<SUBMISSION>
<ACCESSION-NUMBER>0000950134-00-007894
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>12
<PERIOD>20000731
<FILING-DATE>20000914
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>3DFX INTERACTIVE INC
<CIK>0001010026
<ASSIGNED-SIC>7372
<IRS-NUMBER>770390421
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>0201
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-22651
<FILM-NUMBER>723264
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>4435 FORTRAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
<PHONE>4089354400
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>4435 FORTRAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d80311e10-q.txt
<DESCRIPTION>FORM 10-Q FOR QUARTER ENDED JULY 31, 2000
<TEXT>

<PAGE>   1
                                  United States
                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended July 31, 2000.

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from _______________ to _________________.

                         Commission file number 0-22651

                                   ----------

                             3DFX INTERACTIVE, INC.

                                   ----------

             (Exact name of registrant as specified in its charter)


           CALIFORNIA                                   77-0390421
           ----------                                   ----------
(State or Other Jurisdiction of              (IRS Employer Identification No.)
 Incorporation or Organization)

                               4435 FORTRAN DRIVE
                           SAN JOSE, CALIFORNIA 95134
                           --------------------------
               (Address of Principal Executive Office) (Zip Code)

                         TELEPHONE NUMBER (408) 935-4400
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

================================================================================

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X  No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, No Par Value --- 39,362,406 shares as of July 31, 2000.
================================================================================


<PAGE>   2

                             3DFX INTERACTIVE, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                            PAGE
<S>                                                                                                         <C>
PART I     FINANCIAL INFORMATION

           Item 1.           Financial Statements

                             Condensed Consolidated Balance Sheets at
                             January 31, 2000 and July 31, 2000................................................1

                             Condensed Consolidated Statements of Operations for
                             the three and six months ended July 31, 2000 and
                             July 31, 1999.....................................................................2

                             Condensed Consolidated Statements of Cash Flows for
                             the six months ended July 31, 2000 and July 31, 1999..............................3

                             Notes to Condensed Consolidated Financial Statements..............................4

           Item 2.           Management's Discussion and Analysis of Financial Condition
                             and Results of Operations.........................................................9

           Item 3.           Quantitative And Qualitative Disclosure About Market Risk.........................30

  PART II  OTHER INFORMATION

           Item 1.           Legal Proceedings.................................................................30

           Item 2.           Changes in Securities and Use of Proceeds.........................................31

           Item 3.           Defaults Upon Senior Securities...................................................31

           Item 4.           Submission of Matters to a Vote of Security Holders...............................31

           Item 5.           Other Information.................................................................32

           Item 6.           Exhibits and Reports on Form 8-K..................................................32

SIGNATURES                   ..................................................................................33
</TABLE>



<PAGE>   3


                          PART I FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     3dfx INTERACTIVE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                     JULY 31,         JANUARY 31,
                                                                       2000              2000
                                                                   ------------      ------------
<S>                                                                <C>               <C>
ASSETS
Current Assets:
 Cash and cash equivalents                                         $     23,525      $     41,818
 Short-term investments                                                  13,153            24,012
 Accounts receivable, net of allowance for doubtful
     accounts of $4,954 and $6,681                                       52,627            66,160
 Inventories, net                                                        70,670            45,065
 Other current assets                                                    12,298            28,407
                                                                   ------------      ------------
     Total current assets                                               172,273           205,462
                                                                   ------------      ------------
Property and equipment, net                                              37,839            40,269
Intangibles                                                              22,350            12,942
Goodwill                                                                131,288            32,709
Other assets                                                              8,679             4,729
                                                                   ------------      ------------
     Total assets                                                  $    372,429      $    296,111
                                                                   ============      ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Short-term debt                                                   $     25,000      $     25,000
 Accounts payable                                                        66,665            60,879
 Accrued liabilities                                                     21,630            20,385
 Current portion of long-term liabilities                                 1,311               732
 Deferred revenue                                                         9,075                --
                                                                   ------------      ------------
     Total current liabilities                                          123,681           106,996
                                                                   ------------      ------------
Long-Term Liabilities:                                                      879             1,881
                                                                   ------------      ------------
Shareholders' equity:
 Preferred stock, no par value, 5,000,000 shares                             --                --
     authorized; none issued and outstanding
 Common stock, no par value, 50,000,000 shares
     authorized; 39,362,406 and 24,442,370 shares issued and
     outstanding                                                        435,506           251,883
 Warrants                                                                   242               242
 Deferred compensation                                                   (6,876)             (172)
 Note receivable                                                            (80)               --
 Unrealized gain (loss) on equity securities                             (1,433)            1,844
 Accumulated deficit                                                   (179,490)          (66,563)
                                                                   ------------      ------------
 Total shareholders' equity                                             247,869           187,234
                                                                   ------------      ------------
     Total liabilities and shareholders' equity                    $    372,429      $    296,111
                                                                   ============      ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                       1
<PAGE>   4

                     3DFX INTERACTIVE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                Three Months                        Six Months
                                                                   Ended                               Ended
                                                                  July 31,                            July 31,
                                                           2000              1999              2000              1999
                                                       ------------      ------------      ------------      ------------
<S>                                                    <C>               <C>               <C>               <C>
Net sales                                              $     66,989      $    104,836      $    175,567      $    145,280
Cost of sales                                                56,800            76,308           138,967           102,498
                                                       ------------      ------------      ------------      ------------
Gross profit                                                 10,189            28,528            36,600            42,782
                                                       ------------      ------------      ------------      ------------
Operating expenses:
  Research and development                                   19,195            16,577            35,752            28,333
  Sales, general and administrative                          16,532            19,006            35,657            25,626
  In-process research and development                        66,250             4,302            66,250             4,302
  Goodwill and intangibles amortization                       4,495             2,974             8,325             2,974
                                                       ------------      ------------      ------------      ------------
Total operating expenses                                    106,472            42,859           145,984            61,235
                                                       ------------      ------------      ------------      ------------

Loss from operations                                        (96,283)          (14,331)         (109,384)          (18,453)
Interest and other income (expense), net                       (436)              685              (481)            1,596
                                                       ------------      ------------      ------------      ------------
Loss before income taxes                                    (96,719)          (13,646)         (109,865)          (16,857)
Provision (benefit) for income taxes                          3,777            (2,047)            3,062            (3,074)
                                                       ------------      ------------      ------------      ------------
Net loss                                               $   (100,496)     $    (11,599)     $   (112,927)     $    (13,783)
                                                       ============      ============      ============      ============

Net loss per share:
  Basic and diluted                                    $      (3.81)     $      (0.50)     $      (4.44)     $      (0.71)

Shares used in net loss per share calculations:
  Basic and diluted                                          26,350            23,296            25,430            19,533
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>   5

                     3DFX INTERACTIVE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (In thousands, except per share data)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED
                                                                            JULY 31,
                                                                      2000            1999
                                                                   ----------      ----------
<S>                                                                <C>             <C>
Cash flows from operating activities:
 Net loss                                                          ($ 112,927)     ($  13,783)
Adjustments to reconcile net income to net cash
from operating activities:
   Depreciation                                                        12,791           5,289
   Amortization                                                         8,325           2,974
   Stock compensation                                                     363             242
   Write-off of acquired in-process research and development           66,250           4,302
   Increase (decrease) in allowance for doubtful accounts              (1,728)          2,653
   Changes in assets and liabilities:
    Accounts receivable                                                17,561           8,710
    Inventories                                                       (25,605)         (2,191)
    Other assets                                                        7,020          (2,239)
    Accounts payable                                                    5,574          (3,379)
    Accrued and other long-term liabilities                            (4,343)         (8,381)
      Deferred revenue                                                   (355)             --
                                                                   ----------      ----------
     Net cash used in operating activities                            (27,074)         (5,803)
                                                                   ----------      ----------
Cash flows from investing activities:
  Sales (purchases) of short-term investments                          10,859           3,685
  Purchases of property and equipment                                  (9,200)        (19,391)
  Merger with STB Systems, Inc.                                            --          (7,226)
  Merger with GigaPixel Corporation                                     5,319              --
                                                                   ----------      ----------
    Net cash provided by (used in) investing activities                 6,978         (22,932)
                                                                   ----------      ----------
Cash flows from financing activities:
  Proceeds from issuance (repurchase) of common stock, net              2,226          (2,520)
  Principal payments of capitalized lease obligations, net               (423)           (417)
  Proceeds (payments) on line of credit, net                               --          (2,143)
                                                                   ----------      ----------
    Net cash provided by financing activities                           1,803          (5,080)
                                                                   ----------      ----------
Net increase (decrease) in cash and cash equivalents                  (18,293)        (33,815)
                                                                   ----------      ----------
Cash and cash equivalents at beginning of period                       41,818         103,594
                                                                   ----------      ----------
Cash and cash equivalents at end of period                         $   23,525      $   69,779
                                                                   ==========      ==========
</TABLE>

Supplemental disclosure of non-cash information:

 - Unrealized gain (loss) on equity securities available-for-sale was ($2,173)
   for the six months ended July 31, 2000.

   The accompanying notes are an integral part of these financial statements.



                                       3
<PAGE>   6

                             3DFX INTERACTIVE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:

3dfx Interactive, Inc. (the "Company" or "3dfx") was incorporated in California
on August 24, 1994. The Company is engaged in the design, development, marketing
and support of 3D and 2D media processors, subsystems and API software for the
interactive electronic entertainment market.

The unaudited condensed consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
information included therein. While the Company believes that the disclosures
are adequate to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the audited financial
statements and accompanying notes included in the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended January 31, 2000 as filed with
the Securities and Exchange Commission.

One customer represented 19% of the Company's revenues for the three
months ended July 31, 2000, and one customer represented 18% of the Company's
revenues for the three months ended July 31, 1999. Two customers represented
more than 10% of the Company's revenues during the first six months of fiscal
2001, one customer represented 22% and the other 12% of total revenues for the
period. One customer represented 15% of the Company's revenues during the first
six months of fiscal 2000.

On July 21, 2000, 3dfx acquired GigaPixel Corporation ("GigaPixel"). Please
refer to Note 4 of these financial statements. In February 2000, GigaPixel
entered into a development agreement with Microsoft to develop a highly advanced
graphics chip. In March 2000, GigaPixel and Microsoft entered into a release
agreement under which Microsoft paid to GigaPixel the up-front development fees
of $14.0 million as provided by the development agreement. The release agreement
severs the proprietary development relationship between the companies and
provides that GigaPixel will use its best efforts to deliver by June 2001, a
non-proprietary sample of a product similar to the originally specified design.
At the time of the merger, GigaPixel had deferred revenue of approximately $9.1
million related to the deliverable called for in the agreement. At that time,
this deliverable was significantly far from being completed. As a result of the
GigaPixel merger, 3dfx is recognizing revenue ratably through June 2001.

Recent accounting pronouncements. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities".
SFAS 133, as amended, requires that all derivative instruments be recorded on
the balance sheet at their fair market value. Changes in the fair market value
of derivatives are recorded each period in current earnings or comprehensive
income, depending on whether a derivative is designed as part of a hedge
transaction, and if so, the type of hedge transaction. Substantially all of
3dfx's revenues and the majority of its costs are denominated in U.S. dollars,
and to date 3dfx has not entered into any derivative contracts. 3dfx does not
expect that the adoption of SFAS 133 will have a material effect on its
financial statements. The effective date of SFAS 133, as amended, is for fiscal
quarters of fiscal years beginning after June 15, 2000.

In December 1999, the Securities and Exchange Commission staff released
Staff Accounting bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The Company believes the
application of SAB No. 101 will not have a material impact on 3dfx's financial
statements.



                                       4
<PAGE>   7

In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an
interpretation of APB Opinion No. 25. This interpretation clarifies the
definition of employee for purposes of applying APB No. 25, the criteria for
determining whether a plan qualifies as a non-compensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and the accounting for an exchange of stock compensation awards
in a business combination. This interpretation is effective July 1, 2000. We
apply the provisions of APB Opinion 25 in accounting for our stock based
compensation and will apply the guidance in Interpretation No. 44 following its
effective date.

NOTE 2 - INVENTORY:

<TABLE>
<CAPTION>
                                     July 31,        January 31,
                                       2000             2000
                                   ------------     ------------

<S>                                <C>              <C>
Raw materials                      $     31,473     $     26,708
Work in-process                          16,309            8,940
Finished goods                           22,888            9,417
                                   ------------     ------------
     Total inventory               $     70,670     $     45,065
                                   ============     ============
</TABLE>

NOTE 3 - ACQUISITION OF STB SYSTEMS, INC:

In May 1999, 3dfx completed a merger with STB Systems, Inc. ("STB merger"). As a
result of the merger, STB is now a wholly-owned subsidiary of 3dfx. The STB
merger was accounted for under the purchase method of accounting. The purchase
price of $139.3 million included $116.1 million of stock issued at fair value
(fair value being determined as the average price of the 3dfx stock for a period
of a few days before and after the announcement of the merger), $9.9 million in
STB stock option costs (being determined under the Black Sholes formula) and
$13.3 million in estimated expenses of the transaction. The purchase price was
allocated as follows: $85.6 million to the estimated fair value of STB net
tangible assets purchased (as of May 13, 1999), ($7.6) million to establish
deferred tax liabilities associated with the certain intangibles acquired, $4.3
million to purchased in-process research and development, $11.4 million to
purchased existing technology, $4.4 million to trademarks, $2.3 million to
workforce-in-place, $1.0 million to executive covenants and $37.9 million to
goodwill. The allocation of the purchase price to intangibles was based upon an
independent, third party appraisal and management's estimates.

The intangible assets and goodwill acquired have estimated and useful lives and
estimated first year amortization, as follows:

<TABLE>
<CAPTION>
                                                           Estimated       Fiscal 2001
                                           Amount         Useful Life     Amortization
                                        ------------      -----------     ------------
<S>                                     <C>               <C>             <C>
Purchased existing technology:
      1.5 year life                     $  6,475,000        1.5 years     $  3,418,000
      3 year life                          4,966,000          3 years        1,655,000
Trademarks                                 4,406,000          5 years          881,000
Workforce-in-place                         2,250,000          5 years          450,000
Executive covenants                        1,000,000          5 years          200,000
Goodwill                                  37,500,000          5 years        7,816,000
</TABLE>

The value assigned to purchased in-process research and development ("IPR&D")
was determined by identifying research projects in areas for which technological
feasibility had not been established. These include projects for Voodoo3 as well
as other specialized technologies totaling $4.3 million. The value was
determined by estimating the expected cash flows from the projects once
commercially viable,



                                       5
<PAGE>   8

discounting the net cash flows back to their present value and then applying a
percentage of completion to the calculated value as defined below.

Net Cash Flows. The net cash flows from the identified projects are based on our
estimates of revenues, cost of sales, research and development costs, selling,
general and administrative costs, royalty costs and income taxes from those
projects. These estimates are based on the assumptions mentioned below. The
research and development costs included in the model reflect costs to sustain
projects, but exclude costs to bring in-process projects to technological
feasibility.

Revenues. The estimated revenues are based on management projections of each
in-process project and these business projections were compared and found to be
in line with industry analysts' forecasts of growth in substantially all of the
relevant markets. Estimated total revenues from the IPR&D product areas are
expected to peak in the year ending December 31, 1999 and decline from 2000 into
2001 as other new products are expected to become available. These projections
are based on our estimates of market size and growth, expected trends in
technology and the nature and expected timing of new project introductions by
our competitors and us.

Gross Margins. Projected gross margins associated with the identified projects
approximate STB's recent historical performance and are in line with comparable
industry margins. The estimated selling, general and administrative costs are
consistent with STB's historical cost structure, which is in line with industry
averages at approximately 10% of revenues. Research and development costs are
consistent with STB's historical cost structure.

Royalty rate. The Company applied a royalty charge of 25% of operating income
for each in-process project to attribute value for dependency on predecessor
core technologies.

Discount rate. Discounting the net cash flows back to their present value is
based on the industry weighted average cost of capital ("WACC"). The industry
WACC is approximately 14%. The discount rate used in discounting the net cash
flows from IPR&D is 20%, a 600 basis point increase from the industry WACC. This
discount rate is higher than the industry WACC due to inherent uncertainties
surrounding the successful development of the IPR&D, market acceptance of the
technology, the useful life of such technology and the uncertainty of
technological advances which could potentially impact the estimates described
above.

Percentage of completion. The percentage of completion for each project was
determined using costs incurred to date on each project as compared to the
remaining research and development to be completed to bring each project to
technological feasibility. The percentage of completion varied by individual
project ranging from 50% to 91%. If the projects discussed above are not
successfully developed, the sales and profitability of the combined company may
be adversely affected in future periods.

Pro forma results of operations for the combined company as if the transaction
had been consummated at the beginning of the period presented are as follows:

<TABLE>
<CAPTION>
                                                 Three Months      Six Months
                                                    Ended             Ended
                                                July 31, 1999     July 31, 1999
                                                -------------     -------------
<S>                                              <C>               <C>
Revenues                                         $    114,175      $    226,068
Net income (loss)                                $    (12,693)     $    (31,558)
Basic and diluted net (loss) per share           $      (0.54)     $      (1.33)
                                                 ============      ============
</TABLE>

On a combined basis, there were no material transactions between the Company and
STB during the periods presented except for sales of product by the Company to
STB which have been eliminated.



                                       6
<PAGE>   9

NOTE 4 - ACQUISITION OF GIGAPIXEL CORPORATION:

In July 2000, 3dfx completed a merger with GigaPixel Corporation, a Delaware
corporation ("GigaPixel"). As a result of the merger, GigaPixel became a
wholly-owned subsidiary of 3dfx. The merger was accounted for under the purchase
method of accounting. The purchase price of GigaPixel was approximately $181.3
million and included $173.9 million of stock issued at fair value (fair value
being determined as the average price of the 3dfx stock for a period of a few
days before and after the announcement of the merger), $2.7 million in GigaPixel
stock option costs (being determined under the Black Sholes formula) and $4.7
million in estimated expenses of the transaction. The purchase price was
allocated as follows: $3.6 million to the estimated fair value of GigaPixel net
tangible assets purchased (as of July 21, 2000), $66.3 million to purchased
in-process research and development, $10.8 million to purchased existing
technology, $2.4 million to workforce-in-place, ($5.3) million to deferred tax
liabilities associated with certain intangibles acquired, and $103.5 million to
goodwill. The allocation of the purchase price to intangibles was based upon an
independent, third party appraisal and management's estimates.

The intangible assets and goodwill acquired have estimated and useful lives and
estimated first year amortization, as follows:

<TABLE>
<CAPTION>
                                                        Estimated        Fiscal 2002
                                         Amount        Useful Life      Amortization
                                      ------------     ------------     ------------
<S>                                   <C>              <C>              <C>
Purchased existing technology         $ 10,830,000          5 years     $  2,166,000
Workforce-in-place                       2,400,000          5 years          480,000
Goodwill                               103,510,000          5 years       20,702,000
</TABLE>

The value assigned to purchased IPR&D was determined by identifying research
projects in areas for which technological feasibility had not been established.
The value was determined by estimating the expected cash flows from the projects
once commercially viable, discounting the net cash flows back to their present
value and then applying a percentage of completion to the calculated value as
defined below.

Net Cash Flows. The net cash flows from the identified projects are based on our
estimates of revenues, research and development costs, selling, general and
administrative costs, royalty costs and income taxes from those projects. These
estimates are based on the assumptions mentioned below. The research and
development costs included in the model reflect costs to sustain projects, but
exclude costs to bring in-process projects to technological feasibility.

Revenues. The estimated revenues are based on management projections of each
in-process project and these business projections were compared and found to be
in line with industry analysts' forecasts of growth in substantially all of the
relevant markets. Estimated total revenues from the IPR&D product areas are
expected to peak in the year ending January 31, 2005 and decline in 2006 as
other new products are expected to become available. These projections are based
on our estimates of market size and growth, expected trends in technology and
the nature and expected timing of new product introductions by GigaPixel and
their competitors.

Gross Margins. Projected gross margins associated with the identified projects
are in line with comparable industry margins. Research and development, as well
as sales, general and administrative costs are consistent with industry averages
of companies of comparable size and age.

Discount Rate. Discounting the net cash flows back to their present value is
based on the industry WACC. The industry WACC is approximately 28%. The discount
rate used in discounting the net cash flows from IPR&D is 30%, a 200 basis point
increase from the industry WACC. This discount rate is higher than the industry
WACC due to inherent uncertainties surrounding the successful development of the
IPR&D, market acceptance of the technology, the useful life of such technology
and the uncertainty of technological advances which could potentially impact the
estimates described above.

Percentage of Completion. The percentage of completion for GigaPixel technology
was determined using costs incurred to date on each project as compared to the
remaining research and development to be completed to bring each project to
technological



                                       7
<PAGE>   10
feasibility. The Company anticipates beginning to ship product incorporating
this technology in the calendar year 2001. The percentage of completion related
to GigaPixel technology was 72. If the projects discussed above are not
successfully developed, the sales and profitability of the Company may be
adversely affected in future periods.

Pro forma results of operations for the combined company as if the transaction
had been consummated at the beginning of the period presented are as follows:

<TABLE>
<CAPTION>
                                               Three Months       Six Months
                                                  Ended             Ended
                                              July 31, 2000     July 31, 2000
                                              -------------     -------------
<S>                                            <C>               <C>
Revenues                                       $     69,634      $    180,212
Net income (loss)                              $    (33,803)     $    (47,061)
Basic and diluted net (loss) per share         $      (0.86)     $      (1.20)
                                               ============      ============
</TABLE>

On a combined basis, there were no material transactions between the Company and
GigaPixel during the periods presented.

In connection with the acquisition of GigaPixel, the Company recorded deferred
compensation in the amount of approximately $6.9 million. The amount of deferred
compensation is based upon the adoption of the Financial Accounting
Standards Board Interpretation No. 44 issued in March 2000, "Accounting for
Certain Transactions Involving Stock Compensation". The amount of deferred
compensation is determined using the Black Sholes formula. This deferred
compensation will be expensed over the remaining life of unvested Gigapixel
options assumed by 3dfx in the acquisition of GigaPixel.

NOTE 5 - NET INCOME (LOSS) PER SHARE:

Basic net income (loss) per share is computed using the weighted average number
of common shares outstanding during the periods. Diluted net income (loss) per
share is computed using the weighted average number of common and potentially
dilutive common shares during the periods. Diluted loss per share was the same
as basic loss per share for the three and six months ended July 31, 1999 and the
three and six months ended July 31, 2000. During the quarters ended July 31,
2000 and July 31, 1999, options to purchase approximately 5,516,000 and
2,084,000 shares of common stock, respectively, were outstanding but not
included in the calculation because they were anti-dilutive. For the six months
ended July 31, 2000 and July 31, 1999, options to purchase approximately
2,879,000 and 3,025,000 shares of common stock, respectively, were outstanding
but not included in the calculation because they were anti-dilutive.

NOTE 6 - INCOME TAXES:

The Company recorded income tax benefits of $447,000 and $2.0 million for the
three months ended July 31, 2000 and July 31, 1999, respectively, and $1.2
million and $3.0 million for the six months ended July 31, 2000 and July 31,
1999, respectively. The Company's effective tax rate in fiscal 2001 and 2000
differs from the statutory rate due to non-deductible charges relating to the
acquisition of STB, increase in valuation allowance against the Company's
deferred tax assets, and benefits realized as a result of a net operating loss
carryback to profitable years. The Company believes it is more likely than not
that a portion of its net deferred tax assets will not be realized. Accordingly,
a $4.3 million charge was recorded, reducing the Company's net deferred tax
asset to $10.1 million, representing the tax refunds due the Company.

NOTE 7 - COMPREHENSIVE INCOME:

Other comprehensive income (loss) for the three months ended July 31, 2000 was
an unrealized loss of ($651,000), representing a loss from investing activities,
resulting in total comprehensive income (loss) of ($100.1) million. Other
comprehensive income (loss) for the six months ended July 31, 2000 was an
unrealized loss of ($3.3) million, representing a loss from investing
activities, resulting in total comprehensive income (loss) of ($116.2) million.
Comprehensive income (loss) for the three and six months ended July 31, 1999 was
not materially different form net income (loss).


                                       8

<PAGE>   11

NOTE 8 - SHORT-TERM DEBT:

3dfx has a line of credit agreement with a bank, which provides for maximum
borrowings in an amount up to the lesser of 80% of eligible accounts receivable
or $25.0 million. Borrowings under the line are secured by $25.0 million of
restricted cash and short-term investments and all of 3dfx's owned assets and
bear interest at Libor plus 100 basis points (7.62% as of July 31, 2000). The
agreement requires that 3dfx maintain certain levels of tangible net worth and
generally prohibits 3dfx from paying cash dividends. The line of credit expires
on December 19, 2000. At July 31, 2000, $25.0 million was outstanding under this
line of credit.

The Company is in the process of negotiating with a new lender for a $30.0
million revolving credit facility, which will be based upon the level of
eligible accounts receivable of the Company. Upon consummation of this
financing, the Company intends to payoff the previous Revolving Credit Facility
and the Term Loan with the previous lender. The $25.0 million cash and
short-term investments previously pledged to secure the Revolving Credit
Facility will be used to fund the payoff.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Any statements contained in this document, including
without limitation statements to the effect that 3dfx or its management
"believes," "expects," "anticipates," "plans," "may," "will," "projects,"
"continues," or "estimates," or statements concerning "potential," or
"opportunity" or other variations thereof or comparable terminology or the
negative thereof, that are not statements of historical fact should be
considered forward-looking statements. These forward-looking statements are
based on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from those projected in the
forward-looking statements. Such risks and uncertainties are set forth below
under "Risk Factors".

OVERVIEW

The Company was founded in August 1994 to design, develop, market and support 3D
media processors, subsystems and API software for the interactive electronic
entertainment market. The Company derives revenue from the sale of 3D and 3D/2D
media processors and graphics boards designed for use in PCs. The Company began
commercial shipments of its first 3D graphics product, the Voodoo Graphics
chipset, in September 1996 and introduced subsequent media processors in 1997,
1998 and 1999. In 1999, the Company broadened its product offerings to include
board-level products. The Company commenced shipping significant quantities of
its new Voodoo5 products in June 2000.

The Company's sales have historically been concentrated among a limited number
of customers. Revenues derived from sales to D&H Distribution and Ingram Micro
accounted for approximately 19% and 18% of revenues, respectively, for the
quarter ended July 31, 2000. For the six months ended July 31, 2000, D&H
Distribution and Ingram Micro accounted for approximately 12% and 21% of
revenues, respectively. The Company expects that a small number of customers
will continue to account for a substantial portion of its total revenues for the
foreseeable future. The loss of any one of these customers could have a material
impact on the Company's results of operations, cash flows, or financial
position. In addition, sales to these customers can fluctuate and could have a
material impact on the Company's revenues and profitability on a quarterly
basis.

The announcement and consummation of the merger between 3dfx and STB in May 1999
caused some of 3dfx's customers to end or curtail their relationships with the
combined company. For example, two of 3dfx's former largest customers, Creative
Labs and Diamond Multimedia Systems, Inc., compete directly with 3dfx. Sales to
Diamond and Creative Labs following the merger have been reduced significantly
from prior levels and these customers are no longer customers of the combined
company. To date, the loss



                                       9
<PAGE>   12

of business from former 3dfx customers has not been fully replaced through the
sale of the combined company's own add-in-board level products, which has
negatively impacted the Company's revenues. If other major customers of 3dfx
terminate their relationship with the combined company or sales of the combined
company's add-in boards continue to be less than sales to former 3dfx customers,
the Company's business could be materially harmed.

As part of its manufacturing strategy, the Company leverages the expertise of
third party suppliers in the areas of wafer fabrication, assembly, quality
control and assurance, reliability and testing. This strategy allows the Company
to devote its resources to research and development and sales and marketing
activities while avoiding the significant costs and risks associated with owning
and operating a wafer fabrication facility and related operations. The Company
does not manufacture the semiconductor wafers used for its products and does not
own or operate a wafer fabrication facility. All of the Company's wafers are
currently manufactured by Taiwan Semiconductor Manufacturing Corporation
("TSMC") in Taiwan. The Company obtains manufacturing services from TSMC on a
purchase order basis. The Company provides TSMC with a rolling six month
forecast of its supply needs and TSMC builds to the Company's orders. The
Company purchases wafers and die from TSMC. Once production yield for a
particular product stabilizes, the Company pays an agreed price for wafers
meeting certain acceptance criteria pursuant to a "good die" only pricing
structure for that particular product. Until production yield for a particular
product stabilizes, however, the Company must pay an agreed price for wafers
regardless of yield. Such wafer and die purchases constitute a substantial
portion of cost of product revenues once products are sold. TSMC is responsible
for procurement of raw materials used in the production of the Company's
products. The Company believes that raw materials required are readily
available. The Company's products are packaged by three third party
subcontractors, Advanced Semiconductor Engineering Group ("ASE"), Caesar
Technology, Inc., and Siliconware. All of the Company's products are tested by
ASE. Such assembly and testing is conducted on a purchase order basis rather
than under a long-term agreement. All purchases of wafers and assembly and test
services are denominated in U.S. dollars. The Company is in the process of
developing a relationship with a new manufacturer of wafers.

In connection with the grant of stock options to employees since inception
(August 1994) through the effective date of the Company's initial public
offering, the Company recorded aggregate deferred compensation of approximately
$1.9 million, representing the difference between the deemed fair value of the
common stock for accounting purposes and the option exercise price at the date
of grant. This amount is presented as a reduction of shareholders' equity and is
amortized ratably over the vesting period of the applicable options. This
amortization resulted in charges to operations of $121,000 in each of the
quarters ended July 31, 2000 and July 31, 1999 (of which $48,000 and $73,000
will be recorded in research and development expenses and selling, general and
administrative expenses, respectively). The Company recorded amortization of
deferred compensation of $242,000 for the six months ended July 31, 2000 and
July 31, 1999, of which $96,000 was charged to research and development expense
and $146,000 was charged to selling, general and administrative expense. As of
July 31, 2000, there was no remaining deferred compensation relating to these
stock options.

OVERVIEW OF GIGAPIXEL MERGER AND TREATMENT OF IPR&D

In July 2000, 3dfx completed a merger with GigaPixel Corporation, a Delaware
Corporation. As a result of the merger, GigaPixel became a wholly-owned
subsidiary of 3dfx. The merger was accounted for under the purchase method of
accounting. The purchase price of GigaPixel was approximately $181.3 million and
included $173.9 million of stock issued at fair value (fair value being
determined as the average price of the 3dfx stock for a period of five days
before and after the announcement of the merger), $2.7 million in GigaPixel
stock option costs (being determined under the Black Sholes formula) and $4.7
million in estimated expenses of the transaction. The purchase price was
allocated as follows: $3.6 million to the estimated fair value of GigaPixel net
tangible assets purchased (as of July 21, 2000), $66.3 million to purchased
in-process research and development, $10.8 million to purchased existing



                                       10
<PAGE>   13

technology, $2.4 million to workforce-in-place, ($5.3) million to deferred tax
liabilities, and $103.5 million to goodwill. The allocation of the purchase
price to intangibles was based upon an independent, third party appraisal and
management's estimates.

The intangible assets and goodwill acquired have estimated and useful lives and
estimated first year amortization, as follows:

<TABLE>
<CAPTION>
                                                          Estimated        Fiscal 2002
                                           Amount        Useful Life      Amortization
                                        ------------     ------------     ------------
<S>                                     <C>              <C>              <C>
Purchased existing technology:          $ 10,830,000          5 years     $  2,166,000
Workforce-in-place                         2,400,000          5 years          480,000
Goodwill                                 103,510,000          5 years       20,702,000
</TABLE>

The value assigned to purchased IPR&D was determined by identifying research
projects in areas for which technological feasibility had not been established.
The value was determined by estimating the expected cash flows from the projects
once commercially viable, discounting the net cash flows back to their present
value and then applying a percentage of completion to the calculated value as
defined below.

Net Cash Flows. The net cash flows from the identified projects are based on our
estimates of revenues, research and development costs, selling, general and
administrative costs, royalty costs and income taxes from those projects. These
estimates are based on the assumptions mentioned below. The research and
development costs included in the model reflect costs to sustain projects, but
exclude costs to bring in-process projects to technological feasibility.

Revenues. The estimated revenues are based on management projections of each
in-process project and these business projections were compared and found to be
in line with industry analysts' forecasts of growth in substantially all of the
relevant markets. Estimated total revenues from the IPR&D product areas are
expected to peak in the year ending January 31, 2005 and decline in 2006 as
other new products are expected to become available. These projections are based
on our estimates of market size and growth, expected trends in technology and
the nature and expected timing of new product introductions by GigaPixel and
their competitors.

Gross Margin. Projected gross margins associated with the identified projects
are in line with comparable industry margins. Research and development, as well
as sales, general and administrative costs are consistent with industry average
of companies of comparable size and age.

Discount Rate. Discounting the net cash flows back to their present value is
based on the industry WACC. The industry WACC is approximately 28%. The discount
rate used in discounting the net cash flows from IPR&D is 30%, a 200 basis point
increase from the industry WACC. This discount rate is higher than the industry
WACC due to inherent uncertainties surrounding the successful development of the
IPR&D, market acceptance of the technology, the useful life of such technology
and the uncertainty of technological advances which could potentially impact the
estimates described above.

Percentage of Completion. The percentage of completion for GigaPixel technology
was determined using costs incurred to date on each project as compared to the
remaining research and development to be completed to bring each project to
technological feasibility. The percentage of completion related to GigaPixel
technology was 72. If the projects discussed above are not successfully
developed, the sales and profitability of the combined company may be adversely
affected in future periods.

In connection with the acquisition of GigaPixel, the Company recorded deferred
compensation in the amount of approximately $6.9 million. The amount of deferred
compensation is based upon the adoption of the Financial Accounting Standards
Board Interpretation No. 44 issued in March 2000, "Accounting for Certain
Transactions Involving Stock Compensation". The amount of deferred compensation
is determined using the Black Sholes formula. This deferred compensation will be
expensed over the remaining life of unvested Gigapixel options assumed by 3dfx
in the acquisition of GigaPixel.

OVERVIEW OF STB MERGER AND TREATMENT OF IPR&D

In May 1999, 3dfx completed a merger with STB Systems, Inc. As a result of the
STB merger, STB is now a wholly-owned subsidiary of 3dfx. The STB merger was
accounted for under the purchase method of accounting. The purchase price of
$139.3 million included $116.1 million of stock issued at fair value (fair value
being determined as the average price of the 3dfx stock for a period three days
before and after the announcement of the merger), $9.9 million in STB stock
option costs (being determined under both the Black Sholes formula and in
accordance with the merger agreement) and $13.3 million in estimated expenses of
the transaction. The purchase price was



                                       11
<PAGE>   14

allocated as follows: $85.6 million to the estimated fair value of STB net
tangible assets purchased (as of May 13, 1999), ($7.6) million to establish
deferred tax liabilities associated with the certain intangibles acquired, $4.3
million to purchased in-process research and development, $11.4 million to
purchased existing technology, $4.4 million to trademarks, $2.3 million to
workforce-in-place, $1.0 million to executive covenants and $37.9 million to
goodwill. The allocation of the purchase price to intangibles was based upon an
independent, third party appraisal and management's estimates.

The intangible assets and goodwill acquired have estimated and useful lives and
estimated first year amortization, as follows:

<TABLE>
<CAPTION>
                                                          Estimated        Fiscal 2001
                                           Amount        Useful Life      Amortization
                                        ------------     ------------     ------------
<S>                                     <C>              <C>              <C>
Purchased existing technology:
       1.5 year life                    $  6,475,000        1.5 years     $  3,418,000
       3 year life                         4,966,000          3 years        1,655,000
Trademarks                                 4,406,000          5 years          881,000
Workforce-in-place                         2,250,000          5 years          450,000
Executive covenants                        1,000,000          5 years          200,000
Goodwill                                  37,500,000          5 years        7,816,000
</TABLE>

The value assigned to purchased IPR&D was determined by identifying research
projects in areas for which technological feasibility had not been established.
These include projects for Voodoo3 as well as other specialized technologies
totaling $4.3 million. The value was determined by estimating the expected cash
flows from the projects once commercially viable, discounting the net cash flows
back to their present value and then applying a percentage of completion to the
calculated value as defined below.

Net Cash Flows. The net cash flows from the identified projects are based on our
estimates of revenues, cost of sales, research and development costs, selling,
general and administrative costs, royalty costs and income taxes from those
projects. These estimates are based on the assumptions mentioned below. The
research and development costs included in the model reflect costs to sustain
projects, but exclude costs to bring in-process projects to technological
feasibility.

Revenues. The estimated revenues are based on management projections of each
in-process project and the business projections were compared and found to be in
line with industry analysts' forecasts of growth in substantially all of the
relevant markets. Estimated total revenues from the IPR&D product areas are
expected to peak in the year ending December 31, 1999 and decline from 2000 into
2001 as other new products are expected to become available. These projections
are based on our estimates of market size and growth, expected trends in
technology and the nature and expected timing of new project introductions by
our competitors and us.

Gross Margins. Projected gross margins associated with the identified projects
approximate STB's recent historical performance and are in line with comparable
industry margins. The estimated selling, general and administrative costs are
consistent with STB's historical cost structure, which is in line with industry
averages at approximately 10% of revenues. Research and development costs are
consistent with STB's historical cost structure.

Royalty Rate. The Company applied a royalty charge of 25% of operating income
for each in-process project to attribute value for dependency on predecessor
core technologies.

Discount Rate. Discounting the net cash flows back to their present value is
based on the industry WACC. The industry WACC is approximately 14%. The discount
rate used in discounting the net cash flows from IPR&D is 20%, a 600 basis point
increase from the industry WACC. This discount rate is higher than the industry
WACC due to inherent uncertainties surrounding the successful development of the
IPR&D, market acceptance



                                       12
<PAGE>   15

of the technology, the useful life of such technology and the uncertainty of
technological advances which could potentially impact the estimates described
above.

Percentage of Completion. The percentage of completion for each project was
determined using costs incurred to date on each project as compared to the
remaining research and development to be completed to bring each project to
technological feasibility. The percentage of completion varied by individual
project ranging from 50% to 91%. If the projects discussed above are not
successfully developed, the sales and profitability of the combined company may
be adversely affected in future periods.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2000 AND JULY 31, 1999

Revenues. Revenues are recognized upon product shipment. The Company's total
revenues were $67.0 million in the three months ended July 31, 2000, a decrease
of 36.1%, or $37.8 million from revenues of $104.8 million in the three months
ended July 31, 1999. The decrease was primarily attributable to delays in the
launch of the Voodoo5 product line, component shortages and pricing pressure in
the retail and commercial channel on the Voodoo3 products. As a result of the
delays, the Company was only able to recognize significant revenues from the
Voodoo5 product line in the second half of the quarter. Revenues for the three
months ended July 31, 2000 were derived from sales of the Company's Voodoo3 and
Voodoo5 products. Substantially all of the revenues in the three months ended
July 31, 1999 were attributable to sales of the Company's Voodoo3 products.

Gross Profit. Gross profit consists of total revenues less cost of revenues.
Cost of revenues consists primarily of costs associated with the purchase of
components and the procurement of semiconductors from the Company's contract
manufacturers, labor and overhead associated with such procurement, board
assembly and warehousing, shipping and warranty costs. The Company's gross
profit decreased by $18.3 million from $28.5 million in the three months ended
July 31, 1999 to $10.2 million in the three months ended July 31, 2000. Gross
profit as a percentage of revenues was 15.2% and 27.2% in the three months ended
July 31, 2000 and July 31, 1999, respectively. The decrease can primarily be
attributed to lower margins associated with pricing pressure in the retail and
commercial channel on the Voodoo3 products sold in the three months ended July
31, 2000. In addition, lower unit volumes resulted in increased overhead applied
on a per unit basis, resulting in decreased overall gross profit margin. The
Company's future gross profit will be affected by the overall level of sales,
the mix of products sold in a period, manufacturing yields, and the Company's
ability to reduce product procurement and production costs.

Research and Development. Research and development expenses consist primarily of
compensation and other expenses related to research and development personnel,
occupancy costs of research and development facilities, depreciation of capital
equipment used in product development and engineering costs paid to the
Company's foundries in connection with manufacturing start-up of new products.
Research and development expenses increased 15.7% from $16.6 million in the
three months ended July 31, 1999 to $19.2 million in the three months ended July
31, 2000. This increase reflects an increase in personnel costs, common cost
allocations and engineering costs resulting from the development of Voodoo5 and
other future products. In addition, the Company recorded a onetime charge for
the write-down of certain purchased software in the amount of $1.9 million. The
Company expects to continue to make substantial investments in research and
development and anticipates that research and development expenses will increase
in absolute dollars in future periods, although such expenses as a percentage of
total revenues will fluctuate.

Selling, General and Administrative. Selling, general and administrative
expenses include compensation and benefits for sales, marketing, finance and
administration personnel, commissions paid to independent sales representatives,
tradeshow, advertising and other promotional expenses and facilities expenses.
Selling, general and administrative expenses decreased 13.2% from $19.0 million
in the three months ended July 31, 1999 to $16.5 million in the three months
ended July 31, 2000. The



                                       13
<PAGE>   16

decrease is primarily attributable to decreases in marketing costs, advertising
and Co-Op advertising associated with the commercial channel. The Company
expects that selling, general and administrative expenses will increase in
absolute dollars in future periods, although such expenses as a percentage of
total revenues will fluctuate.

Goodwill and Other Intangibles Amortization. In connection with the STB merger
and the GigaPixel merger, the latter of which was consummated in July 2000, the
Company recorded assets representing goodwill of $37.9 million and $103.5
million, respectively, and intangibles of $19.1 million and $13.2 million,
respectively. These amounts will be amortized ratably over the amortization
periods of the applicable assets. The Company recorded amortization expense in
the amount of $4.5 million for the three months ended July 31, 2000, and $3.0
million for the three months ended July 31, 1999.

Interest and Other Income (Expense), Net. Interest and other income (expense),
net decreased from income of $685,000 in the three months ended July 31, 1999 to
a net expense of $436,000 in the three months ended July 31, 2000. The decrease
is related to decreased earnings from lower invested cash balances and higher
interest expense on the outstanding equipment line of credit, capital lease
balances and the revolving credit facility. In addition, the Company recorded an
expense related to the settlement of a lawsuit.

Provision (Benefit) For Income Taxes. The Company recorded income tax benefits
of $447,000 and $2.0 million for the three months ended July 31, 2000 and July
31, 1999, respectively. The Company's effective tax rate in fiscal 2001 and 2000
differs from the statutory rate due to non-deductible charges relating to the
acquisition of STB, increase in valuation allowance against the Company's
deferred tax assets and benefits realized as a result of a net operating loss
carryback to profitable years. Management believes it is more likely than not
that a portion of its net deferred tax assets will not be realized. Accordingly,
a $4.3 million charge was recorded reducing the Company's net deferred tax asset
to $10.1 million, representing the tax refunds due the Company. At January 31,
2000, 3dfx had net operating loss carryforwards of $22.5 million and $32.2
million for federal and state purposes, respectively. At January 31, 2000, 3dfx
had research and development credit carryforwards of approximately $1.5 million
and $1.0 million for federal and California purposes, respectively.

Under the Tax Reform Act of 1986, the amount of and the benefit from net
operating losses that can be carried forward may be impaired in certain
circumstances. Due to the completion of 3dfx's initial public offering in June
1997, the acquisition of STB Systems, Inc. and the merger with GigaPixel
Corporation, certain annual limitations will apply which will limit the amount
of net operating losses that may be utilized on an annual basis.

SIX MONTHS ENDED JULY 31, 2000 AND JULY 31, 1999

Revenues. Revenues are recognized upon product shipment. The Company's total
revenues were $175.6 million in the six months ended July 31, 2000, an increase
of $30.3 million over revenues of $145.3 million in the six months ended July
31, 1999. The increase was primarily attributable to revenues generated from
board-level sales incorporating Voodoo technology throughout the period.
Revenues for the six months ended July 31, 1999 include board level sales from
May 13, 1999 through the end of the quarter; however, prior to the STB merger,
substantially all of the revenues were comprised of chip level sales, which are
priced significantly less on a per unit basis. Substantially all of the revenues
in the six months ended July 31, 2000 were attributable to sales of the
Company's Voodoo3 products. Revenues in the six months ended July 31, 1999 were
derived in part from the sale of the Company's Voodoo Banshee, the Voodoo2
chipsets and the Voodoo3 chip. In addition, subsequent to May 13, 1999, the
effective date of the STB merger, sales of board level products contributed to a
substantial amount of revenues for the period.



                                       14
<PAGE>   17

Gross Profit. Gross profit consists of total revenues less cost of revenues.
Cost of revenues consists primarily of costs associated with the purchase of
components and the procurement of semiconductors from the Company's contract
manufacturers, labor and overhead associated with such procurement, board
assembly and warehousing, shipping and warranty costs. The Company's gross
profit decreased by $6.2 million from $42.8 million in the six months ended July
31, 1999 to $36.6 million in the six months ended July 31, 2000. Gross profit as
a percentage of revenues was 20.8% and 29.4% in the six months ended July 31,
2000 and July 31, 1999, respectively. The decrease can primarily be attributed
to the gross profit generated from sales of board-level products, which have
lower margins as compared with the margins on chip-only products. In addition,
the decrease in gross profit as a percentage of revenues resulted from lower
margins associated with pricing pressure in the retail and commercial channel on
the Voodoo3 products sold in the six months ended July 31, 2000. Decreased unit
volumes of products for the six months ended July 31, 2000 also had a negative
impact on gross margin. The Company's future gross profit will be affected by
the overall level of sales, the mix of products sold in a period, manufacturing
yields, and the Company's ability to reduce product procurement and production
costs.

Research and Development. Research and development expenses consist primarily of
compensation and other expenses related to research and development personnel,
occupancy costs of research and development facilities, depreciation of capital
equipment used in product development and engineering costs paid to the
Company's foundries in connection with manufacturing start-up of new products.
Research and development expenses increased 26.1% from $28.3 million in the six
months ended July 31, 1999 to $35.7 million in the six months ended July 31,
2000. This increase is due in part to research and development expenses
attributable to the operations of STB, which are included in the total research
and development expenses for the entire six months ended July 31, 2000, but only
for a portion of the six-month period ended July 31, 1999. In addition, this
increase reflects an increase in personnel costs, common cost allocations and
engineering costs resulting from the development of Voodoo5 and other future
products, as well as a onetime write-down of certain purchased software in the
amount of $1.9 million. The Company expects to continue to make substantial
investments in research and development and anticipates that research and
development expenses will increase in absolute dollars in future periods,
although such expenses as a percentage of total revenues will fluctuate.

Selling, General and Administrative. Selling, general and administrative
expenses include compensation and benefits for sales, marketing, finance and
administration personnel, commissions paid to independent sales representatives,
tradeshow, advertising and other promotional expenses and facilities expenses.
Selling, general and administrative expenses increased 39.4% from $25.6 million
in the six months ended July 31, 1999 to $35.7 million in the six months ended
July 31, 2000. The selling, general and administrative expenses relating to the
operations of STB, are included in total in the six months ended July 31, 2000,
and from the effective date of the merger, May 13, 1999 through July 31, 1999.
In addition, marketing costs associated with the Voodoo5 product family launch
and increased legal costs contributed to the increase in selling, general and
administrative. The Company expects that selling, general and administrative
expenses will increase in absolute dollars in future periods, although such
expenses as a percentage of total revenues will fluctuate.

Goodwill and Other Intangibles Amortization. In connection with the STB merger,
the Company recorded assets representing goodwill of approximately $37.9 million
and intangibles of approximately $19.1 million. Additionally, the Company
recorded goodwill of approximately $103.5 million and intangibles of $13.2
million in connection with the GigaPixel merger, consummated on July 21, 2000.
These amounts will be amortized ratably over the amortization periods of the
applicable assets. The Company recorded $8.3 million and $3.0 million in related
amortization for the six months ended July 31, 2000 and the six months ended
July 31, 1999, respectively.

Interest and Other Income (Expense), Net. Interest and other income (expense),
net decreased from income of $1.6 million in the six months ended July 31, 1999
to a net expense of $481,000 in the six months ended July 31, 2000. The decrease
is primarily



                                       15
<PAGE>   18
related to decreased earnings from lower invested cash balances and higher
interest expense on the outstanding equipment line of credit, capital lease
balances and the revolving credit facility. In addition, the Company recorded an
expense related to the settlement of a lawsuit.

Provision (Benefit) For Income Taxes. The Company recorded income tax benefits
of $1.2 million and $3.0 million for the six months ended July 31, 2000 and July
31, 1999, respectively. The Company's effective tax rate in fiscal 2001 and 2000
differs from the statutory rate due to non-deductible charges relating to the
acquisition of STB, increase in valuation allowance against the Company's
deferred tax assets and benefits realized as a result of a net operating loss
carryback to profitable years. Management believes it is more likely than not
that a portion of its net deferred tax assets will not be realized. Accordingly,
a $4.3 million charge was recorded reducing the Company's net deferred tax asset
to $10.1 million, representing tax refunds due the Company. At January 31, 2000,
3dfx had net operating loss carryforwards of $22.5 million and $32.2 million for
federal and state purposes, respectively. At January 31, 2000, 3dfx had research
and development credit carryforwards of approximately $1.5 million and $1.0
million for federal and California purposes, respectively.

Under the Tax Reform Act of 1986, the amount of and the benefit from net
operating losses that can be carried forward may be impaired in certain
circumstances. Due to the completion of 3dfx's initial public offering in June
1997, the acquisition of STB Systems, Inc. and the proposed merger with
GigaPixel Corporation, certain annual limitations will apply which will limit
the amount of net operating losses that may be utilized on an annual basis.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2000, the Company had working capital of $48.6 million including
cash, cash equivalents and short-term investments of $36.7 million. Net cash
used in operating activities in the first six months of fiscal 2001 was due
primarily to a net loss of $112.9 million, and increases of $25.6 million in
inventory, partially offset by the immediate write-off of acquired in-process
research and development of $66.3 million, adjustments of depreciation of $12.8
million and amortization of $8.3 million, as well as decreases in accounts
receivable and other assets of $17.6 million and $7.0 million, respectively. Net
cash used in operating activities for the six months ended July 31, 1999 of $5.8
million was due primarily to a net loss of $13.8 million, and decreases of $8.4
million in accrued liabilities and $3.4 million in accounts payable, partially
offset by a decrease of $8.7 million in accounts receivable, adjustments to
depreciation of $5.3 million and amortization of $3.0 million, and the write-off
of in-process research and development of $4.3 million.

Net cash provided by investing activities in the first six months ended July 31,
2000 was approximately $7.0 million due to maturities of short-term investments,
and proceeds from the GigaPixel merger, partially offset by purchases of
property and equipment of $9.2 million. Net cash used in investing activities in
the six months ended July 31, 1999 was primarily due to purchases of property
and equipment of $19.4 million and $7.2 million used in the merger of STB
Systems. The Company does not have any significant capital spending or purchase
commitments other than normal purchase commitments and commitments under leases.
The Company expects capital expenditures to increase over the next several years
as it expands facilities and acquires equipment to support the planned expansion
of its operations.

Net cash provided by financing activities for the six months ended July 31, 2000
of $1.8 million was due to the net proceeds from the issuance of common stock of
$2.2 million, partially offset by payments on its capital lease obligations. Net
cash used in financing activities was approximately $5.1 million for the six
months ended July 31, 1999 due primarily to the repurchase of common stock of
$2.5 million and payments on line of credit and capital lease obligations.

3dfx has a $25.0 million revolving credit facility ("Revolving Credit
Facility"), as well as a $3.0 million term loan ("Term Loan"). At July 31, 2000,
$25.0 million was


                                       16
<PAGE>   19
outstanding under the Revolving Credit Facility and $1.6 million was outstanding
under the Term Loan. Principal amounts outstanding under the Revolving Credit
Facility bear interest at LIBOR plus 100 basis points (7.62% at July 31, 2000).
Amounts outstanding under the Term Loan bear interest at LIBOR plus 250 basis
points and are payable in 60 monthly installments of principal and interest
(9.12% at July 31, 2000). Payment of principal and interest began November 1,
1997. Formulas based on eligible accounts receivable determine availability
under the Revolving Credit Facility. 3dfx has pledged $25.0 million of cash and
short term-term investments, as well of 3dfx's owned assets as collateral to
secure the Revolving Credit Facility. All indebtedness under the Revolving
Credit Facility matures on December 19, 2000, and indebtedness under the Term
Loan matures on November 1, 2002 (subject to renewal of the Revolving Credit
Facility through such date).

The Company is in the process of negotiating with a new lender for a $30.0
million revolving credit facility which will be based upon the level of eligible
accounts receivable of the Company. Upon consummation of this financing, the
Company intends to payoff the previous Revolving Credit Facility and the Term
Loan with the previous lender. The $25.0 million cash and short-term investments
previously pledged to secure the Revolving Credit Facility will be used to fund
the payoff. The Company estimates that approximately $24.0 million in cash will
be available to the Company from the new facility following the payoff. Although
the Company has been informed of approval of the facility by the lender's credit
committee, a formal commitment letter has not been received. No assurances can
be given that the new revolving credit facility will be completed between the
Company and such new lender.

3dfx is obligated under a five-year agreement to lease a facility in Richardson,
Texas which was previously the corporate headquarters of STB Systems.
Construction of the 210,000 square foot facility was completed in December 1998.
The total cost of the land and building was approximately $22.8 million. 3dfx
made lease payments of approximately $187,000 per month in fiscal 2000, although
the lease agreement provides that the amount of the lease payments is subject to
adjustment based upon prevailing interest rates. Consequently, an increase in
prevailing interest rates will increase the expense of the facility. 3dfx
previously entered into an interest rate swap agreement that fixes the interest
rate on a majority of the lease obligation at 7.55%. 3dfx does not currently use
a portion of the facility and has subleased substantially all of the unused
space, constituting approximately 50% of the facility space, to third parties
under long term leases expiring in approximately five years. At the end of the
initial five-year lease term, 3dfx has the option to renew the lease for an
additional five years, pay off the underlying debt or cause the building to be
sold. In the event of a sale, the proceeds are to be used to retire the
underlying debt. Any excess will be paid to 3dfx. Any remaining unpaid balance
owing on the underlying obligation after the sale of the facility will be the
responsibility of 3dfx.

3dfx has invested in capital equipment through equipment leases for its
manufacturing facility in Juarez, Mexico. 3dfx's aggregate obligations under all
such equipment lease financing arrangements totaled approximately $4.7 million
at July 31, 2000.

The Company's future liquidity and capital requirements will depend upon
numerous factors, including the costs and timing of expansion of research and
product development efforts and the success of these development efforts, the
costs and timing of expansion of sales and marketing activities, the extent to
which the Company's existing and new products gain market acceptance, competing
technological and market developments, the costs involved in maintaining and
enforcing patent claims and other intellectual property rights, and available
borrowings under line of credit arrangements and other factors. The Company
believes that its current cash balances and cash generated from operations and
from available or future debt financing, together with capital to be provided
under the new revolving credit facility, will be sufficient to meet the
Company's operating and capital requirements through at least the next twelve
months. However, there can be no assurance that the Company will not require
additional financing within this time frame. The Company's forecast of the
period of time through which its financial resources will be adequate to support
its operations is a forward-looking statement that involves risks and
uncertainties, and



                                       17
<PAGE>   20

actual results could vary. The factors described earlier in this paragraph will
impact the Company's future capital requirements and the adequacy of its
available funds. The Company may be required to raise additional funds through
public or private financing, strategic relationships or other arrangements.
There can be no assurance that such additional funding, if needed, will be
available on terms attractive to the Company, or at all. Furthermore, any
additional equity financing may be dilutive to shareholders, and debt financing,
if available, may involve restrictive covenants or an equity component.
Strategic arrangements, if necessary to raise additional funds, may require the
Company to relinquish its rights to certain of its technologies or products. The
failure of the Company to raise capital when needed could have a material
adverse effect on the Company's business, financial condition and results of
operations.

RISK FACTORS

This Quarterly Report contains certain forward-looking statements within the
meaning of the federal securities laws. 3dfx's actual results and the timing of
certain events could differ greatly from those anticipated in these
forward-looking statements as a result of known and unknown factors, including
the risks faced by 3dfx described below. The risks and uncertainties described
below are not the only ones facing 3dfx. Additional risks and uncertainties not
presently known by 3dfx or that 3dfx does not currently believe are important
may also harm 3dfx's business operations. If any of the following risks actually
occur, 3dfx's business, financial conditions or results of operations could be
seriously harmed.

3DFX'S MERGER WITH GIGAPIXEL POSES A NUMBER OF SIGNIFICANT RISKS TO 3DFX'S
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The merger of GigaPixel with and into a wholly-owned subsidiary of 3dfx,
involves some specific risks, including the following:

         o        3dfx may encounter substantial difficulties and costs
                  integrating the two companies' products, technologies,
                  research and development activities, administration, sales and
                  marketing and other aspects of operations in a timely manner.
                  The difficulties, costs and delays involved in this
                  integration may increase operating costs, cause lower than
                  anticipated financial performance or lead to the loss of
                  customers and employees. The failure to successfully integrate
                  the GigaPixel operations in a timely manner could result in a
                  failure of 3dfx to realize any of the anticipated benefits of
                  the merger and could materially harm the business of the
                  combined company.

         o        Uncertainty in the marketplace or customer concern regarding
                  the impact of the merger on 3dfx could result in customers or
                  potential customers of 3dfx deferring purchasing or licensing
                  decisions until they have had an opportunity to assess that
                  impact, or ceasing to do business with 3dfx altogether, which
                  could harm the business of 3dfx.

         o        Because some GigaPixel customers and licensees compete with
                  3dfx, these customers and licensees may cease to do business,
                  or may reduce the amount of business that they do, with 3dfx,
                  which could cause a decline in the combined company's
                  revenues.

         o        The merger has dramatically increased the number of freely
                  tradeable 3dfx shares and will result in a substantial
                  dilution to current 3dfx shareholders, which could drive down
                  the price of 3dfx common stock. Subject to certain contractual
                  restrictions and relevant securities laws generally applicable
                  to affiliates, all of the shares of 3dfx common stock issued
                  in the merger will be freely tradable in the public market.
                  Actual sales or the perception of the potential for
                  significant sales in the public market of a substantial number
                  of these shares following



                                       18
<PAGE>   21

                  completion of the merger could adversely affect the market
                  price of 3dfx common stock.

         o        GigaPixel has reported net losses in recent historical
                  periods, and if these losses continue, they would adversely
                  affect 3dfx's financial performance and condition. GigaPixel
                  has incurred net losses for both of the years ended December
                  31, 1998 and December 31, 1999. If 3dfx is not successful in
                  reversing the performance of GigaPixel's operations, those
                  business operations would have a negative impact on the
                  overall business of the combined company.

         o        Because of the purchase accounting treatment of the merger,
                  non-cash charges associated with the amortization of goodwill
                  and other intangibles will reduce 3dfx's earnings in the
                  future, which could adversely affect 3dfx's stock price.

         o        3dfx's success following the merger will depend on the
                  retention and integration of key personnel.

         o        There are substantial expenses resulting from the GigaPixel
                  merger.

In addition, there are a number of risks related to the business and operations
of GigaPixel that would affect the operations of 3dfx, including a number of the
same or similar risks faced by 3dfx identified below, as well as a number of
risks specific to GigaPixel, including GigaPixel's limited operating history,
its dependence on a limited number of customers, GigaPixel's inability to
control or influence its licensees' manufacturing, promotion, distribution or
pricing of products incorporating its 3D core technologies and its limited
experience in the set-top box, game console and portable device markets.

3DFX MAY EXPERIENCE UNEXPECTED REVENUE SHORTFALLS AND QUARTERLY VARIATIONS IN
OPERATING RESULTS.

3dfx's quarterly and annual results of operations have varied significantly in
the past and are likely to continue to vary in the future. These variations are
the result of a number of factors, many of which are beyond 3dfx's control.
These factors include:

         o        The ability to successfully develop, introduce and market new
                  or enhanced products.

         o        The ability to introduce and market products in accordance
                  with customer design requirements and design cycles.

         o        Changes in the relative volume of sales of various products
                  with different margins.

         o        Changes in demand for 3dfx's products or for its customers'
                  products.

         o        Gains or losses of significant customers or strategic
                  relationships.

         o        The volume and timing of customer orders.

         o        The availability, pricing and timeliness of delivery of
                  components for 3dfx's products.

         o        The timing of new product announcements or introductions by
                  competitors.

         o        Product obsolescence and the management of product
                  transitions.

         o        Production delays.



                                       19
<PAGE>   22

         o        Decreases in the average selling prices of products.

Any one or more of the factors listed above or other factors could cause 3dfx to
fail to achieve its revenue and profitability expectations. Most of 3dfx's
operating expenses are relatively fixed in the short term. 3dfx may be unable to
rapidly adjust spending to compensate for any unexpected sales shortfall, which
could materially harm quarterly operating results. As a result of the above
factors, 3dfx does not believe that you should rely on period-to-period
comparisons of results of operations as an indication of future performance or
that the results of any one quarter should be viewed as indicative of results to
be expected for a full fiscal year.

3DFX's BUSINESS CHANGES RAPIDLY AND IT MAY NOT HAVE THE RESOURCES TO EFFECTIVELY
MANAGE THESE RAPID CHANGES.

The potential future growth of 3dfx has placed significant demands on its
management as well as on its technical, administrative, operational and
financial resources. As a result, 3dfx may not have sufficient resources to
sustain and effectively manage any additional growth. The expansion of 3dfx's
business to take advantage of new market opportunities will require significant
technical resources, management attention and financial resources. To manage
additional growth 3dfx may be required to:

         o        Expand its engineering, sales, marketing and customer support
                  organizations.

         o        Attract and retain additional qualified personnel.

         o        Expand its physical facilities.

         o        Invest in the development or enhancement of its current
                  products and develop new technologies and products that meet
                  changing industry needs.

         o        Develop systems, procedures or controls to support the
                  expansion of its operations.

An inability on the part of 3dfx to sustain or manage any additional growth
could have a material adverse effect on the business, operating results and
financial condition of 3dfx.

3DFX WILL DEPEND ON ITS ABILITY TO EFFECTIVELY DEVELOP NEW TECHNOLOGIES AND
PRODUCTS TO MEET THE CHANGING INDUSTRY STANDARDS, PRACTICES AND CUSTOMER NEEDS
ASSOCIATED WITH THE RAPIDLY CHANGING AND INTENSELY COMPETITIVE PC AND GRAPHICS
CHIP AND BOARD INDUSTRIES.

3dfx will depend, in part, on its ability to develop leading technologies,
enhance its existing services and develop and introduce new technologies and
products to meet the needs of 3dfx's customers. 3dfx also must continue to meet
the demands of technological advances and emerging industry standards and
practices on a timely and cost-effective basis. Although 3dfx will strive to be
a technological leader, future technology advances may not complement or be
compatible with its products. 3dfx has expended significant resources, primarily
through the acquisition of GigaPixel, to develop non-PC based products. However,
there is no assurance that these non-PC based products will either be accepted
or competitive in the market place, or will be profitable for 3dfx. In addition,
3dfx may be unable to economically and timely incorporate technology changes and
technology advances into its business. 3dfx may be unsuccessful in effectively
using new technologies, adapting its services to emerging industry standards or
developing, introducing and marketing product enhancements or new products. 3dfx
may also experience difficulties that could delay or prevent the successful
development, introduction or marketing of these products. The inability or delay
of 3dfx to develop and introduce new technologies or products or to enhance
existing products or services on a timely and cost-effective basis, or the
failure of new technologies or products to achieve market acceptance, could have
a material adverse effect on its business, operating results and financial
condition.



                                       20
<PAGE>   23

3DFX'S OPERATIONS DEPEND ON THE EXPERIENCE OF KEY PERSONNEL AND ITS ABILITY TO
RETAIN, ATTRACT AND INTEGRATE ITS KEY PERSONNEL.

3dfx's business operations depend on the continued services of its executive
officers and other key personnel. 3dfx may be unable to retain its key personnel
or to attract other qualified personnel. The future operations of 3dfx depend
upon its ability to retain, attract and integrate key management personnel.

In addition, competition for highly-skilled technical personnel is intense in
the industries in which 3dfx operates. 3dfx's shareholders cannot be assured
that 3dfx will be able to successfully identify, attract, hire and retain
highly-skilled technical personnel in a timely and effective manner. Moreover,
competitors may intensify their efforts to recruit highly-skilled technical
personnel currently employed by 3dfx as a result of its merger with GigaPixel.
The loss of services of one or more highly-skilled technical personnel, the
failure to attract and retain other highly-skilled technical personnel or to
recruit new highly-skilled technical personnel could disrupt operations and have
a negative effect on employee productivity and morale of 3dfx.

AS NEARLY ALL OF THE REVENUES OF 3DFX WILL BE DERIVED FROM THE PC AND GRAPHICS
BOARD AND CHIP INDUSTRIES, A DOWNTURN IN ANY ONE OF THESE INDUSTRIES WOULD
LIKELY ADVERSELY AFFECT 3DFX'S BUSINESS.

For the fiscal years ended December 31, 1997, December 31, 1998 and January 31,
2000, 93%, 100% and 100% of 3dfx's revenues were derived from graphics chips and
graphics boards sold for use in PCs. 3dfx expects to continue to derive its
revenues primarily from the sale of products for use in PCs and, in the longer
term, for use in the consumer product markets. These markets are cyclical and
have been characterized by:

         o        Rapid technological change;

         o        Evolving industry standards;

         o        Cyclical and seasonal market patterns;

         o        Frequent new product introductions and short product life
                  cycles;

         o        Significant price competition and price erosion;

         o        Fluctuating inventory levels;

         o        Alternating periods of over-capacity and capacity constraints;

         o        Variations in manufacturing costs and yields; and

         o        Significant expenditures for capital equipment and product
                  development.

The PC market has grown substantially in recent years. However, such growth may
not continue. A decline in PC or semiconductor sales or in the growth rate of
such sales would likely reduce demand for 3dfx's products. Moreover, such
changes in demand could be large and sudden. Since PC manufacturers often build
inventories during periods of anticipated growth, they may be left with excess
inventories if growth slows or if they have incorrectly forecasted product
transitions. In such cases, the manufacturers may abruptly stop purchasing
additional inventory from suppliers such as 3dfx until the excess inventory has
been used. Such suspension of purchases or any reduction in the demand for PCs
generally, or for particular products that incorporate 3dfx's products, would
materially harm 3dfx's business.

In addition, the PC market has experienced significant economic downturns at
various times in the past, characterized by lower product demand and accelerated
reduction of



                                       21
<PAGE>   24

product prices. In addition, the consumer product market will likely experience
significant volatility as it develops. 3dfx may experience substantial
period-to-period fluctuations in its results of operations due to general
conditions in the semiconductor industry.

BECAUSE 3DFX DEPENDS ON THE RETAIL/DISTRIBUTOR DISTRIBUTION CHANNEL, THE
INABILITY TO ADEQUATELY SUPPORT THE RETAIL/DISTRIBUTOR DISTRIBUTION CHANNEL
WOULD LIKELY HARM 3DFX'S ABILITY TO SELL AND TO MARKET ITS PRODUCTS.

3dfx's products have historically been distributed in the retail/distributor
distribution channel. To access the retail/distributor channel, 3dfx depends on
getting adequate retail shelf space to sell its products. 3dfx has developed a
presence in the retail/distributor distribution channel through its own
marketing efforts, as well as through the significant marketing efforts of a
number of its customers. Although 3dfx successfully penetrated the
retail/distributor distribution channel, there can be no assurances that this
success will continue in the future.

3DFX'S LIMITED EXPERIENCE IN MANAGING AND INTEGRATING ORGANIZATIONS MAY RESULT
IN FUTURE ACQUISITIONS OR JOINT VENTURES BEING DIFFICULT AND DISRUPTIVE.

3dfx regularly evaluates acquisition and joint venture opportunities, and in the
future 3dfx may make acquisitions of other companies or technologies or enter
into joint ventures. 3dfx's merger with GigaPixel is an example of such an
acquisition. These acquisitions or joint ventures may divert the time and
resources of 3dfx's management. Further, 3dfx has limited experience in
integrating newly acquired organizations into its operations. Acquisitions
involve many risks, including:

         o        Difficulty in integrating or otherwise assimilating
                  technologies, products, personnel and operations;

         o        Diversion of management's attention from other business
                  concerns;

         o        Issuance of dilutive equity securities and incurrence of debt
                  or contingent liabilities;

         o        Large write-offs and amortized expenses related to goodwill
                  and other intangible assets;

         o        Loss of key employees of acquired organizations;

         o        Risks of entering markets in which 3dfx has no or limited
                  prior experience; and

         o        Payments of cash, incurrence of debt or assumption of other
                  liabilities to acquire other businesses.

The result of one or more of these factors could have a material adverse effect
on the business, operating results and financial condition of 3dfx.



                                       22
<PAGE>   25

3DFX'S LIMITED OPERATING HISTORY MAKES THE ASSESSMENT OF ITS FUTURE OPERATING
RESULTS DIFFICULT.

3dfx has been shipping products only since the third quarter of 1996. This
limited operating history makes the assessment of 3dfx's future operating
results difficult. Additionally, 3dfx incurred net losses of approximately $1.7
million in fiscal 1997 and $63.3 million in fiscal 2000. The net losses in
fiscal 2000 were attributable to substantial reduction in revenues due to a
delayed product launch, changes in component costs with no ability to adjust
pricing, additional unanticipated costs relating to 3dfx's merger with STB
Systems, Inc. and continuing significant costs incurred in product research,
development and testing and in connection with the amortization of intangibles.
3dfx may also be unable to sustain or to increase revenues on a consistent basis
in the future, and in the near term, it is unlikely to have profits due to the
amortization of intangibles.

3DFX'S FINANCIAL RESULTS DEPEND SIGNIFICANTLY ON ITS ABILITY TO CONTINUALLY
DEVELOP NEW PRODUCTS AND TECHNOLOGIES.

The markets for which 3dfx's products and technologies are designed are
intensely competitive and are characterized by short product life cycles,
rapidly changing technology, evolving industry standards and declining average
selling prices. As a result, the financial performance of 3dfx depends to a
significant extent on 3dfx's ability to successfully develop new products,
including non-PC based products arising primarily from GigaPixel's technology.
Because of the rapidly changing technologies in the businesses in which 3dfx
will operate, 3dfx believes that significant expenditures for research and
development will continue to be required by 3dfx in the future. To succeed in
these businesses, 3dfx must anticipate the features and functionality that
customers will demand. 3dfx must then incorporate those features and
functionality into products that meet the design requirements of the PC,
graphics chip and graphics board markets and the timing requirements of retail
selling seasons. The success of 3dfx's new product introductions will depend on
several factors, including:

         o        Proper new product definition;

         o        Timely completion and introduction of new product designs;

         o        The ability of subcontractors and component manufacturers to
                  effectively design and implement the manufacture of new
                  products and technologies;

         o        The quality of new products and technologies;

         o        Product and technology performance as compared to competitors'
                  products and technologies;

         o        Market acceptance of 3dfx's and its customers' products;

         o        Competitive pricing of products and technologies; and

         o        Introduction of new products and technologies to the market
                  within the limited time window for retail selling seasons and
                  OEM design cycles.

As the markets for 3dfx's products continue to develop and competition
increases, 3dfx anticipates that product life cycles will shorten and that the
average selling prices of these products will decline. In particular, average
selling prices and, in some cases, gross margins for 3dfx's products and
technologies will decline as those products and technologies mature. Thus, 3dfx
will need to introduce new products and technologies to maintain average selling
prices and gross margins. To do this, 3dfx must successfully identify new
product and technology opportunities and develop and bring new products and
technologies to market in a timely manner. 3dfx has in the past experienced
delays in completing the development and introduction of new products. The
failure of 3dfx to successfully develop and introduce new products and
technologies or



                                       23
<PAGE>   26

to achieve market acceptance for such products and technologies would materially
harm the business and financial performance of 3dfx.

BECAUSE 3DFX'S PRODUCTS WILL HAVE SHORT PRODUCT LIFE CYCLES, 3DFX MUST
SUCCESSFULLY MANAGE PRODUCT TRANSITIONS.

In the past, 3dfx's products have had short product life cycles, and 3dfx
believes that its products will continue to have short product life cycles in
the future. A failure by 3dfx to successfully introduce new products within a
given product cycle could materially harm its business for that cycle and
possibly in subsequent cycles. Any such failure could also damage 3dfx's brand
name, reputation and relationships with its customers and cause long-term harm
to its business.

The PC market frequently undergoes transitions in which products rapidly
incorporate new features and performance standards on an industry-wide basis.
3dfx's products must be able to support the new features and performance levels
being required by PC manufacturers at the beginning of such a transition.
Otherwise, 3dfx will likely lose business as well as the opportunity to compete
for new design contracts until the next product transition. An inability to
develop products with required features and performance levels or even a short
delay in bringing a new product to market could significantly reduce 3dfx's
revenues for a substantial period.

The success of 3dfx will depend upon continued market acceptance of its existing
products, and its ability to continually develop and introduce new products and
technologies and new product features and enhancements to meet changing customer
requirements. Each new product cycle presents new opportunities for competitors
of 3dfx to gain market share.

Some components used in 3dfx's products have also historically required long
lead times. Therefore, 3dfx may not be able to quickly reduce its production or
inventory levels in response to unexpected shortfalls in sales or, conversely,
to increase production in response to unexpected demand. If 3dfx is unable to
quickly identify, develop, manufacture or market new products and technologies
or to enhance its existing products and technologies rapidly, then 3dfx's
business and results of operations could be materially and adversely affected.

BECAUSE 3DFX HAS SIGNIFICANT CUSTOMER CONCENTRATION, THE LOSS OF ANY OF ITS
SIGNIFICANT CUSTOMERS WOULD HAVE A MATERIAL ADVERSE EFFECT ON 3DFX'S FINANCIAL
PERFORMANCE AND RESULTS OF OPERATIONS.

3dfx's sales are highly concentrated among a limited number of customers. For
the fiscal year ended January 31, 2000, 3dfx's largest customer, Ingram MicroD,
Inc., accounted for approximately 13% of its net revenues, while 3dfx's 6
largest customers collectively accounted for approximately 40.5% of its net
revenues. There can be no assurance that 3dfx will be able to retain such
customers or to continue to derive significant revenues from them. The loss of
any one of 3dfx's significant customers could have a material adverse effect on
its financial performance and results of operations

BECAUSE 3DFX DOES NOT TYPICALLY ENTER INTO LONG-TERM CONTRACTS WITH ITS
CUSTOMERS, THERE CAN BE NO ASSURANCE THAT HISTORICAL SALES VOLUMES WILL CONTINUE
IN THE FUTURE.

All of 3dfx's sales are made pursuant to purchase orders. The lack of long-term
commitments, together with the customer concentration noted above, poses a
significant risk to 3dfx. If a single customer of 3dfx cancels an order or
ceases to be a customer of 3dfx, then 3dfx's business and financial condition
could be materially harmed.



                                       24
<PAGE>   27

BECAUSE 3DFX HAS LIMITED PRODUCT DIVERSITY, IF 3DFX WERE UNABLE TO INCREASE OF
MAINTAIN 3DFX'S HISTORICAL SALES VOLUMES, THERE COULD BE A NEGATIVE IMPACT ON
3DFC'S RESULTS OF OPERATIONS.

3dfx's revenues depend on the markets for 3D/2D and 3D graphics chips and boards
for PCs and on 3dfx's ability to compete effectively in those markets. Since
3dfx currently has no other products, 3dfx's business would be materially harmed
if it were unable to continue to sell these products at historical levels or to
increase these historical sales levels in the future.

BECAUSE 3DFX DEPENDS ON THIRD PARTY DEVELOPERS AND PUBLISHERS TO CREATE AND
MARKET SOFTWARE TITLES THAT OPERATE WITH ITS GRAPHICS CHIPS, THERE CAN BE NO
ASSURANCE THAT A SUFFICIENT NUMBER OF QUALITY SOFTWARE TITLES THAT ARE
COMPATIBLE WITH 3DFX'S PRODUCTS WILL BE DEVELOPED.

3dfx believes that the availability of numerous high quality, commercially
successful software entertainment titles and applications significantly affects
sales of its products. 3dfx depends on third party software developers and
publishers to create, produce and market software titles that will operate with
3dfx's graphics chips. Only a limited number of software developers are capable
of creating high quality entertainment software. Competition for these resources
is intense and is expected to increase. Therefore, a sufficient number of high
quality, commercially successful software titles compatible with 3dfx's products
may not be developed. In addition, the development and marketing of game titles
that do not fully demonstrate the technical capabilities of 3dfx's products
could create the impression that 3dfx's technology offers only marginal
performance improvements, if any, over competing products.

3DFX'S DEPENDENCE ON SINGLE SOURCE MANUFACTURERS WILL EXPOSE IT TO SIGNIFICANT
RISK IF THE OPERATIONS OF THESE MANUFACTURERS AND OTHER THIRD PARTIES ARE
INTERRUPTED.

3dfx's graphics chip products require wafers manufactured with state-of-the-art
fabrication equipment and techniques. Currently, 3dfx does not manufacture the
semiconductor wafers used for its graphics chip products and does not own or
operate a wafer fabrication facility, nor does 3dfx expect to manufacture
semiconductor wafers or to own or operate a wafer fabrication facility in the
future. Taiwan Semiconductor Manufacturing Company, or TSMC, currently
manufactures all of 3dfx's wafers in Taiwan. 3dfx obtains manufacturing services
from TSMC on a purchase order basis. 3dfx depends on TSMC to:

         o        Produce wafers of acceptable quality and with acceptable
                  manufacturing yields;

         o        Deliver those wafers to 3dfx and its independent assembly and
                  testing subcontractors on a timely basis; and

         o        Allocate to 3dfx a portion of its manufacturing capacity
                  sufficient to meet 3dfx's needs.

3dfx expects to continue to be dependent upon TSMC in the near future. 3dfx is
in the process of qualifying an alternative source of supply, however, it could
take several months to establish a strategic relationship with a new
manufacturing partner. As a result, a manufacturing disruption (such as the one
that occurred in September 1999 when an earthquake struck Taiwan) or capacity
constraints experienced by TSMC would negatively impact the production of 3dfx's
graphics chips and boards and, consequently, would have a negative effect on
3dfx's business and results of operations.



                                       25
<PAGE>   28

BECAUSE 3DFX PRIMARILY DEPENDS ON A SINGLE GRAPHICS BOARD MANUFACTURING
FACILITY, ANY DISRUPTION OF THE GRAPHICS BOARD MANUFACTURING OPERATIONS AT THIS
FACILITY COULD MATERIALLY HARM 3DFX'S BUSINESS.

3dfx's sole graphics board manufacturing facility is located in Juarez, Mexico.
Although a portion of 3dfx's board production is secured from third party
sources, 3dfx is substantially dependent on this single manufacturing facility.
As a result, any disruption of 3dfx's graphics board manufacturing operations at
this facility could materially harm its business. Such disruption could result
from various factors, including difficulties in attracting and retaining
qualified manufacturing employees, difficulties associated with the use of new,
reconfigured or upgraded manufacturing equipment, labor disputes, human error,
governmental or political risks or a natural disaster such as an earthquake,
tornado, fire or flood.

In comparison to those of its competitors that do not maintain their own
graphics board manufacturing facilities, 3dfx incurs higher relative fixed
overhead and labor costs as a result of operating its own manufacturing
facility. Any failure to generate the level of product revenues needed to absorb
these overhead and labor costs would materially harm 3dfx's business.

3DFX'S INTERNATIONAL OPERATIONS WILL MAKE IT SUSCEPTIBLE TO GLOBAL ECONOMIC
FACTORS, FOREIGN TAX LAW ISSUES, FOREIGN BUSINESS PRACTICES AND CURRENCY
FLUCTUATIONS.

3dfx relies on foreign third-party manufacturing, assembly and testing
operations that are located in Asia for its graphics chips and relies primarily
on its own Mexican manufacturing facility for graphics boards. 3dfx also has
significant export sales. These international operations subject 3dfx to a
number of risks associated with conducting business outside of the United
States. These risks include:

         o        Unexpected changes in legislative or regulatory requirements;

         o        Delays resulting from difficulty in obtaining export licenses
                  for some technology;

         o        Tariffs, quotas and other trade barriers and restrictions;

         o        Longer accounts receivable payment cycles;

         o        Difficulties in collecting payment, including increased credit
                  exposures;

         o        Potentially adverse tax consequences, including repatriation
                  of earnings;

         o        Burdens of complying with a variety of foreign laws;

         o        Unfavorable intellectual property laws;

         o        Political instability; and

         o        Foreign currency fluctuations.

Any of these factors could materially harm the international operations and
sales of 3dfx, and consequently, its business. Recently, financial markets in
Asia have experienced significant turmoil, which could harm 3dfx's international
sales or operations. Currently, all of 3dfx's product sales and its arrangements
with its foundry, assembly and test vendors provide for pricing and payment in
U.S. dollars. To date, 3dfx has not engaged in any currency hedging activities,
although 3dfx may do so in the future. An increase in the value of the U.S.
dollar relative to foreign currencies could make 3dfx's products more expensive
and potentially less competitive in foreign markets.



                                       26
<PAGE>   29

3DFX MAY BE UNABLE TO ADEQUATELY PROTECT ITS PROPRIETARY RIGHTS OR PREVENT THEIR
UNAUTHORIZED USE, WHICH COULD DIVERT ITS FINANCIAL RESOURCES AND HARM ITS
BUSINESS.

3dfx's success will depend upon its proprietary technology. 3dfx currently
relies upon a combination of patents, copyrights, trademarks, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
technology rights. Despite current efforts to protect these proprietary rights,
protective measures may not be adequate to prevent misappropriation or
independent third-party development of 3dfx's technology. The laws of many
foreign jurisdictions offer less protection of intellectual property rights than
the laws of the United States. Effective patent, copyright, trademark and trade
secret protection may not be available in other jurisdictions. In addition, 3dfx
may need to litigate claims against third parties to enforce its intellectual
property rights, protect its trade secrets, determine the validity and scope of
the proprietary rights of others or defend against claims of infringement or
invalidity. On September 21, 1998, 3dfx filed suit against nVidia in Northern
California District Federal Court. 3dfx's complaint alleges patent infringement
relating to nVidia's use of multi-texturing technology in its RIVA TNT product.
Discovery in this case is presently under way. This litigation, and other
litigation like it, could result in substantial cost and diversion of management
resources. A successful claim against 3dfx could effectively block its ability
to use or license its technology in the United States or abroad. Any failure of
3dfx to protect its proprietary rights adequately could have a material adverse
effect on the business, operating results and financial condition of 3dfx.

3DFX RELIES ON SEVERAL TECHNOLOGY LICENSES FROM THIRD PARTIES, THE LOSS OF WHICH
MAY HARM 3DFX'S ABILITY TO DEVELOP AND SELL ITS SERVICES.

3dfx currently possesses, and in the future 3dfx may procure, licenses from
third parties relating to its services or technology. Certain of these licenses
are critical to 3dfx's business and would be difficult to replace. If 3dfx were
unable to obtain or maintain these licenses, its ability to develop and to sell
its products could be impaired. If 3dfx or its suppliers are unable to obtain
licenses, 3dfx could be forced to market products without some technological
features. 3dfx also licenses some software and technology for its operations. If
3dfx were unable to obtain licenses or to obtain such licenses on competitive
terms, there could be a material adverse effect on the ability of 3dfx to
effectively offer its products.

BECAUSE THE MARKETS IN WHICH 3DFX WILL OPERATE ARE INTENSELY COMPETITIVE, 3DFX
MAY LOSE MARKET SHARE AND BE FORCED TO REDUCE THE PRICE OF ITS PRODUCTS.

The markets in which 3dfx competes are intensely competitive and are likely to
become more competitive in the future. Existing competitors and new market
entrants may introduce products that are less costly or provide better
performance or features than 3dfx's products. 3dfx does not compete on the basis
of price alone. 3dfx believes that the principal competitive factors for 3D
graphics products are:

         o        Product performance and quality;

         o        Conformity to industry standard application programming
                  interfaces, or APIs;

         o        Access to customers and distribution channels;

         o        Brand awareness;

         o        Price;

         o        Product support; and

         o        Ability to bring new products to the market in a timely
                  manner.



                                       27
<PAGE>   30

Many of 3dfx's current and potential competitors have substantially greater
financial, technical, manufacturing, marketing, distribution and other resources
than 3dfx. These competitors may also have greater name recognition and market
presence, longer operating histories, lower cost structures and larger customer
bases than 3dfx. As a result, such competitors may be able to adapt more quickly
to new or emerging technologies and changes in customer requirements. Some of
3dfx's principal competitors offer a single vendor solution, because they
maintain their own semiconductor foundries and may therefore benefit from some
capacity, cost and technical advantages.

3dfx seeks to use strategic relationships to augment its capabilities. However,
the benefits of these relationships may not be realized or sufficient to
overcome the established market positions of 3dfx's largest competitors.
Regardless of the relative qualities of 3dfx's products, the market power,
product breadth and customer relationships of its larger competitors can be
expected to provide such competitors with substantial competitive advantages.

3dfx competes primarily against companies that offer a board or chip solution to
the 3D/2D PC graphics market. These companies typically have operated in the PC
2D graphics market and now offer 3D capability as an enhancement to their 2D
solutions. These competitors include ATI Technologies, Inc., S3 Incorporated,
Creative Technology Ltd. And nVidia. 3dfx also faces potential competition from
companies that have focused on the high-end of the 3D market and the production
of 3D systems targeted for the professional engineering market, including
3Dlabs, Inc., Integraph Corporation and SGI. These companies are developing
lower cost versions of their 3D technology to bring workstation-like 3D graphics
to mainstream applications. Intel Corporation also competes in the 3D graphics
market by offering an integrated core logic/3D/2D solution aimed at the
mainstream PC market. These companies may enter the interactive electronics
entertainment market, and, if they do, then 3dfx may not be able to compete
successfully against them.

3dfx now also competes with graphics board manufacturers, with suppliers who
sell graphics chips directly to OEMs, with OEMs who internally produce graphics
chips or integrategraphics chips on the main computer processing board of their
personal computers, commonly known as the motherboard, and with the makers of
other personal computer components and software that are increasingly providing
graphics processing capabilities.

3DFX MAY REQUIRE ADDITIONAL FINANCING TO MEET ITS FUTURE CAPITAL AND OPERATIONAL
REQUIREMENTS AND MAY FACE UNCERTAINTY IN OBTAINING FAVORABLE FINANCING
ALTERNATIVES.

If the liquidity and cash flow from 3dfx's operations are insufficient to meet
its operating and capital requirements, then 3dfx may have to seek additional
financing, including public or private debt or equity offerings that may be
dilutive to 3dfx's shareholders. If adequate funds are not available on
acceptable terms, then 3dfx may be unable to develop or enhance its services,
take advantage of future opportunities or respond to competitive pressures or
unanticipated requirements. 3dfx's future capital requirements will depend on
numerous factors, including 3dfx's profitability, operational cash requirements,
competitive pressures, development of new services and applications, acquisition
of complementary businesses or technologies and response to unanticipated
requirements. There can be no assurance that any financing alternatives sought
by 3dfx will be available, or, if available, will be on terms or in amounts
attractive to 3dfx.

POTENTIAL YEAR 2000 ISSUES MAY EXPOSE 3DFX TO LIABILITY OR LOSS.

3dfx has not experienced any material adverse impact from the transition to the
year 2000. Even though no material adverse impact from the year 2000 transition
has been noted through internal investigations and inquiries with its major
customers and suppliers, 3dfx cannot provide any assurance that its suppliers
and customers have not been affected in a manner that is not yet apparent. 3dfx
will continue to monitor its year 2000 compliance and the year 2000 compliance
of its suppliers and customers.



                                       28
<PAGE>   31

LITIGATION MAY DIVERT 3DFX'S RESOURCES AND REDUCE THE MARKET PRICE OF 3DFX'S
COMMON STOCK.

In the past, following periods of volatility in the market price of a company's
stock, securities class action litigation has been brought against the issuing
company. It is possible that similar litigation could be brought against 3dfx.
Such litigation could result in substantial costs and would likely divert
management's attention and resources. Any adverse determination in such
litigation could also subject 3dfx to significant liabilities. A securities
class action lawsuit of this type was filed October 9, 1998 in Dallas County,
Texas against STB, which 3dfx acquired by merger in May 1999. The suit was
brought against STB and some of its officers and directors and the underwriters
who participated in the STB secondary offering on March 20, 1998. The petition
alleges that the registration statement for the secondary public offering
contained false and misleading statements of material facts and omitted to state
material facts. The petition asserts claims under Sections 11, 12(a)(2) and 15
of the Securities Act of 1933, as amended, and Sections 581-33A of the Texas
Securities Act on behalf of a purported class of persons who purchased or
otherwise acquired STB common stock in the public offering. The petition seeks
recission and/or unspecified damages. That action was removed to federal court
in April 2000. On December 17, 1999, a similar securities class action lawsuit
was also filed in the United States District Court for the Northern District of
Texas, Dallas Division, against STB and three of its officers and directors. The
action asserts claims under Sections 10 and 20 of the Securities Exchange Act of
1934. On February 8, 2000, another similar class action lawsuit, asserting
claims under Sections 10 and 20 of the Securities Exchange Act of 1934, was
filed against STB and three of its officers and directors in the United States
District Court for the Northern District of Texas. All of these actions have
subsequently been consolidated, and the parties have now reached an agreement in
principle to settle them. The settlement, which is subject to final
documentation and Court approval, does not reflect any admission of liability by
any of the defendants. The principal terms of the settlement call for the
establishment of a settlement fund consisting of $4.7 million to be paid by
insurance.

THE STOCK PRICE OF 3DFX HAS BEEN AND MAY CONTINUE TO BE EXTREMELY VOLATILE DUE
TO MANY FACTORS, WHICH MAY MAKE IT MORE DIFFICULT FOR 3DFX SHAREHOLDERS TO SELL
THEIR SHARES AT PRICES THEY FIND ATTRACTIVE.

Several factors have caused the stock price of 3dfx common stock to be extremely
volatile in the past and may cause the stock price of 3dfx common stock to be
extremely volatile in the future. The 3dfx stock price could be subject to wide
fluctuations in response to a variety of factors, including the following:

         o        Actual or anticipated variations in quarterly operating
                  results;

         o        The ability of 3dfx to successfully develop, introduce and
                  market new or enhanced products and technologies on a timely
                  basis;

         o        Unexpected changes in demand for 3dfx's products and services;

         o        The pricing policies of 3dfx's competitors;

         o        Announcements of technological innovations or new products by
                  3dfx or its competitors;

         o        Changes in securities analysts' recommendations;

         o        Changes in the market valuations of other similarly situated
                  companies;

         o        Announcements by 3dfx or its competitors of significant
                  acquisitions, strategic partnerships, joint ventures or
                  capital commitments; and



                                       29
<PAGE>   32

         o        Market fluctuations and performance of the PC and graphics
                  chip and board industries.

In addition, the trading prices of technology stocks as a whole have experienced
particularly extreme price and volume fluctuations and such effects have often
been unrelated to the operating performance of the applicable companies. Any
negative change in the public's perception of the prospects of technology
companies or other broad market and industry factors could depress the market
price of 3dfx common stock, regardless of its operating performance. Market
fluctuations, as well as general political and economic conditions, such as
recession or interest rate or currency rate fluctuations, may also decrease the
market price of 3dfx's common stock.

3DFX'S SHAREHOLDER RIGHTS PLAN MAY DISCOURAGE A THIRD PARTY FROM ACQUIRING
CONTROL OF 3DFX.

On October 30, 1998, 3dfx adopted a shareholder rights plan that gives each
holder of 3dfx common stock the right to purchase one one-thousandth of a share
of 3dfx's preferred stock if a tender or exchange offer is announced by an
entity or individual that has acquired 12% or more of 3dfx's outstanding common
stock. The shareholder rights plan may make it more difficult for a third party
to acquire control of 3dfx or may discourage acquisition bids for 3dfx
altogether.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         None


                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On September 21, 1998, 3dfx filed suit against nVidia Corporation ("nVidia") in
Northern California District Federal Court. The complaint alleges patent
infringement relating to nVidia's use of multi-texturing technology in its RIVA
TNT product. Discovery in the case is presently under way.

On August 28, 2000, nVidia filed suit against 3dfx in Northern California
District Federal Court. The complaint alleges infringement by 3dfx of five
nVidia patents in the Voodoo3, Voodoo4, Voodoo5 and VSA-100 families of 3dfx
products. nVidia is seeking damages for the alleged infringement. The suit has
just recently been filed and discovery in the case has not yet commenced.

A securities class action lawsuit was filed October 9, 1998 in Dallas County,
Texas against STB Systems, Inc. ("STB"), which 3dfx acquired by merger in May,
1999. The suit was brought against STB and some of its officers and directors
and the underwriters who participated in the STB secondary offering on March 20,
1998. The petition alleges that the registration statement for the secondary
public offering contained false and misleading statements of material facts and
omitted to state material facts. The petition asserts claims under Sections 11,
12(a)(2) and 15 of the Securities Act of 1933, as amended, and Sections 581-33A
of the Texas Securities Act on behalf of a purported class of persons who
purchased or otherwise acquired STB common stock in the public offering. The
petition seeks recission and/or unspecified damages. That action was removed to
federal court in April 2000.

On December 17, 1999, a similar securities class action lawsuit was also filed
in the United States District Court for the Northern District of Texas, Dallas
Division, against STB and three of its officers and directors. The action
asserts claims under Sections 10 and 20 of the Securities Exchange Act of 1934.
On February 8, 2000, another similar class action lawsuit, asserting claims
under Sections 10 and 20 of the Securities Exchange Act of 1934, was filed
against STB and three of its officers and



                                       30
<PAGE>   33

directors in the United States District Court for the Northern District of
Texas. All of these actions have subsequently been consolidated, and the parties
have now reached an agreement in principle to settle their actions. The
settlement, which is subject to final documentation and Court approval, does not
reflect any admission of liability by any of the defendants. The principal terms
of the settlement call for the establishment of a settlement fund consisting of
$4.7 million to be paid by insurance.

3dfx is a party from time to time to some other legal proceedings arising in the
ordinary course of business. Although the amount of any liability that could
arise with respect to these proceedings cannot be predicted accurately, 3dfx
believes that any liability that might result from such claims will not have a
material adverse effect on its financial position.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         At the Annual Meeting held on July 19, 2000, 3dfx shareholders voted to
approve each of the following proposals:

         (1) to approve the Agreement and Plan of Reorganization by and among
3dfx, Galapagos Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of 3dfx, and GigaPixel Corporation, a Delaware corporation, to
approve the merger of 3dfx and GigaPixel, and to approve the issuance of shares
of 3dfx common stock to GigaPixel shareholders in the merger:

<TABLE>
<CAPTION>
                                               Votes Cast Against or      Abstention
                     Votes Cast in Favor              Withheld           and Non-Vote
                     -------------------       ---------------------     ------------
<S>                                            <C>                        <C>
                          13,155,822                   231,818             8,999,177
</TABLE>


         (2)      to approve an amendment to the 3dfx Interactive, Inc. 1995
                  Employee Stock Option Plan to increase the number of shares of
                  common stock reserved for issuance under the stock plan by
                  2,500,000 shares for a total of 8,875,000 shares:

<TABLE>
<CAPTION>
                                               Votes Cast Against or      Abstention
                     Votes Cast in Favor              Withheld           and Non-Vote
                     -------------------       ---------------------     ------------
<S>                                            <C>                        <C>
                          10,024,950                  3,362,690            8,999,177
</TABLE>


         (3)      to approve an amendment to the 3dfx Interactive, Inc. 1997
                  Employee Stock Purchase Plan to increase the number of shares
                  of common stock reserved for issuance under the purchase plan
                  by 850,000 shares for a total of 1,600,000 shares, as well as
                  to provide for larger annual increases in the number of shares
                  reserved for issuance under the purchase plan equal to the
                  lesser of 600,000 shares or 1.5% of 3dfx's then outstanding
                  shares:

<TABLE>
<CAPTION>
                                               Votes Cast Against or      Abstention
                     Votes Cast in Favor              Withheld           and Non-Vote
                     -------------------       ---------------------     ------------
<S>                                            <C>                        <C>
                          11,831,493                  1,556,147            8,999,177
</TABLE>



                                       31
<PAGE>   34

         (4) to ratify the selection of PricewaterhouseCoopers LLP as the
independent public accountants for 3dfx's fiscal year ending January 31, 2001:

<TABLE>
<CAPTION>
                                               Votes Cast Against or
                     Votes Cast in Favor             Withheld
                     -------------------       ---------------------
<S>                                            <C>
                          22,229,457                   157,360
</TABLE>


ITEM 5. OTHER INFORMATION

         None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

         3.1*     Amended and Restated Bylaws.

         10.1*    Indemnity Escrow Agreement, dated as of July 20, 2000, by and
                  between the Company, GigaPixel Corporation, Galapagos
                  Acquisition Corp. and U.S. Trust Company, N.A.

         10.2*    Consulting Agreement, dated July 20, 2000, by and between the
                  Company and George T. Haber.

         10.3*    Noncompetition Agreement, dated as of July 20, 2000, by and
                  between the Company and George T. Haber.

         10.4*    Contingent Recourse Non-Negotiable Promissory Note, dated as
                  of July 20, 2000, made by George T. Haber for the benefit of
                  GigaPixel Corporation.

         10.5*    Lock Up Agreement dated as of July 20, 2000, by and between
                  the Company and George T. Haber.

         10.6*    Noncompetition Agreement dated July 20, 2000, by and between
                  the Company and Philip Carmack.

         10.7*    Employment Agreement for Executive Officer dated as of July
                  20, 2000, by and between GigaPixel Corporation and Philip
                  Carmack.

         10.8*    Contingent Recourse Non-Negotiable Promissory Note dated as of
                  July 20, 2000, made by Philip Carmack for the benefit of
                  GigaPixel Corporation.

         10.09*   Performance Bonus Agreement dated as of July 20, 2000, by and
                  between GigaPixel Corporation and Philip Carmack.

         10.10    3dfx Interactive, Inc. Employee Stock Plan (Amended and
                  Restated as of May 1, 2000) (incorporated by reference to
                  Exhibit 4.1 of the Company's Registration Statement on Form
                  S-8 filed on July 25, 2000).

         10.11    GigaPixel Corporation 1997 Employee Incentive Plan
                  (incorporated by reference to Exhibit 4.1 of the Company's
                  Registration Statement on Form S-8 filed on July 25, 2000).

         27.1*    Financial Data Schedule

----------

         *        Filed herewith

         (b)      Reports on Form 8-K

                  (i)      Current Report on Form 8-K filed on June 23, 2000
                           disclosing a press release, dated as of June 22,
                           2000, announcing that the Company's revenues for the
                           three months ended July 31, 2000 will be lower than
                           previously expected due to the Company not receiving



                                       32
<PAGE>   35

                           a substantial portion of certain components that a
                           supplier committed to provide.

                  (ii)     Current Report on Form 8-K filed on July 28, 2000
                           disclosing the consummation of the merger of
                           GigaPixel Corporation with the Company pursuant to
                           the Agreement and Plan of Reorganization by and among
                           3dfx Interactive, Inc., Galapagos Acquisition Corp.
                           and GigaPixel Corporation dated March 27, 2000
                           (incorporated by reference to the Form S-4 declared
                           effective by the Commission on June 7, 2000).


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: September 14, 2000

                                             3DFX INTERACTIVE, INC.
                                             (Registrant)


                                             By: /s/ ALEX LEUPP
                                                 -------------------------------
                                                 Alex Leupp
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)


                                             By: /s/ DAVID ZACARIAS
                                                 -------------------------------
                                                 David Zacarias
                                                 Vice President, Administration
                                                 and Chief Financial Officer
                                                 (Principal Financial and
                                                 Accounting Officer)




                                       33
<PAGE>   36


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER            DESCRIPTION
-------           -----------
<S>               <C>

         3.1*     Amended and Restated Bylaws.

         10.1*    Indemnity Escrow Agreement, dated as of July 20, 2000, by and
                  between the Company, GigaPixel Corporation, Galapagos
                  Acquisition Corp. and U.S. Trust Company, N.A.

         10.2*    Consulting Agreement, dated July 20, 2000, by and between the
                  Company and George T. Haber.

         10.3*    Noncompetition Agreement, dated as of July 20, 2000, by and
                  between the Company and George T. Haber.

         10.4*    Contingent Recourse Non-Negotiable Promissory Note, dated as
                  of July 20, 2000, made by George T. Haber for the benefit of
                  GigaPixel Corporation.

         10.5*    Lock Up Agreement dated as of July 20, 2000, by and between
                  the Company and George T. Haber.

         10.6*    Noncompetition Agreement dated July 20, 2000, by and between
                  the Company and Philip Carmack.

         10.7*    Employment Agreement for Executive Officer dated as of July
                  20, 2000, by and between GigaPixel Corporation and Philip
                  Carmack.

         10.8*    Contingent Recourse Non-Negotiable Promissory Note dated as of
                  July 20, 2000, made by Philip Carmack for the benefit of
                  GigaPixel Corporation.

         10.09*   Performance Bonus Agreement dated as of July 20, 2000, by and
                  between GigaPixel Corporation and Philip Carmack.

         10.10    3dfx Interactive, Inc. Employee Stock Plan (Amended and
                  Restated as of May 1, 2000) (incorporated by reference to
                  Exhibit 4.1 of the Company's Registration Statement on Form
                  S-8 filed on July 25, 2000).

         10.11    GigaPixel Corporation 1997 Employee Incentive Plan
                  (incorporated by reference to Exhibit 4.1 of the Company's
                  Registration Statement on Form S-8 filed on July 25, 2000).

         27.1*    Financial Data Schedule
</TABLE>

----------

         *        Filed herewith

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>d80311ex3-1.txt
<DESCRIPTION>BYLAWS
<TEXT>

<PAGE>   1


                                                                     EXHIBIT 3.1








                              AMENDED AND RESTATED

                                    BYLAWS OF

                             3DFX INTERACTIVE, INC.




<PAGE>   2





                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                          <C>
ARTICLE I. -- Principal Office..............................    1
  Section 1. Location of Principal Office...................    1
  Section 2. Other Business Offices.........................    1
ARTICLE II. -- Meetings of Shareholders.....................    1
  Section 1. Location of Meetings...........................    1
  Section 2. Annual Meetings................................    1
  Section 3. Special Meetings...............................    2
  Section 4. Quorum.........................................    3
  Section 5. Adjournment....................................    3
  Section 6. Record Date; Cumulative Voting.................    3
  Section 7. Waiver of Notice...............................    4
  Section 8. Action by Written Consent......................    4
  Section 9. Proxies........................................    6
  Section 10. Inspectors of Election........................    6
  Section 11. Nominations and Proposals.....................    7
ARTICLE III. -- Board of Directors..........................    7
  Section 1. Powers of the Board............................    7
  Section 2. Number of Directors............................    8
  Section 3. Election of Directors..........................    9
  Section 4. Vacancies; Resignation.........................    9
ARTICLE IV. -- Meetings of Directors........................   10
  Section 1. Location of Meetings...........................   10
  Section 2. Regular Meetings...............................   10
  Section 3. Special Meetings; Notice.......................   10
  Section 4. Quorum.........................................   10
  Section 5. Waiver of Notice...............................   11
  Section 6. Action by Written Consent......................   11
  Section 7. Committees.....................................   11
  Section 8. Compensation of Directors......................   11
  Section 9. Indemnification................................   11
ARTICLE V. -- Officers......................................   12
  Section 1. Designation of Officers........................   12
  Section 2. Chairman of the Board..........................   12
  Section 3. President......................................   12
  Section 4. Vice Presidents................................   12
  Section 5. Secretary......................................   12
  Section 6. Assistant Secretary............................   13
  Section 7. Treasurer......................................   13
  Section 8. Assistant Treasurer............................   13
ARTICLE VI. -- Miscellaneous................................   13
  Section 1. Record Date....................................   13
  Section 2. Inspection of Corporate Records................   14
  Section 3. Certificates for Shares........................   14
</TABLE>


                                        i


<PAGE>   3






<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                          <C>
  Section 4. Representation of Shares of Other
             Corporations...................................   14
  Section 5. Inspection of Bylaws...........................   14
  Section 6. Construction and Definitions...................   14
ARTICLE VII. -- Amendments..................................   15
  Section 1. Amendment by Shareholders......................   15
  Section 2. Amendment by Board of Directors................   15
ARTICLE VIII. -- Annual and Other Reports...................   15
  Section 1. Annual Report to Shareholders..................   15
  Section 2. Request for Financial Statements...............   15
</TABLE>


                                       ii


<PAGE>   4



                           AMENDED AND RESTATED BYLAWS
                                       OF
                             3DFX INTERACTIVE, INC.

                                   ARTICLE I.

                                PRINCIPAL OFFICE

     SECTION 1. Location of Principal Office. The principal executive office for
the transaction of the business of the corporation shall be established and
maintained by the board of directors at any place within or without the State of
California. The board of directors may change said principal executive office
from one location to another.

     SECTION 2. Other Business Offices. The board of directors may at any
time establish other business offices within or without the State of California.

                                   ARTICLE II.

                            MEETINGS OF SHAREHOLDERS

     SECTION 1. Location of Meetings. All meetings of the shareholders shall be
held at any place within or without the State of California which may be
designated either by the board of directors or by the written consent of all
shareholders entitled to vote thereat and not present at the meeting given
either before or after the meeting and filed with the secretary of the
corporation. In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the corporation.

     SECTION 2. Annual Meetings. The annual meeting of the shareholders of the
corporation shall be held on such date and at such time as shall be determined
by the board of directors, not more than fifteen (15) months after the date of
the preceding annual meeting or, in the case of the first annual meeting, not
more than fifteen (15) months after the organization of the corporation. At such
meeting, directors shall be elected and any other proper business may be
transacted which is within the powers of the shareholders. Written notice of
each annual meeting shall be given to each shareholder entitled to vote either
personally or by first-class mail or other means of written communications
(which includes, without limitation and wherever used in these bylaws,
telegraphic and facsimile communication), charges prepaid, addressed to each
shareholder at the address appearing on the books of the corporation, or given
by the shareholder to the corporation for the purpose of notice. If any notice
or report addressed to the shareholder at the address of such shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice or report to the shareholder at such
address, all future notices or reports shall be deemed to have been duly given
without further mailing if the same shall be available for the shareholder upon
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
or report to all other shareholders. If no address of a shareholder appears on
the books of the corporation or is given by the shareholder to the corporation,
notice is duly given to him if sent by mail or other means of written
communication addressed to the place where the principal executive office of the
corporation is located or if published at least once in a newspaper of general
circulation in the county in which said principal executive office is located.

     All such notices shall be given to each shareholder entitled thereto not
less than ten (10) days nor more than sixty (60) days before each annual
meeting. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the United States mail or delivered to a
common carrier for transmission to the recipient



                                       1
<PAGE>   5

or actually transmitted by the person giving the notice by electronic means to
the recipient or sent by other means of written communication. An affidavit of
mailing of any such notice in accordance with the foregoing provisions, executed
by the secretary, assistant secretary or transfer agent of the corporation shall
be prima facie evidence of the giving of the notice.

     Such notices shall state:

          (a) The place, date and hour of the meeting;

          (b) Those matters which the board, at the time of the mailing of the
notice, intends to present for action by the shareholders;

          (c) If directors are to be elected, the names of nominees intended at
the time of the notice to be presented by management for election;

          (d) The general nature of a proposal, if any, to take action with
respect to the approval of (i) a contract or other transaction with an
interested director, (ii) an amendment of the articles of incorporation, (iii) a
reorganization of the corporation as defined in section 181 of the California
General Corporation Law (the "General Corporation Law"), (iv) a voluntary
dissolution of the corporation, or (v) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, if any; and

          (e) Such other matters, if any, as may properly come before the
meeting or may be expressly required by statute.

     SECTION 3. Special Meetings. Special meetings of the shareholders, for the
purpose of taking any action permitted by the shareholders under the California
General Corporation Law, may be called at any time by the Board or, subject to
the provisions of this Section 3, by the Chair of the Board, the President, or
one or more shareholders holding not less than ten percent (10%) of the votes
entitled to be cast at the meeting. For a special meeting of the shareholders to
be properly brought by any person or persons other than the Board pursuant to
the preceding sentence, the person or persons calling the meeting must have
given timely notice thereof in writing to the Secretary of the Corporation and
the business proposed to be conducted at such meeting must otherwise be a proper
matter for shareholder action. To be timely, such notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the date of the meeting proposed by the person
or persons calling the meeting. Such notice shall set forth (a) the proposed
date and time of the meeting, (b) as to each person whom the person or persons
calling the meeting propose to nominate for election or reelection as a director
all information relating to such nominee that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (or any successor thereto) and Rule 14a-11
thereunder (or any successor thereto) (including such nominee's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected); (c) as to any other business that the person or persons calling the
meeting proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
person or persons and any other person or entity, if any, on whose behalf the
proposal is made; and (d) as to any shareholders giving the notice (i) the name
and address of such shareholders, as they appear on the Corporation's books and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholders. Upon notice meeting the
requirements of this Section 3 by




                                       2
<PAGE>   6

any person or persons entitled to call a special meeting of shareholders, the
Corporation shall cause notice to be given to shareholders entitled to vote that
a meeting will be held. Except in special cases where other express provision is
made by statute, notice of special meetings shall be given in the same manner as
for annual meetings of shareholders. In addition, to the matters required by
items (i), and, if applicable, (ii) and (iii) of the preceding Section, notice
of any special meeting shall specify the general nature of the business to be
transacted, and no other business may be transacted at such meeting.

     SECTION 4. Quorum. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.

     SECTION 5. Adjournment. Any shareholders' meeting, annual or special,
whether or not a quorum is present, may be adjourned from time to time by the
vote of a majority of the shares, the holders of which are either present in
person or represented by proxy thereat, but in the absence of a quorum no other
business may be transacted at such meeting, except as provided in Section 4
above.

     When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken, except that notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at an adjourned meeting in accordance
with Section 2 of this Article II if a new record date for the adjourned meeting
is fixed by the board of directors, or if the adjournment is for more than
forty-five (45) days from the date set for the original meeting. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.

     SECTION 6. Record Date; Cumulative Voting. Unless a record date for voting
purposes be fixed as provided in Section 1 of Article VI of these bylaws, then,
subject to the provisions of sections 702 to 704, inclusive, of the General
Corporation Law, only persons in whose names shares entitled to vote stand on
the stock records of the corporation at the close of business on the business
day next preceding the day on which notice of the meeting is given or if such
notice is waived, at the close of business on the business day next preceding
the day on which the meeting of shareholders is held (except that the record
date for shareholders entitled to give consent to corporate action without a
meeting shall be determined in accordance with Section 8 of this Article II)
shall be entitled to receive notice of and to vote at such meeting, and such day
shall be the record date for such meeting. Any shareholder entitled to vote on
any matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or vote them against the proposal (other than
elections of directors), but if the shareholder fails to specify the number of
shares such shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
such shareholder is entitled to vote. Such vote may be via voice or by ballot;
provided, however, that all elections for directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins. The
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
shall constitute at least a majority of the required quorum) shall be the act of
the shareholders except as may otherwise be provided by (i) Section 4 of this
Article II, (ii) the cumulative voting provisions for the election of directors
as stated in this section below, and (iii) the General Corporation Law or the
articles of incorporation of this corporation


                                       3
<PAGE>   7

(including without limitation the provision that, upon the vote of the holder or
holders of shares representing fifty percent or more of the voting power of this
corporation, this corporation may elect voluntarily to wind up and dissolve).
Subject to the requirements of the next sentence, every shareholder entitled to
vote at any election for directors may cumulate his votes and give one candidate
a number of votes equal to the number of directors to be elected multiplied by
the number of votes to which his shares are normally entitled, or distribute his
votes on the same principle among as many candidates as he shall think fit. No
shareholder shall be entitled to cumulate votes unless such candidate or
candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate his votes. If any one shareholder has given
such notice, all shareholders may cumulate their votes for candidates in
nomination. The candidates receiving the highest number of votes of shares
entitled to be voted for them, up to the number of directors to be elected,
shall be elected.

     SECTION 7. Waiver of Notice. The transactions of any meeting of
shareholders, either annual or special, however called and noticed, and wherever
held, shall be as valid as though they had been determined at a meeting duly
held after regular call and notice, if a quorum be present either in person or
by proxy, and if, either before or after the meeting, each person entitled to
vote, not present in person or by proxy, signs a written waiver of notice or a
consent to a holding of the meeting, or an approval of the minutes thereof. The
waiver of notice, consent or approval need not specify either the business to be
transacted or the purpose of any regular or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in subparagraph (d) of the third paragraph of Section 2
of this Article II, the waiver of notice, consent or approval shall state the
general nature of such proposal. All such waivers, consents or approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.

     Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required to be included in
the notice but not so included if such objection is expressly made at the
meeting.

     SECTION 8. Action by Written Consent. Directors may be elected without a
meeting by a consent in writing, setting forth the action so taken, signed by
all of the persons who would be entitled to vote for the election of directors;
in addition a director may be elected at any time to fill a vacancy (other than
a vacancy created by removal) not filled by the directors by the written consent
of persons holding a majority of the outstanding shares entitled to vote for the
election of directors. Notice of such election shall be given to nonconsenting
shareholders if required by this Section 8.

     Any other action which, under any provision of the General Corporation Law,
may be taken at a meeting of the shareholders, may be taken without a meeting,
and without notice except as hereinafter set forth, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. All such consents shall be filed with the
secretary of the corporation and shall be maintained in the corporate records.

     Unless the consents of all shareholders entitled to vote have been
solicited in writing:



                                       4
<PAGE>   8

          (a) Notice of any proposed shareholder approval of (i) a contract or
other transaction with an interested director; (ii) indemnification of an agent
of the corporation as authorized by Section 9 of Article IV of these bylaws;
(iii) a reorganization of the corporation as defined in section 181 of the
General Corporation Law; or (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, if any, without a
meeting by less than unanimous written consent, shall be given at least ten (10)
days before the consummation of the action authorized by such approval; and

          (b) Prompt notice shall be given at the taking of any other corporate
action approved by shareholders without a meeting by less than unanimous written
consent, to those shareholders entitled to vote who have not consented in
writing. Such notices shall be given as provided in Section 2 of Article II of
these Bylaws.

     Any shareholder of record or other person or entity seeking to have the
shareholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date pursuant to Section 6 hereof. The Board of Directors may, at any time
within ten (10) days after the date on which such a request is received, adopt a
resolution fixing the record date (unless a record date has previously been
fixed pursuant to Section 6 hereof). If no record date has been fixed by the
Board of Directors pursuant to Section 6 hereof or otherwise within ten (10)
days of the date on which such a request is received, the record date for
determining shareholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its principal place of business or to any officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of shareholders are recorded. Delivery shall be by hand or by certified
or registered mail, return receipt requested. If no record date has been fixed
by the Board of Directors and prior action by the Board of Directors is required
by applicable law, the record date for determining shareholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts the resolution
taking such prior action.

     In the event of the delivery, in the manner provided by this Section 8(b),
to the Corporation of the requisite written consent or consents to take
corporate action and/or any related revocation or revocations, the Corporation
may engage independent inspectors of elections for the purpose of performing
promptly a ministerial review of the validity of the consents and revocations.
For the purpose of permitting the inspectors to perform such review, in the
event such inspectors are appointed, no action by written consent without a
meeting shall be effective until such date as such appointed independent
inspectors certify to the Corporation that the consents delivered to the
Corporation in accordance herewith represent at least the minimum number of
votes that would be necessary to take the corporate action. Nothing contained in
this Section 8 shall in any way be construed to suggest or imply that the Board
of Directors or any shareholder shall not be entitled to contest the validity of
any consent or revocation thereof, whether before or after any certification by
any independent inspectors, or to take any other action (including, without
limitation, the commencement, prosecution or defense of any litigation with
respect thereto, and the seeking of injunctive relief in such litigation).

     Every written consent shall bear the date of signature of each shareholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated written consent received in accordance with this Section 8, a
written consent or consents signed by a sufficient number of holders to take
such action are delivered to the Corporation in the manner prescribed herein.



                                       5
<PAGE>   9

     Any shareholder giving a written consent, or the shareholder's proxyholder,
or a transferee of the shares, or a personal representative of the shareholder
or their respective proxyholders, may revoke the consent by a writing received
by the Corporation prior to the time that written consents by the number of
shares required to authorize the proposed action have been filed with the
Secretary of the Corporation, but may not do so thereafter. Such revocation is
effective upon its receipt by the Secretary of the Corporation.

     SECTION 9. Proxies. Every person entitled to vote shares or execute
consents shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and delivered to the secretary of the corporation. A proxy shall be deemed
executed if the shareholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise) by the
shareholder or the shareholder's attorney in fact. Any proxy duly executed which
does not state that it is irrevocable shall continue in full force and effect
until (i) a writing stating that the proxy is revoked is delivered to the
secretary of the corporation, (ii) a proxy bearing a later date is executed by
the person who executed the prior proxy and is presented to the meeting, (iii)
as to any meeting, by attendance at such meeting and voting in person by the
person executing the proxy or (iv) written notice of the death or incapacity of
the maker of such proxy is received by the corporation before the vote pursuant
thereto is counted; provided that no such proxy shall be valid after the
expiration of eleven (11) months from the date of its execution, unless
otherwise provided in the proxy. The revocability of a proxy which states on its
face that it is irrevocable shall be governed by the provisions of sections
705(e) and (f) of the General Corporation Law.

     SECTION 10. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting and any adjournment
thereof. If inspectors of election be not so appointed, the chairman of any such
meeting may, and on the request of any shareholder or his proxy shall, make such
appointment at the meeting. The number of inspectors shall be either one or
three. If appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares represented in person or by proxy shall
determine whether one or three inspectors are to be appointed. In case any
person appointed as inspector fails to appear or fails or refuses to act, the
vacancy may and on the request of any shareholder or a shareholder's proxy
shall, be filled by appointment by the board of directors in advance of the
meeting, or at the meeting by the chairman of the meeting.

     The duties of such inspectors shall be as prescribed by section 707 of the
General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining when the polls shall close;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. In the determination of the validity
and effect of proxies the dates contained on the forms of proxy shall
presumptively determine the order of execution of the proxies, regardless of the
postmark dates on the envelopes in which they are mailed.

     The inspectors of election shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously as is practical. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.



                                       6
<PAGE>   10

     SECTION 11. Nominations and Proposals. Nominations of persons for election
to the Board of Directors of the Corporation and the proposal of business to be
considered by the shareholders may be made at any meeting of shareholders only
(a) pursuant to the Corporation's notice of meeting, (b) by or at the direction
of the Board of Directors or (c) by any shareholder of the Corporation who was a
shareholder of record at the time of giving of notice provided for in these
bylaws, who is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 11.

     For nominations or other business to be properly brought before a
shareholders meeting by a shareholder pursuant to clause (c) of the preceding
sentence, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareholder action. To be timely, a shareholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the meeting; provided,
however, that in the event that less than 65 days notice of the meeting is given
to shareholders, notice by the shareholder to be timely must be so delivered not
earlier than the close of business on the seventh (7th) day following the day on
which the notice of meeting was mailed. In no event shall the public
announcement of an adjournment of a shareholders meeting commence a new time
period for the giving of a shareholder's notice as described above. Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (or any successor thereto) and Rule 14a-11 thereunder
(or any successor thereto) (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the shareholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such shareholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
shareholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such shareholder,
as they appear on the Corporation's books, and of such beneficial owner, and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.
Notwithstanding any provision herein to the contrary, no business shall be
conducted at a shareholders meeting except in accordance with the procedures set
forth in this Section 11.

                                  ARTICLE III.

                               BOARD OF DIRECTORS

     SECTION 1. Powers of the Board. Subject to the provisions of the General
Corporation Law and any limitations in the articles of incorporation and these
bylaws as to action to be authorized or approved by the shareholders, the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the board of directors shall have the
following powers:

         First: To conduct, manage and control the affairs and business of the
corporation and to make such rules and regulations therefor, not inconsistent
with law or with the articles of incorporation or with these bylaws, as they may
deem best;



                                       7
<PAGE>   11

         Second: To elect and remove at pleasure the officers, agents and
employees of the corporation, prescribe their duties and fix their compensation;

          Third: To authorize the issue of shares of stock of the corporation
from time to time upon such terms as may be lawful, in consideration of money
paid, labor done, services actually rendered to the corporation or for its
benefit or in its formation or reorganization, debts or securities canceled, and
tangible or intangible property actually received, but neither promissory notes
of the purchaser (unless adequately secured by collateral other than the shares
acquired or unless permitted by section 408 of the General Corporation Law) nor
future services shall constitute payment or part payment for the shares of the
corporation;

          Fourth: To borrow money and incur indebtedness for the purposes of the
corporation and to cause to be executed and delivered therefor, in the corporate
name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidences of debt and securities therefor;

          Fifth: To alter, repeal or amend, from time to time, and at any time,
these bylaws and any and all amendments of the same, and from time to time, and
at any time, to make and adopt such new and additional bylaws as may be
necessary and proper, subject to the power of the shareholders to adopt, amend
or repeal such bylaws, or to revoke the delegation of authority of the
directors, as provided by law or by Article VIII of these bylaws; and

          Sixth: By resolution adopted by a majority of the authorized number of
directors, to designate an executive and/or other committees, each consisting of
two or more directors, to serve at the pleasure of the board, and to prescribe
the manner in which proceedings of such committee shall be conducted. The
appointment of members or alternate members (who may replace any absent member
at any meeting of the committee) of a committee requires the vote of a majority
of the authorized number of directors. Any such committee, to the extent
provided in a resolution of the board, shall have all of the authority of the
board, except with respect to:

             (i)  The approval of any action for which the General Corporation
Law or the articles of incorporation also require shareholder approval;

             (ii) The filling of vacancies on the board or in any committee;

             (iii) The fixing of compensation of the directors for serving on
the board or on any committee;

             (iv) The adoption, amendment or repeal of bylaws;

             (v) The amendment or repeal of any resolution of the board which
by its express terms is not so amendable or repealable;

             (vi) Any distribution to the shareholders, except at a rate or in a
periodic amount or within a price range determined by the board; and

             (vii) The appointment of other committees of the board or the
members thereof.

     SECTION 2. Number of Directors. The number of directors of the corporation
shall be not less than five (5) nor more than nine (9). The exact number of
directors shall be five (7) until changed, within the limits specified above, by
a bylaw amending this Section 3.2, duly adopted by the board of directors or by
the shareholders. The indefinite number of directors may be changed, or a
definite number may be fixed without



                                       8
<PAGE>   12

provision for an indefinite number, by a duly adopted amendment to the articles
of incorporation or by an amendment to this bylaw duly adopted by the vote or
written consent of holders of a majority of the outstanding shares entitled to
vote; provided, however, that an amendment reducing the fixed number of or the
minimum number of directors to a number less than five (5) cannot be adopted if
the votes cast against its adoption at a meeting, or the shares not consenting
in the case of an action by written consent, are equal to more than sixteen and
two-thirds percent (16 2/3%) of the outstanding shares entitled to vote thereon.
No amendment may change the stated maximum number of authorized directors to a
number greater than two (2) times the stated minimum number of directors minus
one (1). No reduction of the authorized number of directors shall have the
effect of removing any director before the director's term of office expires.

     SECTION 3. Election of Directors. The directors shall be elected at each
annual meeting of shareholders, but if any such annual meeting is not held or
the directors are not elected thereat, the directors may be elected at any
special meeting of shareholders held for that purpose. Each director, including
a director elected to fill a vacancy, shall hold office until his successor is
elected, except as otherwise provided by statute.

     SECTION 4. Vacancies; Resignation. A vacancy in the board of directors
shall be deemed to exist in case of the death, resignation or removal of any
director, if the authorized number of directors be increased, or if the
shareholders fail, at any annual or special meeting of shareholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting. The board of directors may declare
vacant the office of a director who has been declared of unsound mind by an
order of court or has been convicted of a felony.

     Vacancies in the board of directors, except for a vacancy created by the
removal of a director, may be filled by a majority of the directors then in
office, whether or not less than a quorum, or by a sole remaining director, and
each director so elected shall hold office until his successor is elected at an
annual or a special meeting of the shareholders. A vacancy in the board of
directors created by the removal of a director may only be filled by the vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute at least
a majority of the required quorum), or by the written consent of the holders of
all of the outstanding shares.

     The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. Any such election by written
consent other than to fill a vacancy created by removal shall require the
consent of holders of a majority of the outstanding shares entitled to vote.

     Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors of
the corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the board of directors accepts the resignation of a
director tendered to take effect at a future time, the board or the shareholders
shall have power to elect a successor to take office when the resignation is to
become effective.

     No reduction of the authorized number of the directors shall have the
effect of removing any director prior to the expiration of his term of office.



                                       9
<PAGE>   13

                                   ARTICLE IV.

                              MEETINGS OF DIRECTORS

     SECTION 1. Location of Meetings. Regular meetings of the board of directors
shall be held at any place within or without the State of California that has
been designated from time to time by the board of directors. In the absence of
such designation, regular meetings shall be held at the principal executive
office of the corporation, except as provided in Section 2. Special meetings of
the board of directors may be held at any place within or without the State of
California which has been designated in the notice of the meeting, or, if not
designated in the notice or if there is no notice, at the principal executive
office of the corporation.

      SECTION 2. Regular Meetings. Immediately following each annual meeting of
the shareholders there shall be a regular meeting of the board of directors of
the corporation at the place of said annual meeting or at such other place as
shall have been designated by the board of directors for the purpose of
organization, election of officers and the transaction of other business. Other
regular meetings of the board of directors shall be held without call on such
date and time as may be fixed by the board of directors; provided, however, that
should any such day fall on a legal holiday, then said meeting shall be held at
the same time on the next business day thereafter ensuing which is not a legal
holiday. Notice of regular meetings of the directors is hereby dispensed with
and no notice whatever of any such meeting need be given, provided that notice
of any change in the time or place of regular meetings shall be given to all of
the directors in the same manner as notice for special meetings of the board of
directors.

     SECTION 3. Special Meetings; Notice. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board or president or, if both the chairman of the board and the
president are absent or are unable or refuse to act, by any vice president or by
any two directors. Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director, or sent by first-class
mail or telegram or facsimile transmission, charges prepaid, addressed to him at
his address as it appears upon the records of the corporation or, if it is not
so shown on the records and is not readily ascertainable, at the place at which
the meetings of the directors are regularly held. In case such notice is mailed,
it shall be deposited in the United States mail at least four (4) days prior to
the time of the holding of the meeting. In case such notice is delivered
personally, telephoned, telegraphed or sent by facsimile transmission, it shall
be delivered to the director or transmitted to the director at least forty-eight
(48) hours prior to the time of the holding of the meeting. Any notice given
personally or by telephone, telegraph or facsimile may be communicated to either
the director or to a person at the office of the director whom the person giving
the notice has reason to believe will promptly communicate it to the director.
Such deposit in the mail, delivery to a common carrier, transmission by
electronic means or delivery, personally or by telephone, as above provided,
shall be due, legal and personal notice to such directors. The notice need not
specify the place of the meeting if the meeting is to be held at the principal
executive office of the corporation, and need not specify the purpose of the
meeting.

     SECTION 4. Quorum. Presence of a majority of the authorized number of
directors at a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
sections 310, 311 and 317 of the General Corporation Law. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, provided that any action taken is approved by at
least a majority of the required quorum for such meeting. A majority of the
directors present, whether or not a quorum is present, may adjourn any meeting
to another time and place. If the meeting is adjourned for more than twenty-four
(24) hours, notice of any adjournment to another time



                                       10
<PAGE>   14

or place (other than adjournments until the time fixed for the next regular
meeting of the board of directors, as to which no notice is required) shall be
given prior to the time of the adjourned meeting to the directors who were not
present at the time of the adjournment.

     SECTION 5. Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.

     SECTION 6. Action by Written Consent. Any action required or permitted to
be taken by the board of directors, may be taken without a meeting if all
members of the board shall individually or collectively consent in writing to
such action. Such written consent or consents shall be filed with the minutes of
the proceedings of the board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors.

     SECTION 7. Committees. The provisions of this Article IV shall also apply,
with necessary changes in points of detail, to committees of the board of
directors, if any, and to actions by such committees (except for the first
sentence of Section 2 of Article IV, which shall not apply, and except that
special meetings of a committee may also be called at any time by any two
members of the committee), unless otherwise provided by these bylaws or by the
resolution of the board of directors designating such committees. For such
purpose, references to "the board" or "the board of directors" shall be deemed
to refer to each such committee and references to "directors" and "members of
the board" shall be deemed to refer to members of the committee.

     SECTION 8. Compensation of Directors. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
board.

     SECTION 9. Indemnification. The corporation shall, to the maximum extent
permitted by the General Corporation Law, indemnify each of its agents against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that any such person is or was an agent of the corporation. For purposes of
this Section, an "agent" of the corporation includes any person who is or was a
director, officer, employee or other agent of the corporation, or who is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or who was a director, officer, employee or agent of a corporation
which was a predecessor of the corporation or of another enterprise at the
request of such predecessor corporation.



                                       11
<PAGE>   15

                                   ARTICLE V.

                                    OFFICERS

     SECTION 1. Designation of Officers. The officers of the corporation shall
be a chairman of the board or a president, or both, a secretary, and a
treasurer, who shall also be the chief financial officer of the corporation. The
corporation may also have, at the discretion of the board of directors, one or
more vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be designated from time to time by
the board of directors. Any number of offices may be held by the same person.
The officers shall be elected by the board of directors and shall hold office at
the pleasure of such board.

     SECTION 2. Chairman of the Board. The chairman of the board, if there be
such officer, shall, if present, preside at all meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the board of directors or prescribed by the
bylaws. If there is not a president, the chairman of the board shall, in
addition, be the general manager and chief executive officer of the corporation
and shall have the powers and duties prescribed in Section 3 of Article V of
these bylaws.

     SECTION 3. President. Subject to such powers and duties, if any, as may be
prescribed by these bylaws or the board of directors for the chairman of the
board, if there be such officer, the president shall be the general manager and
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction and control of the
business and officers of the corporation. He shall preside at all meetings of
the shareholders and, in the absence of the chairman of the board, or if there
be none, at all meetings of the board of directors. He shall have all of the
powers and shall perform all of the duties which are ordinarily inherent in the
office of the president, and he shall have such further powers and shall perform
such further duties as may be prescribed for him by the board of directors.

     SECTION 4. Vice Presidents. In the absence or disability or refusal to act
of the president, the vice presidents in order of their rank as fixed by the
board of directors, or, if not ranked, the vice president designated by the
president or the board of directors, shall perform all of the duties of the
president and when so acting shall have all the powers of and be subject to all
the restrictions upon the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them, respectively, by the board of directors or the bylaws.

     SECTION 5. Secretary. The secretary shall keep or cause to be kept at the
principal executive office of the corporation or such other place as the board
of directors may order, a book of minutes of all proceedings of the
shareholders, the board of directors and committees of the board, with the time
and place of holding, whether regular or special, and if special how authorized,
the notice thereof given, the names of those present at directors' and committee
meetings, and the number of shares present or represented at shareholders'
meetings. The secretary shall keep or cause to be kept at the principal
executive office or at the office of the corporation's transfer agent a record
of shareholders or a duplicate record of shareholders showing the names of the
shareholders and their addresses, the number of shares and classes of shares
held by each, the number and date of certificates issued for the same and the
number and date of cancellation of every certificate surrendered for
cancellation. The secretary or an assistant secretary, or, if they are absent or
unable or refuse to act, any other officer of the corporation, shall give or
cause to be given notice of all the meetings of the shareholders, the board of
directors and committees of the board required by the bylaws or by law to be
given, and he shall keep the seal of the corporation, if any, in safe



                                       12
<PAGE>   16

custody and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or by the bylaws.

     SECTION 6. Assistant Secretary. It shall be the duty of the assistant
secretaries to assist the secretary in the performance of his duties and
generally to perform such other duties as may be delegated to them by the board
of directors.

     SECTION 7. Treasurer. The treasurer shall be the chief financial officer of
the corporation and shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of account of the corporation. He shall
receive and deposit all moneys and other valuables belonging to the corporation
in the name and to the credit of the corporation and shall disburse the same
only in such manner as the board of directors or the appropriate officers of the
corporation may from time to time determine, shall render to the president and
the board of directors, whenever they request it, an account of all his
transactions as treasurer and of the financial condition of the corporation, and
shall perform such further duties as the board of directors may require.

     SECTION 8. Assistant Treasurer. It shall be the duty of the assistant
treasurers to assist the treasurer in the performance of his duties and
generally to perform such other duties as may be delegated to them by the board
of directors.

                                   ARTICLE VI.

                                  MISCELLANEOUS

     SECTION 1. Record Date. The board of directors may fix a time in the future
as a record date for the determination of the shareholders entitled to notice of
and to vote at any meeting of shareholders or entitled to give consent to
corporate action in writing without a meeting, to receive any report, to receive
any dividend or distribution, or any allotment of rights, or to exercise rights
in respect to any change, conversion, or exchange of shares. The record date so
fixed shall be not more than sixty (60) days nor less than ten (10) days prior
to the date of any meeting, nor more than sixty (60) days prior to any other
event for the purposes of which it is fixed. When a record date is so fixed,
only shareholders of record at the close of business on that date are entitled
to notice of and to vote at any such meeting, to give consent without a meeting,
to receive any report, to receive a dividend, distribution, or allotment of
rights, or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date,
except as otherwise provided by statute or in the articles of incorporation or
bylaws.

     If the board of directors does not so fix a record date:

          (a) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held.

          (b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the board has been taken, shall be the day on which the first written consent
is given.

          (c) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.



                                       13
<PAGE>   17

     SECTION 2. Inspection of Corporate Records. The accounting books and
records, the record of shareholders, and minutes of proceedings of the
shareholders and the board and committees of the board of this corporation and
any subsidiary of this corporation shall be open to inspection upon the written
demand on the corporation of any shareholder or holder of a voting trust
certificate at any reasonable time during usual business hours, for a purpose
reasonably related to such holder's interests as a shareholder or as the holder
of such voting trust certificate. Such inspection by a shareholder or holder of
a voting trust certificate may be made in person or by agent or attorney, and
the right of inspection includes the right to copy and make extracts.

     Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of the corporation and its subsidiary corporations. Such
inspection by a director may be made in person or by agent or attorney and the
right of inspection includes the right to copy and make extracts.

     SECTION 3. Certificates for Shares. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the chairman or vice chairman of the board or the president or a
vice president and by the treasurer or an assistant treasurer or the secretary
or any assistant secretary, certifying the number of shares and the class or
series of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile.

     Any such certificate shall contain such legend or other statement as may be
required by the California Corporate Securities Law of 1968, the Federal
securities laws, and any agreement between the corporation and the issuee
thereof.

     Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the board of directors or the bylaws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state on the face thereof the amount remaining unpaid and the
terms of payment thereof.

     SECTION 4. Representation of Shares of Other Corporations. The president or
any vice president or the secretary or any assistant secretary of this
corporation is authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or corporations
may be exercised either by such officers in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officers.

     SECTION 5. Inspection of Bylaws. The corporation shall keep in its
principal executive office in California, or if its principal executive office
is not in California, then at its principal business office in California (or
otherwise provide upon written request of any shareholder), the original or a
copy of the bylaws as amended to date, certified by the secretary, which shall
be open to inspection by the shareholders at all reasonable times during office
hours.

     SECTION 6. Construction and Definitions. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Corporation Law shall govern the construction of these
bylaws. Without limiting the generality of the foregoing, the masculine gender
includes the feminine and neuter, the singular number includes the plural and
the plural number includes the singular, and the term "person" includes a
corporation as well as a natural person.



                                       14
<PAGE>   18

                                  ARTICLE VII.

                                   AMENDMENTS

     SECTION 1. Amendment by Shareholders. New bylaws may be adopted or these
bylaws may be amended or repealed by the affirmative vote or written consent of
a majority of the outstanding shares entitled to vote, except as otherwise
provided by law or by the articles of incorporation or these bylaws.

     SECTION 2. Amendment by Board of Directors. Subject to the right of
shareholders as provided in Section 1 of this Article to adopt, amend or repeal
bylaws, and except as otherwise provided by law or by the articles of
incorporation, bylaws (other than a bylaw or amendment thereof changing the
authorized maximum or minimum number of directors) may be adopted, amended or
repealed by the board of directors.

                                  ARTICLE VIII.

                            ANNUAL AND OTHER REPORTS

     SECTION 1. Annual Report to Shareholders.

          (a) So long as the corporation shall have fewer than one hundred
shareholders of record (determined as provided in section 605 of the General
Corporation Law), the requirement of section 1501(a) of said law that an annual
report be sent to the shareholders is expressly waived.

          (b) Notwithstanding subdivision (a) of this Section, the corporation
shall, upon the written request of any shareholder made more than one hundred
twenty (120) days after the close of a fiscal year, deliver or mail to the
person making the request, within thirty (30) days thereafter, the financial
statements required by section 1501(a) of the General Corporation Law.

     SECTION 2. Request for Financial Statements. A shareholder or shareholders
holding at least five percent (5%) of the outstanding shares of any class of the
corporation may make a written request to the corporation for an income
statement of the corporation for the three-month, six-month or nine-month period
of the current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of such period
and, in addition, if no annual report for the last fiscal year has been sent to
shareholders, the statements referred to in section 1501(a) of the General
Corporation Law for the last fiscal year. The corporation shall deliver or mail
the statements to the person making the request within thirty (30) days
thereafter. A copy of any such statements shall be kept on file in the principal
executive office of the corporation for twelve (12) months and they shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to such shareholder. The quarterly income
statements and balance sheets referred to in this Section shall be accompanied
by the report thereon, if any, of any independent accountants engaged by the
corporation or the certificate of an authorized officer of the corporation that
such financial statements were prepared without audit from the books and records
of the corporation.



                                       15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>d80311ex10-1.txt
<DESCRIPTION>INDEMNITY ESCROW AGREEMENT DATED JULY 20, 2000
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.1

                           INDEMNITY ESCROW AGREEMENT


         THIS INDEMNITY ESCROW AGREEMENT (the "Agreement") made and entered into
as of the 20th day of July, 2000, by and among 3dfx Interactive, Inc., a
California corporation ("3dfx"), GigaPixel Corporation, a Delaware corporation
("GigaPixel"), on behalf of its holders of its Common Stock and Preferred Stock
and of the Warrant prior to the Effective Time of the Merger (the
"Securityholders"), Galapagos Acquisition Corp., a Delaware corporation
("Newco"), the Securityholder Representative named in Section 9 hereof, and U.S.
Trust Company, N.A., as escrow agent (the "Agent").

                                   WITNESSETH:

         WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as
of March 27, 2000 (the "Acquisition Agreement"), by and among 3dfx, Newco and
GigaPixel, each of the parties has agreed to effect the Merger;

         WHEREAS, the Acquisition Agreement provides, as a condition to the
closing of the Merger, that the parties execute and deliver this Agreement
whereby a certain portion of the consideration to be payable to the
Securityholders following the Merger would be placed in escrow for a period of
time.

         NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms, and subject to the
conditions hereinafter set forth, the parties hereto do agree as follows:

     1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meaning ascribed to them in the Acquisition Agreement.

     2. Appointment of Agent. 3dfx, Newco, GigaPixel and the Securityholder
Representative hereby appoint Agent as escrow agent in accordance with the terms
and conditions set forth herein, and the Agent hereby accepts such appointment.

     3. Deposit of Shares of 3dfx Common Stock.

         (a) At the Closing, 3dfx and Newco shall, in accordance with Section
     3.1 of the Acquisition Agreement, deposit with the Agent certificates for
     the number of shares of 3dfx Common Stock described on Exhibit A hereto,
     with the Agent's interest as escrow agent set forth on the face thereon
     (the "Escrowed Shares"), which Escrow Shares shall be held by the Agent in
     accordance with Section 4 below.

         (b) All taxable dividends with respect to the Escrowed Shares shall be
     distributed currently to the Securityholders.

         (c) Voting of Escrowed Shares. Until such time as 3dfx shall have
     delivered a notice to the Agent as described in the first sentence of
     Section 4(a) of this Agreement, the Securityholder Representative shall
     have the right to direct the Agent as to the manner of voting of the
     Escrowed Shares. Such Securityholder Representative shall use its
     reasonable best efforts to vote the Escrowed Shares in accordance with the
     directions of the beneficial holders thereof.

     4. Disposition of Escrowed Shares.

         (a) If the Agent shall receive a written notice from 3dfx at any time
     from the date of this Agreement through the date that is three hundred
     eighty (380) days from the Closing Date certifying (i) that during the one
     (1) year period following the Closing Date 3dfx has suffered 3dfx Losses as
     a result of the Company's breach of any of its representations and
     warranties or its failure to perform any of its covenants, in each case as
     set forth in the Acquisition Agreement, and that, as a result, 3dfx is
     entitled to payment hereunder pursuant to Article X of the


<PAGE>   2


     Acquisition Agreement, (ii) the total amount that 3dfx is entitled to be
     paid from the Escrowed Shares and the basis of calculation of such amount
     (a "Claim") with respect to such 3dfx Losses, (iii) a description of the
     asserted Claim and the basis thereof, and (iv) that 3dfx has delivered a
     copy of such notice to the Securityholder Representative (as defined and
     described in Section 9 hereof) with respect to such Claim, then the Agent
     shall promptly (and in any event within ten (10) days following receipt of
     such notice from 3dfx) deliver a copy of such notice to the Securityholder
     Representative. If the Agent does not, within twenty (20) days after its
     delivery of such notice, receive a written objection from the
     Securityholder Representative with respect to such Claim, then the Agent
     shall promptly deliver to 3dfx a number of Escrowed Shares, the value of
     which (based on the closing price of such Escrowed Shares on the Closing
     Date) equals the amount that 3dfx shall have specified as its Claim. If the
     Agent shall receive a written objection from the Securityholder
     Representative within such twenty (20) day period, then a conflict shall be
     deemed to have arisen, and the Agent shall, within five (5) days of the
     Agent's receipt of the written objection from the Securityholder
     Representative, deliver notice of such conflict to the parties hereunder.
     Thereafter, the Agent shall be entitled to refrain from taking any action
     until the Agent shall be directed otherwise in accordance with Section 4(b)
     below.

         (b) If a conflict shall have arisen as described in Section 4(a) above,
     then upon receipt by the Agent during the term of this Agreement of (i)
     joint written instructions signed by 3dfx and the Securityholder
     Representative directing payment of all or a portion of the Escrowed
     Shares, or (ii) a final, non-appealable judgment or order of a court of
     competent jurisdiction directing the payment of an amount of the Escrowed
     Shares held hereunder, the Agent shall promptly deliver to the person or
     persons specified, out of the escrow created hereunder and in the manner
     specified in the applicable instructions, judgment or order, or as
     otherwise agreed in writing by 3dfx and the Securityholder Representative,
     (A) the number of Escrowed Shares specified therein, or (B) a number of
     Escrowed Shares the value of which (based on the closing price of such
     Escrowed Shares on the Closing Date) equals the amount specified in such
     instructions, judgment or order, and the Agent shall thereupon be relieved
     and discharged from any responsibility or obligation with respect to such
     amount or amounts of the Escrowed Shares delivered in accordance with this
     Agreement.

         (c) Unless otherwise notified by a joint instruction signed by 3dfx and
     the Securityholder Representative, in the event the escrow created
     hereunder is not sooner terminated pursuant to the provisions of Section
     4(e) below or extended pursuant to the provisions of this Section 4(c), the
     escrow period and the escrow created hereunder shall terminate at the close
     of business on the date that is three hundred eighty (380) days from the
     Closing Date (the "Escrow Period"). Upon such termination, the Agent shall
     release and deliver to the Securityholders the Escrowed Shares remaining in
     escrow; provided, however, if 3dfx has filed a Claim with the Agent and the
     Securityholder Representative for a 3dfx Loss suffered during the one (1)
     year period following the Closing Date prior to such termination, which
     Claim has not been resolved in accordance with Section 4(a) or (b) above by
     the date of termination, the Agent shall release and pay to the
     Securityholders only the number of Escrowed Shares the value of which
     (based on the closing price of such Escrowed Shares on the Closing Date)
     exceeds the aggregate amount of the outstanding and unresolved Claim(s) of
     3dfx. Upon resolving all remaining Claims in accordance with this Section
     4, including any distributions to 3dfx (which may be after the period
     provided herein, in which case the Escrow Period shall be extended to such
     time in which all Claims are resolved), the Agent shall release and pay to
     the Securityholders all Escrowed Shares held in escrow hereunder and close
     the escrow, whereupon the Escrow Period and the escrow created hereunder
     shall be terminated.

         (d) Notwithstanding the provisions of Section 4(c) above, at the
     conclusion of the Escrow Period, if any Claim has not been resolved in
     accordance with the terms hereof, the Agent shall have the right, in its
     sole discretion, to deposit with the registry of any state or federal court
     located in San Jose, California, the number of Escrowed Shares the value of
     which (based on the closing price of such Escrowed Shares on the Closing
     Date) equals the aggregate amount of the outstanding and unresolved
     Claim(s) of 3dfx. The Agent shall implead 3dfx and the Securityholders in
     any action filed with such court.

         (e) Unless otherwise notified in a joint instruction signed by 3dfx and
     the Securityholder Representative, if the Agent disburses to 3dfx all
     Escrowed Shares held in escrow in accordance with the terms of this Section
     4 prior to the date that is the one (1) year anniversary of the Closing
     Date, then the Escrow Period and the escrow created hereunder shall
     immediately terminate, and the Agent shall close the escrow and give notice
     thereof to 3dfx and the Securityholder Representative.


                                      -2-
<PAGE>   3

     5. Duties and Obligations.

         (a) The Agent shall have no duty to enforce any obligation of any
     person to make any payment or delivery, or to direct or cause any payment
     or delivery to be made, or to enforce any obligation of any persons to
     perform any other act. The Agent shall not be liable to 3dfx or the
     Securityholder Representative or to anyone else by reason of any failure on
     the part of any party hereto or any other person to perform such party's or
     such person's obligations under any document or agreement.

         (b) The Agent shall not be liable to 3dfx and the Securityholder
     Representative or to anyone else for any action taken or omitted by it, or
     any action suffered by it to be taken or omitted, in good faith and in the
     exercise of its own best judgment. The Agent may rely conclusively and
     shall be protected in acting upon any order, notice, demand, certificate,
     opinion or advice of counsel (including counsel chosen by the Agent),
     statement, instrument, report or other paper or document (not only as to
     its due execution and the validity and effectiveness of its provisions, but
     also as to the truth and acceptability of any information therein
     contained) that is believed by the Agent to be genuine and to be signed or
     presented by the proper person or persons.

         (c) The Agent shall not be responsible for the sufficiency or accuracy
     of the form of, or the execution, validity, value or genuineness of, any
     document or property received, held or delivered by it hereunder, or of any
     signature or endorsement thereon, or for any lack of endorsement thereon,
     or for any description therein, nor shall the Agent be responsible or
     liable to 3dfx or the Securityholder Representative or to anyone else in
     any respect on account of the identity, authority, or rights of the persons
     executing or delivering or purporting to execute or deliver any document or
     property or this Agreement. The Agent shall not be liable to 3dfx or the
     Securityholder Representative or to anyone else for any loss that may be
     incurred by reason of any investment of any monies it holds hereunder.

         (d) To the extent that the Agent becomes liable for the payment of
     taxes, including withholding taxes, in respect of income derived from the
     investment of funds held hereunder or any payment made hereunder, the Agent
     may pay such taxes. The Agent may withhold from any payment of monies held
     by it hereunder such amount as the Agent estimates to be sufficient to
     provide for the payment of such taxes not yet paid, and may use the sum
     withheld for that purpose. The Agent shall be indemnified and held harmless
     from and against any liability for taxes and for any penalties or interest
     in respect of taxes on such investment income or payments in the manner
     provided in Section 5(e) below. At the signing of the agreement, each
     relevant party shall provide a W-8 or W-9 to the Escrow Agent.

         (e) The Agent shall be indemnified and held harmless jointly and
     severally by 3dfx and the Securityholder Representative from and against
     any and all expenses, including attorneys' fees and disbursements, or
     losses suffered by the Agent in connection with any action, suit or other
     proceeding involving any claim, or in connection with any claim or demand
     that directly or indirectly arises out of or otherwise relates to this
     Agreement, the services of the Agent hereunder, the monies or other
     property held by the Agent hereunder or any income earned from investment
     of such monies, other than expenses or losses arising as a result of the
     Agent's gross negligence or willful misconduct.

     6. Compensation and Reimbursement of Agent. The Agent shall be entitled to
compensation and reimbursement from GigaPixel after the Closing for all
reasonable expenses paid or incurred by it in the administration of its duties
hereunder, including, but not limited to, all reasonable attorneys' and agents'
fees and disbursements and all taxes or other governmental charges. The Escrow
Agent's first-year fee is due at the execution of this Agreement.

     7. Further Assurances. From time to time on and after the date hereof, 3dfx
and the Securityholder Representative shall deliver or cause to be delivered to
the Agent such further documents and instruments and shall do and cause to be
done such further acts as the Agent shall reasonably request to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.


                                      -3-
<PAGE>   4

     8. Termination of Agreement and Resignation of Agent.

         (a) This Agreement shall terminate upon the termination of the escrow
     created hereunder as provided in Section 4(c), provided that the rights of
     the Agent and the obligations of 3dfx, Newco and the Securityholders under
     Sections 5, 6 and 10 shall survive any termination hereof.

         (b) The Agent may resign and be discharged from its duties hereunder at
     any time by giving not less than 45 days prior written notice of such
     resignation to 3dfx and the Securityholder Representative, which notice
     shall specify the date when such resignation shall take effect. Upon such
     notice, 3dfx and the Securityholder Representative shall jointly appoint a
     successor escrow agent. If 3dfx and the Securityholder Representative do
     not agree upon a successor escrow agent within 45 days after such notice,
     The Chase Manhattan Bank shall be appointed successor. The agent shall
     continue to serve until its successor delivers to 3dfx and the
     Securityholder Representative a duly executed instrument of acceptance from
     such successor of the terms and conditions of this Agreement and other
     property held in escrow, at which time the agent shall have no further
     duties or responsibilities hereunder.

     9. Appointment and Acceptance of Securityholder Representative.

         (a) In order to facilitate the consummation of the transactions
     contemplated by this Agreement and by the Acquisition Agreement and the
     resolution of matters after the Closing, George T. Haber (the
     "Securityholder Representative") shall serve as the attorney-in-fact and
     agent for each of the Securityholders in his or her name, place and stead
     in connection with the transactions contemplated by this Agreement in
     accordance with the terms of this Agreement, such appointment being coupled
     with an interest and irrevocable. By executing and delivering this
     Agreement, the Securityholder Representative hereby accepts its
     authorization and appointment as the Securityholder Representative and as
     attorney-in-fact and agent on behalf of the Securityholders in accordance
     with the terms of this Agreement.

         (b) Upon approval of the Acquisition Agreement and the Merger by the
     Securityholders, each Securityholder shall be deemed to have expressly
     acknowledged and agreed that (i) the Securityholder Representative is
     authorized to act on his or her behalf notwithstanding any dispute or
     disagreement between or among the Securityholders and (ii) 3dfx and Newco
     and any other person shall be entitled to rely on any and all actions taken
     by the Securityholder Representative under or pursuant to this Agreement
     without liability to, or obligation to inquire of, any Securityholder.

         (c) The authority of the Securityholder Representative hereunder shall
     continue and be effective until all of the rights and obligations of the
     Securityholders hereunder, or any dispute arising hereunder, shall
     terminate.

     10. Consent to Service of Process. 3dfx and Newco and the Securityholder
Representative hereby irrevocably consent to the jurisdiction of the courts of
the State of California and of any federal court located in such state in
connection with any action, suit or other proceeding arising out of or relating
to this Agreement or any action taken or omitted hereunder, and each such party
waives personal service of any summons, complaint or other process and agrees
that the service thereof may be made by certified or registered mail directed to
such person at such person's address for purposes of notices hereunder.

     11. Notices. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (i) delivered personally, (ii)
sent by facsimile with electronic confirmation of receipt, (iii) delivered by
overnight express, or (iv) sent by registered or certified mail, postage
prepaid, as follows:



                                      -4-
<PAGE>   5
     (i)   If to 3dfx or Newco:

           3dfx Interactive, Inc.
           4435 Fortran Drive
           San Jose, California 95134
           Facsimile No.: (408) 262-5551
           Telephone No.: (408) 935-4400
           Attention:  President
           cc:     Legal Department

     (ii)  If to the Securityholder Representative:

           Mr. George T. Haber
           c/o 4435 Fortran Drive
           San Jose, California 95134
           Facsimile No.: (408) 262-5551
           Telephone No.: (408) 935-4400

     (iii) If to the Agent:

           U.S. Trust Company, N.A.
           One Embarcadero Center
           Suite 2050
           San Francisco, California 94111
           Facsimile No.: (415) 392-0876
           Telephone No.: (415) 743-9035
           Attn: Priscilla R. Dedoro, Assistant Vice President

     with copies to:

     Heller Ehrman White & McAuliffe LLP
     601 South Figueroa, 40th Floor
     Los Angeles, California 90017-5758
     Facsimile No.: (213) 614-1868
     Telephone No.: (213) 689-7539
     Attn: Stephen E. Newton, Esq.

or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon receipt by such party. Any notice that is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been given to the party to whom it is addressed at the close of business, local
time of the recipient, on the fifth day after the day it is so placed in the
mail.

     12. Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof, and no
party shall be liable or bound to the other in any manner by any representations
or warranties not set forth herein.

     13. Successors and Assigns. This Agreement and the rights and obligations
hereunder may not be assigned, except that 3dfx may assign this Agreement and
its rights and obligations hereunder to any wholly-owned subsidiary of 3dfx or
to a successor to such party's entire business. This Agreement and the rights
and obligations hereunder of the Agent may be assigned by the Agent only to a
successor to its entire business. This Agreement shall be binding upon and inure
to the benefit of each party's respective successors, heirs and permitted
assigns. No other person shall acquire or have any rights under or by virtue of
this Agreement. This Agreement is intended to be for the sole benefit of the
parties hereto, and (subject to the provisions of this Section 13) their
respective successors, heirs and assigns, and none of the provisions of this
Agreement are intended to be, not shall they be construed to be, for the benefit
of any third person.

     14. Rules of Construction. This Agreement shall be construed without regard
to any presumption or other rule requiring construction against the party
causing such instrument to be drafted. The terms "hereby", "hereof", "hereunder"
and any similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not only to the particular portion of this Agreement where the term
is used. The word "person" shall mean any natural person,


                                      -5-
<PAGE>   6

partnership, corporation, government and any other form of business or legal
entity. All words or terms used in this Agreement, regardless of the number or
gender in which they are used, shall be deemed to include any other number and
any other gender as the context may require.

     15. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

     16. Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party that is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by all parties hereto. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by all
parties. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.

     17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED, AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO ITS
CHOICE OF LAW PRINCIPLES).

     18. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provision
shall be fully severable, then this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Agreement, and the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.

     19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.


                                      -6-
<PAGE>   7



         IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed as of the day and year first above written.


                                  3DFX:

                                  3DFX INTERACTIVE, INC.


                                  By:  /s/ David Zacarias
                                       -----------------------------------------
                                  Printed Name:  David Zacarias
                                                 -------------------------------
                                  Title: Vice President, Administration and
                                         Chief Financial Officer
                                         ---------------------------------------


                                  NEWCO:

                                  GALAPAGOS ACQUISITION CORP.


                                  By:  /s/ David Zacarias
                                       -----------------------------------------
                                  Printed Name: David Zacarias
                                                --------------------------------
                                  Title: Vice President
                                         ---------------------------------------

                                  GIGAPIXEL:

                                  GIGAPIXEL CORPORATION


                                  By:  /s/ George T. Haber
                                       -----------------------------------------
                                  Printed Name: George T. Haber
                                                --------------------------------
                                  Title: Chief Executive Officer and President
                                         ---------------------------------------

                                  SECURITYHOLDER REPRESENTATIVE:


                                   /s/ George T. Haber
                                  ----------------------------------------------
                                  George T. Haber


                                  AGENT:

                                  U.S. TRUST COMPANY, N.A.


                                  By: /s/ Prisellia R. Dedoro
                                      -----------------------------------------
                                  Name: Prisellia R. Dedoro
                                        ----------------------------------------
                                  Title: Assistant Vice President
                                         ---------------------------------------

                                      -7-
<PAGE>   8



                                   EXHIBIT "A"

<TABLE>
<CAPTION>


                 SHAREHOLDERS:                        INDEMNITY ESCROW:
             -------------------------        ----------------------------------
             <S>                              <C>
              Shareholder A                                     shares
                                                         ------
              Shareholder B                                     shares
                                                         ------
              Shareholder C                                     shares
                                                         ------
              Shareholder D                                     shares
                                                         ======
</TABLE>



                                      -8-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>d80311ex10-2.txt
<DESCRIPTION>CONSULTING AGREEMENT WITH GEORGE T. HABER
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 10.2
                              CONSULTING AGREEMENT

         This CONSULTING AGREEMENT (the "Agreement") made as of this 20th day of
July, 2000 ("Effective Date") by and between GigaPixel Corporation, a Delaware
corporation ("Company"), and George T. Haber ("Consultant").

         WHEREAS, GigaPixel desires consulting and similar services relating to
GigaPixel's business; and

         WHEREAS, Consultant desires to contract with the Company to perform
such services.

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
recited, the sufficiency of which is hereby acknowledged, the parties agree as
follows;

         1. Consultancy. The Consultant shall serve as a consultant to the
Company for a period commencing on the date of this Agreement for a period of
two (2) years unless earlier terminated in accordance with Section 9 of this
Agreement.

         2. Scope of Work. The Consultant shall perform the services set forth
in Exhibit A attached hereto (the "Services"). Any additions to or modifications
of the Services shall be set forth in writing and shall be signed by both
parties. The performance of services and compensation therefore necessary to the
completion of such additions or modifications shall be governed by this
Agreement unless otherwise described in the written agreement of the parties.

         3. Performance Bonus Advance. Within sixty days after commencement of
Consultant's services under this Agreement, the Company shall pay to the
Consultant, in advance of the performance of two (2) full years of service under
this Agreement, a performance bonus in the amount of $300,000 ("Performance
Bonus").

         4. Repayment Obligation. Concurrently herewith, the Consultant shall
execute the contingent recourse non-negotiable promissory note attached hereto
as Exhibit B (the "Note"). The Note shall provide that in the event that the
Consultant, as maker of the Note, ceased to be engaged as a consultant or
employee by the Company (or its successors or assigns) prior to the two year
anniversary of the Effective Date of this Agreement, the principal balance of
the Note shall become payable no later than one day after the termination of the
consulting or employment relationship between the Consultant and the Company.
Notwithstanding the foregoing, the Note shall also provide that if the
Consultant ceases to be engaged as a consultant or employed by the Company for
any of the following reasons, the repayment obligation therein shall not apply:

            (a) Death or permanent disability of Consultant;

            (b) Assignment of this Agreement to a subsidiary, parent, successor
or affiliate of the Company.

         5. Consulting Fees. The Company agrees to pay the Consultant a flat fee
of $400,000 for the Services promptly upon the commencement of the consultancy
relationship between the Company and Consultant.

         6. Payments. The Company shall reimburse the Consultant for
out-of-pocket expenses reasonably incurred by the Consultant in the performance
of the Services upon the Consultant's submission of any request for
reimbursement in a format consistent with the Company's policies from time to
time in effect.

         7. Confidentiality. The Consultant acknowledges that Confidential
Information (as defined in Section 8 of this Agreement) is of great value to the
Company. Accordingly, the Consultant agrees not to divulge to anyone, either
during or after the term of this Agreement, any Confidential Information
obtained or developed by the Consultant during the term of this Agreement. Upon
the expiration or earlier termination of this Agreement, the Consultant agrees
to deliver to the Company all documents, papers, drawings, tabulations, reports
and similar documentation which are furnished by the Company to the Consultant
or were prepared by the Consultant in performance of the Services for the
Company. Upon the expiration or termination of this Agreement, the Consultant



<PAGE>   2

agrees to make no further use or utilization of any Confidential Information.
The provisions of this Paragraph 7 shall survive the termination of this
Agreement.

         8. Confidential Information. "Confidential Information," as used in
this Agreement, shall mean information regarding the business affairs,
operations, business opportunities, price and cost information, finances,
customer names, prospects and customer lists, business plans, sales techniques,
manuals, letters, notebooks, procedures, reports, products, processes, services,
inventions, research and development, and other confidential information and
knowledge concerning the Company or 3dfx Interactive, Inc., a California
corporation ("3dfx"). The term "Confidential Information" shall not include
information that (a) is or becomes generally available to the public through no
violation of this Agreement, (b) was available to Consultant on a
nonconfidential basis prior to disclosure to Consultant by the Company or 3dfx,
or (c) becomes available to the Consultant on a nonconfidential basis from a
source other than the Company or 3dfx, provided that such source is not bound by
a confidentiality agreement with the Company or 3dfx.

         9. Termination. The Company shall have the right to terminate this
Agreement at any time upon 15 days prior written notice to the Consultant. In
addition, in the event either party fails to cure a breach of this Agreement
within fifteen (15) days after receiving written notice thereof, then the
non-breaching party may terminate this Agreement upon written notice to the
breaching party. In the event of any termination of this Agreement, the Company
shall make payments to the Consultant for all work performed in accordance with
the terms and conditions of this Agreement up to the date of termination, and
the Consultant shall immediately return to the Company, without limitation, all
correspondence, reports, documents, drawings and any other items of whatever
nature supplied to the Consultant by the Company or owned by the Company
pursuant to this Agreement.

         10. Independent Contractor/Taxes. The Consultant is not an agent or
employee of the Company and is not authorized to act on behalf of the Company.
Except as required by a final determination by the Internal Revenue Service or
state taxing authority and upon due notice to the other party, the Consultant
and the Company each agrees that it will treat the Consultant as an independent
contractor for tax purposes and file all tax and information returns and pay all
applicable taxes on that basis.

         11. Assignment. The Consultant shall not assign this Agreement or any
interest herein, nor delegate any obligation hereunder, without the prior
written consent of the Company. The Company shall not assign its rights and
obligations under this Agreement to any third party without the written consent
of the Consultant, except that the Company may assign this Agreement to a
subsidiary, parent, successor or affiliate of the Company without the consent of
the Consultant.

         12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
between California residents and wholly to be performed in California.

         13. Headings. The headings in this Agreement are intended principally
for convenience and shall not, by themselves, determine the rights and
obligations of the parties to this Agreement.

         14. Notices. All notices, requests, demands, and other communications
required by, or made in connection with, this Agreement or the transactions
contemplated by this Agreement, shall be in writing and shall be deemed to have
been duly given on the date of delivery, if delivered in person, or three days
after mailing if mailed by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:

         If to the Company:         GigaPixel Corporation
                                    4435 Fortran Drive
                                    San Jose, California 95134

         If to the Consultant:      George T. Haber
                                    890 Robb Road
                                    Palo Alto, CA 94306


                                      -2-
<PAGE>   3

         Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 13.

         15. Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent possible.
In any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.

         16. Waiver. The waiver of any term or condition contained in this
Agreement by any party to this Agreement shall not be construed as a waiver of a
subsequent breach or failure of the same term or condition or a waiver of any
other term or condition contained in this Agreement.

         17. Entire Agreement. This Agreement, together with the Note and
Confidential Information and Inventions Agreement to be executed concurrently
herewith, contain all of the terms and conditions agreed upon by the parties
relating to its subject matter and supersedes any and all prior and
contemporaneous agreements, negotiations, correspondence, understandings and
communications of the parties, whether oral or written, respecting the subject
matter herein.

         18. Counterpart Execution. This Agreement may be executed by facsimile
and in counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.


Company:                            GIGAPIXEL CORPORATION


                                    By:  /s/ Andrei M. Manoliu
                                         ---------------------------------------
                                    Print Name: Andrei M. Manoliu
                                                --------------------------------
                                    Title: Secretary
                                           -------------------------------------

Consultant:                         GEORGE T. HABER


                                    By:  /s/ George T. Haber
                                         ---------------------------------------
                                         George T. Haber


                                      -3-
<PAGE>   4

                                                                       EXHIBIT A

                                    SERVICES

    o   Business consulting services, based on prior knowledge and experience
        attained as a former president and chief executive officer of GigaPixel
        Corporation,

    o   General administrative and management services


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>d80311ex10-3.txt
<DESCRIPTION>NONCOMPETITION AGREEMENT WITH GEORGE T. HABER
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 10.3
                            NONCOMPETITION AGREEMENT

     THIS NONCOMPETITION AGREEMENT (the "Agreement") made and entered into as of
the 20th day of July, 2000, by and among 3dfx Interactive, Inc., a California
corporation ("Buyer"), and George T. Haber ("Promisor").

                                   WITNESSETH:

     WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as of
March 27, 2000 (the "Purchase Agreement"), by and among Buyer, Galapagos
Acquisition Corp., a Delaware corporation and the wholly-owned subsidiary of
Buyer ("Galapagos"), and GigaPixel Corporation, a Delaware corporation (the
"Company"), Galapagos shall merge with and into the Company and the Company
shall be the surviving corporation in the Merger (as defined in the Purchase
Agreement);

     WHEREAS, the Purchase Agreement provides, as a condition to the closing
thereunder, that Promisor shall execute and deliver this Agreement;

     WHEREAS, the agreements of Promisor hereunder are an important aspect of
the transactions under the Purchase Agreement, and Buyer would not consummate
such transactions absent the execution and delivery by Promisor of this
Agreement;

     WHEREAS, the Company has been and is presently engaged in the development,
implementation, license, sale and/or other distribution of high-performance 3D
graphics hardware and software (the "Business") in and around the territories
specified in Schedule I attached hereto (collectively, the "Territory");

     WHEREAS, Promisor and Promisor's affiliates have substantial financial
resources, experience in the Business and the ability to operate a business or
businesses that could compete with the Company in the Business or in related
businesses following the Closing; and

     WHEREAS, the agreements of Promisor hereunder are reasonable and necessary,
both in scope and duration, to protect the business and goodwill of the Company
that will be acquired pursuant to the Purchase Agreement, and the Company would
suffer damages, including the loss of profits, if Promisor or any of Promisor's
affiliates engaged, directly or indirectly, in a competing business with the
Company or Buyer.

     NOW, THEREFORE for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:

     1. Consideration; Disclosure of Information. For and in consideration of
the sum of $700,000, the receipt and sufficiency of which are acknowledged by
Promisor, Promisor agrees that for a period of three (3) years from the date
hereof, without the prior written consent of Buyer, Promisor shall not, directly
or indirectly, through any form of ownership, in any individual or
representative or affiliated capacity whatsoever, except as may be required by
law, reveal, divulge, disclose or communicate to any person, firm, association,
corporation or other entity in any manner whatsoever information of any kind,
nature or description concerning: (i) the names of any prior or present
suppliers or customers of the Company or Buyer, (ii) the prices for which the
Company or Buyer obtains or has obtained products or services, (iii) the names
of the personnel of the Company or Buyer, (iv) the manner of operation of the
Company or Buyer, (v) the plans, trade secrets, or other confidential or
proprietary data of any kind, nature or description, whether tangible or
intangible, of the Company or Buyer, or (vi) any other financial, statistical or
other information that the Company or Buyer designates or treats as confidential
or proprietary. The agreements set forth herein shall not apply to any
information that at the time of disclosure or thereafter is generally available
to and known by the public (other than as a result of a disclosure directly or
indirectly by Promisor in violation of this Agreement), the disclosure of which
is required by law, regulation, order, decree or process or is otherwise
approved by the Company or Buyer. Without regard to whether any or all of the
foregoing matters would be deemed confidential, material or important, the
parties hereto stipulate that as between them, the same are important, material
and confidential and gravely affect the effective and successful conduct of the
Business and its goodwill.

<PAGE>   2

    2. Noncompetition. Promisor agrees that for a period of three (3) years from
the date hereof, Promisor shall not:

        (i) Call upon, solicit, divert, take away or attempt to call upon,
    solicit, divert or take away any past, existing or potential customers,
    suppliers, businesses, or accounts of (a) the Company or (b) the Business in
    connection with any business substantially similar to the Business in the
    Territory;

        (ii) Hire, attempt to hire, contact or solicit with respect to hiring
    for Promisor or on behalf of any other person any present or future employee
    of the Company or Buyer in the Business;

        (iii) Engage in, or give any advice to any person, firm, partnership,
    association, venture, corporation or other entity engaged in, a business
    substantially similar to the Business in the Territory;

        (iv) Lend credit, money or reputation for the purpose of establishing or
    operating a business substantially similar to the Business in the Territory;

        (v) Do any act that Promisor knew or reasonably should have known might
    injure the Company or Buyer; and

        (vi) Without limiting the generality of the foregoing provisions,
    conduct a business substantially similar to the Business, whether or not
    under the name "GigaPixel" or any other trade names, trademarks or service
    marks used by the Company or Buyer in the Territory.

    The covenants in subsections (i) through (vi) are intended to restrict
Promisor from competing in any manner with the Company or the Business in the
activities that have heretofore been carried on by the Company. The obligations
set forth in subsections (i) through (vi) above shall apply to actions by
Promisor, through any form of ownership, and whether as principal, officer,
director, agent, employee, employer, consultant, shareholder or holder of any
equity security (beneficially or as trustee of any trust), lender, partner,
joint venturer or in any other individual or representative or affiliated
capacity whatsoever. However, none of the foregoing shall prevent Promisor from
being the holder of up to 5.0% in the aggregate of any class of securities of
any corporation engaged in, directly or indirectly, the activities described in
subsections (i) through (vi) above, provided that such securities are listed on
a national securities exchange or reported on Nasdaq.

    3. Enforcement of Covenants.

    3.1 Promisor acknowledges that a violation or attempted violation of any of
the covenants and agreements in Sections 1 and 2 above will cause such damage to
Buyer and the Company as will be irreparable, the exact amount of which would be
difficult to ascertain and for which there will be no adequate remedy at law,
and accordingly, Promisor agrees that Buyer and the Company shall be entitled as
a matter of right to an injunction issued by any court of competent
jurisdiction, restraining such violation or attempted violation of such
covenants and agreements by Promisor, or the affiliates, partners or agents of
such Promisor, as well as recover from Promisor any and all costs and expenses
sustained or incurred by Buyer and the Company in obtaining such an injunction,
including, without limitation, reasonable attorneys' fees. Promisor agrees that
no bond or other security shall be required in connection with such injunction.
Promisor further agrees that the periods of restriction set forth in Sections 1
and 2 above shall be tolled during any period of violation thereof by Promisor.
Any exercise by Buyer or the Company of their respective rights pursuant to this
Section 3 shall be cumulative and in addition to any other remedies to which
Buyer or the Company may be entitled. Each party represents and warrants that it
has been represented by counsel in the negotiation and execution of this
Agreement, including without limitation the provisions set forth above in this
Section 3(a) concerning the recovery of attorney's fees.

    3.2 Promisor understands and acknowledges that each of Buyer and the Company
shall have the right, in its sole discretion, to reduce the scope of any
covenants set forth in Sections 1 and 2, or any portion thereof, without
Promisor's consent, effective immediately upon receipt by Promisor of written
notice thereof; and Promisor agrees that Promisor shall comply forthwith with
any covenant as so modified, which shall be fully enforceable as so revised in
accordance with the terms of this Agreement.


                                      -2-
<PAGE>   3


    4. Intellectual Property. Promisor recognizes and agrees that, on and after
the date hereof, Promisor will not have the right to use for Promisor's own
account any of the service marks, trademarks, trade names, licenses, procedures,
processes, labels, trade secrets or customer lists owned by or licensed to the
Company.

    5. Validity. To the extent permitted by applicable law, if it should ever be
held that any provision contained herein does not contain reasonable limitations
as to time, geographical area or scope of activity to be restrained, then the
court so holding shall at the request of Buyer or the Company reform such
provisions to the extent necessary to cause them to contain reasonable
limitations as to time, geographical area and scope of activity to be restrained
and to give the maximum permissible effect to the intentions of the parties as
set forth herein; and the court shall enforce such provisions as so reformed.
If, notwithstanding the foregoing, any provision hereof is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or enforceable provision or by its severance here from. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically by Buyer or the Company as a part hereof a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable, and the parties hereby agree to such provision.

    6. Notice. Any notice, request, instruction, document or other communication
to be given hereunder by any party hereto to any other party hereto shall be in
writing and validly given if (i) delivered personally, (ii) sent by telecopy
with electronic confirmation of receipt, (iii) delivered by overnight express,
or (iv) sent by registered or certified mail, postage prepaid, as follows:

       If to Buyer:

       3dfx Interactive, Inc.
       4435 Fortran Drive
       San Jose, CA 95134
       Attn: President
       cc: Legal Department
       Facsimile Number (408) 262-5551

       If to Promisor:

       George T. Haber
       890 Robb Road
       Palo Alto, CA 94306
       Facsimile Number (408) 262-5551
       and marked "Personal and Confidential"

       With a copy to:

       ---------------------------------------

       ---------------------------------------

       ---------------------------------------


or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon receipt by such party. Any notice that is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been given to the party to whom it is addressed at the close of business, local
time of the recipient, on the fourth day after the day it is so placed in the
mail.


                                      -3-
<PAGE>   4

    7. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the matters covered hereby, and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.

    8. Modification and Waiver. No modification or amendment of any of the
terms, conditions or provisions in this Agreement may be made otherwise than by
written agreement signed by the parties hereto, except as provided in Sections
3.2 and 5 hereof. The waiver by any party to this Agreement of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party nor shall such waiver constitute a continuing
waiver.

    9. Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, interests or obligations hereunder may be assigned by Promisor without
the prior written consent of the other parties hereto, and any purported
assignment in violation of this Section 9 shall be null and void.

    10. Headings. The headings of the sections of this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.

    11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED AND GOVERNED
BY THE INTERNAL LAW OF THE STATE OF CALIFORNIA.

    12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and such counterparts together
shall constitute one and the same instrument.

    IN WITNESS WHEREOF, the parties have duly caused this Agreement to be
executed as of the date first above written.


                                        BUYER:

                                        3DFX INTERACTIVE, INC.

                                        By:  /s/ David Zacarias
                                             -----------------------------------
                                        Printed Name: David Zacarias
                                                      --------------------------
                                        Title: Vice President, Administration
                                               ---------------------------------
                                        and Chief Financial Officer
                                        ----------------------------------------

                                        PROMISOR:

                                                /s/ George T. Haber
                                        ----------------------------------------

                                        ----------------------------------------



                                      -4-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>d80311ex10-4.txt
<DESCRIPTION>CONTINGENT RECOURSE NON-NEGOTIABLE PROMISSORY NOTE
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 10.4

               CONTINGENT RECOURSE NON-NEGOTIABLE PROMISSORY NOTE

                              San Jose, California

$700,000                                                    July 20, 2000

         FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"),
subject to the conditions below, promises to pay to the order of GIGAPIXEL
CORPORATION, a Delaware corporation (the "Company"), the principal sum of Seven
Hundred Thousand and No/100 Dollars ($700,000) with no interest. All amounts are
payable at 4435 Fortran Drive, San Jose, California 95134 or such other place as
the holder hereof may designate in writing. This Note is executed pursuant to
the Consulting Agreement (the "Consulting Agreement") dated of even date
herewith between the Company and Maker, is subject to the provisions set forth
therein, and is being executed solely to evidence the contingent repayment
obligation of Maker described in Section 4 of the Consulting Agreement.

         This Note shall be due and payable in a single installment of the full
principal amount hereof IF AND ONLY IF Maker shall fail to remain employed by
the Company for two (2) years under Maker's Consulting Agreement with the
Company of even date herewith for reasons other than (i) Maker's death or
permanent disability (as described in the Consulting Agreement), (ii) leave
authorized by the Company not involving termination of the consulting
relationship between the Company and Maker, or (iii) transfer of Maker by the
Company to a subsidiary, parent, successor or affiliate of the Company to which
the Consulting Agreement is assigned by the Company. If this Note shall become
due and payable, such single installment shall be paid one (1) business day
following the termination of Maker's employment with the Company.

         Maker waives all demands for payment, presentations for payment, notice
of intention to accelerate maturity, notices of acceleration of maturity,
diligence in collecting, grace, notice, protest and notices of protest.

         If this Note becomes due and payable and is not paid at maturity and is
placed in the hands of an attorney for collection or if it is collected through
bankruptcy or any other judicial proceedings, then (i) Maker agrees and promises
to pay to the holder hereof all costs of collection and enforcement including,
but not limited to, reasonable attorneys' fees, not to exceed ten percent (10%)
of the principal on this Note not paid at maturity, and (ii) interest at the
rate of ten percent (10%) per annum shall begin to accrue thereafter.

         This Note is governed by, and shall be construed under, the laws of the
State of California.

                                        By:   /s/ George T. Haber
                                           ------------------------------------
                                        Name: George T. Haber

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>d80311ex10-5.txt
<DESCRIPTION>LOCK UP AGREEMENT WITH GEORGE T. HABER
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 10.5

                                LOCK-UP AGREEMENT


                                  July 20, 2000

3dfx Interactive, Inc.
4435 Fortran Drive
San Jose, California  95134

         As a condition to the closing contemplated by that certain Agreement
and Plan of Reorganization (the "Agreement") dated as of March 27, 2000 by and
among 3dfx Interactive, Inc., a California corporation ("3dfx"), Galapagos
Acquisition Corp., a Delaware corporation, and GigaPixel Corporation, a Delaware
corporation (the "Company"), the undersigned is required to deliver this Lock-up
Agreement. Capitalized terms used and not otherwise defined herein have the
meaning ascribed to them in the Agreement.

         The undersigned recognizes that it is in the best financial interests
of the undersigned, as a shareholder of 3dfx, and of 3dfx that the 3dfx Common
Stock received thereby be subject to such restrictions and hereby agrees as
follows:

         Before the earlier of (i) the date that is fifteen (15) months after
the Closing Date or (ii) the sale, conveyance or transfer, during any such
quarter during the fifteen-month period, of 836,005 or more shares of 3dfx
Common Stock in the aggregate by the officers and directors of 3dfx listed on
Schedule A, the undersigned shall not: (a) sell, assign, exchange, transfer,
encumber, pledge, distribute or otherwise dispose of (i) any shares of 3dfx
Common Stock received by the undersigned in the Merger, or (ii) any interest
(including, without limitation, an option to buy or sell) in any such shares of
3dfx Common Stock, in whole or in part, in each case in excess of the Permitted
Sale Amount (as defined below), and no such attempted transfer shall be treated
as effective for any purpose; or (b) engage in any transaction, whether or not
with respect to any shares of 3dfx Common Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning the shares of 3dfx
Common Stock acquired pursuant to the Agreement (including, but not limited to,
engaging in put, call, short-sale, straddle or similar market transactions), in
excess of the Permitted Sale Amount. As used herein, "Permitted Sale Amount"
means ten percent (10%) per quarter on a cumulative basis commencing one (1)
quarter after the Closing (e.g., commencing November 1, 2000). The certificates
evidencing the 3dfx Common Stock received by the undersigned in the Merger will
bear a legend substantially in the form set forth below and containing such
other information as 3dfx may deem necessary or appropriate:

         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER
         RESTRICTIONS SET FORTH IN THAT CERTAIN LOCK-UP AGREEMENT BY AND BETWEEN
         3DFX INTERACTIVE, INC., A CALIFORNIA CORPORATION, AND THE HOLDER
         HEREOF, DATED JULY 20, 2000 (THE "LOCK-UP AGREEMENT"), AND MAY NOT BE
         SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
         DISTRIBUTED OR OTHERWISE DISPOSED OF, OTHER THAN IN CERTAIN PERMITTED
         AMOUNTS, PRIOR TO CERTAIN EVENTS DETAILED IN THE LOCK-UP AGREEMENT. THE
         ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER
         PLACED WITH THE TRANSFER AGENT) UPON (I) THE OCCURRENCE OF THE EVENTS
         SPECIFIED IN THE LOCK-UP AGREEMENT AND (II) THE WRITTEN REQUEST OF THE
         HOLDER OF THIS CERTIFICATE. A COPY OF THE LOCK-UP AGREEMENT IS
         AVAILABLE FOR REVIEW AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.

                                                     Very truly yours,


                                                     By:   /s/ George T. Haber
                                                           ---------------------
                                                     Name:  George T. Haber
                                                     Title:   President


<PAGE>   2


                                   SCHEDULE A

                                   Alex Leupp
                                 David Zacarias
                                  Scott Sellers
                                   Bryan Keyes



                                      -2-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>8
<FILENAME>d80311ex10-6.txt
<DESCRIPTION>NONCOMPETITION AGREEMENT WITH PHILIP CARMACK
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 10.6

                            NONCOMPETITION AGREEMENT

    THIS NONCOMPETITION AGREEMENT (the "Agreement") made and entered into as of
the 20th day of July, 2000, by and among 3dfx Interactive, Inc., a California
corporation ("Buyer"), and Philip Carmack ("Promisor").

                                   WITNESSETH:

    WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as of
March 27, 2000 (the "Purchase Agreement"), by and among Buyer, Galapagos
Acquisition Corp., a Delaware corporation and the wholly-owned subsidiary of
Buyer ("Galapagos"), and GigaPixel Corporation, a Delaware corporation (the
"Company"), Galapagos shall merge with and into the Company and the Company
shall be the surviving corporation in the Merger (as defined in the Purchase
Agreement);

    WHEREAS, the Purchase Agreement provides, as a condition to the closing
thereunder, that Promisor shall execute and deliver this Agreement;

    WHEREAS, the agreements of Promisor hereunder are an important aspect of the
transactions under the Purchase Agreement, and Buyer would not consummate such
transactions absent the execution and delivery by Promisor of this Agreement;

    WHEREAS, the Company has been and is presently engaged in the development,
implementation, license, sale and/or other distribution of high-performance 3D
graphics hardware and software (the "Business") in and around the territories
specified in Schedule I attached hereto (collectively, the "Territory");

    WHEREAS, Promisor and Promisor's affiliates have substantial financial
resources, experience in the Business and the ability to operate a business or
businesses that could compete with the Company in the Business or in related
businesses following the Closing; and

    WHEREAS, the agreements of Promisor hereunder are reasonable and necessary,
both in scope and duration, to protect the business and goodwill of the Company
that will be acquired pursuant to the Purchase Agreement, and the Company would
suffer damages, including the loss of profits, if Promisor or any of Promisor's
affiliates engaged, directly or indirectly, in a competing business with the
Company or Buyer.

    NOW, THEREFORE for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:

    1. Consideration; Disclosure of Information. For and in consideration of the
sum of $50,000, the receipt and sufficiency of which are acknowledged by
Promisor, Promisor agrees that for a period of three (3) years from the date
hereof, without the prior written consent of Buyer, Promisor shall not, directly
or indirectly, through any form of ownership, in any individual or
representative or affiliated capacity whatsoever, except as may be required by
law, reveal, divulge, disclose or communicate to any person, firm, association,
corporation or other entity in any manner whatsoever information of any kind,
nature or description concerning: (i) the names of any prior or present
suppliers or customers of the Company or Buyer, (ii) the prices for which the
Company or Buyer obtains or has obtained products or services, (iii) the names
of the personnel of the Company or Buyer, (iv) the manner of operation of the
Company or Buyer, (v) the plans, trade secrets, or other confidential or
proprietary data of any kind, nature or description, whether tangible or
intangible, of the Company or Buyer, or (vi) any other financial, statistical or
other information that the Company or Buyer designates or treats as confidential
or proprietary. The agreements set forth herein shall not apply to any
information that at the time of disclosure or thereafter is generally available
to and known by the public (other than as a result of a disclosure directly or
indirectly by Promisor in violation of this Agreement), the disclosure of which
is required by law, regulation, order, decree or process or is otherwise
approved by the Company or Buyer. Without regard to whether any or all of the
foregoing matters would be deemed confidential, material or important, the
parties hereto stipulate that as between them, the same are important, material
and confidential and gravely affect the effective and successful conduct of the
Business and its goodwill.


<PAGE>   2


    2. Noncompetition. Promisor agrees that for a period of three (3) years from
the date hereof, Promisor shall not:

        (i) Call upon, solicit, divert, take away or attempt to call upon,
    solicit, divert or take away any past, existing or potential customers,
    suppliers, businesses, or accounts of (a) the Company or (b) the Business in
    connection with any business substantially similar to the Business in the
    Territory;

        (ii) Hire, attempt to hire, contact or solicit with respect to hiring
    for Promisor or on behalf of any other person any present or future employee
    of the Company or Buyer in the Business;

        (iii) Engage in, or give any advice to any person, firm, partnership,
    association, venture, corporation or other entity engaged in, a business
    substantially similar to the Business in the Territory;

        (iv) Lend credit, money or reputation for the purpose of establishing
    or operating a business substantially similar to the Business in the
    Territory;

        (v) Do any act that Promisor knew or reasonably should have known might
    injure the Company or Buyer; and

        (vi) Without limiting the generality of the foregoing provisions,
    conduct a business substantially similar to the Business, whether or not
    under the name "GigaPixel" or any other trade names, trademarks or service
    marks used by the Company or Buyer in the Territory.

    The covenants in subsections (i) through (vi) are intended to restrict
Promisor from competing in any manner with the Company or the Business in the
activities that have heretofore been carried on by the Company. The obligations
set forth in subsections (i) through (vi) above shall apply to actions by
Promisor, through any form of ownership, and whether as principal, officer,
director, agent, employee, employer, consultant, shareholder or holder of any
equity security (beneficially or as trustee of any trust), lender, partner,
joint venturer or in any other individual or representative or affiliated
capacity whatsoever. However, none of the foregoing shall prevent Promisor from
being the holder of up to 5.0% in the aggregate of any class of securities of
any corporation engaged in, directly or indirectly, the activities described in
subsections (i) through (vi) above, provided that such securities are listed on
a national securities exchange or reported on Nasdaq.

    3. Enforcement of Covenants.

    3.1 Promisor acknowledges that a violation or attempted violation of any of
the covenants and agreements in Sections 1 and 2 above will cause such damage to
Buyer and the Company as will be irreparable, the exact amount of which would be
difficult to ascertain and for which there will be no adequate remedy at law,
and accordingly, Promisor agrees that Buyer and the Company shall be entitled as
a matter of right to an injunction issued by any court of competent
jurisdiction, restraining such violation or attempted violation of such
covenants and agreements by Promisor, or the affiliates, partners or agents of
such Promisor, as well as recover from Promisor any and all costs and expenses
sustained or incurred by Buyer and the Company in obtaining such an injunction,
including, without limitation, reasonable attorneys' fees. Promisor agrees that
no bond or other security shall be required in connection with such injunction.
Promisor further agrees that the periods of restriction set forth in Sections 1
and 2 above shall be tolled during any period of violation thereof by Promisor.
Any exercise by Buyer or the Company of their respective rights pursuant to this
Section 3 shall be cumulative and in addition to any other remedies to which
Buyer or the Company may be entitled. Each party represents and warrants that it
has been represented by counsel in the negotiation and execution of this
Agreement, including without limitation the provisions set forth above in this
Section 3(a) concerning the recovery of attorney's fees.

    3.2 Promisor understands and acknowledges that each of Buyer and the Company
shall have the right, in its sole discretion, to reduce the scope of any
covenants set forth in Sections 1 and 2, or any portion thereof, without
Promisor's consent, effective immediately upon receipt by Promisor of written
notice thereof; and Promisor agrees that Promisor shall comply forthwith with
any covenant as so modified, which shall be fully enforceable as so revised in
accordance with the terms of this Agreement.

    4. Intellectual Property. Promisor recognizes and agrees that, on and after
the date hereof, Promisor will not have the right to use for Promisor's own
account any of the service marks, trademarks, trade names, licenses, procedures,
processes, labels, trade secrets or customer lists owned by or licensed to the
Company.

    5. Validity. To the extent permitted by applicable law, if it should ever be
held that any provision contained herein does not contain reasonable limitations
as to time, geographical area or scope of activity to be restrained, then the
court so holding shall at the request


<PAGE>   3


of Buyer or the Company reform such provisions to the extent necessary to cause
them to contain reasonable limitations as to time, geographical area and scope
of activity to be restrained and to give the maximum permissible effect to the
intentions of the parties as set forth herein; and the court shall enforce such
provisions as so reformed. If, notwithstanding the foregoing, any provision
hereof is held to be illegal, invalid or unenforceable under present or future
laws effective during the term hereof, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or enforceable provision or by its severance
here from. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically by Buyer or the Company as a part
hereof a provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable, and the
parties hereby agree to such provision.

    6. Notice. Any notice, request, instruction, document or other communication
to be given hereunder by any party hereto to any other party hereto shall be in
writing and validly given if (i) delivered personally, (ii) sent by telecopy
with electronic confirmation of receipt, (iii) delivered by overnight express,
or (iv) sent by registered or certified mail, postage prepaid, as follows:

       If to Buyer:

       3dfx Interactive, Inc.
       4435 Fortran Drive
       San Jose, CA 95134
       Attn: President
       cc: Legal Department
       Facsimile Number (408) 262-5551

       If to Promisor:

       Philip Carmack
       c/o 3dfx Interactive, Inc.
       4435 Fortran Drive
       San Jose, CA 95134
       Facsimile Number (408) 262-5551
       and marked "Personal and Confidential"

       With a copy to:


       -----------------------------------------

       -----------------------------------------

       -----------------------------------------

or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon receipt by such party. Any notice that is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been given to the party to whom it is addressed at the close of business, local
time of the recipient, on the fourth day after the day it is so placed in the
mail.

    7. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the matters covered hereby, and supersedes all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.

    8. Modification and Waiver. No modification or amendment of any of the
terms, conditions or provisions in this Agreement may be made otherwise than by
written agreement signed by the parties hereto, except as provided in Sections
3.2 and 5 hereof. The waiver by any party to this Agreement of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by any party nor shall such waiver constitute a continuing
waiver.


<PAGE>   4


    9. Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, interests or obligations hereunder may be assigned by Promisor without
the prior written consent of the other parties hereto, and any purported
assignment in violation of this Section 9 shall be null and void.

    10. Headings. The headings of the sections of this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.

    11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED AND GOVERNED
BY THE INTERNAL LAW OF THE STATE OF CALIFORNIA.

    12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and such counterparts together
shall constitute one and the same instrument.

    IN WITNESS WHEREOF, the parties have duly caused this Agreement to be
executed as of the date first above written.


                                    BUYER:

                                    3DFX INTERACTIVE, INC.

                                    By:   /s/ DAVID ZACARIAS
                                       -----------------------------------------
                                    Printed Name: David Zacarias
                                                 -------------------------------
                                    Title: Vice President, Administration and
                                           Chief Financial Officer
                                          --------------------------------------

                                    PROMISOR:

                                        /s/ PHILIP CARMACK
                                    --------------------------------------------

                                    --------------------------------------------

<PAGE>   5




                                    SCHEDULE I

                                    TERRITORY

United States of America
European Union
Asia


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>9
<FILENAME>d80311ex10-7.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT FOR EXEC. OFFICER - P.CARMACK
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 10.7

                   EMPLOYMENT AGREEMENT FOR EXECUTIVE OFFICER

         EMPLOYMENT AGREEMENT FOR EXECUTIVE OFFICER ("Agreement") made as of the
day of July 20, 2000, between GigaPixel Corporation, a Delaware corporation (the
"Company"), and Philip Carmack ("Executive").

         WHEREAS, Executive possesses an intimate knowledge of the business and
affairs of the Company, its policies, methods, personnel, and plans for the
future;

         WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that Executive's contribution to the growth and success of the Company has been
substantial and desires to assure the Company of Executive's continued
employment in an executive capacity and to compensate him therefor; and

         WHEREAS, Executive is desirous of committing himself to serve the
Company on the terms herein provided.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:

         1. Employment. The Company hereby agrees to continue to employ
Executive and Executive hereby agrees to continue to serve the Company, on the
terms and conditions set forth herein, for the period commencing on the date
hereof and expiring on July 31, 2002 (unless sooner terminated as hereinafter
set forth); provided, however, that commencing on August 1, 2002, and each year
thereafter, the term of this Agreement shall automatically be renewed for one
additional year unless, at least 30 days prior to the expiration of the initial
or renewal term, the Company or Executive shall have given written notice to the
other party that it does not wish to extend this Agreement. The term of this
Agreement, as it may from time to time be extended in accordance with this
Paragraph, may be referred to herein as the "Period of Employment."

         2. Position and Duties. Executive shall serve as the Senior Vice
President -- Engineering of the Company performing the functions and duties as
shall be reasonably prescribed from time to time by the Company's Board of
Directors provided that such functions and duties are consistent with and
attendant to Executive's position or other positions that he may hold from time
to time. Executive shall devote his full working time and efforts to the
business and affairs of the Company and the promotion of its interests and
perform all duties and services on behalf of the Company necessary to carry out
such functions.

         3. Compensation and Related Matters.

            (a) Base Salary. Initially, Executive shall receive an annual base
salary ("Base Salary") at the rate of Two Hundred Fifty Thousand Dollars
($250,000) during the period ending July 31, 2002. Thereafter, Executive's Base
Salary shall be redetermined at least 30 days before each year in an amount to
be fixed by the Compensation Committee. The term "Base Salary" as used in this
Agreement shall mean, at any point in time, Executive's annual base salary at
such time. The Base Salary shall be payable in substantially equal semi-monthly
installments and shall in no way limit or reduce the obligations of the Company
hereunder.

            (b) Incentive Compensation. In addition to Base Salary, Executive is
eligible to receive incentive compensation in accordance with the then-current
incentive plan of the Company's parent, 3dfx Interactive, Inc. ("3dfx").

            (c) Sales Commissions. In addition to Base Salary and Incentive
Compensation, Executive shall receive sales commissions that shall be payable
monthly on the fifteenth of the month following the month in which they are
earned. For each fiscal year during the term, the Chief Executive Officer shall
recommend and the Compensation Committee shall approve the formula to be used to
calculate sales commissions.

            (d) Expenses. Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by him during any Period of
Employment (in accordance with the policies and procedures then in effect and
established by the Company for its senior executive officers) in performing
services hereunder, provided that Executive properly accounts therefor in
accordance with Company policy.

            (e) Other Benefits. Executive shall be entitled to continue to
participate in or receive benefits under all of the Employee Benefit Plans of
3dfx under which Employee may participate in accordance with applicable laws and
the terms of such plans in effect on the date hereof, or under plans or
arrangements that provide Executive with at least substantially equivalent
benefits


<PAGE>   2


to those provided under such Employee Benefit Plans. As used herein, "Employee
Benefit Plans" include, without limitation, each pension, and retirement plan;
supplemental pension, retirement, and deferred compensation plan; savings and
profit-sharing plan; stock ownership plan; stock purchase plan; stock option
plan; life insurance plan; medical insurance plan; disability plan; and health
and accident plan or arrangement established and maintained by the Company or
3dfx on the date hereof. Executive shall be entitled to participate in or
receive benefits under any employee benefit plan or arrangement which may, in
the future, be made available to the Company's executives and key management
employees, subject to and on a basis consistent with the terms, conditions, and
overall administration of such plan or arrangement. Nothing paid to Executive
under the Employee Benefit Plans presently in effect or any employee benefit
plan or arrangement which may be made available in the future shall be deemed to
be in lieu of compensation payable to Executive under Subparagraphs 3(a), 3(b),
and 3(c). Any payments or benefits payable to Executive under a plan or
arrangement referred to in this Subparagraph 3(e) in respect of any calendar
year during which Executive is employed by the Company for less than the whole
of such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is so employed. Should any such payments or benefits accrue
on a fiscal (rather than calendar) year, then the proration in the preceding
sentence shall be on the basis of a fiscal year rather than calendar year.

            (f) Vacations. Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to time
for its senior executive officers. Executive shall also be entitled to all paid
holidays given by the Company to its senior executive officers.

         4. Offices. Executive agrees to serve as a director of the Company, if
elected or appointed thereto, provided he is indemnified for serving in such
capacity on a basis no less favorable than is currently provided by the
Company's By-laws and any indemnification agreement with any other director.

         5. Confidential Information. THIS PROVISION SHALL BE OF NO FORCE OR
EFFECT IF EMPLOYEE HAS EXECUTED AN EMPLOYEE CONFIDENTIAL INFORMATION AND
INVENTIONS AGREEMENT WITH THE COMPANY. Executive acknowledges that in the course
of his employment with the Company, he will gain a close, personal and special
influence with the customers of the Company and of 3dfx and will be acquainted
with the Company's and 3dfx's business affairs, information, trade secrets, and
other matters which are of a proprietary or confidential nature, including but
not limited to the Company's and 3dfx's operations, business opportunities,
price and cost information, finances, customer names, prospects and customer
lists, business plans, various sales techniques, manuals, letters, notebooks,
procedures, reports, products, processes, services, inventions, research and
development, and other confidential information and knowledge (collectively,
"Confidential Information") concerning the Company's and 3dfx's business. The
term "Confidential Information" shall not include information which (a) is or
becomes generally available to the public through no violation of this
Agreement, (b) was available to Executive on a nonconfidential basis prior to
disclosure to Executive by the Company or 3dfx, or (c) becomes available to
Executive on a nonconfidential basis from a source other than the Company or
3dfx, provided that such source is not bound by a confidentiality agreement with
the Company or 3dfx. The Company agrees to provide such Confidential Information
and/or training which the Company deems necessary or desirable to aid Executive
in the performance of his duties. Executive understands and acknowledges that
such Confidential Information is confidential, and he agrees not to disclose
such Confidential Information to anyone outside the Company. Executive further
agrees that he will not during employment and/or at any time thereafter use such
Confidential Information in competing, directly or indirectly, with the Company
or 3dfx. At such time as Executive shall cease to be employed by the Company, he
will immediately turn over to the Company all such Confidential Information
including papers, documents, writings, electronically stored information, other
property, and all copies of them provided to him during the course of his
employment with the Company. During or upon termination, for any reason, of
Executive's employment with the Company, Executive shall sign a list
acknowledging the Confidential Information of which he has gained knowledge or
information during the course of his employment with the Company. The
obligations of this Paragraph 5 shall continue beyond the termination of
Executive's employment, regardless of the reason for such termination, and shall
be binding upon Executive's assigns, executors, administrators, and other legal
representatives. NOTWITHSTANDING ANYTHING CONTAINED OR IMPLIED HEREIN TO THE
CONTRARY, THE PROVISIONS OF THIS SECTION 5 SHALL BE OF NO FORCE OR EFFECT IF
EMPLOYEE HAS EXECUTED AN EMPLOYEE CONFIDENTIAL INFORMATION AND INVENTION
AGREEMENT WITH THE COMPANY.

         6. Conflict of Interest. In keeping with Executive's fiduciary duties
to the Company, Executive agrees that while employed by the Company he shall
not, acting alone or in conjunction with others, directly or indirectly, become
involved in a conflict of interest or, upon discovery thereof, allow such a
conflict to continue. Moreover, Executive agrees that he shall immediately
disclose to the Company any facts which might involve any reasonable possibility
of a conflict of interest. It is agreed that any direct or indirect interest,
connection with, or benefit from any outside activities, where such interest
might in any way adversely affect the Company, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Executive
might arise, and which must be reported immediately by Executive to the Company,
include, but are not limited to, the following: (a) ownership of


<PAGE>   3


a material interest in any supplier, contractor, subcontractor, customer, or
other entity with which the Company does business; (b) acting in any capacity,
including director, officer, partner, consultant, employee, distributor, agent,
or the like for a supplier, contractor, subcontractor, customer, or other entity
with which the Company does business; (c) accepting, directly or indirectly,
payment, service, or loans from a supplier, contractor, subcontractor, customer,
or other entity with which the Company does business, including, but not limited
to, gifts, trips, entertainment, or other favors of more than a nominal value;
(d) misuse of the Company's information or facilities to which Executive has
access in a manner which will be detrimental to the Company's interest, such as
utilization for Executive's own benefit of know-how, inventions, or information
developed through the Company's business activities; (e) disclosure or other
misuse of Confidential Information of any kind obtained through Executive's
connection with the Company; (f) appropriation by Executive or the diversion to
others, directly or indirectly, of any business opportunity in which it is known
or could reasonably be anticipated that the Company would be interested; and (g)
the ownership, directly or indirectly, of a material interest in an enterprise
in competition with the Company, or acting as an owner, director, principal,
officer, partner, consultant, employee, agent, servant, or otherwise of any
enterprise which is in competition with the Company.

         7. Proprietary Information. THIS PROVISION SHALL BE OF NO FORCE OR
EFFECT IF EMPLOYEE HAS EXECUTED AN EMPLOYEE CONFIDENTIAL INFORMATION AND
INVENTIONS AGREEMENT WITH THE COMPANY. Executive agrees to promptly and freely
disclose to the Company in writing any and all ideas, conceptions, inventions,
improvements, suggestions for improvements, discoveries, formulae, processes,
designs, software, firmware, hardware, circuitry, diagrams, copyrights, trade
secrets, and any other proprietary information (collectively, the "Proprietary
Information"), whether patentable or not, which are conceived, and made or
acquired by Executive solely or jointly with others during the Period of
Employment by the Company or using the Company's time, data, facilities, and/or
materials, and which are related to the products, business, or activities of the
Company which Executive conceives as a result of his employment by the Company,
and Executive agrees to assign and hereby does assign all of his interest
therein to the Company, or its nominee. Whenever requested to do so by the
Company, Executive shall execute any and all applications, assignments, or other
instruments, which the Company shall deem necessary to apply for and obtain
Letters Patent or Copyrights of the United States, or any foreign country, to
otherwise protect the Company's interest in the Proprietary Information or to
vest title to the Proprietary Information in the Company. These obligations
shall continue beyond the termination of Executive's employment, regardless of
the reason for such termination, with respect to the Proprietary Information,
conceived, and made or acquired by Executive during the period of his employment
and shall be binding upon Executive's assigns, executors, administrators, and
other legal representatives. NOTWITHSTANDING ANYTHING CONTAINED OR IMPLIED
HEREIN TO THE CONTRARY, THE PROVISIONS OF THIS SECTION 7 SHALL BE OF NO FORCE OR
EFFECT IF EMPLOYEE HAS EXECUTED AN EMPLOYEE CONFIDENTIAL INFORMATION AND
INVENTION AGREEMENT WITH THE COMPANY.

         8. Termination. Executive's employment hereunder may be terminated
without any breach of this Agreement under the following circumstances:

            (a) Death. Executive's employment hereunder shall terminate upon his
death.

            (b) Disability. If, as a result of Executive's incapacity due to
illness, accident, or other physical or mental incapacity, Executive shall have
been absent from his duties hereunder on a full-time basis for 180 calendar days
in the aggregate in any 12-month period, the Company may terminate Executive's
employment hereunder.

            (c) Cause. The Company may terminate Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate Executive's employment hereunder upon: (A) the willful and
continued failure by Executive to perform substantially his duties consistent
with this Agreement in the reasonable judgment of the Company's board of
directors (other than any such failure resulting from Executive's incapacity due
to physical or mental illness) after notice demanding substantial performance is
delivered by the Company to Executive specifically identifying the manner in
which the Company believes Executive has not substantially performed his duties
and Executive has not cured such demands within 30 days after receipt of such
notice; (B) the willful engaging by Executive in misconduct which is injurious
to the Company, monetarily or otherwise; (C) the willful violation by Executive
of the provisions of Paragraphs 5, 6, or 7; (D) the willful, persistent failure
or refusal by Executive to follow reasonable policies, standards, directives, or
orders established by the Company; or (E) the conviction of or guilty plea by
Executive of a crime of moral turpitude or other felony including without
limitation fraud, theft, or embezzlement. For purposes of this Subparagraph
8(c), no act, or failure to act, on Executive's part shall be considered
"willful" unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purposes (after reasonable notice
to Executive and an opportunity for him, together with his counsel, to be heard
before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct set forth above in clause (A), (B), (C), (D), or
(E) of this subparagraph.


<PAGE>   4


            (d) Termination by Executive. Executive may, during the Period of
Employment, upon giving Notice of Termination, terminate his employment
hereunder (i) for Good Reason or (ii) if his health should become impaired to
such an extent that the continued performance of his duties hereunder is
hazardous to his physical or mental health or his life, provided that Executive
shall have furnished the Company with a written statement from a qualified
doctor to such effect.

For purposes of this Agreement, "Good Reason" shall mean: (A) without
Executive's consent, an assignment to Executive of duties, or a material
limitation of the scope of Executive's duties or powers, materially inconsistent
with his designated position and not contemplated by Paragraph 2; (B) without
Executive's consent, a removal, during the Period of Employment, of Executive
from or, with respect to a term ending prior to the end of the Period of
Employment, any failure by management to nominate, or, if nominated by the
shareholders, to re-elect, Executive to any of the positions indicated in
Paragraph 2, except in connection with termination of Executive's employment for
Cause, death, or disability; (C) without Executive's consent, a reduction of
Executive's Base Salary to an amount less than previously determined and fixed
by the Compensation Committee in accordance with Subparagraph 3(a) other than a
reduction deemed necessary by the Board for all executive officers; or (D)
breach by the Company of any of its material obligations under this Agreement
and such breach is not cured within 30 days after written notice thereof by
Executive.

            (e) Notice of Termination. Except for terminations specified in
Subparagraphs 8(a) and 8(h), any termination during the Period of Employment of
Executive's employment by the Company or any such termination by Executive shall
be communicated by written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

            (f) Date of Termination. "Date of Termination" shall, during the
Period of Employment, mean: (i) if Executive's employment is terminated by his
death, the date of his death; (ii) if Executive's employment is terminated on
account of disability under Subparagraph 8(b), the date on which Notice of
Termination is given; (iii) if Executive's employment is terminated by the
Company for Cause under Subparagraph 8(c), the date specified in the Notice of
Termination; (iv) if Executive's employment is terminated by the expiration of
the Period of Employment under Subparagraph 8(h), the date of such expiration;
and (v) if Executive's employment is terminated for any other reason, subject to
the provisions of Subparagraphs 8(g) and 9(d) and Paragraph 10 to the contrary,
the date on which a Notice of Termination is given.

            (g) Retirement. Notwithstanding any other provision hereof to the
contrary, Executive may, at any time during the Period of Employment, upon the
giving of 90 days Notice of Termination, terminate his employment hereunder, if
Executive is then permitted to retire under the provisions of the Company's
pension plan then in effect. The Date of Termination in event of such Retirement
shall be 90 days after such Notice of Termination but in no case shall it exceed
the Period of Employment.

            (h) Expiration of Agreement. Executive's employment hereunder shall
terminate at the expiration of the Period of Employment as provided in Paragraph
1.

         9. Compensation Upon Termination or During Disability.

            (a) If Executive's employment terminates by reason of his death, the
Company shall, within 90 days of death, pay in a lump sum amount to such person
as Executive shall designate in a notice filed with the Company or, if no such
person is designated, to Executive's estate, Executive's accrued and unpaid Base
Salary to the date of his death, plus his accrued and unpaid incentive
compensation under Subparagraph 3(b), if any, plus his accrued and unpaid sales
commissions under Subparagraph 3(c), if any, plus Executive's accrued and unpaid
vacation time, if any. In addition to the foregoing, any payments to which
Executive's spouse, beneficiaries, or estate may be entitled to receive under
any employee benefit plan shall also be paid in accordance with the terms of
such plan or arrangement. Such payments, in the aggregate, shall fully discharge
the Company's obligations hereunder.

            (b) During any period that Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, Executive
shall continue to receive his accrued and unpaid Base Salary and accrued and
unpaid incentive compensation payments under Subparagraph 3(b), if any, and
accrued and unpaid sales commissions under Subparagraph 3(c), if any, plus
Executive's accrued and unpaid vacation time, if any, until Executive's
employment is terminated due to disability in accordance with Subparagraph 8(b)
or until Executive terminates his employment in accordance with Subparagraph
8(d)(ii), whichever first occurs. Upon termination due to death prior to the
termination first to occur as specified in the preceding sentence, Subparagraph
9(a) shall apply.


<PAGE>   5


            (c) If Executive's employment is terminated for Cause, the Company
shall, through the Date of Termination, pay Executive his accrued and unpaid
Base Salary at the rate in effect at the time Notice of Termination is given and
his accrued and unpaid incentive compensation under Subparagraph 3(b), if any,
and his accrued and unpaid sales commissions under Subparagraph 3(c), if any,
plus Executive's accrued and unpaid vacation time, if any, and thereafter, the
Company shall have no further obligations to Executive under this Agreement;
provided, any such termination for Cause shall not adversely affect or alter
Executive's rights under any employee benefit plan of the Company in which
Executive, at the Date of Termination, has a vested interest.

            (d) If (A) the Company terminates Executive's employment other than
in accordance with Subparagraph 8(a), 8(b), or 8(c) (it being understood that a
purported termination under Subparagraph 8(c) which is disputed and finally
determined not to have been proper shall be a termination by the Company in
material breach of this Agreement and shall be treated as if terminated by
Executive for Good Reason), or (B) Executive shall terminate his employment for
Good Reason, or (C) the Company gives Executive notice that it does not wish to
extend this Agreement in accordance with Paragraph 1, then

                (i) the Company shall, through the Date of Termination, pay
Executive his accrued and unpaid Base Salary at the rate in effect at the time
Notice of Termination is given and his accrued and unpaid incentive compensation
under Subparagraph 3(b), if any, and his accrued and unpaid sales commissions
under Subparagraph 3(c), if any, plus Executive's accrued and unpaid vacation
time, if any;

                (ii) in lieu of any further payments to or claims by Executive
for payments of salary or incentive compensation for periods subsequent to the
Date of Termination, the Company shall pay to Executive a Severance Payment
Amount equal to the sum of (1) Executive's Base Salary, (2) Executive's
annualized incentive compensation under Subparagraph 3(b), and (3) Executive's
annualized sales commissions under Subparagraph 3(c). For purposes of
calculating the Severance Payment Amount, Executive's Base Salary will be equal
to Executive's then-current Base Salary (provided, however, that if the basis
for Executive's termination is for Good Reason under clause (C) of Subparagraph
8(d), the Severance Payment Amount shall be based on the Base Salary in effect
prior to such reduction); the annualized incentive compensation will be four
times the average of the amount of incentive compensation earned in the eight
full quarters preceding the earlier of the Notice of Termination or Date of
Termination; and the annualized sales commissions will be 12 times the average
of the amount of sales commissions earned in the 24 full months preceding the
earlier of the Notice of Termination or Date of Termination. The Company shall
pay Executive the Severance Payment Amount in one lump sum on the thirtieth day
following the Date of Termination.

                (iii) Executive shall receive all the rights and benefits
granted or in effect with respect to Executive under the Company's qualified and
nonqualified stock option plans and agreements with Executive pursuant thereto;
and

                (iv) Executive shall receive payments made in lieu of accrued
and unused vacation as provided for in the Company's vacation policies.

Notwithstanding the foregoing, if Executive terminates his employment for Good
Reason, he shall be entitled to severance pay under Subparagraph 9(d)(ii) if he
gives a Notice of Termination in accordance with Subparagraph 8(e) within 30
days after the occurrence of the event or events specified in clauses (A), (B),
(C), and (D) of Subparagraph 8(d).

            (e) If Executive's employment shall be terminated by reason of
retirement under Subparagraph 8(g) or by Executive giving the Company notice
that he does not wish to extend this Agreement in accordance with Paragraph 1,
the Company shall have no further obligations following such termination
hereunder except for continuing obligations arising under Subparagraphs 3(d) and
8(g).

            (f) Nothing contained in the foregoing Subparagraphs 9(a) through
9(e) shall be construed so as to affect the Executive's rights or the Company's
obligations relating to agreements or benefits which are unrelated to
termination of employment.


<PAGE>   6


         10. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:

      if to the Executive:

      At his home address as shown
      in the Company's personnel records;

      if to the Company:

      GigaPixel Corporation
      4435 Fortran Drive
      San Jose, California 95134
      Facsimile Number (408) 262-5551
      Attn: Legal Department

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

         11. Miscellaneous. No provisions of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by the Executive and such officer of the Company as may
be specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of California.

         12. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The invalid portion of this Agreement, if any, shall be modified by any
court having jurisdiction to the extent necessary to render such portion
enforceable.

         13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         14. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
San Jose, California, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. Notwithstanding the above, the Company shall be
entitled to seek a restraining order or injunction in any court of competent
jurisdiction to prevent any continuation of any violation of Paragraphs 5, 6 or
7; and Executive shall be entitled to seek a restraining order or injunction in
any court of competent jurisdiction to prevent enforcement of Paragraphs 5, 6 or
7. Furthermore, should a dispute occur concerning Executive's mental or physical
capacity as described in Subparagraphs 8(b) or 8(d), the procedure to resolve
the dispute solely as to this mental or physical condition shall be that
described in Subparagraph 9(d), except that after Employee shall have furnished
the Company with a written statement from a qualified doctor, a doctor selected
by the Company shall also be entitled to examine Executive. If the opinion of
the Company's doctor and Executive's doctor conflict, the Company's doctor and
Executive's doctor shall together agree upon a third doctor, whose opinion shall
be binding.

                      [The next page is the signature page]



<PAGE>   7




         IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year written above.

                                                    GIGAPIXEL CORPORATION


 /s/ Philip Carmack                                 By: /s/ George T. Haber
---------------------------------                     --------------------------
EXECUTIVE
                                                    Its: CEO
                                                        ------------------------



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>10
<FILENAME>d80311ex10-8.txt
<DESCRIPTION>CONTINGENT RECOURSE NON-NEGOTIABLE PROM. NOTE
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 10.8

               CONTINGENT RECOURSE NON-NEGOTIABLE PROMISSORY NOTE
                              San Jose, California

$150,000                                            July 20, 2000

         FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"),
subject to the conditions below, promises to pay to the order of GIGAPIXEL
CORPORATION, a Delaware corporation (the "Company"), the principal sum of One
Hundred Thousand and No/100 Dollars ($150,000) with no interest. All amounts are
payable at 4435 Fortran Drive, San Jose, California 95134 or such other place as
the holder hereof may designate in writing. This Note is executed pursuant to
the Consulting Agreement (the "Consulting Agreement") dated of even date
herewith between the Company and Maker, is subject to the provisions set forth
therein, and is being executed solely to evidence the contingent repayment
obligation of Maker described in Section 4 of the Consulting Agreement.

         This Note shall be due and payable in a single installment of the full
principal amount hereof IF AND ONLY IF Maker shall fail to remain employed by
the Company for two (2) years under Maker's Consulting Agreement with the
Company of even date herewith for reasons other than (i) Maker's death or
permanent disability (as described in the Consulting Agreement), (ii) leave
authorized by the Company not involving termination of the consulting
relationship between the Company and Maker, or (iii) transfer of Maker by the
Company to a subsidiary, parent, successor or affiliate of the Company to which
the Consulting Agreement is assigned by the Company. If this Note shall become
due and payable, such single installment shall be paid one (1) business day
following the termination of Maker's employment with the Company.

         Maker waives all demands for payment, presentations for payment, notice
of intention to accelerate maturity, notices of acceleration of maturity,
diligence in collecting, grace, notice, protest and notices of protest.

         If this Note becomes due and payable and is not paid at maturity and is
placed in the hands of an attorney for collection or if it is collected through
bankruptcy or any other judicial proceedings, then (i) Maker agrees and promises
to pay to the holder hereof all costs of collection and enforcement including,
but not limited to, reasonable attorneys' fees, not to exceed ten percent (10%)
of the principal on this Note not paid at maturity, and (ii) interest at the
rate of ten percent (10%) per annum shall begin to accrue thereafter.

         This Note is governed by, and shall be construed under, the laws of the
State of California.

                                       By:   /s/ Philip Carmack
                                          --------------------------------
                                       Name: Philip Carmack




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>11
<FILENAME>d80311ex10-9.txt
<DESCRIPTION>PERFORMANCE BONUS AGREEMENT WITH PHILIP CARMACK
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.9

                          PERFORMANCE BONUS AGREEMENT

         This Performance Bonus Agreement (the "Agreement") is made between
GigaPixel Corporation (the "Company"), a Delaware corporation with its
principal place of business at 2350 Mission College Boulevard, Suite 800, Santa
Clara, California and Philip Carmack ("Employee"), on this 20th day of July,
2000 (the "Effective Date"). The parties agree as follows:

Conditions Precedent. The Company's obligation to advance to Employee a
performance bonus in accordance with the terms of this Agreement is subject to
Employee's (a) execution of, and agreement to, the terms of the employment
agreement attached hereto as Exhibit A (the "Employment Agreement"); (b)
commencement of the engagement of Employee thereunder, and (c) execution of the
contingent recourse non-negotiable promissory note attached hereto as Exhibit B
(the "Note").

Performance Bonus Advance. Upon satisfaction of the conditions precedent set
forth in Section 1 above and within the time period set forth in Section 3
below, the Company shall pay to Employee in advance of the performance of two
years of service under the Employment Agreement a performance bonus in the
amount of $50,000 ("Performance Bonus"), less all amounts to be withheld by the
Company in accordance with all applicable federal, state, local and foreign tax
laws and regulations.

Time of Payment. The Performance Bonus shall be paid to Employee within sixty
days after the effective date of the Employment Agreement.

Repayment Obligations. The Note shall provide that in the event that Employee,
as maker of the Note, ceases to provide services to the Company under the
Employment Agreement prior to the two-year anniversary of the effective date of
the Employment Agreement, the principal balance of the Note shall be payable no
later than one day after the termination of Employee's employment with the
Company. Notwithstanding the foregoing, the Note shall also provide that if,
Employee ceases to be employed by the Company for any of the following reasons,
then the payment obligation set forth therein shall not apply:

Death or permanent disability of employee;

Leave authorized by the Company not involving termination of the employment
relationship between Company and Employee; or

Transfer of Employee by the Company to a subsidiary, parent, successor or
affiliate of the Company (each, a "Company Affiliate"); provided that, if Maker
is transferred to any Company Affiliate, then Maker shall be obligated to
provide services to such Company Affiliate until the expiration of the two-year
period described above.

         For purposes of this Section 4, the term "permanent disability" shall
mean permanent inability of Employee, due to a physical or mental illness,
injury or impairment, to perform a substantial portion of his or her duties, as
determined by the board of directors of the Company. The exceptions expressly
enumerated in this Section 4 shall be the only exceptions under this Agreement.

Not an Employment Agreement. This Agreement is not an employment agreement and
shall not be construed or implied to be such from the terms herein.

Assignment. This Agreement is not assignable by Employee, and shall not be
subject to voluntary or involuntary alienation or transfer. The Company may
assign, in whole or in part, its rights and obligations under this Agreement to
any third party without consent of Employee.

Modification. This Agreement, together with the Employment Agreement and the
Note, shall constitute the entire agreement between the Company and Employee
with regard to the performance bonus to be paid to Employee by the Company, and
may not be changed, altered, or modified unless in writing and signed by the
Company and Employee.

Construction. This Agreement shall be governed and construed in accordance with
the laws of the State of California. All claims, if any, arising under this
Agreement shall be brought only in the courts located in San Jose, California,
and both parties agree to the jurisdiction and venue of such courts.


<PAGE>   2

Waiver. Any waiver by the Company of any provision of this Agreement or breach
thereof shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of any subsequent breach.

Employee Acknowledgement. Employee agrees that by his signature to this
Agreement that he has read this Agreement before signing it and that he fully
understands its purposes, terms and provisions, which he expressly acknowledges
to be reasonable in all respects. Employee further acknowledges receipt of a
copy of this Agreement.

Counterpart Execution. This Agreement may be executed by facsimile and in
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.



                                    /s/ Philip Carmack
                                    -------------------------------------------
                                    Philip Carmack ("Employee")



                                    GIGAPIXEL CORPORATION

                                    /s/ George T. Haber
                                    -------------------------------------------
                                    George T. Haber
                                    President and Chief Executive Officer





<PAGE>   3



                                   EXHIBIT A

                              Employment Agreement





<PAGE>   4


                                   EXHIBIT B

               CONTINGENT RECOURSE NON-NEGOTIABLE PROMISSORY NOTE

                              San Jose, California

                                                                 July ___, 2000
-----------


         FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"),
subject to the conditions below, promises to pay to the order of GIGAPIXEL
CORPORATION, a Delaware corporation (the "Company"), the principal sum of
_______________________________ and No/100 Dollars ($______________) with no
interest. All amounts are payable at 4435 Fortran Drive, San Jose, California
95134 or such other place as the holder hereof may designate in writing. This
Note is executed pursuant to the Performance Bonus Agreement (the "Bonus
Agreement") dated of even date herewith between the Company and Maker, is
subject to the provisions set forth therein, and is being executed solely to
evidence the contingent repayment obligation of Maker described in Section 4 of
the Bonus Agreement.

         This Note shall be due and payable in a single installment of the full
principal amount hereof IF AND ONLY IF Maker shall fail to remain employed by
the Company for two (2) years under Maker's Employment or Consulting Agreement
with the Company of even date herewith for reasons other than (i) Maker's death
or permanent disability (as described in the Bonus Agreement), (ii) leave
authorized by the Company not involving termination of the employment or
consulting relationship between the Company and Maker, or (iii) transfer of
Maker by the Company to a subsidiary, parent, successor or affiliate of the
Company to which the Bonus Agreement is assigned by the Company. If this Note
shall become due and payable, such single installment shall be paid one (1)
business day following the termination of Maker's employment with the Company.

         Maker waives all demands for payment, presentations for payment,
notice of intention to accelerate maturity, notices of acceleration of
maturity, diligence in collecting, grace, notice, protest and notices of
protest.

         If this Note becomes due and payable and is not paid at maturity and
is placed in the hands of an attorney for collection or if it is collected
through bankruptcy or any other judicial proceedings, then (i) Maker agrees and
promises to pay to the holder hereof all costs of collection and enforcement
including, but not limited to, reasonable attorneys' fees, not to exceed ten
percent (10%) of the principal on this Note not paid at maturity, and (ii)
interest at the rate of ten percent (10%) per annum shall begin to accrue
thereafter.

         This Note is governed by, and shall be construed under, the laws of
the State of California.

                                      By:
                                         --------------------------------------
                                      Name:
                                           ------------------------------------


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>12
<FILENAME>d80311ex27-1.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          JAN-31-2001
<PERIOD-START>                             FEB-01-2000
<PERIOD-END>                               JUL-31-2000
<CASH>                                          23,525
<SECURITIES>                                    13,153
<RECEIVABLES>                                   57,581
<ALLOWANCES>                                     4,954
<INVENTORY>                                     70,670
<CURRENT-ASSETS>                               172,273
<PP&E>                                          81,412
<DEPRECIATION>                                  43,572
<TOTAL-ASSETS>                                 372,429
<CURRENT-LIABILITIES>                          123,681
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                       435,506
<OTHER-SE>                                   (187,637)
<TOTAL-LIABILITY-AND-EQUITY>                   372,429
<SALES>                                        175,567
<TOTAL-REVENUES>                               175,567
<CGS>                                          138,967
<TOTAL-COSTS>                                  138,967
<OTHER-EXPENSES>                               145,984
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 481
<INCOME-PRETAX>                              (109,865)
<INCOME-TAX>                                     3,062
<INCOME-CONTINUING>                          (112,927)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                 (112,927)
<EPS-BASIC>                                     (4.44)
<EPS-DILUTED>                                   (4.44)


</TABLE>
</TEXT>
</DOCUMENT>
</SUBMISSION>
