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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Lins who wrote (6003)	8/4/1998 6:17:00 PM
From: William T. Katz	Read Replies (1) \| Respond to of 16960

Some information on the lawsuit's content: In March 1997, the Company and Sega Enterprises, Ltd. ("Sega") entered into a Technology Development and License Agreement (the "Sega Agreement") pursuant to which the Company began developing a 3D media processor chipset for Sega's next generation home game console. During the nine months ended September 30, 1997, the Company recognized development contract revenues of $1.8 million under the Sega Agreement representing 8% of total revenues during that period. In July 1997, Sega terminated the Technology Development and License Agreement. In August 1997, the Company filed a lawsuit against Sega, alleging breach of contract, interference with contract, misrepresentation, unfair competition, and threatened misappropriation of trade secrets. Discovery in the case is presently under way. Although there can be no assurance that this litigation will be resolved in the Company's favor, the Company believes that the resolution of this matter will not have material adverse impact on the Company's financial position or results of operations. No future revenues are expected under the Sega Agreement. ... In February 1997, the Company and Sega entered into the Sega Agreement pursuant to which the Company began developing a 3D media processor chipset for Sega's next generation home game console. During 1997, the Company recognized development contract revenues of $1.8 million under the Sega Agreement representing 4.1% of total revenues during that period. In July 1997, Sega terminated the Sega Agreement. In August 1997, the Company filed a lawsuit against Sega, and filed an amended complaint in October 1997 naming as additional defendants NEC and VideoLogic. The complaint alleges breach of contract, interference with contract, misrepresentation, unfair competition, and threatened misappropriation of trade secrets. Discovery in the case is currently being conducted. Although NEC and VideoLogic have responded to the Company's complaint, Sega has not yet responded to the Company's complaint by way of answer or counterclaim. The Company expects to incur significant legal expenses in connection with this litigation which could have a material adverse effect on the Company's financial condition and results of operations. In addition, pursuing this litigation is likely to result in the diversion of management's attention from the day-to-day operations of the business. There can be no assurance that the litigation will be resolved in the Company's favor or that the litigation will be resolved quickly. Any prolonged litigation could have a material adverse effect on the Company's business, financial condition and results of operations. An adverse outcome of the litigation could have a material adverse effect on the Company's business, financial condition and results of operations.