{"id":42901,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/technology-development-and-license-agreement-sega-enterprises.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"technology-development-and-license-agreement-sega-enterprises","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/operations\/technology-development-and-license-agreement-sega-enterprises.html","title":{"rendered":"Technology Development and License Agreement &#8211; Sega Enterprises Ltd and 3dfx Interactive Inc."},"content":{"rendered":"<pre>\n TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT\n\n         This Technology Development and License Agreement (the \"AGREEMENT\") is\nmade and entered into as of February 28, 1997 (the \"EFFECTIVE DATE\"), by and\nbetween Sega Enterprises, Ltd., a Japanese corporation having its principal\nplace of business at 212, Haneda 1-Chome, Ohta-ku, Tokyo 194, Japan (\"SEGA\")\nand 3Dfx Interactive, Inc. (\"3DFX\"), a California corporation having its\nprincipal place of business at 4435 Fortran Drive, San Jose, California 95134.\n\n                                    RECITALS\n\n         WHEREAS, Sega is in the business of developing, marketing, and\ndistributing video games for both coin-operated arcade and consumer markets,\nvideo game consoles, peripherals and various other products and services,\nthroughout the world;\n\n         WHEREAS, 3Dfx is in the business of creating advanced 3D graphics\naccelerators, including semiconductor chips, hardware, and software, for both\ncoin-operated arcade and consumer video game markets throughout the world;\n\n         WHEREAS, Sega desires that 3Dfx develop for Sega a semiconductor 3D\ngraphics accelerator [*], and that 3Dfx license to Sega on a limited\nexclusive basis the manufacturing rights thereto, including without limitation\nfor Sega's use with, and distribution in, Sega's forthcoming consumer video\ngame console product, [*]\n\n         WHEREAS, 3Dfx is willing to promote the [*] Console video game\narchitecture in connection with 3Dfx's 3D graphics technology;\n\n         WHEREAS, Sega desires that 3Dfx provide assistance to qualify 3Dfx and\nSega designated foundries to produce the 3D accelerator [*] in commercial\nquantities;\n\n         WHEREAS, Sega desires to obtain certain licenses from 3Dfx for certain\ninterface software for the 3Dfx graphic accelerator [*] and certain\nhardware to enable manufacturing and support; and\n\n         WHEREAS, 3Dfx is willing to perform the development, grant the\nlicenses, and provide the other assistance required by Sega in connection with\nsuch 3Dfx graphics accelerator [*]:\n\n\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       1\n\n\n\n   2\n\n         IT IS THEREFORE AGREED AS FOLLOWS:\n\n1.       DEFINITIONS\n\n         Unless otherwise defined or stated, \"days\" shall mean calendars days,\n\"including\" shall mean \"including without limitation\", and the following terms\nshall have the meanings stated below:\n\n         1.1     \"ALPHA VERSION [*]\" means a preliminary version of the [*]\nGraphics [*] with functionality sufficiently complete and usable to enable\nhardware and software engineers to operate, test and evaluate for further\nproduction, and integration, as further set forth in the Specifications.\n\n         1.2     \"ARCADE TOOL BOX\" means 3Dfx's proprietary arcade game\ndeveloper software toolbox.\n\n         1.3     [*]\n\n         1.4     \"BETA VERSION [*]\" means a preliminary version of the [*]\nGraphics [*] with functionality complete and usable in all material\nrespects, but which is not in a form intended for production in commercial\nvolumes, as further set forth in the Specifications.\n\n         1.5     [*]\n\n         1.6     \"[*] GRAPHICS [*]\" means the 3D graphic accelerator\n[*] as provided to Sega for use in the [*] Console, as set forth in the\nSpecifications, [*]\n\n         1.7     \"[*] GRAPHICS [*] TECHNOLOGY\" means any and all\ninventions, works of authorship, technology, know-how, algorithms, methods,\nprocesses, procedures, work-arounds and Intellectual Property Rights relating\nto the [*] Graphics [*], exclusive of the Sega Deliverables, Sega Foundry\nDeliverables, the [*] Console Technology, and all associated documentation\nand all related modifications and derivative works and all Intellectual\nProperty Rights related thereto.\n\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n                                       2\n\n   3\n         1.8     \"[*] MASK DATA SET\" means the manufacturing database and mask\nlevel information to be delivered by 3Dfx to a Sega Foundry or the 3Dfx Foundry\nto allow such foundry to manufacture the [*] Graphics [*], as further set\nforth in Schedule 1.8.\n\n         1.9     [*]\n\n         1.10    \"DELIVERABLES\" means the deliverable items specified for each\nMilestone on the Development Schedule.\n\n         1.11    \"DEVELOPMENT SCHEDULE\" means the schedule for the completion\nof the Milestones and acceptance of Deliverables as set forth in Schedule 1.10.\n\n         1.12    [*]\n\n         1.13    \"[*] CONSOLE\" means a video game console code-named [*],\nunder development by Sega, including all components, enhancements, plug-ins,\nattachments, controllers, input and output devices, cables, connectors,\nperipherals and upgrades as further defined in Schedule 1.12.\n\n         1.14    \"[*] CONSOLE TECHNOLOGY\" means any and all inventions, works\nof authorship, technology, know-how, algorithms, methods, processes,\nprocedures, work-arounds and Intellectual Property Rights relating to the [*]\nConsole.\n\n         1.15    \"[*] CONSOLE UNIT\" means each [*] Graphics [*] purchased\nby Sega from the 3Dfx Foundry or a Sega Foundry for use by Sega in a [*]\nConsole, [*]\n\n         1.16    \"FOUR CORNER MANUFACTURING PROCESS TEST\" means the industry\nstandard four corner testing process to be used to test the Production Version\n[*] produced by the Sega Foundry as further specified in Schedule 1.15.\n\n         1.17    \"INTELLECTUAL PROPERTY RIGHTS\" means any and all rights\nexisting now or in the future under patent law, copyright law, industrial\ndesign rights law, semiconductor chip and mask work protection law, moral\nrights law, trade secret law, trademark law, unfair competition law, publicity\nrights law, privacy rights law, and any and all similar proprietary rights, and\nany and all renewals, extensions, and restorations thereof, now or\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       3\n\n   4\nhereafter in force and effect worldwide, including, without limitation, in the\nUnited States and Japan.\n\n         1.18    \"MILESTONE\" means an individual task or set of tasks to be\ncompleted by a certain date as described in the Development Schedule.\n\n         1.19    \"NET ROYALTIES\" means: (i) with respect to per unit royalties,\nnondefective per unit amounts reduced by two percent (2%) to take into account\ndemonstration, internal use, free or sample products, any defective products,\nreturns, credits, costs of collection; and (ii) with respect to royalties based\non Reference Cost, per unit royalties, net of any royalties which would be due\non (A) a reasonable number of demonstration, free, or sample products, and (B)\nreturns of defective products; all of the foregoing net of Japanese or other\nwithholding taxes.\n\n         1.20    [*]\n\n         1.21    \"PRODUCTION VERSION [*]\" means the [*] Graphics [*] in\nthe form intended for production in commercial volume by a 3Dfx Foundry or by a\nSega Foundry utilizing the [*] Mask Data Set provided by 3Dfx.\n\n         1.22    \"SEGA ACCEPTANCE DATE\" means the date that Sega first accepts\nthe Production Version [*] manufactured by the initial Sega Foundry\npursuant to Section 2.3(a)(iii).\n\n         1.23    \"SEGA FOUNDRY\" means a Sega-designated semiconductor\nmanufacturing foundry approved by the parties to manufacture the [*] Graphics\n[*] in commercial volume in accordance with the provisions of Section 2.3.\n\n         1.24    \"SEGA FOUNDRY CELL LIBRARIES\" means the cell libraries and\nother design information of a proposed Sega Foundry, required by 3Dfx to\nqualify the fabrication process used at a proposed Sega Foundry and to create\nthe 3Dfx Mask Data Set to be provided to such Sega Foundry, as further set\nforth in Schedule 1.24. The Sega Foundry Cell Libraries must relate to a\nfabrication process sufficiently advanced and sophisticated to manufacture the\n[*] Graphics [*].\n\n         1.25    \"SEGA FOUNDRY DELIVERABLES\" means, collectively, the Sega\nFoundry Design Rules and Sega Foundry Cell Libraries.\n\n         1.26    \"SEGA FOUNDRY DESIGN RULES\" means the specifications,\nincluding (but not limited to) design rules, spice models, and process\nparameters of a proposed Sega Foundry, reasonably required by 3Dfx pursuant to\nSection 2.3 below, to qualify the\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       4\n\n   5\nfabrication process used at a proposed Sega Foundry and to create the 3Dfx Mask\nData Set, as further set forth in Schedule 1.26. The Sega Foundry Design Rules\nmust relate to a fabrication process sufficiently advanced and sophisticated to\nmanufacture the [*] Graphics [*].\n\n         1.27    \"SEGA PRODUCTS\" [*]\n\n         1.28    \"SOURCE CODE\" means computer programs, instructions and\nrelated material written in a human-readable source language in form capable of\nserving as the input to a compiler or assembler program, and in form capable of\nbeing modified, supported and enhanced by programmers reasonably familiar with\nthe source language.\n\n         1.29    \"SPECIFICATIONS\" or \"PRO FORMA SPECIFICATIONS\" means the\ndescriptions of the technical requirements, component parts, features,\nfunctionality, performance criteria, operating conditions, interfaces, data\ntransfer, processing parameters, and protocols, associated with the [*]\nGraphics [*], as set forth in Schedule 1.29.\n\n         1.30    \"TEST VECTORS\" means the test vectors to be supplied by 3Dfx\nand approved by Sega (such approval not to be withheld unreasonably) and used\nto test specific functionality of the Alpha, Beta, and Production Version\n[*]s, as set forth in the Specifications, Schedule 1.30.\n\n         1.31.   \"VERIFICATION TEST GAMES\" means the sample games used to test\nthe Alpha, Beta, and Production Version [*], as set forth in the\nSpecifications, Schedule 1.31.\n\n         1.32    \"3DFX FOUNDRY\" means the semiconductor manufacturing facility\ndesignated by 3Dfx in Schedule 1.32 to manufacture the [*] Graphics [*]\nunder this Agreement.\n\n         1.32    \"3DFX GLIDE API\" means 3Dfx's proprietary graphics accelerator\nAPI, as set forth on Schedule 1.33.\n\n         1.33    \"3DFX GLIDE INTERNALS\" means the 3Dfx Glide Software exclusive\nof the 3Dfx Glide API.\n\n         1.34    \"3DFX GLIDE SOFTWARE\" means 3Dfx's graphics accelerator driver\nsoftware, together with all associated documentation provided by 3Dfx\nincluding, but not limited to, the [*] Glide Programming Manual.\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       5\n\n   6\n2.       DEVELOPMENT AND PROCESS QUALIFICATION PHASE\n\n         2.1     DEVELOPMENT. In accordance with the terms of this Section 2,\n3Dfx shall develop the [*] Graphics [*] for manufacture in commercial\nvolume by the 3Dfx Foundry and the Sega Foundry on Sega's behalf, and to\ncomplete all Milestones specified in the Development Schedule. Subject to 3Dfx\ncompleting the Milestones set forth in the Development Schedule, and Sega's\nacceptance thereof, Sega shall pay 3Dfx the engineering services charges as\nprovided in Section 2.8.\n\n         2.2     [*] GRAPHICS [*] MANUFACTURED BY THE 3DFX FOUNDRY.\n\n                 (a)      DELIVERY OF MILESTONE DELIVERABLES. 3Dfx shall\ncomplete and deliver to Sega, in accordance with the Development Schedule, the\nAlpha Version [*], the Beta Version [*] and the Production Version\n[*], all manufactured by the 3Dfx Foundry under the direction of 3Dfx, for\nSega's acceptance testing in accordance with the acceptance procedure set forth\nin Section 2.2(b) below. Prior to each delivery, 3Dfx shall have completed all\nrequired testing applicable to such Deliverables to ensure material compliance\nwith all applicable Specifications.\n\n                 (b)      ACCEPTANCE TESTING.\n\n                          (i)     ACCEPTANCE STANDARDS. Following receipt of\nthe Deliverables for each Milestone, Sega shall have twenty-one (21) calendar\ndays (the \"VERIFICATION PERIOD\") in which to use commercially reasonable\nefforts to review, examine and verify such Deliverables and notify 3Dfx of any\nmaterial failure thereof to meet the applicable Specifications (a \"DELIVERABLE\nFAILURE\").\n\n                                  (A)      ALPHA AND BETA VERSION ACCEPTANCE\nSTANDARDS. The Alpha and Beta Version [*]s will each be deemed to have met\nthe applicable Specifications and be accepted by Sega if (i) the Verification\nTest Games run successfully with each of the Alpha and the Beta Version\n[*]s in a Sega-approved personal computer test environment, [*], which \nshall be tested on the [*] Console; and (ii) the applicable set of the Test \nVectors runs successfully with each of the Alpha and the Beta Version [*]s.\n\n                                  (B)      PRODUCTION VERSION ACCEPTANCE\nSTANDARDS. The Production Version will be deemed to have met the applicable\nSpecifications and be accepted by Sega if it satisfies the Beta Version\nAcceptance Standard set forth above and performs in accordance with the\nSpecifications as verified by the Four Corner Manufacturing Process Test.\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       6\n\n\n   7\n                          (ii)    ACCEPTANCE PROCEDURE. Sega agrees to use\ncommercially reasonable efforts to detect any Deliverable Failure during the\nVerification Period, and if Sega discovers any Deliverable Failure, it shall\npromptly provide 3Dfx with written notice of such Deliverable Failure,\nincluding all information reasonably available regarding such Deliverable\nFailure. Upon receipt of such notice, 3Dfx shall use best efforts, at 3Dfx's\nsole cost and expense, to correct any such Deliverable Failure and to resubmit\nthe corrected applicable Deliverables to Sega as soon as commercially and\ntechnically practicable, but in all cases within one hundred (100) days\nfollowing Sega's notification of a Deliverable Failure. If Sega does not\nprovide 3Dfx with notice of a Deliverable Failure within the Verification\nPeriod, the applicable Deliverable shall be deemed accepted by Sega. Subject to\nSections 2.2(b)(iii) and 2.2(b)(iv) below, 3Dfx shall repeat the process of\ncorrection and resubmission of an applicable Deliverable, subject to additional\nVerification Periods, until Sega's acceptance. The parties agree that any\nfailure by Sega to discover and notify 3Dfx of defects within any Verification \nPeriod shall not negate any of 3Dfx's representations or warranties, nor waive\nany of Sega's rights or remedies.\n\n                          (iii)   EXCLUSIVE REMEDIES FOR ALPHA VERSION [*]\nDELAY.\n\n                                  (A)      PLACEMENT OF SEGA ENGINEERS. In the\nevent that (1) 3Dfx fails to deliver the Alpha Version [*]  (the \"ALPHA DELIVERY\nDATE\" as scheduled in accordance with the Development Schedule) and has not\nshipped the [*] Mask Data Set for the Alpha Version [*] to the 3Dfx Foundry\nwithin sixty (60) days of the Alpha Delivery Date, or (2) 3Dfx delivers the\nAlpha Version [*] on or before the Alpha Delivery Date, Sega has informed 3Dfx\nof a Deliverable Failure, and 3Dfx has not shipped the [*] Mask Data Set for the\ncorrected Alpha Version [*] to the 3Dfx Foundry within sixty (60) days of such\nnotification, then Sega may require 3Dfx to allow a team of Sega engineers to\nassist the 3Dfx * Graphics [*] design team. 3Dfx will, however, retain the\ncontrol of the management of the development obligations under this Agreement.\n[*] Sega engineers may be placed on-site at the [*] development team location\n(the \"3DFX FACILITIES\") until the Production Version [*] for the Sega Foundry is\naccepted by Sega in accordance with Section 2.3(a)(iii), unless otherwise\nrequested by 3Dfx and agreed to by Sega. 3Dfx shall cooperate regarding the\nplacement of Sega engineers at the 3Dfx Facilities, including, but not limited\nto, the provision at 3Dfx's expense of sufficient office and lab facilities,\npersonal computers, and workstations.  Sega shall be responsible for salary or\nother compensation of such Sega engineers.\n\n                                  (B)      3DFX HOUSE RULES. While working at\nthe 3Dfx Facilities, all Sega engineers and other personnel shall: (i) at all\ntimes comply with all of 3Dfx's safety, security and mutually agreed\nconfidentiality policies and procedures; and\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       7\n\n\n   8\n(ii) limit their activities solely to assisting 3Dfx in the development of the\n[*] Graphics [*]. Sega will maintain its standard general liability\ninsurance to protect against covered damages, costs or fees (including\nreasonable attorney's fees) arising out of or relating to any property damage,\nbodily injury, sickness, disease or death, caused directly by any negligent act\nor omission of any Sega personnel while on premises at the 3Dfx Facility, and\nwill name 3Dfx as an additional insured under such issuance. All such Sega\npersonnel shall execute confidentiality agreements reasonably acceptable to\nSega and 3Dfx.\n\n                                  (C)      ALPHA TERMINATION REMEDY. In the\nevent that 3Dfx fails to deliver the Alpha Version [*], in compliance with\nthe Specifications and acceptance criteria thereof, within one hundred (100)\ndays of the Alpha Delivery Date, then Sega in its sole discretion may: (i)\nterminate the requirement that 3Dfx develop the Alpha Version [*]; or (ii)\ndetermine that 3Dfx should continue its efforts to correct the Alpha Version\n[*] by a date determined by Sega. In the event that Sega elects to\nterminate the Alpha Version development as provided above, [*]. Provided that\nthroughout the Alpha Version [*] development, until completed or terminated\nas provided above, 3Dfx provides commercially reasonable efforts to complete\nsuch development, the remedies set forth in this Section 2(b)(iii) shall be\nSega's exclusive remedy for delays in Alpha Version [*] development.\n\n                          (iv)    ADDITIONAL REMEDIES: BETA VERSION [*]. If\nSega does not accept the Beta Version [*] pursuant to the procedure set\nforth in Section 2.2(b)(ii) by [*] then Sega shall have additional remedies \nas follows:\n\n                                  (A)      RECOUPMENT OF EXPENSES. Sega may\nrecoup out of any advances or royalties owed to 3Dfx Sega's expenses incurred\nin relation to 2.2(b)(iii)(A); and\n\n                                  (B)      REDUCTION OF MANUFACTURING ROYALTY.\nSega may reduce the Manufacturing Royalty to be paid by Sega to 3Dfx for the\nfirst [*] Console Units under Section 4.1 hereof, such reduction to be in \nthe amount of [*] U.S. for each [*] Console Unit; and\n\n                                  (C)      FREE COST REDUCTION PROJECT. Sega\nmay require 3Dfx to perform, at no cost or expense to Sega, the work necessary\nto complete the first \"Cost Reduction Project\", as defined in Section 2.4\nhereof; and\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       8\n\n   9\n                                  (D)      PLACEMENT OF SEGA ENGINEERS. Subject\nto the conditions of Section 2.2(b)(iii)(B), Sega may require 3Dfx to allow a\nteam of Sega engineers to assist the [*] [*] [*] [*] design team,\nwhether or not Sega has done so previously pursuant to Section 2.2(b)(iii).\n3Dfx will, however, retain the control of the management of the development\nobligations under this Agreement. [*] such Sega engineers may be placed\non-site at the [*] Facilities until the Production Version [*] for the\nSega Foundry is accepted by Sega in accordance with Section 2.3(a)(iii), unless\notherwise requested by 3Dfx and agreed to by Sega. 3Dfx shall cooperate\nregarding the placement of Sega engineers at the 3Dfx Facilities, including,\nbut not limited to, the provision at 3Dfx's expense of sufficient office and\nlab facilities, personal computers, and workstations. Sega shall be responsible\nfor salary or other compensation of such Sega engineers.\n\n                                  (E)      TERMINATION FOR BETA DELAY. In the\nevent that Sega has not accepted the Beta Version [*] by [*], [*] \nthen Sega may terminate the Agreement without obligation to make any further\npayments of any kind to 3Dfx and seek recovery of damages caused to Sega by the\ndelay in the delivery of the Beta Version [*], provided, however, that any\nterm of this Agreement notwithstanding, 3Dfx's liability to Sega for such\ndamages shall not exceed [*] the engineering services charges paid by Sega to\n3Dfx under this Agreement. In addition, if Sega terminates the Agreement as\nprovided above, Sega may exercise the rights described in Section 3.2(e).\nProvided that throughout the Beta Version [*] development, until completed\nor terminated as provided above, 3Dfx provides commercially reasonable efforts,\nincluding without limitation, that 3Dfx makes no reductions in staffing or\nother resources, to complete such development, the remedies set forth in this\nSection 2.2(b)(iv) shall be Sega's exclusive remedy for delays in Beta version\n[*] development. In the event that 3Dfx does not provide commercially\nreasonable efforts, by (for example) reducing staffing or other resources, or\notherwise, to complete such development, the remedies set forth in this Section\n2.2(b)(iv) shall cease to be exclusive.\n\n         2.3     DEVELOPMENT TARGETED FOR SEGA FOUNDRY.\n\n                 (a)      SEGA FOUNDRY QUALIFICATION. Sega shall have the right\nto designate a Sega Foundry to manufacture the [*] Graphics [*], subject\nonly to such Sega Foundry satisfying reasonable requirements for qualification\nto manufacture. As set forth in this Section 2.3, 3Dfx shall timely evaluate,\nin accordance with the Development Schedule, or as otherwise agreed in writing\nby the parties, the reasonable requirements for the proposed Sega Foundry to\nmanufacture the [*] Graphics [*] on a commercial basis, and, 3Dfx will\npromptly review and reasonably qualify the Sega Foundry to manufacture the [*]\nGraphics [*].\n\n                          (i)     EVALUATION OF PROPOSED SEGA FOUNDRY\nDELIVERABLES.\n\n\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       9\n\n   10\nWithin a reasonable time after the Effective Date, Sega shall cause the proposed\nSega Foundry to deliver to 3Dfx the Sega Foundry Deliverables.  Within a\nreasonable time of receipt thereof, subject to the Development Schedule, 3Dfx\nshall commence evaluating the fabrication process set forth in the Sega Foundry\nDesign Rules to determine whether such process is adequate to manufacture the\n[*] Graphics [*] in a form that functions in conformance with the\nSpecifications. 3Dfx shall complete the evaluation of the fabrication and\nquality assurance process [*] provided that 3Dfx receives reasonable cooperation\nfrom the proposed Sega Foundry. As part of such evaluation process, 3Dfx may\nrequire, at 3Dfx's expense, (A) that the proposed Sega Foundry allow 3Dfx to\nsend its personnel to visit the proposed Sega Foundry facilities (subject to\n3Dfx's agreement to reasonable confidentiality and security procedures), and (B)\nthat the proposed Sega Foundry manufacture and provide to 3Dfx for evaluation\ncertain 3Dfx specified semiconductor chips. If qualification of the proposed\nSega Foundry is feasible, 3Dfx shall use reasonable efforts to assist the\nproposed Sega Foundry achieving qualification. If qualification of the proposed\nSega Foundry is not feasible, Sega shall propose an alternative Sega Foundry,\nand the parties shall repeat the foregoing evaluation process (including, if\nnecessary Sega's proposal of additional Sega Foundries), until, with 3Dfx's\nreasonable assistance, a proposed Sega Foundry is deemed qualified.\n\n                          (ii)    PORT OF [*] GRAPHICS [*] TO PROPOSED SEGA\nFOUNDRY. Within a reasonable time of 3Dfx providing written notice to Sega that\nit is probable that the proposed Sega Foundry will be able to manufacture the\n[*] Graphics [*] in a form that functions in conformance with the\nSpecifications, 3Dfx shall commence porting the [*] Graphics [*] to the\nmanufacturing process specified in the Sega Foundry Design Rules for the\nproposed Sega Foundry. Such porting may include 3Dfx, at its sole discretion,\nincorporating the Sega Foundry Cell Libraries into the * Mask Data Set to be\nused by the proposed Sega Foundry.\n\n                          (iii)   ACCEPTANCE OF PRODUCTION VERSION. Upon\ncompletion of such port, 3Dfx shall deliver the [*] Mask Data Set directly to\nthe proposed Sega Foundry for the sole purpose of allowing such proposed Sega\nFoundry to fabricate the Production Version [*] on a trial basis. No [*]\nMask Data Set will be provided to Sega. Sega will use commercially reasonable\nefforts to cause the proposed Sega Foundry to provide samples of the Production\nVersion [*] to 3Dfx no later than the date specified in the Development\nSchedule for the Production Version acceptance testing in accordance with\nSection 2.2(b) above. Upon Sega's providing written notice to 3Dfx of Sega's\nacceptance of such Production Version [*] manufactured by such proposed\nSega Foundry, the proposed Sega Foundry shall be deemed a Sega Foundry.\n\n                          (iv)    FOUNDRY AGREEMENT. As part of the\nqualification process, 3Dfx will require and Sega will cause each proposed Sega\nFoundry to execute confidentiality and\/or foundry manufacturing agreements in a\nform to be negotiated in good faith between Sega and 3Dfx, covering the\nproposed Sega Foundry's use of the\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       10\n\n   11\n[*] Mask Data Set and other 3Dfx Confidential Information, and the\nmanufacturing of the [*] Graphics [*]. Such agreements shall contain terms\nat least as protective of 3Dfx's Intellectual Property Rights as the terms and\nconditions of this Agreement, and shall include a term allowing 3Dfx reasonable\nrights to audit the Sega Foundry's records of units of the [*] Graphics [*]\nshipped to Sega.\n\n                 (e)      PROPOSED SEGA FOUNDRY DELAYS. Any delay, except for\ndelays caused by 3Dfx, in a proposed Sega Foundry delivering the Sega Foundry\nDeliverables or other evaluation materials, or the Production Version [*]s,\nto 3Dfx, shall, at 3Dfx's discretion and upon written notice to Sega, result in\nan extension of all directly affected Milestone completion dates set forth on\nthe Development Schedule by a period of time less than or equal to such delay.\n\n                 (f)      ADDITIONAL SEGA FOUNDRY OR PROCESS QUALIFICATION.\n\n                          (i)     SEGA REQUEST, PAYMENT AND PERFORMANCE. Sega\nmay request in writing that the parties arrange for [*] Sega Foundry\nto manufacture the [*] Graphics [*]. In such event, Sega shall pay 3Dfx an\nengineering services charge, to be negotiated in good faith by the parties, for\n3Dfx to perform an evaluation and qualification of such proposed Sega Foundry\n(such engineering services charge to be at least as favorable to Sega as the\nlowest amount charged by 3Dfx for similar work, and not to exceed a reasonable\nprice). All such evaluation and qualification work shall be performed in\naccordance with the provisions of this Section 2.3. [*]\n\n                          (ii)    QUALIFICATION OF NEW PROCESS AS A COST\nREDUCTION PROJECT. If the manufacturing process set for the in the Sega Foundry\nDesign Rules for the proposed Sega Foundry is reasonably considered by 3Dfx to\nbe a new process generation from either (A) the current fabrication process in\nuse at the 3Dfx Foundry for the manufacture of the [*] Graphics [*]s, or\n(B) the fabrication process described in the Sega Foundry Design Rules for the\ninitial Sega Foundry, then any such additional evaluation and qualification\nwork performed by 3Dfx under this subsection (f) shall be counted as a Cost\nReduction Project under Section 2.4 below.\n\n         2.4     COST REDUCTION DESIGN EFFORTS. [*]\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n                                       11\n\n   12\n[*]\n\n         2.5     DOCUMENTATION FOR [*] GRAPHICS CHIPSET. 3Dfx hereby agrees to\nprepare and deliver to Sega, in accordance with Schedule 2.5 (\"Documentation\nRequirements\") and the Milestones set forth on the Development Schedule for\n3Dfx's draft and final versions of the [*] Glide Programming Reference Manual.\n3Dfx shall be responsible and bear all costs for translating the [*] Glide\nProgramming Reference Manual from English to Japanese. 3Dfx shall deliver the\nfinal English version of the [*] Glide Programming Reference Manual\nsimultaneously to both Sega and 3Dfx's Japanese translator. Sega shall be\nresponsible for the English to Japanese tranlsations of all other documents\n(including the Specifications) that 3Dfx is obligated to deliver to Sega under\nthis Agreement. At no additional cost to Sega, 3Dfx shall review for accuracy\nthe first version of the first Japanese translation Sega prepares of the\nSpecifications, and 3Dfx shall make timely, written recommendations to Sega\nregarding changes and corrections to be made thereto. Subject to the licenses\ngranted by 3Dfx to Sega, 3Dfx shall be the owner of all such derivative works\nof all documents provided to Sega under this Agreement (including the [*] Glide\nProgramming Reference Manual and the Specifications), including any such\nderivative works prepared by Sega. For the duration of the license granted to\nSega in Section 3.2, 3Dfx grants a non-exclusive, royalty-free license to Sega\n(i) to use, reproduce, modify, and create derivative works of the [*] Glide\nProgramming Reference Manual and Specifications for all permitted uses under\nthis Agreement in connection with the licenses granted to Sega under Section 3,\nand (ii) to distribute with Sega Products the [*] Glide Programming Reference\nManual and derivative works thereof prepared by Sega.  Sega herby assigns to\n3Dfx all right, title, and\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       12\n\n   13\n\ninterest in and to any derivative works prepared by Sega of the [*] Glide\nProgramming Reference Manual and the Specifications, and agrees to execute all\ndocuments and assist 3Dfx in all actions necessary to implement such\nassignment.\n\n         2.6     [*] DEVELOPMENT BOARDS. Upon Sega's order and request, and\nsubject to 3Dfx's standard sales terms and conditions, 3Dfx shall supply Sega,\nwithin sixty (60) days of Sega's order, up to [*] at a cost of the lesser of:\n(i) [*] per board or (ii) the lowest 3Dfx customer price irrespective of volume.\nAll such [*] shall contain [*] and shall otherwise meet or exceed the\nspecifications listed in Schedule 2.6.\n\n         2.7     SPECIFICATIONS AND DESIGN REVIEW. The Pro Forma Specifications\nshall be attached hereto as Schedule 1.29 as of the Effective Date of this\nAgreement. Within five (5) days following the Effective Date, 3Dfx shall deliver\nto Sega the Specifications, which shall in all material respects be consistent\nwith the Pro Forma Specifications. No changes to the Specifications shall be\nmade unless agreed to in writing by the parties. On or before [*], the parties\nshall meet to discuss any proposed changes to the Specifications for Beta\nVersion production (the \"BETA DESIGN REVIEW\"). During the Beta Design Review and\nfor seven (7) days thereafter, the parties agree to negotiate in good faith any\nchanges to be made to the Specifications which would not reasonably cause any\nmaterial increase in the cost or difficulty of, or the time required to\ncomplete, 3Dfx's development effort; and (iii) 3Dfx and Sega shall negotiate in\ngood faith to reach agreement regarding any increase in cost (based upon\nmost-favored pricing) or schedule (based upon commercial best efforts) arising\nfrom changes not covered by Subsection (ii) above.\n\n         2.8     PAYMENT OF ENGINEERING SERVICES CHARGES FOR DEVELOPMENT PHASE.\nAs full and complete consideration (except for any contingent payments under\nSection 2.9) for the development by 3Dfx of the [*] Graphics [*],\ncompletion by 3Dfx of all of its development tasks and obligations under this\nAgreement, Sega shall pay to 3Dfx interim payments totaling the sum of [*] in\nengineering services charges according to the following Milestone schedule:\n\n\n\n\n\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n                                       13\n\n   14\nMILESTONE                                                    INTERIM PAYMENT\nSigning of Agreement between Sega and 3Dfx                   $ 1,550,000 U.S.\n\n                [*]                                                [*]\n\n                [*]                                                [*]\n\n                [*]                                                [*]\n\n                [*]                                                [*]\n\nAll interim payments above shall be due within twenty-one (21) days following\nthe date of Sega's acceptance of each Milestone. Sega and 3Dfx agree that the\nabove payments include full compensation to 3Dfx for the production and delivery\nto Sega, both at 3Dfx's expense, following Sega's acceptance of the relevant\nDeliverables, of all Alpha, Beta, and Production Version [*] samples, [*]\nThe Alpha, Beta, and Production Version [*] Samples may be manufactured by\neither the Sega or 3Dfx Foundry and shall be delivered according to the\ndevelopment Schedule. Sega may order additional Alpha, Beta, or Production\nVersion [*] samples from any remaining prototype wafers, at a cost not to\nexceed 3Dfx's actual costs. [*]\n\n         2.9     ON-TIME DELIVERY BONUS. With respect to each of the specified\nversions of the [*] Graphics [*] listed below, Sega shall pay 3Dfx a bonus\nfor on-time delivery (\"On-Time Delivery Bonus\"), in the amounts listed below,\nprovided that: (a) 3Dfx delivers all Deliverables relating to such versions in\nacceptable form on or before the Milestone delivery data specified in the\nDevelopment Schedule; and (b) Sega accepts such Deliverables upon the initial\nsubmission and testing of such Deliverables under Section 2.2.\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       14\n\n   15\n\n         DELIVERABLE                                     ON-TIME DELIVERY BONUS\n                                                                        [*]\n         [*]                                                            [*]\n                                                                        [*]\nAny On-Time delivery Bonuses earned by 3Dfx shall be paid to 3Dfx within\ntwenty-one (21) days of Sega's acceptance of each Deliverable.\n\n3.       LICENSES TO [*] GRAPHICS CHIPSET AND RELATED SOFTWARE\n\n         3.1     OWNERSHIP. As between the parties hereto, and subject to the\nlicenses granted to Sega herein, 3Dfx shall retain ownership of all of its\nexisting 3D graphics technology, the 3Dfx Glide Software, [*], and the Arcade\nToolbox, in existence as of the Effective Date of this Agreement, the [*]\nGraphics [*] Technology, the Alpha, Beta, and Production Versions, the [*]\nGraphics [*] Technology, the Alpha, Beta, and Production Versions, the [*]\nGraphics [*], the Specifications, the [*] Mask Data Set (exclusive of the Sega\nFoundry Deliverables), and all associated documentation and all related\nmodifications and derivative works, and all Intellectual Property Rights related\nthereto (the \"3Dfx Technology\"). Subject to 3Dfx's rights to the 3Dfx\nTechnology, Sega shall retain all rights to the [*] Console Technology, the Sega\nDeliverables (as defined in Section 3.4(a)), and all associated documentation\nand all related modifications and derivative works, and all Intellectual\nProperty Rights related thereto. Sega grants 3Dfx no license of any kind in or\nto the [*] Console Technology.\n\n         3.2     [*] GRAPHICS [*] LICENSE\n\n                 (a)      GRANT OF LICENSE. 3Dfx hereby grants to Sega, and\nSega hereby accepts, a royalty-bearing, worldwide license, including a license\nunder, all Intellectual Property Rights owned or licensable by 3Dfx; [*] \n\n                 (b)      LIMITATIONS AND RESERVATION OF RIGHTS. Sega shall\nnot, and shall not cause or authorize any third party, including but not\nlimited to a Sega Foundry, to sell, lease, license, sublicense, or otherwise\nprovide the [*] Graphics [*] as stand-\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       15\n\n   16\nalone components. Sega shall not reverse engineer, nor authorize a third party\nto reverse engineer, the [*] Graphics [*] or * Mask Data Set to determine\nthe internal functioning of the [*] Graphics [*]. No license or right is\ngranted, by implication or otherwise to Sega, under any Intellectual Property\nRights now or hereafter owned or controlled by 3Dfx except for licenses and\nrights expressly granted in this Agreement.\n\n                 (c)      LIMITED EXCLUSIVITY CONFERRED ON SEGA. [*] \n\n                 (d)      LIMITED EXCLUSIVITY CONFERRED ON 3DFX. Sega hereby\nagrees that, for a period of three (3) years following the Sega Acceptance\nDate, provided that 3Dfx is not in breach of its obligations under this\nAgreement, Sega will not incorporate any 3D video graphics accelerator other\nthan the [*] Graphics [*] into the [*] Console.\n\n                 (e)      LIMITED COVENANT OF NONASSERTION.\n\n                          (i)     COVENANT. 3Dfx will not assert against Sega\nany claim of infringement or misappropriation of its Intellectual Property\nRights embodied in the technical information concerning how the [*] Graphics\n[*] communicates with the [*] Console or other Sega products, such as\nexternal communications protocols or bus specifications, [*] \n\n                          (ii)    LIMITATION. Without limitation of the\nlicenses granted by 3Dfx to Sega, and as provided under this Section 3.2(e),\n3Dfx reserves and retains the right to assert against Sega claims of\ninfringement or misappropriation of any of 3Dfx's Intellectual Property Rights\n(including Intellectual Property Rights in the [*] Interface\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n\n                                       16\n\n   17\nInformation). The covenant of non-assertion set forth in this Section 3.2(e)\ndoes not constitute a license to Sega or any third party of any 3Dfx\nIntellectual Property Rights in the [*] Graphics [*] or the individual [*] or\n[*], except as otherwise provided in this Section 3.2.\n\n         3.3     SOFTWARE LICENSES.\n\n                 (a)      3DFX GLIDE AND [*] SOFTWARE.\n\n                          (i)     LICENSE GRANTS BY 3DFX. 3Dfx hereby grants to\nSega, and Sega hereby accepts, a nonexclusive, royalty-free, worldwide license\nincluding a license under all Intellectual Property Rights owned or licensable\nby 3Dfx: (i) to use and copy the Source Code of the 3Dfx Glide Software and \n[*] for internal use solely in the development, manufacture and support of Sega\nProducts, (ii) to use, copy, distribute, and sublicense to third parties, under\na standard form software license agreement at least as protective of 3Dfx's\nrights in the Driver Software as the terms and conditions of this Agreement, the\nrights to use, copy, and distribute the Driver Software in binary form solely\nfor use in connection with Sega Products; and (iii) to adapt, modify, customize,\nor otherwise transform the 3Dfx Glide Internals solely for use with Sega\nProducts; provided that (A) no such adaptations, customizations, modifications\nor transformations alter, change, modify, or otherwise affect the operation or\nfunctioning of the 3Dfx Glide API, and (B) that Sega agrees to make such\nadaptations, customizations, modifications and transformations available to 3Dfx\nas provided under subsection (ii)(C) below.\n\n                          (ii)    LIMITATIONS.\n\n                                  (A)      Sega may not use, and may not\nauthorize a third party to use, the Source Code of the 3Dfx Glide Software to\nreverse engineer the [*] Graphics [*];\n\n                                  (B)      Sega shall have no right to\ntransfer, sublicense or otherwise convey the Source Code of the 3Dfx Glide\nSoftware to any third party; and\n\n                                  (C)      Sega agrees that, provided 3Dfx is\nnot in breach of this Agreement, Sega shall deliver to 3Dfx on an \"as is\" basis\ncopies of Source Code for all adaptations, customization, modifications,\ntransformations, or derivative works of the 3Dfx Glide API developed by Sega\nwith 3Dfx's consent; and Sega grants, and 3Dfx hereby accepts, a nonexclusive,\nnontransferable, license to use, copy, modify, distribute and make derivative\nworks from any adaptations, modifications, or other changes to the 3Dfx Glide\nAPI, made by Sega. The parties agree to negotiate in good faith regarding the\npossibility of delivery by Sega and licensing to 3Dfx of any adaptations,\nmodifications, or other changes to the 3Dfx Glide Internals, made by Sega.\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n\n                                       17\n\n   18\n\n                 (b)      ARCADE TOOL BOX. 3Dfx hereby grants to Sega, and Sega\nhereby accepts, a nonexclusive, royalty-free, unrestricted, worldwide license\nto adapt, modify, customize, or otherwise transform, and to distribute and\nsublicense the Arcade Tool Box, including without limitation, the Source Code\nthereof. Except as otherwise agreed in writing, 3Dfx will have no obligation to\nprovide Sega or any sublicensee of Sega with support for the Arcade Tool Box or\nany enhancements, improvements or modifications to the Arcade Tool Box.\n\n                 (c)      EVALUATION OF 3DFX GLIDE API FOR [*] CONSOLE. Sega\nagrees to promptly evaluate the 3Dfx Glide API after delivery thereof for use\nas a standard graphics API for use with the [*] Graphics [*] in the [*]\nConsole. Sega shall advise 3Dfx of its decision regarding the Glide API no\nlatter than the date specified on the Development Schedule.\n\n[*]\n                 (d)      DRIVER SOFTWARE SUPPORT. For a period [*]\nSega's acceptance of the Production Version, 3Dfx, at no\nadditional cost to Sega, will provide Sega with maintenance and technical\nsupport for the unmodified Driver Software to enable Sega to support its [*]\nConsole customers in accordance with the Driver Software Support Profile\nattached as Schedule 3.3(d). Such maintenance and support shall include: all\nchanges, upgrades, or enhancements to the Driver Software developed\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n\n                                       18\n\n   19\nand made available in the ordinary course of business by 3Dfx and 3Dfx's prompt\ncorrection of all material errors known by 3Dfx or brought to its attention by\nSega or third parties. 3Dfx shall have no obligation to support Sega customers\ndirectly.\n\n         3.4     SEGA DELIVERABLES AND SEGA FOUNDRY DELIVERABLES.\n\n                 (a)      OWNERSHIP AND LICENSE TO SEGA DELIVERABLES. As\nbetween the parties hereto, Sega shall retain ownership of all Sega technology,\ndesigns, specifications, code, interfaces and protocols (collectively, \"SEGA\nDELIVERABLES\") it supplies to 3Dfx for development of the [*] Graphics [*],\nincluding all Intellectual Property Rights related thereto, whether or not\nembodied in the [*] Console, [*] Console Technology, or Sega Foundry\nDeliverables. Sega grants, and 3Dfx accepts, a limited, non-exclusive license\nsolely during the term of this Agreement, to use internally the Sega\nDeliverables solely to develop and support the [*] Graphics [*] for Sega,\nand otherwise perform its obligations hereunder.\n\n                 (b)      SEGA FOUNDRY DELIVERABLE LICENSE. Subject to the\nterms and conditions of this Agreement and a Foundry Agreement as specified in\nSection 2.3(a)(iv), Sega agrees to cause the Sega Foundry to grant 3Dfx a\nworldwide, non-exclusive, non-transferable, royalty-free license to (i) use the\nSega Foundry Deliverables solely to qualify the Sega Foundry under Section 2.3,\nand (ii) incorporate the Sega Foundry Deliverables into the [*] Graphics\n[*] and resulting [*] Mask Data set solely to provide same to the Sega\nFoundry to manufacture such [*] Graphics [*] on behalf of Sega.\n\n                 (c)      LICENSE RELATING TO SEGA ENGINEERS. With respect to\nany developments, improvements, inventions, enhancements or discoveries\n(\"FIXES\") made by Sega engineers at the 3Dfx Facilities pursuant to Section\n2.2(b)(iii)(A) or Section 2.2(b)(iv)(D), which are provided to 3Dfx and reduced\nto a writing, Sega hereby grants to 3Dfx a limited, non-exclusive, worldwide,\nroyalty-free, perpetual, irrevocable license including a license under all\nIntellectual Property Rights owned by Sega and embodied in the Fixes (i) to\nuse, reproduce, modify, and make derivative works of such Fixes, (ii) subject\nto the restrictions of this Agreement, to manufacture, have manufactured,\ndistribute, and sublicense the Fixes, and derivatives thereof, as embodied in\nthe * Graphics [*] or derivatives thereof; and (iii) the unlimited right\nto sublicense to third parties (with the right to further sublicense to any\nlevel of tiers) all of the rights set forth in subsections (i) and (ii)\nimmediately above.\n\n         3.5     PROPRIETARY MARKS AND MARKING REQUIREMENTS. Subject to Sega's\nprior written approval as to form, size and location, which approval shall not\nbe unreasonably withheld, Sega will not delete or alter in any material manner\nthe Intellectual Property Rights markings of 3Dfx, and its suppliers, if any,\nappearing on or in any 3Dfx product delivered to Sega. Sega agrees to (i)\nreproduce and display such markings on each copy it\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       19\n\n   20\nmakes of any 3Dfx product, and (ii) place in the documentation accompanying the\n[*] Console the phrase: \"3D graphics accelerated by 3Dfx.\"\n\n4.       [*] MANUFACTURING ROYALTIES\n\n         4.1     [*] CONSOLE MANUFACTURING ROYALTIES. As consideration for\nthe license to manufacture and distribute the [*] Graphics [*] as a\ncomponent of the [*] Console, Sega shall pay Net Royalties to 3Dfx, based\nupon the cumulative volume of [*] Units (\"MANUFACTURING ROYALTIES\"),\naccording to the following schedule:\n\nNUMBER OF [*] UNITS\nMANUFACTURING ROYALTY\n[*]\n\n[*]\n\n         4.2     [*] CONSOLE ROYALTY PREPAYMENT. Within thirty (30) days\nfollowing the Sega Acceptance Date, Sega shall pay to 3Dfx a royalty advance in\nthe amount of [*] U.S. (the \"FIRST ADVANCE\"), to be credited against the\nManufacturing Royalties due in the aggregate under Sections 4.1 and 4.4.\nThereafter, on the first anniversary of the Sega Acceptance Date, if the\naggregate amount of the First Advance plus all additional Manufacturing\nRoyalties payable by Sega to 3Dfx under Sections 4.1 and 4.4 combined is less\nthan a total of [*] U.S., then Sega shall pay 3Dfx an additional royalty\nadvance (the \"SECOND ADVANCE\") in an amount such that the total of the First\nAdvance, the Manufacturing Royalties paid as of the first anniversary of the\nSega Acceptance Date, and the Second Advance is equal to [*] U.S. If the\napplicable per unit Manufacturing Royalty is reduced pursuant to Section\n2.2(b)(iv) for late delivery by 3Dfx of the Beta Version, then the First\nAdvance required under this Section 4.2 shall be reduced to [*] U.S., and the\nthreshold amount for purposes of any Second Advance shall be reduced to [*]\nU.S.\n\n         4.3     3DFX REFERENCE COSTS. 3Dfx shall publish, not less than once\neach calendar quarter, a reference cost [*] such reference cost to be based on\nthe then-current lowest purchase price that 3Dfx pays to the 3Dfx Foundry or\nthat 3Dfx is quoted from the Sega Foundry (the \"REFERENCE COST\"). For a period\nof three (3) years from the date of Sega's acceptance of the Production Version\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       20\n\n   21\n\n[*], 3Dfx shall establish the Reference Cost once each calendar quarter,\nbased upon the lowest purchase price paid by any third party to 3Dfx [*]\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n                                       21\n\n   22\n[*]\n\n         4.5     PAYMENT TERMS, REPORTING, AND AUDITS\n\n                 (a)      PAYMENT TERMS.\n\n                          (i)     [*] CONSOLE ROYALTIES. Sega shall make all\npayments due to 3Dfx under Section 4.1 within forty-five (45) days of the end\nof each calendar quarter based on the number of [*] Units purchased and\naccepted by Sega during each calendar quarter.\n\n[*]\n\n                          (iii)   INTEREST. Payments made after the due date\nshall bear interest at one percent (1%) over the prime rate offered by the Bank\nof America.\n\n                 (b)      PAYMENT REPORTS AND RECORDS. Within forty-five (45)\ndays after the close of each quarter ending March 31, June 30, September 30 and\nDecember 31, Sega will deliver to 3Dfx a report which will provide all\ninformation reasonably necessary for computation and\/or confirmation of (i) the\npayments, if any, due or credited to 3Dfx for such quarterly period, and (ii)\nthe number of [*] Consoles manufactured in such quarterly period and the\nnumber of [*] Graphics [*]s incorporated into [*] Games. Sega will\nmaintain reasonable records to support payments required under this Agreement,\nregarding purchases of the [*] Units and manufacture of [*] Consoles and\nthe use of [*] Graphics [*]s in [*] Games.\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       22\n\n   23\n                 (c)      AUDIT. At 3Dfx's sole cost and expense (except as\nprovided below), an internationally recognized independent certified public\naccounting firm selected by 3Dfx, subject to Sega's reasonable approval and\nconsent and execution of a confidentiality agreement acceptable to Sega, may,\nupon reasonable notice and during normal business hours, inspect the records of\nSega on which such reports are based no more than once annually during this\nAgreement to determine any over payments or underpayments. If, upon performing\nsuch audit, it is determined that Sega has underpaid 3Dfx by an amount greater\nthan five percent (5%) of the payments due 3Dfx in the period being audited,\nSega will bear all reasonable expenses and costs of such audit and shall\nimmediately make full payment of the shortfall, plus interest at one percent\n(1%) over the prime rate offered by the Bank of America. Sega shall be entitled\nto all reports and work papers of the auditor and any overpayment shall be\ncorrected promptly via a refund by 3Dfx, or at Sega's sole option, via a credit\nagainst future Sega payments.\n\n5.       LICENSES TO SEGA [*] GAMES\n\n         5.1     PORTING OF SEGA GAMES. Sega and 3Dfx agree to the terms and\nconditions of this Section 5 regarding the possible porting to the 3Dfx Glide\nAPI, and the possible bundling by 3Dfx with 3Dfx hardware, of certain\ncoin-operated arcade or consumer console video game software, which is owned or\nlicensable by Sega and not subject to any conflicting grant of rights in favor\nof any third parties (\"SEGA GAMES\"), for distribution by 3Dfx solely as bundled\nproduct in the personal computer (\"[*]\") market. 3Dfx hereby acknowledges that\nSega has previously granted to Sega Entertainment the right of first refusal to\nport certain Sega video games for use on [*] hardware.\n\n                 (a)      GRANT OF LICENSE. Provided that 3Dfx maintains its 3D\ntechnology [*] graphics product at performance levels equal to or exceeding the\nperformance of competitive products, Sega agrees to offer 3Dfx a nonexclusive,\nnontransferable, royalty-free license, to be exercised by 3Dfx in its sole\ndiscretion at its sole expense, to port up to [*] Sega Games each year for a\nperiod of three years from the date of this Agreement (the \"PORTABLE SEGA\nGAMES\"), solely to port such Portable Sega Games to the then-current 3Dfx Glide\nAPI solely for release as bundled, retail [*] software products bundled with\n3Dfx [*]-based graphics hardware products. Sega shall consider in good faith any\nselection request of 3Dfx as to the Portable Sega Games to be ported, provided\nthat the final decision with respect to such selection shall be Sega's, in its\nsole discretion. Sega may, in its sole discretion and in lieu of the foregoing\nlicense to 3Dfx, port up to [*] Portable Sega Games per year, porting them to\nthe then-current 3Dfx Glide API for release by 3Dfx solely as bundled retail [*]\nSoftware products bundled with 3Dfx [*]-based graphics hardware products.\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       23\n\n   24\n\n                 (b)      OPTIMIZATION EFFORTS. U.S. Each party agrees that\nwhenever it is the party undertaking the porting of Portable Sega Games under\nthis Section 5, it shall use diligent efforts to optimize the ported Portable\nSega Games for advanced features of the 3Dfx [*] graphics product, and to\nmaintain optimizations or functions specific to the * Graphics [*]\nprovided that such functions are supported in the then-current 3Dfx [*] graphics\nproduct.\n\n         5.2     BUNDLING RIGHTS. During the term of the rights granted under\nthis Section 5, Sega shall offer 3Dfx a right of first negotiation for the\nrights to bundle Sega Games other than the Portable Sega Games with 3Dfx [*]\ngraphics hardware. The Sega Games covered by this Section 5.2 shall be limited\nto Sega Games that Sega has the right to port to [*] hardware and bundle, and as\nto which the right of negotiation hereunder does not conflict with any other\nrights granted by Sega to third parties.\n\n                 (a)      With respect to any covered Sega Products, 3Dfx's\nright of first negotiation shall commence upon the earlier of Sega's public\nannouncement, which shall be copied to 3Dfx, or notice to 3Dfx, of its\nintention to release such Sega Game for the [*] market. The parties agree to\nnegotiate in good faith for thirty (30) days following Sega's announcement\nnotice, provided that if the parties are unable to reach agreement during such\nthirty-day period, Sega may negotiate with and contract with any other party\nfor bundling of the applicable Sega Game. Sega's obligation to negotiate during\nthe thirty-day period is conditioned upon 3Dfx providing Sega with an\nacknowledgment of interest within seven (7) days after 3Dfx's receipt of Sega's\nannouncement or notice.\n\n                 (b)      If, within six (6) months after Sega's announcement\nor notice as to any covered Sega Game (and provided that 3Dfx gave Sega notice\nof its interest pursuant to Section 5.2(a)), Sega has not contracted for the\nbundling of such Sega Game, and Sega it not under any conflicting obligations\nto any third party, and Sega receives an offer from a third party to bundle\nsuch Sega Game with [*] hardware utilizing 3Dfx graphics products, Sega will\n(unless prohibited by the terms of the pending offer or any other obligations)\nallow 3Dfx the opportunity to meet or better the pending offer and negotiate\nwith Sega for fifteen (15) days to reach agreement. If the parties do not reach\nagreement within 15 days, Sega shall have no further obligation to negotiate\nwith 3Dfx as to such Sega Game.\n\n         5.4     TERMS OF LICENSE. The rights granted under this Section 5\nshall commence upon the Sega Acceptance Date and shall continue, subject to the\nterms hereof, for three years.\n\n         5.6     INDEPENDENT OBLIGATIONS. Each party acknowledges that this\nSection 5 is intended as an independent agreement and in no event will the\nperformance or breach of\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       24\n\n   25\nthis Section 5 affect in any way the parties' performance or obligations under\nthe other terms of this Agreement. In the event of a breach of this Section 5,\nthe non-breaching party's right to terminate shall only operate to terminate\nthis Section 5 without any effect on the other terms of this Agreement. Any\nclaim for damages for breach under this Section 5 shall be limited by Section\n8.5.2.\n\n6.       DESIGN INTEGRATION, 3DFX TECHNICAL SUPPORT, AND UPDATES.\n\n         6.1     [*] CONSOLE DESIGN INTEGRATION. 3Dfx shall provide reasonable\nconsultation and assistance to Sega, and Sega's third-party component\ndevelopers, at no charge, for the integration of the [*] Graphics [*] into\nthe [*] Console. The scope of such consultation and assistance shall include,\nupon Sega's request, periodic telephonic, e-mail, and written consultation, and\n[*] engineering assistance at locations designated by Sega. Sega agrees to pay\n3Dfx's reasonable travel and accommodation expenses for on-site assistance, and\n3Dfx's engineering services charges at 3Dfx's most-favored customer rates for\n[*] engineering assistance [*].\n\n         6.2     TECHNICAL SUPPORT. For [*] after Sega's acceptance\nof the Production Version [*], 3Dfx shall provide technical, quality\nassurance, and engineering assistance to Sega with respect to the [*] Graphics\n[*] in accordance with the 3Dfx [*] Support Profile to be negotiated in\ngood faith between the parties, in connection with supporting Sega's [*]\nConsole customers; provided, however, that 3Dfx has no obligation to provide\nany support for additional [*] terms for a fee to be negotiated in\ngood faith, provided that Sega is then continuing to ship substantial\ncommercial quantities of Sega Products which incorporate the [*] Graphics\n[*].\n\n         6.3     FOUNDRY SUPPORT. 3Dfx shall use commercially reasonable\nefforts to provide assistance to the 3Dfx Foundry and Sega Foundries to enable\nthe 3Dfx Foundry and Sega Foundries to meet the cost and yield targets defined\nin Schedule 6.3.\n\n         6.4     NO UPDATES. Without limiting 3Dfx's warranty, support and\nother obligations under this Agreement, 3Dfx has no obligation to deliver to\nSega updates, improvements, modifications, or further developments relating to\nthe [*] Graphics [*] unless pursuant to a Cost Reduction Project or as\notherwise agreed by the parties in writing.\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       25\n\n   26\n7.       PURCHASING\n\n         Sega shall purchase all units of the [*] Graphics [*] required to\nmanufacture the [*] Console [*] from the Sega Foundries or the 3Dfx Foundry.\n3Dfx makes no warranty or representation as to the price per unit quantity of\nunits available, or quality of manufacture, of [*] Graphics [*] manufactured by\nthe Sega Foundries or the 3Dfx Foundry. All purchases by Sega of units of the\n[*] Graphics [*] shall be subject to the terms and conditions of separate\nagreements reached by and between Sega and the foundries; provided, however,\nthat 3Dfx will take all steps required to authorize the 3Dfx Foundry and\nqualified Sega Foundries to sell units of the [*] Graphics [*] to Sega.\n\n8.       REPRESENTATIONS, WARRANTIES AND GENERAL COVENANTS\n\n         8.1     REPRESENTATIONS AND WARRANTIES OF 3DFX. 3Dfx covenants,\nrepresents and warrants all of the following:\n\n         8.1.1    Beginning on the date of Sega's acceptance of the Production\nVersion [*], continuing [*] (the \"WARRANTY PERIOD\"), the [*] Graphics [*], and\nall Deliverables, portions or components related thereto shall be free of\nmaterial defects and operate in all material respects in conformance with the\nSpecifications and other requirements of this Agreement (any failure thereof, a\n\"DESIGN DEFECT\"). In the event that Sega notifies 3Dfx of any Design Defects,\n3Dfx shall use best efforts to diligently correct any such nonconformities by\n(i) revising the [*] Mask Data Set and providing such revised [*] Mask Data Set\nto the 3Dfx Foundry and the Sega Foundries, and (ii) providing to Sega software\nwork-arounds or patches for existing defective [*] Graphics [*]s. If, as a\nresult of Design Defects, Sega replaces defective [*], whether in Sega's\npossession or by recall, 3Dfx shall pay the 3Dfx Foundry or Sega Foundries for\nall manufacturing and shipping costs in order to deliver to Sega royalty-free,\ncorrected replacements for such [*]; provided, however, that 3Dfx shall have no\nreplacement liability with regard to Design Defects which Sega detected during\nits testing of the [*] Console internally or by independent prospective and\nactual software developers for the [*] Console, and which Sega did not report to\n3Dfx upon detection. Except as provided above, 3Dfx shall not be responsible for\nthe cost of any product recall, for replacement of defective [*] Graphics [*]s\nor components thereof, nor for a refund of any royalties paid by Sega. 3Dfx\nshall not be liable to Sega for manufacturing defects caused by the 3Dfx Foundry\nor Sega Foundries, nor the costs for any product recall or replacement of any\n[*] Graphics [*] resulting therefrom. The remedies set forth in this Section\nshall be Sega's sole and exclusive remedy for Design Defects.\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n                                       26\n\n   27\n         8.1.2   The [*] Graphics [*] will conform to the Specifications,\nand all components of the * Graphics [*] will operate together as an\nintegrated subsystem. [*]\n\n         8.1.3   The [*] Graphics [*] as provided by 3Dfx will not contain\nany undocumented material features of any kind whatsoever.\n\n         8.1.4   All services rendered by 3Dfx in connection with this\nAgreement shall be provided in a timely manner in accordance with the highest\nprofessional standards and practices, and 3Dfx's personnel performing such work\nshall have the requisite expertise and ability to perform the tasks assigned to\nthem.\n\n         8.1.5   3Dfx has full authority to execute and deliver this Agreement\nand to consummate the transactions contemplated hereby, and this Agreement will\nnot violate any other agreement to which 3Dfx is or becomes a party nor any\nlaw, court order or decree to which 3Dfx is subject.\n\n         8.1.6   The [*] Graphics [*] shall not infringe the Intellectual\nProperty Rights, exclusive of patent rights, of any third party as may now or\nin the future exist, and 3Dfx has the right to grant all of the licenses to\nSega hereunder, free from all claims, liens, security interests or other\nencumbrances. To the best of 3Dfx's knowledge, the [*] Graphics [*] shall\nnot infringe the patent rights of any third party as may now or in the future\nexist. 3Dfx shall not place on any of such software any liens, security\ninterests or other encumbrances that would in any manner affect Sega's licenses\nunder this Agreement.\n\n         8.1.7   Neither the [*] Graphics [*], nor the Driver Software (nor\nany portion thereof) contains or shall contain, at the time of installation,\nany timer, clock, counter, or other limiting design or routine, nor (to the\nbest of 3Dfx's knowledge) any virus, that causes or could cause any Sega\nProduct (or any portion thereof) to become erased, inoperable, impaired, or\notherwise incapable of being used in the full manner for which it was designed\nand licensed (including, without limitation, any design or routine that would\nimpede copying thereof) after being used or copied a certain number of times,\nor after the lapse of a certain period of time, or after the occurrence or\nlapse of any similar triggering factor or event. Furthermore, neither the [*]\nGraphics [*] nor Driver Software contains or shall contain, any virus,\nlimiting design, or routine that causes or\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n                                       27\n\n   28\ncould cause them or any of them to become erased, inoperable, impaired, or\notherwise incapable of being used in the full manner for which it was designed\nand licensed pursuant to this Agreement solely because it has been installed on\nor moved to a hardware unit or system that has a serial number, model number,\nor other identification different from the identification of the one on which\nit was originally installed.\n\n\n         8.1.8   The [*] Graphics [*] and Driver Software developed by 3Dfx\nwill not abruptly end or provide invalid or incorrect results during operation\nprior to, on or after January 1, 2000, or when given a valid date containing\ncentury, year, month, and day. For purposes hereof, a failure to \"operate\naccurately\" exists if any one or more of the following properties or\ncapabilities is lacking: (i) execution of calculations using dates with a\nfour-digit year; (ii) functionality (including both on-line and batch)\nincluding, but not limited to, entry, inquiry, maintenance, and update, to\nsupport four-digit year processing; (iii) interfaces and reports that support\nfour-digit year processing; (iv) successful transition, without human\nintervention, into the year 2000 using the correct system date (e.g.,\n01104\/2000); (v) after transition to the year 2000, continued processing with a\nfour-digit year without human intervention; (vi) calculation of leap year\ncorrectly; and (vii) provision of correct results in forward and backward data\ncalculation spanning century boundaries, including the conversion of previous\nyears currently stored as two digits.\n\n         8.1.9   Except for any license or other payments to be made by 3Dfx\nfor certain inbound elements of the 3Dfx Technology, no fees, licenses or\ncommissions are due or payable to any broker, finder, or other third party in\nconnection with this Agreement.\n\n         8.2     REPRESENTATIONS AND WARRANTIES OF SEGA. Sega convenants,\nrepresents and warrants all of the following:\n\n                 8.2.1    Sega has full corporate authority to execute and\ndeliver this Agreement and to consummate the transactions contemplated hereby,\nand this Agreement will not violate any other agreement to which Sega is or\nbecomes a party nor any law, court order or decree to which Sega is subject.\n\n                 8.2.2    All technology, designs, specifications, code,\ninterfaces and protocols developed internally by Sega, licensed by Sega to 3Dfx\nhereunder, and which are incorporated into [*] Graphics [*], do not\ninfringe the Intellectual Property Rights, exclusive of patent rights, of any\nthird party when incorporated into Sega Products, and Sega has the right to\ngrant all of the licenses to 3Dfx hereunder, free from all claims, liens,\nsecurity interests or other encumbrances. To the best of Sega's knowledge, all\ntechnology, designs, specifications, code, interfaces and protocols developed\ninternally by Sega, licensed by Sega to 3Dfx hereunder, and which are\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n\n\n\n\n\n                                       28\n\n   29\n\n                                            [*]=CONFIDENTIAL TREATMENT REQUESTED\n\n\nincorporated into [*] Graphics [*], do not infringe the patent rights of\nany third party when incorporated into Sega Products.\n\n         8.3     GENERAL COVENANTS. Neither party shall make representations,\nwarranties, or guarantees to anyone with respect to the specifications,\nfeatures, capabilities or operations of the other's products or services that\nare inconsistent with or in addition to this Agreement and such other party's\npublished literature. Neither party shall make modifications, enhancements or\nchanges to the other's products except as permitted hereunder nor shall it\npermit any of its respective agents, employees, or representatives to make any\nsuch modifications, enhancements or changes without the other's prior written\nconsent. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES\nANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,\nINCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A\nPARTICULAR PURPOSE AND NONINFRINGEMENT.\n\n         8.4     LIMITATIONS OF LIABILITY.\n\n                 8.4.1    EXCEPT AS OTHERWISE SPECIFIED IN THIS AGREEMENT,\nNEITHER PARTY SHALL, UNDER ANY CIRCUMSTANCES, BE LIABLE TO THE OTHER PARTY FOR\nANY CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL, OR EXEMPLARY DAMAGES\n(INCLUDING WITHOUT LIMITATION, LOST PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS\nOF DATA, OR BUSINESS LOSSES) EVEN IF SUCH DAMAGES ARE FORESEEABLE, AND EVEN IF\nTHE BREACHING PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES\nOCCURRING. THE LIMITS OF THIS SECTION 8.4.1 SHALL NOT PRECLUDE CLAIMS FOR\nACTUAL AND DIRECT DAMAGES, INCLUDING WITHOUT LIMITATION EXPENSES AND CHARGES\nINCURRED BY A PARTY AS A RESULT OF THE OTHER PARTY'S BREACH AND EXPENSES AND\nCHARGES TO MITIGATE DAMAGES RESULTING FROM THE OTHER PARTY'S BREACH.\n\n                 8.4.2    SUBJECT TO THE LIMITATIONS OF SECTION 8.4.1 ABOVE,\nAND EXCEPT WITH RESPECT TO INDEMNIFICATION UNDER SECTIONS 9.1 AND 9.2, CLAIMS\nARISING FROM INTENTIONAL BREACH, WILLFUL OR INTENTIONAL MISCONDUCT OR GROSS\nNEGLIGENCE, EACH PARTY'S LIABILITY TO THE OTHER FOR DAMAGES CLAIMS SHALL BE\nLIMITED TO [*].\n\n         8.5     SURVIVAL. The covenants, representations and warranties\ncontained in this Section 8 shall survive the termination or expiration of this\nAgreement.\n\n\n\n\n\n\n\n\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       29\n\n   30\n9.       INDEMNIFICATION AND INSURANCE\n\n         9.1     INDEMNIFICATION BY 3DFX. Subject to the terms of Section 9.3\nbelow, 3Dfx shall defend, indemnify and hold Sega harmless from and against any\nand all losses, damages, liability, and reasonable attorneys', expert witness,\nor court fees and costs, and any other reasonable costs and expenses arising\nfrom any claims, demands, suits, causes of action, or any other action brought\nby any third party alleging infringement of any Intellectual Property Right. In\nthe defense or settlement of any claim for Intellectual Property Rights\ninfringement, 3Dfx may obtain for Sega and all customers and users of affected\nSega Products the right to continue using and licensing the allegedly\ninfringing materials, or replace or modify same so that they become\nnon-infringing, provided that 3Dfx pays all costs incurred by Sega associated\nwith such replacement or modification and any modifications required to other\ncomponents.\n\n         9.2     INDEMNIFICATION BY SEGA. Subject to the terms of Section 9.3\nbelow, Sega shall indemnify and hold 3Dfx harmless from and against any and all\nlosses, damages, liability, reasonable attorneys', expert witness, or court\nfees and costs, and any other reasonable costs and expenses arising from any\nclaims, demands, suits, causes of action, or any other action brought by any\nthird party alleging infringement of any Intellectual Property Right other than\nas a result of 3Dfx's exercise of its rights under the license granted under\nSection 3.4(c), but excluding any claim which is covered by 3Dfx's\nindemnification of Sega in Section 9.1. In the defense or settlement of any\nclaim for Intellectual Property Rights infringement, Sega may obtain for 3Dfx\nthe right to continue using and licensing the allegedly infringing materials,\nor replace or modify same so that they become non-infringing. Notwithstanding\nany provision in this Agreement to the contrary, Sega shall have no liability\nor obligation to 3Dfx with respect to a court judgment that an exploitation or\nuse of anything provided by Sega to 3Dfx hereunder, in combination with any\n3Dfx Technology, infringes any Intellectual Property Rights of any third party,\nprovided that such exploitation or use alone (not in combination with any 3Dfx\nTechnology) would not infringe such third party's Intellectual Property Rights.\n\n         9.3     INDEMNIFICATION PROCEDURES. Neither party will have any\nobligation to indemnify the other party under Section 9.1 or 9.2, as the case\nmay be, unless: (A) the indemnifying party is promptly notified of a potential\nclaim by the party seeking indemnification; (B) the indemnifying party has sole\ncontrol of the defense and settlement (subject to reasonable consent of the\nindemnified party) of the claims sought to be indemnified; and (C) the party\nseeking indemnification provides the indemnifying party with reasonable\nassistance, at the indemnifying party's expense, in the defense and settlement\nof the claim sought to be indemnified. Each party shall have the right to\nparticipate in the defense and\/or settlement of such actions or proceedings at\ntheir own expense with counsel of their own choosing.\n\n\n\n\n\n                                       30\n\n   31\n         9.4     INSURANCE OBLIGATIONS. Throughout the term of this Agreement\nand for two (2) years thereafter, 3Dfx shall purchase and maintain (and shall\npay all premiums and deductibles related to) commercial liability insurance,\nincluding errors and omissions insurance, and products liability (with a\nvendor's endorsement in favor of Sega) naming Sega as an additional insured and\nstipulating that the coverage afforded additional insureds is primary and any\ninsurance maintained by additional insureds shall be excess only and\nnon-contributing with the coverage provided under that policy. Sega agrees it\nshall maintain product liability coverage with respect to its distribution of\n[*] Units.\n\n10.      TERM AND TERMINATION\n\n         10.1    TERM. the terms of this Agreement shall commence upon the\nEffective Date and shall continue in full force and effect until terminated as\nprovided in Section 10.2 below.\n\n         10.2    TERMINATION. The parties shall have the right to terminate\nthis Agreement in whole or in part as follows:\n\n                 10.2.1   Provided that, during the Development Phase, 3Dfx\nprovides commercially reasonable efforts, including without limitation that\n3Dfx makes no reductions in staffing or other resources, to complete such\ndevelopment. Sega may terminate this Agreement in whole or in part based upon a\ndevelopment failure by 3Dfx only as provided in Section 2;\n\n                 10.2.2   Sega may terminate if 3Dfx materially breaches any of\nits other obligations under this Agreement (except with respect to Section 5\nand except as otherwise provided in Section 2) and 3Dfx may terminate if Sega\nmaterially breaches any of its obligations under this Agreement (except with\nrespect to Section 5) and such breach shall continue uncured for a period of\nforty-five (45) days after the breaching party's receipt of written notice from\nthe non-breaching party;\n\n                 10.2.3   Either party may terminate in the event of the filing\nby or against the other party of a proceeding under any bankruptcy or similar\nlaw, unless such proceeding is dismissed, within forty-five (45) days from the\ndate of filing; the making by the other party of a proceeding for dissolution\nor liquidation, unless such proceeding is dismissed within forty-five (45) days\nfrom the date of filing; the appointment of a receiver, trustee or custodian\nfor all or part of the assets of the other party, unless such appointment or\napplication is revoked or dismissed within forty-five (45)days from the date\nthereof; the attempt by the other party to make any adjustment, settlement or\nextension of its debts with its creditors generally; or the insolvency of the\nother party.\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       31\n\n   32\n\n                 10.2.4   Under no circumstances, including the pendency of any\ndispute, may 3Dfx terminate, suspend or limit its performance hereunder or\nwithhold or disable any Deliverables unless and until Sega has agreed in\nwriting to such termination, suspension or limitation or until a court of\ncompetent jurisdiction orders otherwise; provided, however, that during that\ntime, Sega continues to pay any undisputed charges required to be paid under\nSection 2 of this Agreement.\n\n         10.3    EFFECT OF TERMINATION\n\n                 10.3.1   EFFECT OF TERMINATION FOR DEVELOPMENT FAILURE. Upon\ntermination of this Agreement under Section 10.2.1, all rights and obligations\nof the parties under this Agreement, including all licenses granted to either\nparty hereunder, shall terminate, except for the rights and obligations of the\nparties under Sections 3.2(f) (Limited Covenant of Nonassertion), 10 (Term and\nTermination), and 12 (Confidentiality) which shall survive the termination of\nthis Agreement. Except as necessary to fulfill the surviving terms, each party\nshall immediately return to the other all Confidential Information,\nDeliverables and technology, including without limitation the Sega Technology\nand 3Dfx Technology.\n\n                 10.3.2   EFFECT OF TERMINATION FOR BREACH.\n\n                          (a)     SEGA'S BREACH. Upon any termination of this\nAgreement under Sections 10.2.2 or 10.2.3 for Sega's breach, all licenses\ngranted to Sega under Section 3 (Licenses) shall terminate as provided in\nsubsection (b) below and each party shall immediately return to the other all\nConfidential Information, Deliverables and technology, including without\nlimitation the Sega Technology and 3Dfx Technology.  All licenses granted by\nSega to third parties shall survive according to their terms, and any licenses\ngranted to 3Dfx under Section 5.2 (License to Bundle Sega [*] Games, if any)\nshall survive according to their terms.\n\n                          (b)     SEGA TRANSITION PROCEDURE. After termination\ndue to Sega's breach:\n\n                                  (i)      Sega can continue to utilize [*]\n[*] in its inventory to manufacture [*] Consoles, [*] and distribute [*] until\nits inventory of [*] and such finished products is exhausted, provided that\nSega has paid all undisputed royalty amounts owed in relation to such chips \nand products;\n\n                                  (ii)     The licensee in Section 3.2(a) to\nthe [*] Graphics [*] will terminate on the later of (a) Sega's receipt of\nall orders for [*]\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       32\n\n   33\nplaced prior to the effective date of termination of this Agreement, or (b)\nSega's receipt of one final order of [*] within one month of the effective date\nof termination of this Agreement, provided, however that Sega pays all\nundisputed royalties owed in relation to such chips and provided that Sega can\nutilize the chips in the manufacture of [*] Consoles, [*] [*], utilizing such\nchips until its inventory of [*] and [*]s and such finished products is\nexhausted, provided that Sega has paid all undisputed royalty amounts owed in\nrelation to such chips and products.\n\n                                  (iv)     The license in Section 3.3 to the\n3Dfx Glide and [*] will terminate [*] after Sega's last shipment of [*]\nConsoles, [*] . Any sublicenses granted to third parties will continue \nindefinitely provided that the third parties are in compliance with the \nterms of the sublicense.\n\n                          (c)     3DFX'S BREACH. Upon any termination of this\nAgreement under Sections 10.2.2 or 10.2.3 for 3Dfx's breach or 3Dfx's financial\ncondition, all licenses granted to Sega under Section 3 (Licenses) shall\nsurvive according to their terms; provided, however, that the limited\nexclusivity granted to 3Dfx under Subsection 3.2(e) shall terminate\nimmediately. The limited exclusivity in favor of Sega under Subsection 3.2(d)\nshall survive such termination provided Sega is distributing [*] Graphics\n[*]s, and only as long as Sega is distributing [*] Graphics [*]s in\ncommercial quantities.\n\n                          (d)     SURVIVALS. Upon any termination of this\nAgreement under Section 10.2.2 or 10.2.23, the rights and obligations of the\nparties under Sections 4 ([*] Manufacturing Royalties), 8 (Warranties,\nGeneral Covenants and Limitations of Liability), 9 (Indemnification and\nInsurance), 10 (Term and Termination), 12 (Confidentiality), and 13 (General\nProvisions), shall survive such termination, provided that in the event of\ntermination resulting from 3Dfx's breach, Sega shall be entitled to offset\nagainst any Manufacturing Royalties all of its damages arising directly from\nsuch breach.\n\n11.      TAX, DUTIES AND OTHER CHARGES\n\n         Sega shall be solely responsible for any sales, use, gross receipts,\nvalue-added, excise, property or other tax, tariff, duty or assessment and\nincome taxes and related interest and penalties collected, levied or imposed by\nnational governments, state or provincial governments, local governments, or\nany subdivision of the foregoing and arising out of or related to the amounts\npaid to 3Dfx by Sega hereunder with the exception of taxes on 3Dfx's net\nincome.\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       33\n\n   34\n12.      CONFIDENTIALITY\n\n         12.1    PRIORITY OVER PRIOR NDA. The terms of this Agreement shall\nsupersede and replace control in the event of any conflict between any and all\nterms or provisions of a previously executed non-disclosure agreement between\nthe parties with respect to the subject matter of this Agreement.\n\n         12.2    DEFINITION. 3Dfx and Sega acknowledge that, in the course of\nperforming their respective obligations hereunder, each may obtain information\nrelating to the other and the other's products that is of a confidential and\nproprietary nature to such other party (\"CONFIDENTIAL INFORMATION\"). Such\nConfidential Information includes without limitation the [*] Graphics [*]\nTechnology, the Source Code of the Driver Software, the Sega Deliverables,\nFixes, [*] Console Technology, the Sega Foundry Deliverables, trade secrets,\nknow-how, formulas, compositions of matter, inventions, techniques, processes,\nprograms, diagrams, schematics, technical information, customer and financial\ninformation, sales and marketing plans and the terms of this Agreement.\n\n         12.3    CONFIDENTIALITY OBLIGATION. Each of Sega and 3Dfx agrees, that\nit will (a) use the other party's Confidential Information only in connection\nwith fulfilling its obligations and exercising its rights and licenses under\nthis Agreement; (b) hold the other party's Confidential Information in strict\nconfidence and exercise due care with respect to its handling and protection,\nconsistent with its own policies concerning protection of its care, (c) not\ndisclose, divulge, or publish the other party's Confidential Information except\nto such of its responsible employees, subcontractors, sublicenses and\nconsultants (collectively, \"PERSONNEL\") who have a bona fide need to know to\nthe extent necessary to fulfill such party's obligations under this Agreement;\nand (d) instruct all such Personnel not to disclose the other party's\nConfidential Information to third parties, without the prior written permission\nof the other party. Each party shall require all Personnel who shall come into\ncontact with the Confidential Information of the other party to execute a\nconfidentiality agreement at least as protective of the rights in such\nConfidential Information as the terms and conditions of this Agreement, prior\nto such Personnel being given access to any Confidential Information.\n\n         12.4    EXCEPTIONS. The obligations set forth in Section 12.3 above\nwill not apply to either party's Confidential Information which (i) is or\nbecomes public knowledge without the fault or action of the recipient party, or\nthe breach of any confidentiality obligation; (ii) the recipient party can\ndocument was independently developed by it without use of Confidential\nInformation of the other party; or (iii) the recipient party can document was\nalready known to it prior to the receipt of the other party's Confidential\nInformation.\n\n\n*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH\nTHE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE\nOMITTED PORTIONS.\n\n\n\n                                       34\n\n   35\n         12.5    DISCLOSURE UNDER THE LAW. If either party is required to\ndisclose any Confidential Information pursuant to an order under law, it shall\nuse its reasonable efforts to give the party owning the Confidential\nInformation sufficient notice of such required disclosure to allow the party\nowning the Confidential Information reasonable opportunity to object to and\ntake necessary legal action to prevent such disclosure.\n\n13.      GENERAL PROVISIONS\n\n         13.1    JOINT PRESS RELEASE. The parties agree to issue a joint press\nrelease regarding the relationship contemplated by this Agreement, and shall\nmutually agree on the contact and timing thereof.\n\n         13.2    NON-SOLICITATION OF EMPLOYEES. During the term of this\nAgreement and for a period of one (1) year after any expiration or termination\nof this Agreement for any reason other than 3Dfx's breach, both parties'\nagreement not to directly solicit for employment any employee or independent\ncontractor of the other party involved in the development, sale or marketing of\nthe subject matter of this Agreement.  Such prohibition shall not extend to\nadvertisements customarily placed in media circulated to the public.\n\n         13.3    ASSIGNMENT. Neither party shall assign or otherwise transfer\nthis Agreement in whole or in part, or any of the rights and obligations\nhereunder, either voluntarily or by operation of law, except to its\nsubsidiaries or affiliates in which such party has at least a fifty percent\n(50%) equity interest or voting control, while the party has such equity\ninterest or voting control, without the prior written consent of the other,\nwhich consent shall not be withheld unreasonably. In the event that either\nparty merges with another corporation, the merging party shall cause the\ncorporation resulting from such merger to be bound by, and assume the\nobligations of, this Agreement.\n\n         13.4    FORCE MAJEURE. Neither Sega nor 3Dfx shall be deemed to be in\ndefault or have breached any provision of this Agreement solely as a result of\nany delay, failure in performance or interruption of service resulting directly\nor indirectly from any act of God, civil or military authority, civil\ndisturbance, war, laws, regulations, acts or orders of any government or agency\nor official thereof, or any other occurrences beyond the party's reasonable\ncontrol.\n\n         13.5    COUNTERPARTS. This Agreement may be executed in one or more\ncounterparts, each of which shall be deemed an original but all of which\ntogether shall constitute one and the same instrument.\n\n         13.6    WAIVER. No waiver of any provision of this Agreement or of any\nrights or obligations of either party hereunder shall be effective unless in\nwriting and signed by the\n\n\n\n\n\n                                       35\n\n   36\nparty or parties waiving compliance, and any such waiver shall be effective\nonly in the specific instance and for the specific purpose stated in such\nwriting.\n\n         13.7    NOTICES. Except as otherwise specified herein, all notices,\nrequests, demands or communications required hereunder shall be in writing,\ndelivered personally, or sent by first class mail, postage prepaid, or by\ncompleted facsimile or e-mail transmission to the parties at their respective\naddresses first set forth in this Agreement (or at such other address as shall\nbe given in writing by either of the parties to the other in accordance with\nthis Section 13.7). All notices, requests, demands, orders or communications\nshall be deemed effective upon receipt in accordance with this Section 13.7.\n\n         13.8    NO JOINT VENTURE. The execution and delivery of this Agreement\nshall not be deemed to confer any rights or remedies upon, nor obligate any of\nthe parties hereto, to any person or entity other than such parties. Nothing in\nthis Agreement shall cause or be deemed to cause the parties to be partners or\njoint venturers with, or agent or employees of, each other. The parties are\nindependent contractors, and neither party shall have any right or power to\ncreate any obligation or responsibility on behalf of the other party.\n\n         13.9    GOVERNING LAW. This Agreement and the rights and obligations\nof the parties hereunder shall not be governed by the United Nations Convention\non Contracts for the International Sale of Goods, the application of which is\nexpressly excluded by the parties hereto. This Agreement shall be governed by,\nand construed and enforced in accordance with the laws of the State of\nCalifornia regardless of the choice of law rules of such state or any other\njurisdiction. All disputes arising out of this Agreement shall be subject to\nthe exclusive jurisdiction of either the state or federal courts located in San\nJose, California, and the parties agree and submit to the personal and\nexclusive jurisdiction and venue of these courts.\n\n         13.10   ENTIRE AGREEMENT. No representations, warranties or\nagreements, oral or written, express or implied, have been made to any party\nhereto, except as expressly provided herein. This Agreement shall be binding\nupon the respective parties hereto and their permitted successors and permitted\nassigns. In the event that any provision hereof is found invalid or\nunenforceable pursuant to judicial decree or decision, the remainder of this\nAgreement shall remain valid and enforceable according to its terms. This\nAgreement constitutes the entire understanding and agreement between the\nparties regarding the subject matter of this Agreement, and supersedes all\nother prior written and oral communications regarding this transaction, and may\nnot be altered, modified or amended except by a written amendment executed by\nboth parties.\n\n\n\n\n\n                                       36\n\n   37\nIN WITNESS WHEREOF, the parties hereto have caused their duly authorized\nofficers to execute this Agreement as of the date set forth below.\n\nSEGA ENTERPRISES LTD.\n\n\n\nBy:       . . . . . . . . . . . . . . . . . . . . . . . .\n\nName:     . . . . . . . . . . . . . . . . . . . . . . . .\n\nTitle:    . . . . . . . . . . . . . . . . . . . . . . . .\n\nDate:     . . . . . . . . . . . . . . . . . . . . . . . .\n\n\n3DFX INTERACTIVE, INC.\n\n\nBy:       . . . . . . . . . . . . . . . . . . . . . . . .\n\nName:     . . . . . . . . . . . . . . . . . . . . . . . .\n\nTitle:    . . . . . . . . . . . . . . . . . . . . . . . .\n\nDate:     . . . . . . . . . . . . . . . . . . . . . . . .\n\n\n\n\n\n\n<\/pre>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6538,8799],"corporate_contracts_industries":[9508],"corporate_contracts_types":[9613,9616],"class_list":["post-42901","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-3dfx-interactive-inc","corporate_contracts_companies-sega-enterprises-ltd","corporate_contracts_industries-technology__hardware","corporate_contracts_types-operations","corporate_contracts_types-operations__ip"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/42901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=42901"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=42901"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=42901"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=42901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}