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Sega / 3DFX - Technology Development & License Agreement
TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
This Technology Development and License Agreement (the "AGREEMENT") is made and entered into as of February 28, 1997 (the "EFFECTIVE DATE"), by and between Sega Enterprises, Ltd., a Japanese corporation having its principal place of business at 2
12, Haneda 1-Chome, Ohta-ku, Tokyo 194, Japan ("SEGA") and 3Dfx Interactive, Inc. ("3DFX"), a California corporation having its principal place of business at 4435 Fortran Drive, San Jose, California 95134.
WHEREAS, Sega is in the business of developing, marketing, and distributing video games for both coin-operated arcade and consumer markets, video game consoles, peripherals and various other products and services, throughout the world;
WHEREAS, 3Dfx is in the business of creating advanced 3D graphics accelerators, including semiconductor chips, hardware, and software, for both coin-operated arcade and consumer video game markets throughout the world;
WHEREAS, Sega desires that 3Dfx develop for Sega a semiconductor 3D graphics
accelerator [*], and that 3Dfx license to Sega on a limited exclusive basis the manufacturing rights thereto, including without limitation for Sega's use with, and distribution in, Sega's forthcoming consumer video game console product, [*]
WHEREAS, 3Dfx is willing to promote the [*] Console video game architecture in connection with 3Dfx's 3D graphics technology;
WHEREAS, Sega desires that 3Dfx provide assistance to qualify 3Dfx and Sega designated foundries to produce the 3D accelerator [*] in commercial quantities;
WHEREAS, Sega desires to obtain certain licenses from 3Dfx for certain interface software for the 3Dfx graphic accelerator [*] and certain hardware to enable manufacturing and support; and
WHEREAS, 3Dfx is willing to perform the development, grant the licenses, and provide the other assistance required by Sega in connection with such 3Dfx graphics accelerator [*]:
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IT IS THEREFORE AGREED AS FOLLOWS:
1. DEFINITIONS
Unless otherwise defined or stated, "days" shall mean calendars days, "including" shall mean "including without limitation", and the following terms shall have the meanings stated below:
1.1 "ALPHA VERSION [*]" means a preliminary ve
rsion of the [*] Graphics [*] with functionality sufficiently complete and usable to enable hardware and software engineers to operate, test and evaluate for further production, and integration, as further set forth in the Specifications.
1.2 "ARCADE TOOL BOX" means 3Dfx's proprietary arcade game developer software toolbox.
1.3 [*]
1.4 "BETA VERSION [*]" means a preliminary version of the [*] Graphics [*] with functionality complete and usable in all material respec
ts, but which is not in a form intended for production in commercial volumes, as further set forth in the Specifications.
1.5 [*]
1.6 "[*] GRAPHICS [*]" means the 3D graphic accelerator [*] as provided to Sega for use in the [*] Console, as set forth in the Specifications, [*]
1.7 "[*] GRAPHICS [*] TECHNOLOGY" means any and all inventions, works of authorship, technology, know-how, algorithms, methods, processes, procedures, work-arounds and Intellectual Property Ri
ghts relating to the [*] Graphics [*], exclusive of the Sega Deliverables, Sega Foundry Deliverables, the [*] Console Technology, and all associated documentation and all related modifications and derivative works and all Intellectual Property Rights rela
ted thereto.
*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1.8 "[*] MASK DATA SET" means the manufacturing database and mask level information to be delivered by 3Dfx to a Sega Foundry or the 3Dfx Foundry to allow such foundry to manufacture the [*] Graphics [*], as further set forth in Schedule 1.8.
1.9 [*]
1.10 "DELIVERABLES" means the deliverable items specified for each Milestone on the Development Schedule.
1.11 "DEVELOPMENT SCHEDULE" means the schedule for the completion of the Milestones and acceptance of Deliverables as set forth in Schedule 1.10.
1.12 [*]
1.13 "[*] CONSOLE" means a video game console code-named [*], under development by Sega, including all components, enhancements, plug-ins, attachments, controllers, input and ou
tput devices, cables, connectors, peripherals and upgrades as further defined in Schedule 1.12.
1.14 "[*] CONSOLE TECHNOLOGY" means any and all inventions, works of authorship, technology, know-how, algorithms, methods, processes, procedures, work-arounds and Intellectual Property Rights relating to the [*] Console.
1.15 "[*] CONSOLE UNIT" means each [*] Graphics [*] purchased by Sega from the 3Dfx Foundry or a Sega Foundry for use by Sega in a [*] Console, [*]
1.16 "FOUR CORNER MANUFACTURING PROCESS TEST" means the industry standard four corner testing process to be used to test the Production Version [*] produced by the Sega Foundry as further specified in Schedule 1.15.
1.17 "INTELLECTUAL PROPERTY RIGHTS
" means any and all rights existing now or in the future under patent law, copyright law, industrial design rights law, semiconductor chip and mask work protection law, moral rights law, trade secret law, trademark law, unfair competition law, publicity r
ights law, privacy rights law, and any and all similar proprietary rights, and any and all renewals, extensions, and restorations thereof, now or
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hereafter in force and effect worldwide, including, without limitation, in the United States and Japan.
1.18 "MILESTONE" means an individual task or set of tasks to be completed by a certain date as described in the Development Schedule.
1.19 "NET ROYALTIES" means: (i) with respect to per unit royalties, nond
efective per unit amounts reduced by two percent (2%) to take into account demonstration, internal use, free or sample products, any defective products, returns, credits, costs of collection; and (ii) with respect to royalties based on Reference Cost, per
unit royalties, net of any royalties which would be due on (A) a reasonable number of demonstration, free, or sample products, and (B) returns of defective products; all of the foregoing net of Japanese or other withholding taxes.
1.20 [*]
1.21 "PRODUCTION VERSION [*]" means the [*] Graphics [*] in the form intended for production in commercial volume by a 3Dfx Foundry or by a Sega Foundry utilizing the [*] Mask Data Set provided by 3Dfx.
1.22 "SEGA ACCEPTANCE DATE" means the date that Sega first accepts the Production Version [*] manufactured by the initial Sega Foundry pursuant to Section 2.3(a)(iii).
1.23 "SEGA FOUNDRY" means a Sega-designated semiconductor manufacturing foundry approved by the parties to manufacture the [*] Graphics [*] in commercial volume in accordance with the provisions of Section 2.3.
1.24 "SEGA FOUNDRY CELL LIBRARIES" means the cell libraries and other design information of a proposed Sega Foundry, required by 3Dfx to
qualify the fabrication process used at a proposed Sega Foundry and to create the 3Dfx Mask Data Set to be provided to such Sega Foundry, as further set forth in Schedule 1.24. The Sega Foundry Cell Libraries must relate to a fabrication process sufficien
tly advanced and sophisticated to manufacture the [*] Graphics [*].
1.25 "SEGA FOUNDRY DELIVERABLES" means, collectively, the Sega Foundry Design Rules and Sega Foundry Cell Libraries.
1.26 "SEGA FOUNDRY DESIGN RULES" means the specifications, including (but not limited to) design rules, spice models, and process parameters of a proposed Sega Foundry, reasonably required by 3Dfx pursuant to Section 2.3 below, to qualify the
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fabrication process used at a proposed Sega Foundry and to create the 3Dfx Mask
Data Set, as further set forth in Schedule 1.26. The Sega Foundry Design Rules must relate to a fabrication process sufficiently advanced and sophisticated to manufacture the [*] Graphics [*].
1.27 "SEGA PRODUCTS" [*]
1.28 "SOURCE
CODE" means computer programs, instructions and related material written in a human-readable source language in form capable of serving as the input to a compiler or assembler program, and in form capable of being modified, supported and enhanced by prog
rammers reasonably familiar with the source language.
1.29 "SPECIFICATIONS" or "PRO FORMA SPECIFICATIONS" means the descriptions of the technical requirements, component parts, features, functionality, performance criteria, operating conditions
, interfaces, data transfer, processing parameters, and protocols, associated with the [*] Graphics [*], as set forth in Schedule 1.29.
1.30 "TEST VECTORS" means the test vectors to be supplied by 3Dfx and approved by Sega (such approval not t
o be withheld unreasonably) and used to test specific functionality of the Alpha, Beta, and Production Version [*]s, as set forth in the Specifications, Schedule 1.30.
1.31. "VERIFICATION TEST GAMES" means the sample games used to test the Alpha, Beta, and Production Version [*], as set forth in the Specifications, Schedule 1.31.
1.32 "3DFX FOUNDRY" means the semiconductor manufacturing facility designated by 3Dfx in Schedule 1.32 to manufacture the [*] Graphics [*] under this Agreement.
1.32 "3DFX GLIDE API" means 3Dfx's proprietary graphics accelerator API, as set forth on Schedule 1.33.
1.33 "3DFX GLIDE INTERNALS" means the 3Dfx Glide Software exclusive of the 3Dfx Glide API.
1.34 "3DFX GLIDE SOFTWARE" means 3Dfx's graphics accelerator driver software, together with all associated documentation provided by 3Dfx including, but not limited to, the [*] Glide Programming Manual.
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2. DEVELOPMENT AND PROCESS QUALIFICATION PHASE
2.1 DEVELOPMENT. In accordance with the terms of this
Section 2, 3Dfx shall develop the [*] Graphics [*] for manufacture in commercial volume by the 3Dfx Foundry and the Sega Foundry on Sega's behalf, and to complete all Milestones specified in the Development Schedule. Subject to 3Dfx completing the Milesto
nes set forth in the Development Schedule, and Sega's acceptance thereof, Sega shall pay 3Dfx the engineering services charges as provided in Section 2.8.
2.2 [*] GRAPHICS [*] MANUFACTURED BY THE 3DFX FOUNDRY.
(a) DELIVE
RY OF MILESTONE DELIVERABLES. 3Dfx shall complete and deliver to Sega, in accordance with the Development Schedule, the Alpha Version [*], the Beta Version [*] and the Production Version [*], all manufactured by the 3Dfx Foundry under the direction of 3Df
x
, for Sega's acceptance testing in accordance with the acceptance procedure set forth in Section 2.2(b) below. Prior to each delivery, 3Dfx shall have completed all required testing applicable to such Deliverables to ensure material compliance with all ap
plicable Specifications.
(b) ACCEPTANCE TESTING.
(i) ACCEPTANCE STANDARDS. Following receipt of the Deliverables for each Milestone, Sega shall have twenty-one (21) calendar days (the "VERIFICATION PERIO
D") in which to use commercially reasonable efforts to review, examine and verify such Deliverables and notify 3Dfx of any material failure thereof to meet the applicable Specifications (a "DELIVERABLE FAILURE").
(A)
ALPHA AND BETA VERSION ACCEPTANCE STANDARDS. The Alpha and Beta Version [*]s will each be deemed to have met the applicable Specifications and be accepted by Sega if (i) the Verification Test Games run successfully with each of the Alpha and the Beta Ver
sion [*]s in a Sega-approved personal computer test environment, [*], which shall be tested on the [*] Console; and (ii) the applicable set of the Test Vectors runs successfully with each of the Alpha and the Beta Version [*]s.
(B) PRODUCTION VERSION ACCEPTANCE STANDARDS. The Production Version will be deemed to have met the applicable Specifications and be accepted by Sega if it satisfies the Beta Version Acceptance Standard set forth above and performs in accordance
with the Specifications as verified by the Four Corner Manufacturing Process Test.
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(ii) ACCEPTANCE PROCEDURE. Sega agrees to use commercially reasonable efforts to detect any Deliverable Failure during the Verification Period, and if Sega discovers any Deliverable Failure, it shall promptly provide 3D
fx with written notice of such Deliverable Failure, including all information reasonably available regarding such Deliverable Failure. Upon receipt of such notice, 3Dfx shall use best efforts, at 3Dfx's sole cost and expense, to correct any such Deliverab
l
e Failure and to resubmit the corrected applicable Deliverables to Sega as soon as commercially and technically practicable, but in all cases within one hundred (100) days following Sega's notification of a Deliverable Failure. If Sega does not provide 3D
f
x with notice of a Deliverable Failure within the Verification Period, the applicable Deliverable shall be deemed accepted by Sega. Subject to Sections 2.2(b)(iii) and 2.2(b)(iv) below, 3Dfx shall repeat the process of correction and resubmission of an ap
p
licable Deliverable, subject to additional Verification Periods, until Sega's acceptance. The parties agree that any failure by Sega to discover and notify 3Dfx of defects within any Verification Period shall not negate any of 3Dfx's representations or wa
rranties, nor waive any of Sega's rights or remedies.
(iii) EXCLUSIVE REMEDIES FOR ALPHA VERSION [*] DELAY.
(A) PLACEMENT OF SEGA ENGINEERS. In the event that (1) 3Dfx fails to deliver the Alpha Version [*] (the "ALPHA DELIVERY DATE" as scheduled in accordance with the Development Schedule) and has not shipped the [*] Mask Data Set for
t
he Alpha Version [*] to the 3Dfx Foundry within sixty (60) days of the Alpha Delivery Date, or (2) 3Dfx delivers the Alpha Version [*] on or before the Alpha Delivery Date, Sega has informed 3Dfx of a Deliverable Failure, and 3Dfx has not shipped the [*]
M
ask Data Set for the corrected Alpha Version [*] to the 3Dfx Foundry within sixty (60) days of such notification, then Sega may require 3Dfx to allow a team of Sega engineers to assist the 3Dfx * Graphics [*] design team. 3Dfx will, however, retain the co
n
trol of the management of the development obligations under this Agreement. [*] Sega engineers may be placed on-site at the [*] development team location (the "3DFX FACILITIES") until the Production Version [*] for the Sega Foundry is accepted by Sega in
a
ccordance with Section 2.3(a)(iii), unless otherwise requested by 3Dfx and agreed to by Sega. 3Dfx shall cooperate regarding the placement of Sega engineers at the 3Dfx Facilities, including, but not limited to, the provision at 3Dfx's expense of sufficie
nt office and lab facilities, personal computers, and workstations. Sega shall be responsible for salary or other compensation of such Sega engineers.
(B) 3DFX HOUSE RULES. While working at the 3Dfx Facilities, all S
ega engineers and other personnel shall: (i) at all times comply with all of 3Dfx's safety, security and mutually agreed confidentiality policies and procedures; and
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(ii) limit their activities solely to assisting 3Dfx in the development of the [*] Graphics [*]. Sega will maintain its standard general liability insurance to prote
ct against covered damages, costs or fees (including reasonable attorney's fees) arising out of or relating to any property damage, bodily injury, sickness, disease or death, caused directly by any negligent act or omission of any Sega personnel while on
premises at the 3Dfx Facility, and will name 3Dfx as an additional insured under such issuance. All such Sega personnel shall execute confidentiality agreements reasonably acceptable to Sega and 3Dfx.
(C) ALPHA TERMIN
ATION REMEDY. In the event that 3Dfx fails to deliver the Alpha Version [*], in compliance with the Specifications and acceptance criteria thereof, within one hundred (100) days of the Alpha Delivery Date, then Sega in its sole discretion may: (i) termina
t
e the requirement that 3Dfx develop the Alpha Version [*]; or (ii) determine that 3Dfx should continue its efforts to correct the Alpha Version [*] by a date determined by Sega. In the event that Sega elects to terminate the Alpha Version development as p
r
ovided above, [*]. Provided that throughout the Alpha Version [*] development, until completed or terminated as provided above, 3Dfx provides commercially reasonable efforts to complete such development, the remedies set forth in this Section 2(b)(iii) sh
all be Sega's exclusive remedy for delays in Alpha Version [*] development.
(iv) ADDITIONAL REMEDIES: BETA VERSION [*]. If Sega does not accept the Beta Version [*] pursuant to the procedure set forth in Section 2.2(b)(ii) by [*] then Sega shall have additional remedies as follows:
(A) RECOUPMENT OF EXPENSES. Sega may recoup out of any advances or royalties owed to 3Dfx Sega's expenses incurred in relation to 2.2(b)(iii)(A); and
(B) REDUCTION OF MANUFACTURING ROYALTY. Sega may reduce the Manufacturing Royalty to be paid by Sega to 3Dfx for the first [*] Console Units under Section 4.1 hereof, such reduction to be in the amount of [*] U.S. for each [*
] Console Unit; and
(C) FREE COST REDUCTION PROJECT. Sega may require 3Dfx to perform, at no cost or expense to Sega, the work necessary to complete the first "Cost Reduction Project", as defined in Section 2.4 hereof; and
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(D) PLACEMENT OF SEGA ENGINEERS. Subject to the conditions of Section 2.2(b)(iii)(B), Sega may require 3Dfx to allow a team of Sega engineers to assist the [*] [*] [*] [*] design team, whether or not Sega has done so
previously pursuant to Section 2.2(b)(iii). 3Dfx will, however, retain the control of the management of the development obligations under this Agreement. [*] such Sega engineers may be placed on-site at the [*] Facilities until the Production Version [*]
f
or the Sega Foundry is accepted by Sega in accordance with Section 2.3(a)(iii), unless otherwise requested by 3Dfx and agreed to by Sega. 3Dfx shall cooperate regarding the placement of Sega engineers at the 3Dfx Facilities, including, but not limited to,
the provision at 3Dfx's expense of sufficient office and lab facilities, personal computers, and workstations. Sega shall be responsible for salary or other compensation of such Sega engineers.
(E) TERMINATION FOR BE
TA DELAY. In the event that Sega has not accepted the Beta Version [*] by [*], [*] then Sega may terminate the Agreement without obligation to make any further payments of any kind to 3Dfx and seek recovery of damages caused to Sega by the delay in the de
l
ivery of the Beta Version [*], provided, however, that any term of this Agreement notwithstanding, 3Dfx's liability to Sega for such damages shall not exceed [*] the engineering services charges paid by Sega to 3Dfx under this Agreement. In addition, if S
e
ga terminates the Agreement as provided above, Sega may exercise the rights described in Section 3.2(e). Provided that throughout the Beta Version [*] development, until completed or terminated as provided above, 3Dfx provides commercially reasonable effo
r
ts, including without limitation, that 3Dfx makes no reductions in staffing or other resources, to complete such development, the remedies set forth in this Section 2.2(b)(iv) shall be Sega's exclusive remedy for delays in Beta version [*] development. In
the event that 3Dfx does not provide commercially reasonable efforts, by (for example) reducing staffing or other resources, or otherwise, to complete such development, the remedies set forth in this Section 2.2(b)(iv) shall cease to be exclusive.
2.3 DEVELOPMENT TARGETED FOR SEGA FOUNDRY.
(a) SEGA FOUNDRY QUALIFICATION. Sega shall have the right to designate a Sega Foundry to manufacture the [*] Graphics [*], subject only to such Sega Foundry satisfying reasonable requi
rements for qualification to manufacture. As set forth in this Section 2.3, 3Dfx shall timely evaluate, in accordance with the Development Schedule, or as otherwise agreed in writing by the parties, the reasonable requirements for the proposed Sega Foundr
y to manufacture the [*] Graphics [*] on a commercial basis, and, 3Dfx will promptly review and reasonably qualify the Sega Foundry to manufacture the [*] Graphics [*].
(i) EVALUATION OF PROPOSED SEGA FOUNDRY DELIVERABLES.
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Within a reasonable time after the Effective Date, Sega shall cause the propo
sed Sega Foundry to deliver to 3Dfx the Sega Foundry Deliverables. Within a reasonable time of receipt thereof, subject to the Development Schedule, 3Dfx shall commence evaluating the fabrication process set forth in the Sega Foundry Design Rules to dete
r
mine whether such process is adequate to manufacture the [*] Graphics [*] in a form that functions in conformance with the Specifications. 3Dfx shall complete the evaluation of the fabrication and quality assurance process [*] provided that 3Dfx receives
r
easonable cooperation from the proposed Sega Foundry. As part of such evaluation process, 3Dfx may require, at 3Dfx's expense, (A) that the proposed Sega Foundry allow 3Dfx to send its personnel to visit the proposed Sega Foundry facilities (subject to 3D
f
x's agreement to reasonable confidentiality and security procedures), and (B) that the proposed Sega Foundry manufacture and provide to 3Dfx for evaluation certain 3Dfx specified semiconductor chips. If qualification of the proposed Sega Foundry is feasib
l
e, 3Dfx shall use reasonable efforts to assist the proposed Sega Foundry achieving qualification. If qualification of the proposed Sega Foundry is not feasible, Sega shall propose an alternative Sega Foundry, and the parties shall repeat the foregoing eva
luation process (including, if necessary Sega's proposal of additional Sega Foundries), until, with 3Dfx's reasonable assistance, a proposed Sega Foundry is deemed qualified.
(ii) PORT OF [*] GRAPHICS [*] TO PROPOSED SEGA FOUND
RY. Within a reasonable time of 3Dfx providing written notice to Sega that it is probable that the proposed Sega Foundry will be able to manufacture the [*] Graphics [*] in a form that functions in conformance with the Specifications, 3Dfx shall commence
p
orting the [*] Graphics [*] to the manufacturing process specified in the Sega Foundry Design Rules for the proposed Sega Foundry. Such porting may include 3Dfx, at its sole discretion, incorporating the Sega Foundry Cell Libraries into the * Mask Data Se
t to be used by the proposed Sega Foundry.
(iii) ACCEPTANCE OF PRODUCTION VERSION.
Upon completion of such port, 3Dfx shall deliver the [*] Mask Data Set directly to the proposed Sega Foundry for the sole purpose of allowing such proposed Sega Foundry to fabricate the Production Version [*] on a trial basis. No [*] Mask Data Set will b
e
provided to Sega. Sega will use commercially reasonable efforts to cause the proposed Sega Foundry to provide samples of the Production Version [*] to 3Dfx no later than the date specified in the Development Schedule for the Production Version acceptance
testing in accordance with Section 2.2(b) above. Upon Sega's providing written notice to 3Dfx of Sega's acceptance of such Production Version [*] manufactured by such proposed Sega Foundry, the proposed Sega Foundry shall be deemed a Sega Foundry.
(iv) FOUNDRY AGREEMENT. As part of the qualification process, 3Dfx will require and Sega will cause each proposed Sega Foundry to execute confidentiality and/or foundry manufacturing agreements in a form to be negotiated in good fait
h between Sega and 3Dfx, covering the proposed Sega Foundry's use of the
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[*] Ma
sk Data Set and other 3Dfx Confidential Information, and the manufacturing of the [*] Graphics [*]. Such agreements shall contain terms at least as protective of 3Dfx's Intellectual Property Rights as the terms and conditions of this Agreement, and shall
include a term allowing 3Dfx reasonable rights to audit the Sega Foundry's records of units of the [*] Graphics [*] shipped to Sega.
(e) PROPOSED SEGA FOUNDRY DELAYS. Any delay, except for delays caused by 3Dfx, in a proposed Sega Fou
ndry delivering the Sega Foundry Deliverables or other evaluation materials, or the Production Version [*]s, to 3Dfx, shall, at 3Dfx's discretion and upon written notice to Sega, result in an extension of all directly affected Milestone completion dates s
et forth on the Development Schedule by a period of time less than or equal to such delay.
(f) ADDITIONAL SEGA FOUNDRY OR PROCESS QUALIFICATION.
(i) SEGA REQUEST, PAYMENT AND PERFORMANCE. Sega may reques
t in writing that the parties arrange for [*] Sega Foundry to manufacture the [*] Graphics [*]. In such event, Sega shall pay 3Dfx an engineering services charge, to be negotiated in good faith by the parties, for 3Dfx to perform an evaluation and qualifi
c
ation of such proposed Sega Foundry (such engineering services charge to be at least as favorable to Sega as the lowest amount charged by 3Dfx for similar work, and not to exceed a reasonable price). All such evaluation and qualification work shall be per
formed in accordance with the provisions of this Section 2.3. [*]
(ii) QUALIFICATION OF NEW PROCESS AS A COST REDUCTION PROJECT. If the manufacturing process set for the in the Sega Foundry Design Rules for the proposed Sega Fo
undry is reasonably considered by 3Dfx to be a new process generation from either (A) the current fabrication process in use at the 3Dfx Foundry for the manufacture of the [*] Graphics [*]s, or (B) the fabrication process described in the Sega Foundry Des
ign Rules for the initial Sega Foundry, then any such additional evaluation and qualification work performed by 3Dfx under this subsection (f) shall be counted as a Cost Reduction Project under Section 2.4 below.
2.4 COST REDUCTION DESIGN EFFORTS. [*]
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[*]
2.5 DOCUMENTATION FOR [*] GRAPHICS CHIPSET. 3Dfx hereby agrees to prepare and deliver to Sega, in accordance with Schedule 2.5 ("Documentation Requirements") and the Milestones set forth on the Development Schedule for 3Dfx's draft and final
v
ersions of the [*] Glide Programming Reference Manual. 3Dfx shall be responsible and bear all costs for translating the [*] Glide Programming Reference Manual from English to Japanese. 3Dfx shall deliver the final English version of the [*] Glide Programm
i
ng Reference Manual simultaneously to both Sega and 3Dfx's Japanese translator. Sega shall be responsible for the English to Japanese tranlsations of all other documents (including the Specifications) that 3Dfx is obligated to deliver to Sega under this A
g
reement. At no additional cost to Sega, 3Dfx shall review for accuracy the first version of the first Japanese translation Sega prepares of the Specifications, and 3Dfx shall make timely, written recommendations to Sega regarding changes and corrections t
o
be made thereto. Subject to the licenses granted by 3Dfx to Sega, 3Dfx shall be the owner of all such derivative works of all documents provided to Sega under this Agreement (including the [*] Glide Programming Reference Manual and the Specifications), i
n
cluding any such derivative works prepared by Sega. For the duration of the license granted to Sega in Section 3.2, 3Dfx grants a non-exclusive, royalty-free license to Sega (i) to use, reproduce, modify, and create derivative works of the [*] Glide Progr
a
mming Reference Manual and Specifications for all permitted uses under this Agreement in connection with the licenses granted to Sega under Section 3, and (ii) to distribute with Sega Products the [*] Glide Programming Reference Manual and derivative work
s thereof prepared by Sega. Sega herby assigns to 3Dfx all right, title, and
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interest in and to any derivative works prepared by Sega of the [*] Glide Programming Reference Manual and the Specifications, and agrees to execute all documents and assist 3Dfx in all actions necessary to implement such assignment.
2.6 [*]
DEVELOPMENT BOARDS. Upon Sega's order and request, and subject to 3Dfx's standard sales terms and conditions, 3Dfx shall supply Sega, within sixty (60) days of Sega's order, up to [*] at a cost of the lesser of: (i) [*] per board or (ii) the lowest 3Dfx c
ustomer price irrespective of volume. All such [*] shall contain [*] and shall otherwise meet or exceed the specifications listed in Schedule 2.6.
2.7 SPECIFICATIONS AND DESIGN REVIEW. The Pro Forma Specifications shall be attached hereto as S
chedule 1.29 as of the Effective Date of this Agreement. Within five (5) days following the Effective Date, 3Dfx shall deliver to Sega the Specifications, which shall in all material respects be consistent with the Pro Forma Specifications. No changes to
t
he Specifications shall be made unless agreed to in writing by the parties. On or before [*], the parties shall meet to discuss any proposed changes to the Specifications for Beta Version production (the "BETA DESIGN REVIEW"). During the Beta Design Revie
w
and for seven (7) days thereafter, the parties agree to negotiate in good faith any changes to be made to the Specifications which would not reasonably cause any material increase in the cost or difficulty of, or the time required to complete, 3Dfx's dev
e
lopment effort; and (iii) 3Dfx and Sega shall negotiate in good faith to reach agreement regarding any increase in cost (based upon most-favored pricing) or schedule (based upon commercial best efforts) arising from changes not covered by Subsection (ii)
above.
2.8 PAYMENT OF ENGINEERING SERVICES CHARGES FOR DEVELOPMENT PHASE. As full and complete consideration (except for any contingent payments under Section 2.9) for the development by 3Dfx of the [*] Graphics [*], completion by 3Dfx of all
of its development tasks and obligations under this Agreement, Sega shall pay to 3Dfx interim payments totaling the sum of [*] in engineering services charges according to the following Milestone schedule:
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MILESTONE INTERIM PAYMENT Signing of Agreement between Sega and 3Dfx $ 1,550,000 U.S.
[*] [*]
[*] [*]
[*] [*]
[*] [*]
All interim payments above shall be due within twenty-one (21) days
following the date of Sega's acceptance of each Milestone. Sega and 3Dfx agree that the above payments include full compensation to 3Dfx for the production and delivery to Sega, both at 3Dfx's expense, following Sega's acceptance of the relevant Deliverab
l
es, of all Alpha, Beta, and Production Version [*] samples, [*] The Alpha, Beta, and Production Version [*] Samples may be manufactured by either the Sega or 3Dfx Foundry and shall be delivered according to the development Schedule. Sega may order additio
nal Alpha, Beta, or Production Version [*] samples from any remaining prototype wafers, at a cost not to exceed 3Dfx's actual costs. [*]
2.9 ON-TIME DELIVERY BONUS. With respect to each of the specified versions of the [*] Graphics [*] listed
below, Sega shall pay 3Dfx a bonus for on-time delivery ("On-Time Delivery Bonus"), in the amounts listed below, provided that: (a) 3Dfx delivers all Deliverables relating to such versions in acceptable form on or before the Milestone delivery data specif
ied in the Development Schedule; and (b) Sega accepts such Deliverables upon the initial submission and testing of such Deliverables under Section 2.2.
*CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
DELIVERABLE ON-TIME DELIVERY BONUS
[*]
[*] [*]
[*] Any On-Time delivery Bonuses earned by 3Dfx shall be paid to 3Dfx within twenty-one (21) days of Sega's acceptance of each Deliverable.
3. LICENSES TO [*] GRAPHICS CHIPSET AND RELATED SOFTWARE
3.1 OWNERSHIP. As bet
ween the parties hereto, and subject to the licenses granted to Sega herein, 3Dfx shall retain ownership of all of its existing 3D graphics technology, the 3Dfx Glide Software, [*], and the Arcade Toolbox, in existence as of the Effective Date of this Agr
e
ement, the [*] Graphics [*] Technology, the Alpha, Beta, and Production Versions, the [*] Graphics [*] Technolog...
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