s in [*] Games.


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                 (c)      AUDIT. At 3Dfx's sole cost and expense (except as
provided below), an internationally recognized independent certified public
accounting firm selected by 3Dfx, subject to Sega's reasonable approval and
consent and execution of a confidentiality agreement acceptable to Sega, may,
upon reasonable notice and during normal business hours, inspect the records of
Sega on which such reports are based no more than once annually during this
Agreement to determine any over payments or underpayments. If, upon performing
such audit, it is determined that Sega has underpaid 3Dfx by an amount greater
than five percent (5%) of the payments due 3Dfx in the period being audited,
Sega will bear all reasonable expenses and costs of such audit and shall
immediately make full payment of the shortfall, plus interest at one percent
(1%) over the prime rate offered by the Bank of America. Sega shall be entitled
to all reports and work papers of the auditor and any overpayment shall be
corrected promptly via a refund by 3Dfx, or at Sega's sole option, via a credit
against future Sega payments.

5.       LICENSES TO SEGA [*] GAMES

         5.1     PORTING OF SEGA GAMES. Sega and 3Dfx agree to the terms and
conditions of this Section 5 regarding the possible porting to the 3Dfx Glide
API, and the possible bundling by 3Dfx with 3Dfx hardware, of certain
coin-operated arcade or consumer console video game software, which is owned or
licensable by Sega and not subject to any conflicting grant of rights in favor
of any third parties ("SEGA GAMES"), for distribution by 3Dfx solely as bundled
product in the personal computer ("[*]") market. 3Dfx hereby acknowledges that
Sega has previously granted to Sega Entertainment the right of first refusal to
port certain Sega video games for use on [*] hardware.

                 (a)      GRANT OF LICENSE. Provided that 3Dfx maintains its 3D
technology [*] graphics product at performance levels equal to or exceeding the
performance of competitive products, Sega agrees to offer 3Dfx a nonexclusive,
nontransferable, royalty-free license, to be exercised by 3Dfx in its sole
discretion at its sole expense, to port up to [*] Sega Games each year for a
period of three years from the date of this Agreement (the "PORTABLE SEGA
GAMES"), solely to port such Portable Sega Games to the then-current 3Dfx Glide
API solely for release as bundled, retail [*] software products bundled with
3Dfx [*]-based graphics hardware products. Sega shall consider in good faith any
selection request of 3Dfx as to the Portable Sega Games to be ported, provided
that the final decision with respect to such selection shall be Sega's, in its
sole discretion. Sega may, in its sole discretion and in lieu of the foregoing
license to 3Dfx, port up to [*] Portable Sega Games per year, porting them to
the then-current 3Dfx Glide API for release by 3Dfx solely as bundled retail [*]
Software products bundled with 3Dfx [*]-based graphics hardware products.



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                 (b)      OPTIMIZATION EFFORTS. U.S. Each party agrees that
whenever it is the party undertaking the porting of Portable Sega Games under
this Section 5, it shall use diligent efforts to optimize the ported Portable
Sega Games for advanced features of the 3Dfx [*] graphics product, and to
maintain optimizations or functions specific to the * Graphics [*]
provided that such functions are supported in the then-current 3Dfx [*] graphics
product.

         5.2     BUNDLING RIGHTS. During the term of the rights granted under
this Section 5, Sega shall offer 3Dfx a right of first negotiation for the
rights to bundle Sega Games other than the Portable Sega Games with 3Dfx [*]
graphics hardware. The Sega Games covered by this Section 5.2 shall be limited
to Sega Games that Sega has the right to port to [*] hardware and bundle, and as
to which the right of negotiation hereunder does not conflict with any other
rights granted by Sega to third parties.

                 (a)      With respect to any covered Sega Products, 3Dfx's
right of first negotiation shall commence upon the earlier of Sega's public
announcement, which shall be copied to 3Dfx, or notice to 3Dfx, of its
intention to release such Sega Game for the [*] market. The parties agree to
negotiate in good faith for thirty (30) days following Sega's announcement
notice, provided that if the parties are unable to reach agreement during such
thirty-day period, Sega may negotiate with and contract with any other party
for bundling of the applicable Sega Game. Sega's obligation to negotiate during
the thirty-day period is conditioned upon 3Dfx providing Sega with an
acknowledgment of interest within seven (7) days after 3Dfx's receipt of Sega's
announcement or notice.

                 (b)      If, within six (6) months after Sega's announcement
or notice as to any covered Sega Game (and provided that 3Dfx gave Sega notice
of its interest pursuant to Section 5.2(a)), Sega has not contracted for the
bundling of such Sega Game, and Sega it not under any conflicting obligations
to any third party, and Sega receives an offer from a third party to bundle
such Sega Game with [*] hardware utilizing 3Dfx graphics products, Sega will
(unless prohibited by the terms of the pending offer or any other obligations)
allow 3Dfx the opportunity to meet or better the pending offer and negotiate
with Sega for fifteen (15) days to reach agreement. If the parties do not reach
agreement within 15 days, Sega shall have no further obligation to negotiate
with 3Dfx as to such Sega Game.

         5.4     TERMS OF LICENSE. The rights granted under this Section 5
shall commence upon the Sega Acceptance Date and shall continue, subject to the
terms hereof, for three years.

         5.6     INDEPENDENT OBLIGATIONS. Each party acknowledges that this
Section 5 is intended as an independent agreement and in no event will the
performance or breach of


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this Section 5 affect in any way the parties' performance or obligations under
the other terms of this Agreement. In the event of a breach of this Section 5,
the non-breaching party's right to terminate shall only operate to terminate
this Section 5 without any effect on the other terms of this Agreement. Any
claim for damages for breach under this Section 5 shall be limited by Section
8.5.2.

6.       DESIGN INTEGRATION, 3DFX TECHNICAL SUPPORT, AND UPDATES.

         6.1     [*] CONSOLE DESIGN INTEGRATION. 3Dfx shall provide reasonable
consultation and assistance to Sega, and Sega's third-party component
developers, at no charge, for the integration of the [*] Graphics [*] into
the [*] Console. The scope of such consultation and assistance shall include,
upon Sega's request, periodic telephonic, e-mail, and written consultation, and
[*] engineering assistance at locations designated by Sega. Sega agrees to pay
3Dfx's reasonable travel and accommodation expenses for on-site assistance, and
3Dfx's engineering services charges at 3Dfx's most-favored customer rates for
[*] engineering assistance [*].

         6.2     TECHNICAL SUPPORT. For [*] after Sega's acceptance
of the Production Version [*], 3Dfx shall provide technical, quality
assurance, and engineering assistance to Sega with respect to the [*] Graphics
[*] in accordance with the 3Dfx [*] Support Profile to be negotiated in
good faith between the parties, in connection with supporting Sega's [*]
Console customers; provided, however, that 3Dfx has no obligation to provide
any support for additional [*] terms for a fee to be negotiated in
good faith, provided that Sega is then continuing to ship substantial
commercial quantities of Sega Products which incorporate the [*] Graphics
[*].

         6.3     FOUNDRY SUPPORT. 3Dfx shall use commercially reasonable
efforts to provide assistance to the 3Dfx Foundry and Sega Foundries to enable
the 3Dfx Foundry and Sega Foundries to meet the cost and yield targets defined
in Schedule 6.3.

         6.4     NO UPDATES. Without limiting 3Dfx's warranty, support and
other obligations under this Agreement, 3Dfx has no obligation to deliver to
Sega updates, improvements, modifications, or further developments relating to
the [*] Graphics [*] unless pursuant to a Cost Reduction Project or as
otherwise agreed by the parties in writing.


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7.       PURCHASING

         Sega shall purchase all units of the [*] Graphics [*] required to
manufacture the [*] Console [*] from the Sega Foundries or the 3Dfx Foundry.
3Dfx makes no warranty or representation as to the price per unit quantity of
units available, or quality of manufacture, of [*] Graphics [*] manufactured by
the Sega Foundries or the 3Dfx Foundry. All purchases by Sega of units of the
[*] Graphics [*] shall be subject to the terms and conditions of separate
agreements reached by and between Sega and the foundries; provided, however,
that 3Dfx will take all steps required to authorize the 3Dfx Foundry and
qualified Sega Foundries to sell units of the [*] Graphics [*] to Sega.

8.       REPRESENTATIONS, WARRANTIES AND GENERAL COVENANTS

         8.1     REPRESENTATIONS AND WARRANTIES OF 3DFX. 3Dfx covenants,
represents and warrants all of the following:

         8.1.1    Beginning on the date of Sega's acceptance of the Production
Version [*], continuing [*] (the "WARRANTY PERIOD"), the [*] Graphics [*], and
all Deliverables, portions or components related thereto shall be free of
material defects and operate in all material respects in conformance with the
Specifications and other requirements of this Agreement (any failure thereof, a
"DESIGN DEFECT"). In the event that Sega notifies 3Dfx of any Design Defects,
3Dfx shall use best efforts to diligently correct any such nonconformities by
(i) revising the [*] Mask Data Set and providing such revised [*] Mask Data Set
to the 3Dfx Foundry and the Sega Foundries, and (ii) providing to Sega software
work-arounds or patches for existing defective [*] Graphics [*]s. If, as a
result of Design Defects, Sega replaces defective [*], whether in Sega's
possession or by recall, 3Dfx shall pay the 3Dfx Foundry or Sega Foundries for
all manufacturing and shipping costs in order to deliver to Sega royalty-free,
corrected replacements for such [*]; provided, however, that 3Dfx shall have no
replacement liability with regard to Design Defects which Sega detected during
its testing of the [*] Console internally or by independent prospective and
actual software developers for the [*] Console, and which Sega did not report to
3Dfx upon detection. Except as provided above, 3Dfx shall not be responsible for
the cost of any product recall, for replacement of defective [*] Graphics [*]s
or components thereof, nor for a refund of any royalties paid by Sega. 3Dfx
shall not be liable to Sega for manufacturing defects caused by the 3Dfx Foundry
or Sega Foundries, nor the costs for any product recall or replacement of any
[*] Graphics [*] resulting therefrom. The remedies set forth in this Section
shall be Sega's sole and exclusive remedy for Design Defects.



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         8.1.2   The [*] Graphics [*] will conform to the Specifications,
and all components of the * Graphics [*] will operate together as an
integrated subsystem. [*]

         8.1.3   The [*] Graphics [*] as provided by 3Dfx will not contain
any undocumented material features of any kind whatsoever.

         8.1.4   All services rendered by 3Dfx in connection with this
Agreement shall be provided in a timely manner in accordance with the highest
professional standards and practices, and 3Dfx's personnel performing such work
shall have the requisite expertise and ability to perform the tasks assigned to
them.

         8.1.5   3Dfx has full authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and this Agreement will
not violate any other agreement to which 3Dfx is or becomes a party nor any
law, court order or decree to which 3Dfx is subject.

         8.1.6   The [*] Graphics [*] shall not infringe the Intellectual
Property Rights, exclusive of patent rights, of any third party as may now or
in the future exist, and 3Dfx has the right to grant all of the licenses to
Sega hereunder, free from all claims, liens, security interests or other
encumbrances. To the best of 3Dfx's knowledge, the [*] Graphics [*] shall
not infringe the patent rights of any third party as may now or in the future
exist. 3Dfx shall not place on any of such software any liens, security
interests or other encumbrances that would in any manner affect Sega's licenses
under this Agreement.

         8.1.7   Neither the [*] Graphics [*], nor the Driver Software (nor
any portion thereof) contains or shall contain, at the time of installation,
any timer, clock, counter, or other limiting design or routine, nor (to the
best of 3Dfx's knowledge) any virus, that causes or could cause any Sega
Product (or any portion thereof) to become erased, inoperable, impaired, or
otherwise incapable of being used in the full manner for which it was designed
and licensed (including, without limitation, any design or routine that would
impede copying thereof) after being used or copied a certain number of times,
or after the lapse of a certain period of time, or after the occurrence or
lapse of any similar triggering factor or event. Furthermore, neither the [*]
Graphics [*] nor Driver Software contains or shall contain, any virus,
limiting design, or routine that causes or


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could cause them or any of them to become erased, inoperable, impaired, or
otherwise incapable of being used in the full manner for which it was designed
and licensed pursuant to this Agreement solely because it has been installed on
or moved to a hardware unit or system that has a serial number, model number,
or other identification different from the identification of the one on which
it was originally installed.


         8.1.8   The [*] Graphics [*] and Driver Software developed by 3Dfx
will not abruptly end or provide invalid or incorrect results during operation
prior to, on or after January 1, 2000, or when given a valid date containing
century, year, month, and day. For purposes hereof, a failure to "operate
accurately" exists if any one or more of the following properties or
capabilities is lacking: (i) execution of calculations using dates with a
four-digit year; (ii) functionality (including both on-line and batch)
including, but not limited to, entry, inquiry, maintenance, and update, to
support four-digit year processing; (iii) interfaces and reports that support
four-digit year processing; (iv) successful transition, without human
intervention, into the year 2000 using the correct system date (e.g.,
01104/2000); (v) after transition to the year 2000, continued processing with a
four-digit year without human intervention; (vi) calculation of leap year
correctly; and (vii) provision of correct results in forward and backward data
calculation spanning century boundaries, including the conversion of previous
years currently stored as two digits.

         8.1.9   Except for any license or other payments to be made by 3Dfx
for certain inbound elements of the 3Dfx Technology, no fees, licenses or
commissions are due or payable to any broker, finder, or other third party in
connection with this Agreement.

         8.2     REPRESENTATIONS AND WARRANTIES OF SEGA. Sega convenants,
represents and warrants all of the following:

                 8.2.1    Sega has full corporate authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and this Agreement will not violate any other agreement to which Sega is or
becomes a party nor any law, court order or decree to which Sega is subject.

                 8.2.2    All technology, designs, specifications, code,
interfaces and protocols developed internally by Sega, licensed by Sega to 3Dfx
hereunder, and which are incorporated into [*] Graphics [*], do not
infringe the Intellectual Property Rights, exclusive of patent rights, of any
third party when incorporated into Sega Products, and Sega has the right to
grant all of the licenses to 3Dfx hereunder, free from all claims, liens,
security interests or other encumbrances. To the best of Sega's knowledge, all
technology, designs, specifications, code, interfaces and protocols developed
internally by Sega, licensed by Sega to 3Dfx hereunder, and which are



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                                            [*]=CONFIDENTIAL TREATMENT REQUESTED


incorporated into [*] Graphics [*], do not infringe the patent rights of
any third party when incorporated into Sega Products.

         8.3     GENERAL COVENANTS. Neither party shall make representations,
warranties, or guarantees to anyone with respect to the specifications,
features, capabilities or operations of the other's products or services that
are inconsistent with or in addition to this Agreement and such other party's
published literature. Neither party shall make modifications, enhancements or
changes to the other's products except as permitted hereunder nor shall it
permit any of its respective agents, employees, or representatives to make any
such modifications, enhancements or changes without the other's prior written
consent. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES
ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT.

         8.4     LIMITATIONS OF LIABILITY.

                 8.4.1    EXCEPT AS OTHERWISE SPECIFIED IN THIS AGREEMENT,
NEITHER PARTY SHALL, UNDER ANY CIRCUMSTANCES, BE LIABLE TO THE OTHER PARTY FOR
ANY CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL, OR EXEMPLARY DAMAGES
(INCLUDING WITHOUT LIMITATION, LOST PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS
OF DATA, OR BUSINESS LOSSES) EVEN IF SUCH DAMAGES ARE FORESEEABLE, AND EVEN IF
THE BREACHING PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES
OCCURRING. THE LIMITS OF THIS SECTION 8.4.1 SHALL NOT PRECLUDE CLAIMS FOR
ACTUAL AND DIRECT DAMAGES, INCLUDING WITHOUT LIMITATION EXPENSES AND CHARGES
INCURRED BY A PARTY AS A RESULT OF THE OTHER PARTY'S BREACH AND EXPENSES AND
CHARGES TO MITIGATE DAMAGES RESULTING FROM THE OTHER PARTY'S BREACH.

                 8.4.2    SUBJECT TO THE LIMITATIONS OF SECTION 8.4.1 ABOVE,
AND EXCEPT WITH RESPECT TO INDEMNIFICATION UNDER SECTIONS 9.1 AND 9.2, CLAIMS
ARISING FROM INTENTIONAL BREACH, WILLFUL OR INTENTIONAL MISCONDUCT OR GROSS
NEGLIGENCE, EACH PARTY'S LIABILITY TO THE OTHER FOR DAMAGES CLAIMS SHALL BE
LIMITED TO [*].

         8.5     SURVIVAL. The covenants, representations and warranties
contained in this Section 8 shall survive the termination or expiration of this
Agreement.










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9.       INDEMNIFICATION AND INSURANCE

         9.1     INDEMNIFICATION BY 3DFX. Subject to the terms of Section 9.3
below, 3Dfx shall defend, indemnify and hold Sega harmless from and against any
and all losses, damages, liability, and reasonable attorneys', expert witness,
or court fees and costs, and any other reasonable costs and expenses arising
from any claims, demands, suits, causes of action, or any other action brought
by any third party alleging infringement of any Intellectual Property Right. In
the defense or settlement of any claim for Intellectual Property Rights
infringement, 3Dfx may obtain for Sega and all customers and users of affected
Sega Products the right to continue using and licensing the allegedly
infringing materials, or replace or modify same so that they become
non-infringing, provided that 3Dfx pays all costs incurred by Sega associated
with such replacement or modification and any modifications required to other
components.

         9.2     INDEMNIFICATION BY SEGA. Subject to the terms of Section 9.3
below, Sega shall indemnify and hold 3Dfx harmless from and against any and all
losses, damages, liability, reasonable attorneys', expert witness, or court
fees and costs, and any other reasonable costs and expenses arising from any
claims, demands, suits, causes of action, or any other action brought by any
third party alleging infringement of any Intellectual Property Right other than
as a result of 3Dfx's exercise of its rights under the license granted under
Section 3.4(c), but excluding any claim which is covered by 3Dfx's
indemnification of Sega in Section 9.1. In the defense or settlement of any
claim for Intellectual Property Rights infringement, Sega may obtain for 3Dfx
the right to continue using and licensing the allegedly infringing materials,
or replace or modify same so that they become non-infringing. Notwithstanding
any provision in this Agreement to the contrary, Sega shall have no liability
or obligation to 3Dfx with respect to a court judgment that an exploitation or
use of anything provided by Sega to 3Dfx hereunder, in combination with any
3Dfx Technology, infringes any Intellectual Property Rights of any third party,
provided that such exploitation or use alone (not in combination with any 3Dfx
Technology) would not infringe such third party's Intellectual Property Rights.

         9.3     INDEMNIFICATION PROCEDURES. Neither party will have any
obligation to indemnify the other party under Section 9.1 or 9.2, as the case
may be, unless: (A) the indemnifying party is promptly notified of a potential
claim by the party seeking indemnification; (B) the indemnifying party has sole
control of the defense and settlement (subject to reasonable consent of the
indemnified party) of the claims sought to be indemnified; and (C) the party
seeking indemnification provides the indemnifying party with reasonable
assistance, at the indemnifying party's expense, in the defense and settlement
of the claim sought to be indemnified. Each party shall have the right to
participate in the defense and/or settlement of such actions or proceedings at
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         9.4     INSURANCE OBLIGATIONS. Throughout the term of this Agreement
and for two (2) years thereafter, 3Dfx shall purchase and maintain (and shall
pay all premiums and deductibles related to) commercial liability insurance,
including errors and omissions insurance, and products liability (with a
vendor's endorsement in favor of Sega) naming Sega as an additional insured and
stipulating that the coverage afforded additional insureds is primary and any
insurance maintained by additional insureds shall be excess only and
non-contributing with the coverage provided under that policy. Sega agrees it
shall maintain product liability coverage with respect to its distribution of
[*] Units.

10.      TERM AND TERMINATION

         10.1    TERM. the terms of this Agreement shall commence upon the
Effective Date and shall continue in full force and effect until terminated as
provided in Section 10.2 below.

         10.2    TERMINATION. The parties shall have the right to terminate
this Agreement in whole or in part as follows:

                 10.2.1   Provided that, during the Development Phase, 3Dfx
provides commercially reasonable efforts, including without limitation that
3Dfx makes no reductions in staffing or other resources, to complete such
development. Sega may terminate this Agreement in whole or in part based upon a
development failure by 3Dfx only as provided in Section 2;

                 10.2.2   Sega may terminate if 3Dfx materially breaches any of
its other obligations under this Agreement (except with respect to Section 5
and except as otherwise provided in Section 2) and 3Dfx may terminate if Sega
materially breaches any of its obligations under this Agreement (except with
respect to Section 5) and such breach shall continue uncured for a period of
forty-five (45) days after the breaching party's receipt of written notice from
the non-breaching party;

                 10.2.3   Either party may terminate in the event of the filing
by or against the other party of a proceeding under any bankruptcy or similar
law, unless such proceeding is dismissed, within forty-five (45) days from the
date of filing; the making by the other party of a proceeding for dissolution
or liquidation, unless such proceeding is dismissed within forty-five (45) days
from the date of filing; the appointment of a receiver, trustee or custodian
for all or part of the assets of the other party, unless such appointment or
application is revoked or dismissed within forty-five (45)days from the date
thereof; the attempt by the other party to make any adjustment, settlement or
extension of its debts with its creditors generally; or the insolvency of the
other party.


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                 10.2.4   Under no circumstances, including the pendency of any
dispute, may 3Dfx terminate, suspend or limit its performance hereunder or
withhold or disable any Deliverables unless and until Sega has agreed in
writing to such termination, suspension or limitation or until a court of
competent jurisdiction orders otherwise; provided, however, that during that
time, Sega continues to pay any undisputed charges required to be paid under
Section 2 of this Agreement.

         10.3    EFFECT OF TERMINATION

                 10.3.1   EFFECT OF TERMINATION FOR DEVELOPMENT FAILURE. Upon
termination of this Agreement under Section 10.2.1, all rights and obligations
of the parties under this Agreement, including all licenses granted to either
party hereunder, shall terminate, except for the rights and obligations of the
parties under Sections 3.2(f) (Limited Covenant of Nonassertion), 10 (Term and
Termination), and 12 (Confidentiality) which shall survive the termination of
this Agreement. Except as necessary to fulfill the surviving terms, each party
shall immediately return to the other all Confidential Information,
Deliverables and technology, including without limitation the Sega Technology
and 3Dfx Technology.

                 10.3.2   EFFECT OF TERMINATION FOR BREACH.

                          (a)     SEGA'S BREACH. Upon any termination of this
Agreement under Sections 10.2.2 or 10.2.3 for Sega's breach, all licenses
granted to Sega under Section 3 (Licenses) shall terminate as provided in
subsection (b) below and each party shall immediately return to the other all
Confidential Information, Deliverables and technology, including without
limitation the Sega Technology and 3Dfx Technology.  All licenses granted by
Sega to third parties shall survive according to their terms, and any licenses
granted to 3Dfx under Section 5.2 (License to Bundle Sega [*] Games, if any)
shall survive according to their terms.

                          (b)     SEGA TRANSITION PROCEDURE. After termination
due to Sega's breach:

                                  (i)      Sega can continue to utilize [*]
[*] in its inventory to manufacture [*] Consoles, [*] and distribute [*] until
its inventory of [*] and such finished products is exhausted, provided that
Sega has paid all undisputed royalty amounts owed in relation to such chips 
and products;

                                  (ii)     The licensee in Section 3.2(a) to
the [*] Graphics [*] will terminate on the later of (a) Sega's receipt of
all orders for [*]


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placed prior to the effective date of termination of this Agreement, or (b)
Sega's receipt of one final order of [*] within one month of the effective date
of termination of this Agreement, provided, however that Sega pays all
undisputed royalties owed in relation to such chips and provided that Sega can
utilize the chips in the manufacture of [*] Consoles, [*] [*], utilizing such
chips until its inventory of [*] and [*]s and such finished products is
exhausted, provided that Sega has paid all undisputed royalty amounts owed in
relation to such chips and products.

                                  (iv)     The license in Section 3.3 to the
3Dfx Glide and [*] will terminate [*] after Sega's last shipment of [*]
Consoles, [*] . Any sublicenses granted to third parties will continue 
indefinitely provided that the third parties are in compliance with the 
terms of the sublicense.

                          (c)     3DFX'S BREACH. Upon any termination of this
Agreement under Sections 10.2.2 or 10.2.3 for 3Dfx's breach or 3Dfx's financial
condition, all licenses granted to Sega under Section 3 (Licenses) shall
survive according to their terms; provided, however, that the limited
exclusivity granted to 3Dfx under Subsection 3.2(e) shall terminate
immediately. The limited exclusivity in favor of Sega under Subsection 3.2(d)
shall survive such termination provided Sega is distributing [*] Graphics
[*]s, and only as long as Sega is distributing [*] Graphics [*]s in
commercial quantities.

                          (d)     SURVIVALS. Upon any termination of this
Agreement under Section 10.2.2 or 10.2.23, the rights and obligations of the
parties under Sections 4 ([*] Manufacturing Royalties), 8 (Warranties,
General Covenants and Limitations of Liability), 9 (Indemnification and
Insurance), 10 (Term and Termination), 12 (Confidentiality), and 13 (General
Provisions), shall survive such termination, provided that in the event of
termination resulting from 3Dfx's breach, Sega shall be entitled to offset
against any Manufacturing Royalties all of its damages arising directly from
such breach.

11.      TAX, DUTIES AND OTHER CHARGES

         Sega shall be solely responsible for any sales, use, gross receipts,
value-added, excise, property or other tax, tariff, duty or assessment and
income taxes and related interest and penalties collected, levied or imposed by
national governments, state or provincial governments, local governments, or
any subdivision of the foregoing and arising out of or related to the amounts
paid to 3Dfx by Sega hereunder with the exception of taxes on 3Dfx's net
income.


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12.      CONFIDENTIALITY

         12.1    PRIORITY OVER PRIOR NDA. The terms of this Agreement shall
supersede and replace control in the event of any conflict between any and all
terms or provisions of a previously executed non-disclosure agreement between
the parties with respect to the subject matter of this Agreement.

         12.2    DEFINITION. 3Dfx and Sega acknowledge that, in the course of
performing their respective obligations hereunder, each may obtain information
relating to the other and the other's products that is of a confidential and
proprietary nature to such other party ("CONFIDENTIAL INFORMATION"). Such
Confidential Information includes without limitation the [*] Graphics [*]
Technology, the Source Code of the Driver Software, the Sega Deliverables,
Fixes, [*] Console Technology, the Sega Foundry Deliverables, trade secrets,
know-how, formulas, compositions of matter, inventions, techniques, processes,
programs, diagrams, schematics, technical information, customer and financial
information, sales and marketing plans and the terms of this Agreement.

         12.3    CONFIDENTIALITY OBLIGATION. Each of Sega and 3Dfx agrees, that
it will (a) use the other party's Confidential Information only in connection
with fulfilling its obligations and exercising its rights and licenses under
this Agreement; (b) hold the other party's Confidential Information in strict
confidence and exercise due care with respect to its handling and protection,
consistent with its own policies concerning protection of its care, (c) not
disclose, divulge, or publish the other party's Confidential Information except
to such of its responsible employees, subcontractors, sublicenses and
consultants (collectively, "PERSONNEL") who have a bona fide need to know to
the extent necessary to fulfill such party's obligations under this Agreement;
and (d) instruct all such Personnel not to disclose the other party's
Confidential Information to third parties, without the prior written permission
of the other party. Each party shall require all Personnel who shall come into
contact with the Confidential Information of the other party to execute a
confidentiality agreement at least as protective of the rights in such
Confidential Information as the terms and conditions of this Agreement, prior
to such Personnel being given access to any Confidential Information.

         12.4    EXCEPTIONS. The obligations set forth in Section 12.3 above
will not apply to either party's Confidential Information which (i) is or
becomes public knowledge without the fault or action of the recipient party, or
the breach of any confidentiality obligation; (ii) the recipient party can
document was independently developed by it without use of Confidential
Information of the other party; or (iii) the recipient party can document was
already known to it prior to the receipt of the other party's Confidential
Information.


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         12.5    DISCLOSURE UNDER THE LAW. If either party is required to
disclose any Confidential Information pursuant to an order under law, it shall
use its reasonable efforts to give the party owning the Confidential
Information sufficient notice of such required disclosure to allow the party
owning the Confidential Information reasonable opportunity to object to and
take necessary legal action to prevent such disclosure.

13.      GENERAL PROVISIONS

         13.1    JOINT PRESS RELEASE. The parties agree to issue a joint press
release regarding the relationship contemplated by this Agreement, and shall
mutually agree on the contact and timing thereof.

         13.2    NON-SOLICITATION OF EMPLOYEES. During the term of this
Agreement and for a period of one (1) year after any expiration or termination
of this Agreement for any reason other than 3Dfx's breach, both parties'
agreement not to directly solicit for employment any employee or independent
contractor of the other party involved in the development, sale or marketing of
the subject matter of this Agreement.  Such prohibition shall not extend to
advertisements customarily placed in media circulated to the public.

         13.3    ASSIGNMENT. Neither party shall assign or otherwise transfer
this Agreement in whole or in part, or any of the rights and obligations
hereunder, either voluntarily or by operation of law, except to its
subsidiaries or affiliates in which such party has at least a fifty percent
(50%) equity interest or voting control, while the party has such equity
interest or voting control, without the prior written consent of the other,
which consent shall not be withheld unreasonably. In the event that either
party merges with another corporation, the merging party shall cause the
corporation resulting from such merger to be bound by, and assume the
obligations of, this Agreement.

         13.4    FORCE MAJEURE. Neither Sega nor 3Dfx shall be deemed to be in
default or have breached any provision of this Agreement solely as a result of
any delay, failure in performance or interruption of service resulting directly
or indirectly from any act of God, civil or military authority, civil
disturbance, war, laws, regulations, acts or orders of any government or agency
or official thereof, or any other occurrences beyond the party's reasonable
control.

         13.5    COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

         13.6    WAIVER. No waiver of any provision of this Agreement or of any
rights or obligations of either party hereunder shall be effective unless in
writing and signed by the





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party or parties waiving compliance, and any such waiver shall be effective
only in the specific instance and for the specific purpose stated in such
writing.

         13.7    NOTICES. Except as otherwise specified herein, all notices,
requests, demands or communications required hereunder shall be in writing,
delivered personally, or sent by first class mail, postage prepaid, or by
completed facsimile or e-mail transmission to the parties at their respective
addresses first set forth in this Agreement (or at such other address as shall
be given in writing by either of the parties to the other in accordance with
this Section 13.7). All notices, requests, demands, orders or communications
shall be deemed effective upon receipt in accordance with this Section 13.7.

         13.8    NO JOINT VENTURE. The execution and delivery of this Agreement
shall not be deemed to confer any rights or remedies upon, nor obligate any of
the parties hereto, to any person or entity other than such parties. Nothing in
this Agreement shall cause or be deemed to cause the parties to be partners or
joint venturers with, or agent or employees of, each other. The parties are
independent contractors, and neither party shall have any right or power to
create any obligation or responsibility on behalf of the other party.

         13.9    GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall not be governed by the United Nations Convention
on Contracts for the International Sale of Goods, the application of which is
expressly excluded by the parties hereto. This Agreement shall be governed by,
and construed and enforced in accordance with the laws of the State of
California regardless of the choice of law rules of such state or any other
jurisdiction. All disputes arising out of this Agreement shall be subject to
the exclusive jurisdiction of either the state or federal courts located in San
Jose, California, and the parties agree and submit to the personal and
exclusive jurisdiction and venue of these courts.

         13.10   ENTIRE AGREEMENT. No representations, warranties or
agreements, oral or written, express or implied, have been made to any party
hereto, except as expressly provided herein. This Agreement shall be binding
upon the respective parties hereto and their permitted successors and permitted
assigns. In the event that any provision hereof is found invalid or
unenforceable pursuant to judicial decree or decision, the remainder of this
Agreement shall remain valid and enforceable according to its terms. This
Agreement constitutes the entire understanding and agreement between the
parties regarding the subject matter of this Agreement, and supersedes all
other prior written and oral communications regarding this transaction, and may
not be altered, modified or amended except by a written amendment executed by
both parties.





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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Agreement as of the date set forth below.

SEGA ENTERPRISES LTD.



By:       . . . . . . . . . . . . . . . . . . . . . . . .

Name:     . . . . . . . . . . . . . . . . . . . . . . . .

Title:    . . . . . . . . . . . . . . . . . . . . . . . .

Date:     . . . . . . . . . . . . . . . . . . . . . . . .


3DFX INTERACTIVE, INC.


By:       . . . . . . . . . . . . . . . . . . . . . . . .

Name:     . . . . . . . . . . . . . . . . . . . . . . . .

Title:    . . . . . . . . . . . . . . . . . . . . . . . .

Date:     . . . . . . . . . . . . . . . . . . . . . . . .