<SUBMISSION>
<ACCESSION-NUMBER>0000891618-01-500803
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>9
<PERIOD>20010131
<FILING-DATE>20010516
<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-K
<ACT>34
<FILE-NUMBER>000-22651
<FILM-NUMBER>1641959
</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-K
<SEQUENCE>1
<FILENAME>f72487e10-k.txt
<DESCRIPTION>FORM 10-K PERIOD ENDED JANUARY 31, 2001
<TEXT>

<PAGE>   1

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            -------------------------

                                    FORM 10-K

          [X]   Annual report pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934 for the fiscal year
                ended January 31, 2001

                                       or

          [ ]   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: 000-22651

                             3DFX INTERACTIVE, INC.
             (Exact name of registrant as specified in its charter)

             CALIFORNIA                                 77-0390421
  (State or other jurisdiction of        (I.R.S. employer identification number)
   incorporation or organization)

   4435 FORTRAN DRIVE, SAN JOSE, CA                         95134
(Address of principal executive office)                   (Zip code)

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                           COMMON STOCK, NO PAR VALUE
                         PREFERRED SHARE PURCHASE RIGHTS
                                (Title of class)

        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 period 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

        The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the common stock on May 9,
2001 of $.32 per share, as reported on the Nasdaq National Market, was
approximately $12,612,106. Shares of common stock held by officers, directors
and their affiliates have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

        As of May 9, 2001, the registrant had outstanding 39,799,364 shares of
common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

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



<PAGE>   2

                           FORWARD-LOOKING STATEMENTS

        Unless the context otherwise requires, the term "3dfx" when used in this
Form 10-K ("Report") refers to 3dfx Interactive, Inc., a California corporation,
and its consolidated subsidiaries and predecessors. This Report contains some
forward-looking statements within the meaning of the federal securities laws.
When used therein, the words "expects," "plans," "believes," "anticipating,"
"estimates," and similar expressions are intended to identify forward-looking
statements. Actual results and the timing of some events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including without limitation those set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Discontinued Operations -- Risk Factors" below.

                                     PART I

ITEM 1. BUSINESS

        3dfx developed high performance, cost-effective graphics chips, graphics
boards, software and related technology that enable an interactive and realistic
3D experience across multiple hardware platforms, but is now in the process of
winding up its business.

        In the fall of 2000, 3dfx began experiencing financial difficulties due
in part to substantially reduced demand in the retail channel for its products.
This reduced demand is attributable to a number of factors, including, in part,
its failure to introduce products in a timely manner and from disappointing
customer response to its existing products, as well as reduced demand in the
retail channel in general and the add-in graphics segment in particular. In
addition, 3dfx's high research and development costs and substantial debt
burden, together with the loss of several large customers due to 3dfx's May 1999
acquisition of STB Systems, Inc. and its inability to refinance its debt on
commercially reasonable terms, aggravated its financial difficulties. After
extensive exploration and evaluation of various strategic alternatives, the 3dfx
board of directors concluded that the liquidation, winding up and dissolution of
3dfx provided the best protection to 3dfx's creditors and was in the best
interests of its shareholders.

        3dfx was incorporated in the State of California in August 1994.

REVIEW OF ALTERNATIVES

        In September 2000, the 3dfx board of directors evaluated 3dfx's business
model and concluded that 3dfx could not continue to operate as a manufacturer of
both graphics chips and graphics boards in light of the losses that 3dfx
continued to incur in its graphics board business segment, and that it would be
necessary to quickly reposition 3dfx to focus principally on the development of
graphics chips and related technologies, and to further analyze the possible
termination or sale of the graphics board business. 3dfx began to explore
opportunities to sell its graphics board assets and transfer the liabilities
related to this business and to obtain an equity investment from a strategic
partner to enable 3dfx to implement its revised business strategy.

        Beginning in mid-November 2000, 3dfx, with the assistance of its
financial advisor Robertson Stephens, undertook a review of 3dfx's strategic
alternatives, including obtaining new sources of financing and consideration of
a merger, reorganization or sale of some or all of the assets of 3dfx, and
3dfx's management and Robertson Stephens contacted both strategic and financial
parties to determine their interest in such transactions. After discussions with
selected parties and an extensive exploration and evaluation of possible
strategic alternatives to best protect 3dfx's creditors and maximize shareholder
value, the 3dfx board of directors determined in December 2000 that the sale of
certain 3dfx assets (including its core graphics processor assets) to a
wholly-owned subsidiary of NVIDIA Corporation ("NVIDIA Sub") was the alternative
available to 3dfx that would best permit 3dfx a reasonable likelihood of
satisfying the claims of its creditors and of placing it in a position to
provide a return to its shareholders. For further details regarding the terms of
3dfx's sale of assets to NVIDIA Sub, see "Management's Discussion and Analysis
of Financial Condition and Results of Discontinued Operations--Overview--Plan of
Dissolution and Asset Sale."

        In addition, during this period members of 3dfx management worked with
Robertson Stephens to assess the strategic and financial viability of 3dfx
continuing as an independent concern following completion of the proposed asset
sale, at which time 3dfx's remaining operating assets would largely consist of
its graphics board business. Following its re-examination of the stand-alone
graphics board business, 3dfx's outstanding liabilities and its consideration of
all other available alternatives, the 3dfx board of directors concluded in
December 2000 that the liquidation, winding up and dissolution of 3dfx was the
alternative most reasonably likely to allow payment of its debts and liabilities
to its creditors and to maximize the return of value to its shareholders.

LIQUIDATION, WINDING UP AND DISSOLUTION

        On December 15, 2000, the 3dfx board of directors approved the
liquidation, winding up and dissolution of 3dfx pursuant to a plan of
dissolution and the asset sale to NVIDIA Sub pursuant to an asset purchase
agreement executed by 3dfx, NVIDIA Corporation ("NVIDIA") and NVIDIA Sub on the
same date. Both proposals were also approved by 3dfx's shareholders at a special
shareholders meeting held on March 27, 2001.



                                       1
<PAGE>   3

        3dfx has substantially reduced its costs in order to conserve its
resources. These cost-cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
Due to these cost-cutting measures, 3dfx's operations have been substantially
curtailed. On March 30, 2001, 3dfx filed a certificate of election to liquidate,
wind up and dissolve with the California Secretary of State's office.

        On April 18, 2001, 3dfx completed the sale of substantially all of its
assets to NVIDIA Sub. At the closing, NVIDIA Sub paid cash in the net amount of
$55.0 million in accordance with the asset purchase agreement ($70.0 million
cash, reduced by repayment of a $15.0 million bridge loan extended by NVIDIA Sub
to 3dfx). Subject to 3dfx in the future satisfying certain additional conditions
provided for in the asset purchase agreement, NVIDIA Sub will also deliver to
3dfx 1,000,000 shares of common stock of NVIDIA or a combination of up to $25.0
million in cash and a lesser number of shares of NVIDIA common stock. 3dfx is
not yet in a position to announce if, or when, it will be able to satisfy these
additional conditions.

        The 3dfx plan of dissolution provides for the liquidation, winding up
and dissolution of 3dfx. The plan of dissolution provides for the liquidation of
3dfx's remaining assets, the winding up of its business and operations, and its
dissolution. To the extent that there are any remaining assets after the payment
of, or the provision for the payment of 3dfx's and its subsidiaries' debts and
liabilities, 3dfx will distribute such assets to its shareholders in one or more
distributions.

        The plan of dissolution grants broad discretion and authority to 3dfx's
board of directors in the administration of the plan of dissolution, including
the engagement of employees and consultants to facilitate the dissolution of
3dfx, the provision for indemnification of 3dfx's directors and officers,
payment of all of its and its subsidiaries' debts and liabilities, establishment
of a liquidating trust and the determination of the timing and amount of
distributions. In addition, the plan of dissolution provides that 3dfx's board
of directors may amend the plan of dissolution, unless the board of directors
determines that such amendment would materially and adversely affect
shareholders' interests.

        The actual amount and timing of, and record dates for, any distributions
to 3dfx's shareholders are not known at this time. These matters will be
determined in the sole discretion of the 3dfx board of directors or the trustees
of the liquidating trust, as the case may be, and will depend upon a variety of
factors, including the aggregate net proceeds received in the asset sale, the
proceeds derived by 3dfx from the sale of other assets, the ultimate amount of
known and unknown debts and liabilities of 3dfx and its subsidiaries, the
resolution of litigation and other contingent liabilities, and the amount of
liquidation-related expenses that must be satisfied out of 3dfx's assets.
Claims, liabilities and expenses continue to accrue, and 3dfx anticipates that
expenses for professional fees and other expenses of dissolution will be
significant. These expenses will reduce the amount of the assets available for
distribution to 3dfx shareholders.

        At this time, 3dfx cannot determine if there will be any assets
remaining after paying for, or providing for the payment of, all of its and its
subsidiaries' debts and liabilities. 3dfx expects that pursuant to the terms of
the asset purchase agreement it will request that NVIDIA Sub provide all or a
portion of a one-time advance of up to $25.0 million cash advance in order to
enable 3dfx to pay the debts owed to its and its subsidiaries' creditors. If the
cash advance is made to 3dfx, then the number of NVIDIA shares receivable by
3dfx will be reduced by a number of shares determined by dividing the amount of
the advance by $50. 3dfx expects that if it obtains all or a portion of the
cash advance from NVIDIA Sub, it will have sufficient cash to pay all of its and
its subsidiaries' known current and determinable liabilities. However, the
amount of unknown or contingent liabilities cannot be quantified and could
decrease or eliminate any remaining assets available for distribution to 3dfx's
shareholders. Further, if 3dfx or its subsidiaries remain subject to any
contingent liabilities or become subject to additional contingencies, this could
require that it establish reserves that could delay any distribution to 3dfx
shareholders.

        Because of the uncertainties as to the precise net realizable value of
3dfx's assets and the settlement amount of 3dfx's and its subsidiaries' debts
and liabilities, 3dfx cannot at this time determine the timing or amount of
distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.

        Assuming 3dfx receives shares of NVIDIA common stock in connection with
the asset sale, 3dfx may distribute the shares of NVIDIA common stock received
by it at or about the time of its dissolution directly to its shareholders, or
it may sell these shares in the open market or contribute the shares to a
liquidating trust for the benefit of 3dfx's shareholders. Further, 3dfx may
elect to directly distribute shares of NVIDIA common stock to some of its
shareholders, while distributing an equivalent per share value in cash to others
who would otherwise be entitled to receive a fractional amount or small number
of shares of NVIDIA common stock. At this time, 3dfx is unable to provide
specific information about the type or types of assets that 3dfx's shareholders
may receive or what the value of those assets might be at the time of
distribution, if a distribution is made to 3dfx's shareholders by 3dfx or a
liquidating trust at all.

        The directors and officers of 3dfx will continue to oversee the
liquidation, winding up and dissolution of 3dfx. However, the board of directors
may determine that the use of a liquidating trust provides a better alternative
for completing the liquidation process.



                                       2
<PAGE>   4

If the assets and liabilities of 3dfx are transferred to a liquidating trust,
all shareholder distributions would be made directly from the trust after the
satisfaction of all of 3dfx's and its subsidiaries' debts and liabilities.

        Upon filing a certificate of dissolution with the California Secretary
of State's office or a California court entering an order declaring 3dfx to be
wound up and dissolved, the stock transfer books of 3dfx will be closed as of
the close of business on such date. Thereafter, no assignments or transfers of
3dfx common stock will be recorded.

PATENTS AND PROPRIETARY RIGHTS

        3dfx has sold substantially all of its intellectual property rights,
including but not limited to rights relating to patents, copyrights, trade
names, trade marks and domain names, to NVIDIA Sub as part of the asset sale
that closed in April 2001. 3dfx and NVIDIA Sub have entered into an agreement
whereby NVIDIA Sub granted to 3dfx a non-transferable license to continue to use
the name "3dfx" solely in connection with the winding up of its operations.

EMPLOYEES

        As of April 30, 2001, 3dfx had approximately 417 employees, 31 of which
were employees were located in the United States, 385 of which were employed by
3dfx's Mexican subsidiary and worked in its Juarez, Mexico facility, and 1
employee worked in 3dfx's office in England. No employee of 3dfx is covered by
collective bargaining agreements, and 3dfx believes that its relationship with
its employees is good.

        3dfx's relationship with its employees at its Mexican manufacturing
facility is regulated by the Mexican Federal Labor Law. The Mexican Federal
Labor Law contains detailed provisions regarding minimum employment conditions
and specifies rights that must be provided to all employees in Mexico. Other
Mexican federal laws require employers to make contributions to the Mexican
Social Security System and to establish and make specified contributions to
individual retirement savings and housing accounts at a commercial bank for all
employees. In addition, Mexican federal law requires the payment of substantial
severance amounts relative to the employees' wages in the event of the
termination of a Mexican employee and, in the event of a shut-down of 3dfx's
Mexican manufacturing facility, 3dfx may incur substantial severance costs.
Although Mexican laws heavily regulate employment relationships, aggregate labor
costs at 3dfx's Mexican facility are less than labor costs would be at a similar
facility in the United States. There can be no assurance, however, that these
laws will not be amended or supplemented in the future to increase the
compensation required to be paid to Mexican employees or the costs of compliance
with such laws. Any such change could have a material adverse effect on 3dfx's
business, financial condition and results of operations.

ITEM 2. PROPERTIES

        3dfx leases approximately 77,805 square feet for its headquarters in one
building in San Jose, California pursuant to a lease that expires on April 30,
2007, with an option to extend the lease for an additional five-year term. In
addition, 3dfx leases approximately 52,040 square feet in a building adjacent to
its San Jose headquarters pursuant to a lease that expires in 2007, with an
option to extend the lease for an additional three-year term. In December 2000,
3dfx sold its Richardson facility to a third party for approximately
$25,435,000. 3dfx is currently leasing some space in that facility from the
purchaser. Under the terms of a lease agreement expiring in November 2007, 3dfx
leases a 136,800 square foot manufacturing facility in Juarez, Mexico.

        3dfx is also currently leasing offices in Austin, Texas (27,179 square
feet expiring in August 2004), Eugene, Oregon (2,675 square feet expiring in
January 2002), Belfast, Northern Ireland (13,000 square feet expiring in April
2006), and London, England.

        The foregoing facilities exceed 3dfx's operating requirements and 3dfx
is seeking to substantially reduce its lease obligations.

ITEM 3. LEGAL PROCEEDINGS

        On December 21, 2000, CagEnt Technologies Inc. filed suit against 3dfx
in the Northern California District Federal Court. The complaint alleges patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint seeks a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment and post-judgment interest, attorneys' fees and cost of suit. 3dfx
believes it has meritorious defenses to the claims against it and intends to
vigorously defend itself.

        Pursuant to the terms of the asset purchase agreement among NVIDIA,
NVIDIA Sub and 3dfx, 3dfx and NVIDIA agreed to dismiss with prejudice the
infringement lawsuit that NVIDIA and 3dfx had filed against each other. Both
parties filed a joint stipulation for dismissal with the Northern California
District Federal Court on April 19, 2001. On April 26, 2001, the Court signed an
order granting such dismissals.

        3dfx is also a party to various legal proceedings involving collection
matters and other matters against it. 3dfx is currently seeking resolutions that
are mutually acceptable to the parties involved in each of these matters.
However, there is no assurance that



                                       3
<PAGE>   5

resolutions will be achieved. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

        3dfx's common stock is currently quoted on the Nasdaq National Market
under the symbol "TDFX." The following table sets forth for the periods
indicated the high and low sale prices per share for 3dfx's common stock as
reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
                                                          HIGH              LOW
                                                         ------            ------
<S>                                                      <C>               <C>
FISCAL YEAR ENDING JANUARY 31, 2002
Second quarter (through May 9, 2001) ........            $  .38            $  .22
First quarter ...............................               .38               .22

FISCAL YEAR ENDED JANUARY 31, 2001
Fourth quarter ..............................              4.52              0.09
Third quarter ...............................              7.75              2.97
Second quarter ..............................             10.38              6.69
First quarter ...............................             13.44              8.13

FISCAL YEAR ENDED JANUARY 31, 2000
Fourth quarter ..............................             10.56              8.50
Third quarter ...............................             15.19              7.53
Second quarter ..............................             21.25             13.13
First quarter ...............................             21.88             10.81
</TABLE>


        On May 9, 2001, the last reported sale price of 3dfx's common stock on
the Nasdaq National Market was $.32 per share. As of May 9, 2001, there were
approximately 452 holders of record of 3dfx's common stock. 3dfx has received a
delisting notice from Nasdaq due to its failure to maintain a minimum bid of at
least $1.00 per share. The notice provides that the 3dfx common stock will be
delisted effective as of the opening of business on May 16, 2001. At that time
trading of 3dfx's common stock will be conducted on the over-the-counter market.
Trading in 3dfx's common stock will cease altogether upon the filing by 3dfx of
a certificate of dissolution with the California Secretary of State's office.

DIVIDEND POLICY

        3dfx has never declared or paid cash dividends on its capital stock.
However, under the terms of 3dfx's plan of dissolution, the 3dfx board of
directors is authorized to make a distribution to shareholders after paying or
otherwise providing for all of 3dfx's and its subsidiaries' debts and
liabilities. Because of the uncertainties as to the precise net realizable value
of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries' debts
and liabilities, 3dfx cannot at this time determine the timing and amount of
distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.

ITEM 6. SELECTED FINANCIAL DATA

        The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Discontinued Operations" and the Financial Statements and the Notes thereto
included elsewhere in this Report.

        On March 27, 2001, 3dfx's shareholders approved proposals to liquidate,
wind up and dissolve 3dfx pursuant to a plan of dissolution. 3dfx is proceeding
to wind up its affairs and dissolve. Accordingly, all activities of 3dfx are
presented as discontinued operations in the selected financial data below. See
Note 1 to Notes to Financial Statements for further discussion.



                                       4
<PAGE>   6

        Effective as of February 1, 1999, 3dfx changed its fiscal year from a
fiscal year beginning January 1 and ending December 31, to a fiscal year
beginning February 1 and ending January 31. References in this Report to
"fiscal 2001" means the year ended January 31, 2001, to "fiscal 2000" means the
year ended January 31, 2000, and to "fiscal 1998" means the year ended December
31, 1998. The statement of discontinued operations data below reflects the
following:

        -       3dfx took a $117.1 million charge for the impairment of goodwill
                and other intangible assets. 3dfx's results of discontinued
                operations for the year ended January 31, 2001 and financial
                position at January 31, 2001 reflect the impact of this charge.
                See Note 1 to Notes to Financial Statements for further
                discussion of the impairment charge.

        -       3dfx's merger with GigaPixel Corporation was consummated on July
                21, 2000 and was treated as a purchase for financial reporting
                and accounting purposes. 3dfx's results of discontinued
                operations for the year ended January 31, 2001 and financial
                position at January 31, 2001 reflect the impact of the GigaPixel
                merger. See Note 3 to Notes to Financial Statements for further
                discussion of the GigaPixel merger.

        -       3dfx's merger with STB Systems, Inc. was consummated on
                May 13, 1999 and was treated as a purchase for financial
                reporting and accounting purposes. 3dfx's results of
                discontinued operations for the year ended January 31, 2000 and
                financial position at January 31, 2000 reflect the impact of the
                STB merger. See Note 2 to Notes to Financial Statements for
                further discussion of the STB merger.

        -       In July 1998, 3dfx reached a settlement with Sega in conjunction
                with a lawsuit which 3dfx filed against Sega in August 1997.
                Fiscal 1998 includes a one-time recognition of income based on
                the settlement.

<TABLE>
<CAPTION>
                                                                                                   MONTH
                                                                      FISCAL YEAR ENDED            ENDED
                                                                         JANUARY 31,              JANUARY
                                                                  -------------------------          31,
                                                                    2001            2000            1999
                                                                  ---------       ---------       ---------
<S>                                                               <C>             <C>             <C>
STATEMENT OF DISCONTINUED OPERATIONS DATA
Revenues ...................................................      $ 233,067       $ 360,523       $  17,048
Cost of revenues ...........................................        242,989         287,872          14,527
                                                                  ---------       ---------       ---------
Gross profit (loss) ........................................         (9,922)         72,651           2,521
                                                                  ---------       ---------       ---------
Operating expenses:
    Research and development ...............................         65,394          66,062           3,340
    Selling, general and  administrative ...................         89,106          63,468           4,614
    In process research and development ....................         66,250           4,302              --
    Amortization of goodwill and other intangibles .........         24,449          10,228              --
    Impairment of goodwill and other intangibles ...........        117,065              --              --
    Restructuring expense ..................................             --           4,382              --
                                                                  ---------       ---------       ---------
       Total operating expenses ............................        362,264         148,442           7,954
                                                                  ---------       ---------       ---------
 Income (loss) from discontinued operations ................       (372,186)        (75,791)         (5,433)
 Interests and other income  (expense), net ................         (4,812)          2,180             322
                                                                  ---------       ---------       ---------
 Income (loss) from discontinued operations before
    income taxes ...........................................       (376,998)        (73,611)         (5,111)
 Provision (benefit) for income taxes ......................        (36,472)        (10,324)         (1,636)
 Net income (loss) from discontinued operations ............      $(340,526)      $ (63,287)      $  (3,475)
                                                                  =========       =========       =========
 Basic net income (loss) per share from discontinued
    operations .............................................      $  (10.63)      $   (2.81)      $   (0.22)
                                                                  =========       =========       =========
 Diluted net income (loss) per share from discontinued
    operations .............................................      $  (10.63)      $   (2.81)      $   (0.22)
                                                                  =========       =========       =========
 Shares used in basic net income (loss) from
    discontinued operations calculation ....................         32,041          22,536          15,641
                                                                  =========       =========       =========
 Shares used in diluted net income (loss) from
    discontinued operations calculation ....................         32,041          22,536          15,641
                                                                  =========       =========       =========

 BALANCE SHEET OF DISCONTINUED OPERATIONS DATA
 Cash, cash equivalents and short-term investments .........      $   9,391       $  65,830       $  94,957
 Working capital ...........................................         22,353          98,466         106,924
 Total assets ..............................................        119,606         296,111         168,870
 Other long-term liabilities ...............................             --           1,881             416
 Accumulated deficit .......................................       (407,089)        (66,563)         (3,276)
 Total shareholders' equity ................................         22,353         187,234         123,018
</TABLE>

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR ENDED
                                                                              DECEMBER 31,
                                                                  -------------------------------------
                                                                   1998          1997           1996
                                                                  --------      --------       --------
<S>                                                               <C>           <C>            <C>
STATEMENT OF DISCONTINUED OPERATIONS DATA
Revenues ...................................................      $202,601      $ 44,069       $  6,390
Cost of revenues ...........................................       119,618        22,611          5,123
                                                                  --------      --------       --------
Gross profit (loss) ........................................        82,983        21,458          1,267
                                                                  --------      --------       --------
Operating expenses:
    Research and development ...............................        34,045        12,412          9,435
    Selling, general and administrative ....................        35,441        11,390          6,642
    In process research and development ....................            --            --             --
    Amortization of goodwill and other intangibles .........            --            --             --
    Impairment of goodwill and other intangibles ...........            --            --             --
    Restructuring expense ..................................            --            --             --
                                                                  --------      --------       --------
       Total operating expenses ............................        69,486        23,802         16,077
                                                                  --------      --------       --------
 Income (loss) from discontinued operations ................        13,497        (2,344)       (14,810)
 Interests and other income  (expense), net ................        15,869           630             59
                                                                  --------      --------       --------
 Income (loss) from discontinued operations before
    income taxes ...........................................        29,366        (1,714)       (14,751)
 Provision (benefit) for income taxes ......................         7,663            --             --
 Net income (loss) from discontinued operations ............      $ 21,703      $ (1,714)      $(14,751)
                                                                  ========      ========       ========
 Basic net income (loss) per share from discontinued
    operations .............................................      $   1.45      $  (0.16)      $  (1.74)
                                                                  ========      ========       ========
 Diluted net income (loss) per share from discontinued
    operations .............................................      $   1.33      $  (0.16)      $  (1.74)
                                                                  ========      ========       ========
 Shares used in basic net income (loss) from
    discontinued operations calculation ....................        14,917        10,767          8,467
                                                                  ========      ========       ========
 Shares used in diluted net income (loss) from
    discontinued operations calculation ....................        16,353        10,767          8,467
                                                                  ========      ========       ========

 BALANCE SHEET OF DISCONTINUED OPERATIONS DATA
 Cash, cash equivalents and short-term investments .........      $ 95,980      $ 34,921       $  5,291
 Working capital ...........................................       110,871        37,456          6,637
 Total assets ..............................................       184,121        61,917         15,581
 Other long-term liabilities ...............................           284           546            632
 Retained earnings (accumulated deficit) ...................           199       (21,504)       (19,790)
 Total shareholders' equity ................................       126,313        44,274          9,621
</TABLE>



                                       5
<PAGE>   7


        3dfx expects to file an amendment to its Current Report on Form 8-K
filed on May 3, 2001 presenting the pro forma impact of the sale of certain of
its assets to NVIDIA Sub on 3dfx's financial condition as of January 31, 2001.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF DISCONTINUED OPERATIONS

        The following discussion contains forward-looking statements that
involve risks and uncertainties. 3dfx's actual results could differ materially
from those discussed in the forward-looking statements as a result of some
factors including those set forth under "-- Risk Factors" and elsewhere in this
Report. The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Report.

OVERVIEW

        3dfx developed high performance, cost-effective graphics chips, graphics
boards, software and related technology that enable an interactive and realistic
3D experience across multiple hardware platforms, but is now in the process of
winding up its business. As discussed below, on March 27, 2001, 3dfx's
shareholders approved proposals to liquidate, wind up and dissolve 3dfx pursuant
to a plan of dissolution. 3dfx is proceeding to wind up its affairs and
dissolve. Accordingly, all activities of 3dfx are presented as discontinued
operations.

        Plan of Dissolution and Asset Sale

        In the fall of 2000, 3dfx began experiencing financial difficulties due
in part to substantially reduced demand in the retail channel for its products.
This reduced demand is attributable to a number of factors, including, in part,
its failure to introduce products in a timely manner and from disappointing
customer response to its existing products, as well as reduced demand in the
retail channel in general and the add-in graphics segment in particular. In
addition, 3dfx's high research and development costs and substantial debt
burden, together with the loss of several large customers due to 3dfx's May 1999
acquisition of STB Systems, Inc. and its inability to refinance its debt on
commercially reasonable terms, aggravated its financial difficulties. After
extensive exploration and evaluation of various strategic alternatives, the 3dfx
board of directors concluded that the liquidation, winding up and dissolution of
3dfx provided the best protection to 3dfx's creditors and was in the best
interests of its shareholders.

        On December 15, 2000, 3dfx entered into an asset purchase agreement with
NVIDIA and NVIDIA Sub under which NVIDIA Sub would acquire certain of 3dfx's
assets, including its core graphics processor assets. Under the terms of the
asset purchase agreement, NVIDIA agreed to pay 3dfx $70.0 million in cash and
1,000,000 shares of registered NVIDIA common stock, subject to the satisfaction
of certain conditions specified in the asset purchase agreement as described
below. Upon signing the asset purchase agreement, NVIDIA loaned to 3dfx $15.0
million in cash for working capital.

        The asset sale to NVIDIA Sub was approved by 3dfx shareholders on March
27, 2001, and on April 18, 2001 substantially all of 3dfx's assets were sold to
NVIDIA Sub. Upon closing, 3dfx received $55.0 million in cash, which amount was
net of repayment of the $15.0 million cash loan 3dfx received upon signing the
asset purchase agreement. In addition, under the terms of the asset purchase
agreement, 3dfx and NVIDIA caused the pending patent litigation between the
parties to be dismissed with prejudice. Under the terms of the asset purchase
agreement, 3dfx may receive part or all of a one-time post-closing cash advance
of up to $25.0 million upon its request if it is not in breach of the asset
purchase agreement, it has expended all or substantially all of the $70.0
million cash consideration in payment of its liabilities and determines in good
faith that (i) the remaining portion of the cash consideration previously
received by it is not sufficient to pay its remaining liabilities, and (ii) such
remaining liabilities could and would be satisfied if 3dfx received the
post-closing cash advance and applied it to the payment of such liabilities, and
if NVIDIA does not determine in good faith that the requested amount would not
permit 3dfx to pay in full its remaining liabilities. In the event that 3dfx
receives the post-closing cash advance, the 1,000,000 shares of NVIDIA common
stock comprising the remaining consideration otherwise payable to 3dfx under the
asset purchase agreement will be reduced by the number of shares equal to the
quotient determined by dividing the amount of the post-closing cash advance by
$50. Irrespective of whether 3dfx receives a post-closing advance, the shares of
NVIDIA common stock will only become deliverable to 3dfx upon satisfaction of
certain conditions specified in the asset purchase agreement, including the
completion of the winding up of the business of 3dfx pursuant to 3dfx's plan of
dissolution, and 3dfx's certification that (i) all liabilities of 3dfx and its
subsidiaries have been paid in full or otherwise provided for and (ii) 3dfx has
or will be validly dissolved.

        On December 15, 2000, the board of directors of 3dfx also approved a
plan of dissolution and on March 27, 2001 this plan of dissolution was approved
by 3dfx's shareholders. On March 30, 2001, 3dfx filed a certificate of election
to liquidate, wind up and dissolve with the California Secretary of State's
office. 3dfx is proceeding to wind up its affairs and is no longer operating or
generating revenues in the normal course of business. Accordingly, all of the
activities of 3dfx have been presented as discontinued operations and assets
have been adjusted, as appropriate, to estimated net realizable value. During
the fiscal year ended January 31, 2001, 3dfx recorded a charge of $7.9 million
for the write-down of inventory and a charge of $5.5 million for the write-down
of property and equipment. 3dfx also recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles during the fiscal year ended
January 31, 2001. In accordance with 3dfx's accounting policy, 3dfx assessed
impairment of its long-lived assets and determined that the carrying amount of
goodwill and other intangibles would not be recoverable due to the deteriorating
condition of its operations. The impairment loss was measured as the amount by
which the carrying amount of the assets exceeded the estimated fair value of the
assets, as determined using the present value of expected future cash flows.



                                       6
<PAGE>   8
        3dfx has substantially reduced its costs in order to conserve its
resources. These cost cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
Due to these cost-cutting measures, 3dfx's operations have been substantially
curtailed.

        3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. However, 3dfx believes that it will have
sufficient cash to pay all of its and its subsidiaries' known current and
determinable liabilities. However, the amount of unknown or contingent
liabilities cannot be quantified and could decrease or eliminate any remaining
assets available for distribution to 3dfx's shareholders. Further, if 3dfx or
its subsidiaries are subject to any contingent liabilities, this could require
that it establish reserves that could delay any distribution to 3dfx
shareholders. Because of the uncertainties as to the precise net realizable
value of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries'
debts and liabilities, 3dfx cannot at this time determine the timing or amount
of distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.

        Miscellaneous

        3dfx's sales have historically been concentrated among a limited number
of customers. Revenues derived from sales to Ingram Micro accounted for
approximately 16% and 13% of revenues for the fiscal years ended January 31,
2001 and January 31, 2000, respectively. Revenues derived from sales to D&H
Distributing accounted for approximately 10% of revenues for the fiscal year
ended January 31, 2001.

        In connection with the grant of stock options to employees from
inception (August 1994) through the effective date of 3dfx's initial public
offering, 3dfx 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 was presented as a reduction of shareholders' equity and was
amortized ratably over the vesting period of the applicable options. The
amortization of the deferred compensation for each of the fiscal years ended
January 31, 2000 and December 31, 1998 totaled $484,000 (of which $194,000 and
$290,000 were recorded as a charge to research and development expenses and
selling, general and administrative expenses, respectively). The remaining
deferred compensation at January 31, 2000 of $172,000 was fully amortized
during the fiscal year ended January 31, 2001 ($69,000 and $103,000
were recorded as a charge to research and development expenses and selling,
general and administrative expenses, respectively).

        On October 20, 2000, 3dfx undertook a stock option exchange program,
allowing employees the opportunity to surrender their existing stock options in
exchange for a new grant of 50% of the number of original options with a new
exercise price of $2.00 per share. The options were to become fully vested on
June 30, 2001, and expire on June 30, 2002. This program was offered to certain
active employees whose options were granted on September 5, 2000, or earlier. On
October 20, 2000, options for 4.7 million shares were canceled and options for
2.35 million shares were granted under this program. As the market value of 3dfx
stock at the date of grant exceeded the exercise price for these options, 3dfx
recorded deferred compensation of $5.3 million to be amortized over the vesting
period. In accordance with Financial Accounting Standards Board Interpretation
No. 44 "Accounting for Certain Transactions Involving Stock Compensation" issued
in March 2000 ("FIN 44"), the repricing required 3dfx to account for the options
as variable from the date of modification to the date the award was exercised,
forfeited, or expired unexercised. On December 15, 2000, substantially all of
3dfx's United States and European employees were terminated or given notice of
termination and their unvested options were correspondingly canceled.
Amortization of deferred compensation taken for the options, all of which were
unvested, totaling $0.9 million for the fiscal year ended January 31, 2001, was
reversed, as was the remaining deferred compensation.

        Overview of GigaPixel Merger and Treatment of IPR&D

        In July 2000, a subsidiary of 3dfx completed a merger with GigaPixel
Corporation ("GigaPixel"), 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 3dfx stock for a few
days before and after the announcement of the merger), $2.7 million in vested
stock option costs (being determined under the Black Scholes 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 ("IPR&D"), $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 had estimated and useful
lives and estimated annual amortization, as follows:

<TABLE>
<CAPTION>
                                                                               Estimated             Annual
                                                            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>



                                       7
<PAGE>   9

        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. As described above, 3dfx recorded a charge of
$117.1 million for the impairment of goodwill and other intangibles. A portion
of the impaired goodwill and other intangibles originally arose as a result of
the GixaPixel acquisition.

        Net Cash Flows. The net cash flows from the identified projects were
based on management estimates of revenues, research and development costs,
selling, general and administrative costs, royalty costs and income taxes from
those projects. These estimates were 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 were 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
were expected to peak in the year ending January 31, 2005 and decline in 2006 as
other new products were expected to become available. These projections were
based on 3dfx's 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 were in line with comparable industry margins. Research and
development, as well as sales, general and administrative costs, were consistent
with the industry average of companies of comparable size and age.

        Discount Rate. Discounting the net cash flows back to their present
value was based on the industry weighted average cost of capital ("WACC"). The
industry WACC was approximately 28%. The discount rate used in discounting the
net cash flows from IPR&D was 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%.

        In connection with the acquisition of GigaPixel, 3dfx recorded deferred
compensation for the unvested portion of GigaPixel options assumed by 3dfx in
the amount of approximately $6.9 million. This deferred compensation was to be
expensed over the remaining life of the unvested GigaPixel options assumed by
3dfx. For the fiscal year ended January 31, 2001, 3dfx recorded amortization of
deferred compensation related to the GigaPixel acquisition of $1.5 million,
which has been included in research and development expense. On December 15,
2000, all of the former GigaPixel employees were terminated and their unvested
options were canceled. Accordingly, the remaining unamortized deferred
compensation, which related to the unvested options, was reversed.

        Overview of STB Merger and Treatment of IPR&D

        In May 1999, 3dfx completed a merger with STB Systems, Inc. ("STB"). As
a result of the STB merger, STB became 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 3dfx stock for a few
days before and after the announcement of the merger), $9.9 million in STB stock
option costs (being determined under both the Black-Scholes formula and in
accordance with the merger agreement) 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
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 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 3dfx's Voodoo3 product, 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 described above, 3dfx recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles. A portion of the impaired goodwill
and other intangibles originally arose as a result of the STB acquisition.



                                       8
<PAGE>   10

RESULTS OF DISCONTINUED OPERATIONS

        As described above, 3dfx is proceeding to wind-up its affairs and is no
longer operating or generating revenues in the normal course of business.
Accordingly, the following discussion of results of discontinued operations is
not indicative of its future operations.

        The following table sets forth certain statement of discontinued
operations data of 3dfx expressed as a percentage of revenue for each of the
periods indicated.

<TABLE>
<CAPTION>
                                                                                             FISCAL YEAR ENDED
                                                                             -------------------------------------------------
                                                                                     JANUARY 31,                  DECEMBER 31,
                                                                             --------------------------           ------------
                                                                              2001                2000                1998
                                                                             ------              ------              ------
     <S>                                                                     <C>                 <C>                 <C>
     Revenues ...................................................             100.0%              100.0%              100.0%
     Cost of revenues ...........................................             104.3%               79.8%               59.0%
                                                                             ------              ------              ------
        Gross profit (loss) .....................................              (4.3%)              20.2%               41.0%
                                                                             ------              ------              ------
     Operating expenses:
        Research and development ................................              28.1%               18.3%               16.8%
        Selling, general and administrative .....................              38.2%               17.6%               17.5%
        In-process research and development .....................              28.4%                1.2%                0.0%
        Amortization of goodwill and other intangibles ..........              10.5%                2.8%                0.0%
        Impairment of goodwill and other intangibles ............              50.2%                0.0%                0.0%
        Restructuring expense ...................................               0.0%                1.2%                0.0%
                                                                             ------              ------              ------
     Total operating expenses ...................................             155.4%               41.1%               34.3%
                                                                             ------              ------              ------
     Income (loss) from discontinued operations .................            (159.7%)             (20.9%)               6.7%
     Interest and other income (expense), net ...................              (2.1%)               0.6%                7.8%
     Provision (benefit) for income taxes .......................             (15.6)               (2.9%)               3.8%
                                                                             ------              ------              ------
     Net income (loss) from discontinued operations .............            (146.2%)             (17.4%)              10.7%
                                                                             ======              ======              ======
</TABLE>


YEARS ENDED JANUARY 31, 2001 (FISCAL 2001) AND JANUARY 31, 2000 (FISCAL 2000)

        Revenues. Revenues are recognized upon product shipment. 3dfx's total
revenues were $233.1 million for the fiscal year ended January 31, 2001 and
$360.5 million for the fiscal year ended January 31, 2000. The decrease was
primarily attributable to a decline in demand for 3dfx's products due to a
number of factors, including, in part, its failure to introduce products in a
timely manner and from disappointing customer response to its existing products,
as well as reduced demand in the retail channel in general and the add-in
graphics segment in particular. Also, the impact arising from 3dfx's
announcement of its plan of dissolution caused revenues to significantly
decrease beginning in December 2000. Revenues for fiscal 2000 include board
level sales from May 13, 1999 (the date of the STB merger) through the end of
the fiscal year, which contributed a substantial amount of revenues for the
period; however, prior to the STB merger, substantially all 3dfx's revenues were
comprised of chip level sales. Revenues in fiscal 2001 were principally
attributable to sales of Voodoo5 and Voodoo3 products. Revenues in fiscal 2000
were derived in part from the sale of 3dfx's Voodoo Banshee, Voodoo2, and
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 3dfx's
contract manufacturers, labor and overhead associated with procurement,
assembly, testing, packaging, warehousing and shipping, and warranty costs.
3dfx's gross profit decreased by $82.6 million from a gross profit of $72.7
million in the year ended January 31, 2000 to a gross loss of ($9.9 million) in
year ended January 31, 2001. Gross profit (loss) as a percentage of revenues was
(4.3%) and 20.2% for the fiscal years ended January 31, 2001 and January 31,
2000, respectively. The decrease is attributable in part 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 and
Voodoo5 products sold during the year and the significant drop in market price
for 3dfx's remaining inventory in the fourth quarter of fiscal 2001. 3dfx also
took significant additional charges totaling $10.3 million related to the
write-down of inventory due to excess inventories resulting from lower than
anticipated sales volumes. Increased production costs as a result of decreased
production volumes during fiscal 2001 also had a negative impact on gross
margins.

        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
3dfx's foundries in connection with manufacturing start-up of new products.
Research and development expenses decreased 1.2% from $66.1 million in the
fiscal year ended January 31, 2000 to $65.4 million in the fiscal year ended
January 31, 2001. This decrease reflects a decrease in personnel costs and
engineering costs resulting from the termination of substantially all employees
in December 2000, mainly offset by an increase in personnel costs related to the
GigaPixel



                                       9
<PAGE>   11

merger and general engineering costs resulting from the development of Voodoo5
and other anticipated products during the first part of fiscal 2001.

        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 40.3% from $63.5 million
in fiscal year ended January 31, 2000 to $89.1 million in the fiscal year ended
January 31, 2001. The selling, general and administrative expenses relating to
the operations of STB are included in the year ended January 2001, and from the
effective date of the STB merger, May 13, 1999, through January 31, 2000. The
selling, general and administrative expenses relating to the operations of
GigaPixel are included in the fiscal year ended January 31, 2001, from the
effective date of the GigaPixel merger, July 21, 2000. In addition, marketing
costs associated with the Voodoo5 product family launch in fiscal 2001 and
increased legal costs contributed to the increase in selling, general and
administrative expenses in fiscal 2001.

        In-Process Research and Development. 3dfx recorded a one-time write-off
for IPR&D in connection with the GigaPixel merger of $66.3 million in the fiscal
year ended January 31, 2001, and a one-time write-off for IPR&D in connection
with the STB merger of $4.3 million in the fiscal year ended January 31, 2000.

        Amortization of Goodwill and Other Intangibles. In connection with the
STB merger in fiscal 2000, 3dfx recorded assets representing goodwill of
approximately $37.9 million and intangibles of approximately $19.1 million.
Also, in connection with the GigaPixel merger in fiscal 2001, 3dfx recorded
assets representing goodwill of approximately $103.5 million and intangibles of
approximately $13.2 million. These amounts are being amortized ratably over the
amortization periods of the applicable assets. 3dfx recorded amortization
expense in the amount of $24.5 million and $10.2 for the fiscal years ended
January 31, 2001 and January 31, 2000, respectively.

        Impairment of Goodwill and Other Intangibles. During the fiscal year
ended January 31, 2001, 3dfx recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles as previously discussed.

        Restructuring Expense. During the fiscal year ended January 31, 2000,
3dfx incurred restructuring expenses totaling approximately $4.4 million.
Approximately $2.6 million of this amount related to downsizing the expense
levels of 3dfx given 3dfx's fiscal 2000 financial losses.

        Interest and Other Income (Expense), Net. Interest and other income
(expense), net, decreased from $2.2 million in the fiscal year ended January 31,
2000 to ($4.8 million) in the fiscal year ended January 31, 2001. During fiscal
2001 3dfx took a charge of $3.1 million, which is included in other income
(expense), for the write-off of a minority investment in a private company.
Also, 3dfx earned less interest income during fiscal 2001 due to significantly
lower invested cash balances. In fiscal 2000 and fiscal 2001, 3dfx incurred
interest expense on its revolving credit facility and its outstanding equipment
line of credit and capital lease balances.

        Provision (Benefit) for Income Taxes. 3dfx recorded an income tax
benefit of $36.5 million for the fiscal year ended January 31, 2001, an
effective tax rate of 10%. 3dfx recorded a benefit for income taxes of $10.3
million for the fiscal year ended January 31, 2000, an effective tax rate of
14%. Management has assessed the realizability of deferred tax assets recorded
at January 31, 2001 based upon the weight of available evidence, including such
factors as expected future taxable income primarily related to the expected gain
on the sale of assets to NVIDIA Sub. Management believes that it is more likely
than not that 3dfx will not realize a portion of its deferred tax assets and,
accordingly, a valuation allowance of $46.8 million has been established for
such amounts at January 31, 2001.

ONE MONTH PERIOD ENDED JANUARY 31, 1999

        As a result of 3dfx's change in fiscal year to January 31 from December
31 commencing on February 1, 1999, 3dfx has reported separately the one-month
period ended January 31, 1999. During this period, revenues for 3dfx were $17.0
million and were principally attributable to the sales of 3dfx's Voodoo Banshee
and Voodoo2 products. Costs of revenues were $14.5 million with gross profit as
a percent of revenues equal to approximately 15%. This is below the previous
year's gross profit percentage due primarily to the December 1998 announcement
of 3dfx's planned merger with STB. This contributed to lost revenues from former
customers and price reductions to existing customers as 3dfx announced its
intention to enter the graphics board business and compete with its existing
customer base. Research and Development expenditures were $3.3 million for the
period and Sales, General, and Administrative expenses were $4.6 million for the
period. Interest and Other Income was $0.3 million, derived primarily from
3dfx's cash balances. There was a tax benefit in the period ended January 31,
1999 in the amount of $1.6 million. This benefit equates to a tax rate of 32%
and is consistent with 3dfx's recent tax rate percentages.

YEARS ENDED JANUARY 31, 2000 (FISCAL 2000) AND DECEMBER 31, 1998 (FISCAL 1998)

        Revenues. Revenues are recognized upon product shipment. 3dfx's total
revenues were $360.5 million for the fiscal year ended January 31, 2000 and
$202.6 million for the fiscal year ended December 31, 1998. Fiscal 2000 revenues
includes revenues of $299.6 million generated from sales of board-level products
incorporating Voodoo3 technology by STB following the May 13, 1999,



                                       10
<PAGE>   12

effective date of the merger. Revenues in fiscal 2000 were principally
attributable to sales of 3dfx's Voodoo3 and Voodoo Banshee products.
Substantially all of the revenues in fiscal 1998 were derived from sale of
3dfx's Voodoo Banshee chip and its Voodoo2 and Voodoo Graphics chipsets.

        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 3dfx's
contract manufacturers, labor and overhead associated with procurement,
assembly, testing, packaging, warehousing and shipping, and warranty costs.
Gross profit as a percentage of revenues was 20% and 41% for the fiscal years
ended January 31, 2000 and December 31, 1998, respectively. The decrease can be
primarily attributed to the gross profit generated from the 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 the Voodoo3 and Voodoo Banshee
products sold in fiscal 2000, as compared with the margins of Voodoo2 and Voodoo
Graphics products sold in fiscal 1998. 3dfx's future gross profits will be
affected by the overall level of sales; the mix of products sold in a period;
manufacturing yields; the impact of price protection credits granted to 3dfx's
customers; and 3dfx's ability to reduce product procurement 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
3dfx's foundries in connection with manufacturing start-up of new products.
Research and development expenses increased 94% from $34.0 million in the fiscal
year ended December 31, 1998 to $66.1 million in the fiscal year ended January
31, 2000. Included in the fiscal 2000 amount is $7.9 million in research and
development expenses attributable to the operations of STB following the May 13,
1999 effective date of the merger. Excluding the impact of expenses related to
STB's operations, research and development expenses increased 70% in fiscal 2000
as compared to the year ended December 31, 1998. This increase reflects an
increase in personnel costs, common cost allocations and engineering costs
resulting from the development of Voodoo3 and other future products. 3dfx
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 these 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 79% from $35.4 million in
fiscal year ended December 31, 1998 to $63.5 million in the fiscal year ended
January 31, 2000. The increase is primarily attributable to the inclusion of
$36.8 million in expenses relating to the operations of STB following the May
13, 1999, effective date of the merger. Excluding the impact of expenses related
to STB's operations, selling, general and administrative expenses decreased 25%
for fiscal 2000, as compared to fiscal 1998. This decrease in selling, general
and administrative expenses is primarily a result of a reduction in selling
expenses due to 3dfx's elimination of the costs of many independent sales
representatives, which were supplanted by the combined 3dfx direct sales force,
partially offset by increases in 3dfx's bad debt expense. 3dfx 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.

        In-Process Research and Development. 3dfx also recorded a one-time
write-off for in-process research and development in connection with the STB
merger of $4.3 million in the fiscal year ended January 31, 2000.

        Restructuring Expense. During the fiscal year ended January 31, 2000,
3dfx incurred restructuring expenses totaling approximately $4.4 million.
Approximately $2.6 million of this amount related to downsizing the expense
levels of 3dfx given 3dfx's fiscal 2000 financial losses. In August 1999, 3dfx
recorded a restructuring charge of $1.8 million, representing a one-time
reduction in workforce related to the merger with STB.

        Amortization of Goodwill and Other Intangibles. In connection with the
STB merger, 3dfx recorded assets representing goodwill of approximately $37.9
million and intangibles of approximately $19.1 million. These amounts will be
amortized ratably over the amortization periods of the applicable assets. For
the fiscal year ended January 31, 2000, 3dfx recorded $10.2 million in related
amortization.

        Interest and Other Income (Expense), Net. Interest and other income
(expense), net decreased from $15.9 million in the fiscal year ended December
31, 1998 to $2.2 million in the fiscal year ended January 31, 2000. The decrease
is primarily related to a one-time recognition of income in fiscal 1998 as a
result of the Sega litigation settlement, as well as decreased earnings from
lower invested cash balances. In addition, in fiscal 2000 3dfx incurred interest
expense on its revolving credit facility and its outstanding equipment line of
credit and capital lease balances.

        Provision (Benefit) For Income Taxes. 3dfx recorded an income tax
benefit of $10.3 million for the fiscal year ended January 31, 2000, an
effective tax rate of 14%. 3dfx recorded a provision for income taxes of $7.7
million for the fiscal year ended December 31, 1998, an effective tax rate of
26%.



                                       11
<PAGE>   13

        Management assessed the realizability of deferred tax assets recorded
based upon the weight of available evidence, including such factors as the
expected future taxable income. Management believed that it was more likely than
not that 3dfx would not realize a portion of its deferred tax assets and,
accordingly, a valuation allowance of $11.1 million was established for such
amounts at January 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

        As of January 31, 2001, 3dfx had net working capital of $22.4 million
including cash and cash equivalents of $9.4 million. Net cash used in operating
activities during the fiscal year ended January 31, 2001 of approximately $49.7
million was due primarily to a net loss of $340.5 million, deferred income taxes
of $28.0 million, and a decrease in accrued and other liabilities of $16.6
million, partially offset by the immediate write-off of acquired in-process
research and development of $66.3 million, depreciation of $24.1 million and
amortization of goodwill and other intangibles of $24.4 million, impairment of
goodwill and other intangibles of $117.1 million, write-down of fixed assets of
$5.5 million, as well as decreases in accounts receivable, inventory and other
assets of $58.8 million, $22.7 million and $9.0 million, respectively. Net cash
used in operating activities in the fiscal year ended January 31, 2000 of
approximately $33.5 million was due primarily to a net loss of $63.3 million,
and increases of $5.3 million in other assets, decreases in accrued expenses of
$8.3 million, partially offset by adjustments of depreciation of $14.9 million
and amortization of $10.2 million, and the in-process research and development
write-off of $4.3 million, as well as decreases in accounts receivable and
inventory of $7.1 million and $5.3 million, respectively. Net cash provided by
operating activities in fiscal 1998 was due primarily to net income of $21.7
million, and increases of $28.5 million in accounts payable and $13.3 million in
accrued liabilities, partially offset by increases of $20.1 million in inventory
due to the increase in manufacturing to meet customer demand and $24.9 million
in accounts receivable associated with the generation of revenues.

        Net cash provided by investing activities in the fiscal year ended
January 31, 2001 of approximately $20.8 million due to net sales of short term
investments of $24.0 million, net proceeds from the GigaPixel merger of $5.3
million, and proceeds from the sale of property and equipment of $9.1 million,
partially offset by purchases of property and equipment of $17.7 million. Net
cash used in investing activities was approximately $5.4 million and $10.9
million in the fiscal years ended January 31, 2000 and December 31, 1998,
respectively, and was due in each period to the purchase of investments and to
the purchase of property and equipment. In addition, $8.7 million was used in
the merger of STB, offset by cash acquired as a result of the merger of $29.9
million in fiscal year 2000, 3dfx does not have any significant capital spending
or purchase commitments other than normal purchase commitments and commitments
under leases.

        Net cash used in financing activities for the fiscal year ended January
31, 2001 of approximately $3.5 million was primarily due to net payments of a
$20.5 million on a revolving credit facility and a term loan, offset by proceeds
from the $15.0 million term loan from NVIDIA Sub provided under the terms of the
asset purchase agreement and proceeds of $4.1 million from the issuance of
common stock. 3dfx has repaid in full all of its indebtedness under its $25
million revolving credit facility and its $3.0 million term loan. Net cash
provided by financing activities was approximately $7.0 million in the fiscal
year ended January 31, 2000, due primarily to net proceeds on the drawdown from
its line of credit, partially offset by the net repurchase of common stock of
$1.9 million and payments on its capital lease obligations. Net cash provided by
financing activities was approximately $58.1 million in the fiscal year ended
December 31, 1998, due primarily to proceeds from a public offering in March
1998.

        3dfx has been obligated under a five-year agreement to lease a facility
in Richardson, Texas, which was previously the corporate headquarters of STB.
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
previously entered into an interest rate swap agreement that fixed the interest
rate on a majority of the lease obligation at 7.55%. During the fourth quarter
of fiscal 2001, the swap agreement was cancelled in exchange for a cash payment
by 3dfx of approximately $300,000. During January 2001, 3dfx exercised its
option to cause the building to be sold and entered into an operating lease for
approximately 50% of the space for the next six months. The proceeds of the sale
were used to retire the underlying debt. A net loss of $2.1 million was recorded
on the sale of the building, which is reflected in other income (expense) for
fiscal 2001.

        3dfx held an option to purchase real estate adjoining its Texas
headquarters. The option entitled 3dfx to purchase the real estate for $3.9
million, but the option would increase to the current market value of the real
estate if the option was not exercised before December 31, 2000. 3dfx exercised
the option in December 2000, and has sold the real estate to a third party for
$6.7 million, resulting in a gain of $2.8 million, which is reflected in other
income (expense) for fiscal 2001.

        3dfx's principal anticipated liquidity requirements involve reaching
settlements with its vendors in reduction of its accounts payable, as well as
reaching mutually satisfactory settlements with the lessors to its facilities
and equipment leases. In addition, unknown or contingent liabilities could
require substantial cash resources. 3dfx is seeking to address each of the
foregoing liquidity requirements, as well as the continuing expenses associated
with the winding up of its business and the overhead associated with its Juarez,
Mexico manufacturing facility, with its remaining cash and other resources.

        On April 18, 2001, 3dfx completed the sale of substantially all of its
assets to NVIDIA Sub and at the closing received cash in the net amount of $55.0
million. Subject to 3dfx in the future satisfying certain additional conditions
provided for in the NVIDIA asset purchase agreement, NVIDIA Sub will also pay to
3dfx 1,000,000 shares of common stock of NVIDIA or a combination of up to



                                       12
<PAGE>   14
$25.0 million in cash and a lesser number of shares of NVIDIA common stock. 3dfx
is also seeking to liquidate its remaining assets and to reduce its lease
obligations through negotiations with its lessors and/or assignments or
subleases of its leased properties.

        3dfx believes that it will have sufficient cash to pay all of its and
its subsidiaries' known current and determinable liabilities. However, the
amount of unknown or contingent liabilities cannot be quantified and could
decrease or eliminate any remaining assets. At this time, 3dfx cannot determine
if there will be any assets remaining after paying for, or providing for the
payment of, all of its and its subsidiaries' debts and liabilities. Only if
there are assets remaining after the payment or provision for 3dfx's and its
subsidiaries' debts and liabilities, will 3dfx shareholders receive a
distribution of those assets.

IMPACT OF ADOPTION OF NEW ACCOUNTING STANDARDS

        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 3dfx has not entered into any
derivative contracts. The effective date of SFAS 133, as amended, is for fiscal
quarters of fiscal years beginning after June 15, 2000. As 3dfx holds no
derivative financial instruments at January 31, 2001, 3dfx does not expect that
the adoption of SFAS 133 will have a material effect on its financial position
or results of discontinued operations.

RISK FACTORS

        This 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. The following factors and other information in this Report
should be considered carefully in evaluating 3dfx and an investment in 3dfx's
common stock.

3DFX CANNOT DETERMINE AT THIS TIME THE AMOUNT OF DISTRIBUTIONS TO ITS
SHAREHOLDERS, OR WHETHER ANY DISTRIBUTIONS WILL BE MADE, BECAUSE THERE ARE A
VARIETY OF FACTORS, SOME OF WHICH ARE OUTSIDE OF 3DFX'S CONTROL, THAT COULD
AFFECT THE ABILITY OF 3DFX TO MAKE DISTRIBUTIONS TO ITS SHAREHOLDERS.

        3dfx cannot determine at this time the amount of or whether there will
be any distributions to its shareholders because that determination depends on a
variety of factors, including, but not limited to, the value of 3dfx's remaining
assets, the amount of 3dfx's and its subsidiaries' known and unknown debts and
liabilities to be paid in the future, the resolution of pending litigation and
other contingent liabilities, 3dfx's ability to reduce its lease obligations,
general business and economic conditions and other matters. Examples of
uncertainties that could reduce the value or eliminate distributions to 3dfx
shareholders include the following:

        -       The amount of 3dfx's and its subsidiaries' debts and liabilities
                and the estimate of the costs and expenses of 3dfx's
                dissolution, including any resulting tax liabilities. If actual
                debts, liabilities, costs and expenses exceed 3dfx's
                expectations, actual net proceeds will be reduced and may result
                in no distributions to shareholders at all.

        -       If liabilities of 3dfx or its subsidiaries that are unknown or
                contingent later arise or become fixed in amount and must be
                satisfied or reserved for as part of the dissolution.

        -       If the resolution of pending or future litigation, including the
                lawsuit with CagEnt Technologies Inc., results in greater than
                anticipated liabilities or expenses.

        -       3dfx will be entitled to receive an advance of up to $25 million
                from NVIDIA Sub only if the advance will pay 3dfx's and its
                subsidiaries' remaining debts and liabilities. If the advance is
                made, the number of shares of common stock of NVIDIA receivable
                by 3dfx from the asset sale will be reduced.

        -       Delays in completing the dissolution of 3dfx could result in
                additional expenses and result in no distributions to 3dfx
                shareholders.

        -       A decline in the value of NVIDIA's common stock.

        For the foregoing reasons, there can be no assurance that there will be
any distribution to shareholders.



                                       13


<PAGE>   15

3DFX MAY NOT BE ABLE TO SATISFY ITS DEBT OBLIGATIONS AND MAY FILE OR BE FORCED
INTO BANKRUPTCY BY ITS CREDITORS.

        The proceeds provided by the asset sale to NVIDIA Sub may not be
sufficient to satisfy all of 3dfx's known and unknown outstanding debts and
liabilities. In the event that the proceeds from the NVIDIA asset sale are
insufficient to pay its outstanding debts and other liabilities, 3dfx's
creditors will be able to foreclose on any collateral granted by 3dfx to secure
its indebtedness, and may force 3dfx into involuntary bankruptcy. Further, in
the event that there are insufficient proceeds to pay or otherwise provide for
3dfx debts and obligations, there will be no assets available for distribution
to 3dfx's shareholders.

THE TIMING OF THE DISSOLUTION OF 3DFX IS NOT KNOWN AND THEREFORE 3DFX CANNOT
DETERMINE THE TIMING OF ANY DISTRIBUTIONS TO ITS SHAREHOLDERS.

        Several factors affect the timing of 3dfx's ability to dissolve,
including the timing of the sale of 3dfx's remaining assets, 3dfx's ability to
determine the amount of its and its subsidiaries' known and unknown debts and
liabilities and 3dfx's ability to resolve litigation and other contingent
liabilities. Any delay in the dissolution of 3dfx will result in a delay in
making distributions, if any, to 3dfx shareholders.

3DFX IS UNABLE TO SPECIFY THE TYPE OF ASSETS THAT MAY BE DISTRIBUTED TO 3DFX'S
SHAREHOLDERS, IF ANY DISTRIBUTION IS MADE.

        3dfx expects to receive a combination of cash and shares of NVIDIA
common stock from the asset sale to NVIDIA Sub. 3dfx also expects to receive
additional proceeds from the sale of its remaining assets, although it may not
be successful in doing so. 3dfx may distribute the shares of NVIDIA common stock
received by it upon its dissolution directly to its shareholders, or it may sell
these shares in the open market or contribute the shares to a liquidating trust
for the benefit of 3dfx's shareholders. Further, 3dfx may elect to directly
distribute shares of NVIDIA common stock to some of its shareholders, while
distributing an equivalent per share value in cash to others who would otherwise
be entitled to receive a fractional amount or small number of shares of NVIDIA
common stock. At this time, 3dfx is unable to provide specifics about the type
of assets that 3dfx's shareholders may receive or what the value of those assets
might be at the time of distribution.

3DFX'S SHAREHOLDERS COULD BE REQUIRED TO RETURN DISTRIBUTIONS IF CONTINGENT
RESERVES ARE INSUFFICIENT TO SATISFY 3DFX'S LIABILITIES.

        If 3dfx (or a liquidating trust to which 3dfx's assets are transferred)
makes a distribution to its shareholders but maintains inadequate reserves for
the payment of its and its subsidiaries debts and liabilities, each shareholder
could be required to return any additional amounts owed, up to the amount of the
total distribution that the shareholder received. A distribution to 3dfx's
shareholders could be delayed or diminished due to the need to make adequate
provisions for 3dfx's and its subsidiaries' debt and liabilities, including
contingent liabilities associated with lawsuits and threatened claims against
3dfx and its subsidiaries.

        The determination of whether a distribution is made and the amount of
the distribution depends on 3dfx's ability to pay, or provide for the payment
of, its and its subsidiaries' debts and liabilities, including contingent
liabilities related to lawsuits and threatened claims. If these contingent
liabilities later arise or become fixed in amount, 3dfx will be required to pay,
or provide for the payment of, such liabilities from any remaining assets. This
could result in the delay of distributions to 3dfx shareholders and the
substantial reduction or elimination of any distributions.

        If 3dfx's or its subsidiaries' creditors believe that 3dfx has not
adequately reserved assets for the payment of its or its subsidiaries' debts and
liabilities, these creditors may be able to obtain from a court an injunction
that prohibits 3dfx from making distributions to its shareholders. This action
could delay or substantially diminish the distributions to be made to 3dfx's
shareholders or holders of beneficial interests of the liquidating trust, as the
case may be.

3DFX MAY NOT BE ABLE TO DISPOSE OF ITS REMAINING ASSETS FOR VALUES EQUALING OR
EXCEEDING THOSE CURRENTLY DESIRED BY 3DFX.

        Many factors affect the prices that 3dfx may receive for 3dfx's
remaining assets, including availability of buyers for these assets and
perceived quality of these assets. Many of these factors are beyond 3dfx's
control. As a result of the foregoing, 3dfx may not be able to sell or otherwise
dispose of its assets for prices equaling or exceeding those desired by 3dfx or
currently offered in the asset sale.

3DFX'S BOARD OF DIRECTORS MAY AMEND THE PLAN OF DISSOLUTION.

        3dfx's board of directors and shareholders have adopted a plan of
dissolution for the liquidation, winding up and dissolution of 3dfx. 3dfx's
board of directors has reserved the right, in its sole discretion, to amend the
plan of dissolution unless it determines that the amendment would materially and
adversely affect 3dfx's shareholders' interests.



                                       14
<PAGE>   16
SINCE A MAJORITY OF 3DFX'S SHAREHOLDERS HAVE APPROVED OF THE DISSOLUTION OF
3DFX, SALES OF THE REMAINING ASSETS WOULD NOT BE SUBJECT TO SHAREHOLDER
APPROVAL.

        Since a majority of 3dfx's shareholders have approved of the dissolution
of 3dfx, the 3dfx board of directors has broad authority to sell any or all of
the remaining assets of 3dfx on such terms as the board of directors determines
advisable or appropriate, even if those terms may not be acceptable to 3dfx
shareholders. 3dfx shareholders will not have a subsequent opportunity to vote
on any disposition of 3dfx's remaining assets.

3DFX COMMON STOCK WILL BE DELISTED FROM THE NASDAQ NATIONAL MARKET ON
MAY 16, 2001.

        The trading price of 3dfx's common stock has declined significantly in
recent periods. 3dfx has received a delisting notice from Nasdaq due to its
failure to maintain a minimum bid of at least $1.00 per share. The notice
provides that the 3dfx common stock will be delisted effective as of the opening
of business on May 16, 2001. Once delisting occurs, the 3dfx common stock will
likely be traded in the over-the-counter bulletin board of the National
Association of Securities Dealers, Inc. or in the so-called "pink sheets." The
delisting of 3dfx's common stock would mean that, among other things, fewer
investors would have access to trade 3dfx's common stock, thus reducing demand
for the stock. In addition, 3dfx's common stock would be subject to penny stock
regulations, which could cause fewer brokers and market makers to execute trades
in 3dfx's common stock. These factors would likely cause 3dfx's common stock
price to further decrease.

        The penny stock regulations require that broker-dealers who recommend
penny stocks to persons other than institutional accredited investors must make
a special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents that identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgement from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.
Holders of 3dfx's common stock would likely find it more difficult to sell their
shares of common stock, which would likely have an adverse effect of the market
price of the common stock.

ONCE 3DFX IS DISSOLVED OR ALL OF ITS ASSETS ARE TRANSFERRED TO A LIQUIDATING
TRUST, IT WILL CLOSE ITS STOCK TRANSFER BOOKS AND NO TRANSFER OF 3DFX'S COMMON
STOCK WILL BE RECORDED.

        Once 3dfx is dissolved or all of its assets are transferred to a
liquidating trust, it will close its stock transfer books and no transfer of
3dfx's common stock will be recorded. Thereafter, certificates representing 3dfx
common stock will not be assignable or transferable on 3dfx's books except by
will, intestate succession or operation of law. The equity interests of all of
3dfx's shareholders will be fixed on the basis of their respective stock
holdings at the close of business on the final record date for the distribution
of all remaining assets of 3dfx, and after the final record date, any
distributions made by 3dfx will be made solely to the shareholders of record on
such date, except as may be necessary to reflect subsequent transfers recorded
on 3dfx's books as may be necessary to reflect subsequent transfers of 3dfx's
common stock as a result of any assignments by will, intestate succession or
operation of law. For any other trades after the final record date, the seller
and purchaser of 3dfx's stock will need to negotiate and rely on contractual
obligations between themselves with respect to the right to a liquidating
distribution arising from ownership of 3dfx's common stock.

3DFX IS AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO ITS STOCK PRICE
VOLATILITY.

        Historically, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. 3dfx may be the target of litigation like this. Securities
litigation would result in substantial costs and divert management's attention
and resources, which would seriously harm 3dfx's ability to complete its
dissolution and may reduce or eliminate the assets available for distribution to
3dfx shareholders.

3DFX MAY BE SUBJECT TO CLAIMS OF FRAUDULENT CONVEYANCE BY 3DFX'S CREDITORS.

        3dfx has incurred substantial indebtedness. Under federal and state
fraudulent conveyance statutes in a bankruptcy, reorganization or rehabilitation
case or similar proceeding or a lawsuit by unpaid creditors of 3dfx, under
certain circumstances, such court could void the asset sale to NVIDIA Sub or the
sale of its remaining assets and/or take other action detrimental to 3dfx and
its shareholders. These circumstances include the findings that, at the time
3dfx consummated the asset sale, (i) the assets were sold to hinder, delay or
defraud current or future creditors or (ii) (A) 3dfx received less than
reasonably equivalent value or fair consideration for its assets and (B) 3dfx,
(1) was insolvent or was rendered insolvent by reason of an asset sale, (2) was
engaged, or about to engage, in a business or transaction for which its assets
constituted unreasonably small capital, (3) intended to incur, or believed that
it would incur, debts beyond its ability to pay as such debts matured (as all of
the foregoing terms are defined in or interpreted under such fraudulent
conveyance statutes) or (4) was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied).

        The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the federal or local law that is being applied in any
such proceeding. Generally, however, 3dfx would be considered insolvent if, at
the time it consummated an asset sale, either (i) the fair market value (or fair
saleable value) of its assets is less than the amount required to pay its total
existing debts



                                       15
<PAGE>   17

and liabilities (including the probable liability on contingent liabilities) as
they become absolute and mature or (ii) it is incurring debts beyond its ability
to pay as such debts mature.

3DFX MAY BE UNABLE TO NEGOTIATE SETTLEMENTS WITH RESPECT TO ITS REMAINING
LIABILITIES.

        3dfx is currently in the process of negotiating settlements with respect
to its and its subsidiaries' remaining debts and liabilities which include
property leases, contracts and trade payables. If 3dfx is unable to successfully
negotiate satisfactory resolutions of these obligations, it will have less or no
cash proceeds to distribute to its shareholders.

3DFX WILL CONTINUE TO INCUR THE EXPENSE OF COMPLYING WITH REPORTING REQUIREMENTS
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").

        3dfx is obligated to comply with applicable reporting requirements of
the Exchange Act, even though compliance with such reporting requirements is
economically burdensome. The Exchange Act provides for an exemption which allows
an issuer to terminate its reporting obligations under the Exchange Act if it
has less than 300 record holders or less than 500 record holders and its total
assets have not exceeded $10.0 million on the last day of each of the issuer's
most recent three fiscal years. At this time, 3dfx has approximately 452 record
holders and has had in excess of $10.0 million in total assets for the last
three fiscal years. As such, 3dfx is unable to terminate its reporting
obligations. 3dfx cannot predict if, and when, it will meet the requirements for
the exemption. The expenses for the preparation and filing of periodic reports
will reduce the cash available for distribution to 3dfx shareholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Interest rate risk. 3dfx's cash equivalents are exposed to financial
market risk due to fluctuation in interest rates, which may affect interest
income. Due to the short term nature of the investment portfolio, 3dfx would not
expect operating results or cash flows to be affected to any significant degree
by the effect of a sudden change in market interest rates. 3dfx does not use its
investment portfolio for trading or other speculative purposes.

        Foreign currency exchange risk. Substantially all of 3dfx's sales and
expenses are denominated in U.S. dollars, and, as a result, 3dfx has relatively
little exposure to foreign currency exchange risk. 3dfx does not currently enter
into forward exchange contracts to hedge exposures denominated in foreign
currencies or any other derivative financial instruments for trading or
speculative purposes. However, in the event exposure to foreign currency risk
increases, 3dfx may choose to hedge those exposures.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Reference is made to the financial statements and supplemental data
required by this item and set forth at the pages indicated in Item 14(a) of this
Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

        Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The current executive officers and directors of 3dfx are as follows:

<TABLE>
<CAPTION>
NAME                                  AGE                              POSITION
----                                  ---                              --------
<S>                                   <C>    <C>
Alex Leupp ....................       61     President, Chief Executive Officer and Director
Scott D. Sellers ..............       32     Executive Vice President, Chief Technical Officer and Director
Richard A. Heddleson ..........       50     Chief Financial Officer
Gordon  A. Campbell(1) (2) ....       56     Chairman of the Board of Directors
James L. Hopkins ..............       56     Director
James Whims (1)(2) ............       46     Director
</TABLE>

(1)     Member of Compensation Committee.

(2)     Member of Audit Committee.

        ALEX LEUPP has served as President and Chief Executive Officer of 3dfx
since December 1999 and has served as a director of 3dfx since October 1998.
From December 1998 until November 1999, Mr. Leupp was President and Chief
Executive Officer of Chip Express Corporation, a semiconductor company. Mr.
Leupp spent 12 years with Siemens Microelectronics, Inc, a semiconductor
company, where his most recent position was President and Chief Executive
Officer.



                                       16
<PAGE>   18

        SCOTT D. SELLERS has served as Chief Technical Officer of 3dfx since May
1999. Between August 1998 and May 1999, Mr. Sellers served as Senior Vice
President, Product Development for 3dfx. Mr. Sellers co-founded 3dfx in August
1994 and served as Vice President, Research and Development from January 1995 to
August 1998. He has also served as a director of 3dfx since March 1995. Mr.
Sellers was Principal Engineer at MediaVision Technology, Inc., a multimedia
computer products company, from June 1993 to June 1994.

        RICHARD A. HEDDLESON has served as Chief Financial Officer since October
2000. Prior to joining 3dfx, Mr. Heddleson served as Chief Financial Officer of
Evoke Software Corporation from February 1997 to February 2000, and as Chief
Financial Officer at Resumix, Inc. from April 1993 to June 1996.

        GORDON A. CAMPBELL has served as the Chairman of the Board of Directors
of 3dfx since August 1994 when he co-founded 3dfx. Mr. Campbell also served as
President and Chief Executive Officer of 3dfx from January 1995 to December
1996. Prior to joining 3dfx, Mr. Campbell founded Techfarm, Inc., a venture
capital investment firm, and has served as President since September 1993. In
1985, Mr. Campbell founded Chips and Technologies, Inc. or CHIPS, a
semiconductor and related device company, and served as Chairman, Chief
Executive Officer and President of CHIPS until July 1993. Mr. Campbell founded
SEEQ Technology, Inc. or SEEQ, a semiconductor and related device company, in
1981. He served as President and Chief Executive Officer of SEEQ from 1981 to
1985. Mr. Campbell currently serves as a director of Palm, Inc. and Bell
Microproducts, Inc., is the Chairman of the board of Cobalt Networks, Inc. and
is the managing partner of TechFund Capital, a venture capital fund, since
August 1997.

        JAMES L. HOPKINS has served as a director of 3dfx since 3dfx's merger
with STB in May 1999. Mr. Hopkins is the Chairman, President and Chief Executive
Officer of Micrografx, Inc., a provider of graphics software. Mr. Hopkins served
as a Managing Director of Hoak Breedlove Wesneski & Co., an investment banking
firm from September 1999 to October 2000. Mr. Hopkins served as an officer of
3dfx from May 1999 (upon completion of the 3dfx/STB merger) to September 1999.
Prior to the 3dfx/STB merger, Mr. Hopkins was the Chief Financial Officer and
Vice President of Strategic Marketing for STB and served in these capacities
since December 1994. Mr. Hopkins' responsibilities in these positions included
directing European sales and marketing, managing specialized technology products
and planning financial strategy.

        JAMES WHIMS has served as a director of 3dfx since November 1996. Mr.
Whims has been a Partner at Techfarm since November 1996. From November 1994
until July 1996, Mr. Whims was the Executive Vice President of Sony Computer
Entertainment, a video game hardware and software company. From 1990 until July
1994, Mr. Whims was Executive Vice President of the Consumer Division of The
Software Toolworks, Inc., a diversified software company. From 1985 to 1988, Mr.
Whims served as Vice President of Sales of Worlds of Wonder, Inc., a toy
products company, which he co-founded.

SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16 (a) of the Exchange Act requires 3dfx's officers and
directors, and persons who own more than 10% of a registered class of 3dfx's
equity securities, to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission or SEC
and the National Association of Securities Dealers, Inc. Such officers,
directors and 10% shareholders are also required by SEC rules to furnish 3dfx
with copies of all such forms that they file. Based solely on its review of the
copies of such forms received by 3dfx, or written representations from some
reporting persons that no Forms 5 were required for such persons, 3dfx believes
that its officers, directors and ten percent shareholders have complied with all
Section 16(a) filing requirements applicable to them in fiscal 2001, except that
each of Richard Burns and Stephen A. Lapinski will be filing a Form 5 late.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

        The current members of the Compensation Committee are Gordon Campbell
and James Whims. No executive officer of 3dfx serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of 3dfx's board of directors or
Compensation Committee.

COMPENSATION OF DIRECTORS

        Members of 3dfx's board of directors do not receive compensation for
their services as directors. The 3dfx Interactive, Inc. 1997 Director Option
Plan (the "Director Plan") provides that options shall be granted to
non-employee directors of 3dfx pursuant to an automatic nondiscretionary grant
mechanism. Pursuant to such automatic grant mechanism, in fiscal 2001, directors
received the following grants:

<TABLE>
<CAPTION>
NAME                                                                    SHARES        EXERCISE PRICE
----                                                                    ------        --------------
<S>                                                                     <C>           <C>
Gordon A. Campbell........................................              11,000             $7.41
James L. Hopkins..........................................               5,000             $7.41
James Whims...............................................               6,000             $7.41
George T. Haber...........................................              13,500             $7.41
Andrei M. Manoliu.........................................              13,500             $7.41
</TABLE>



                                       17
<PAGE>   19

ITEM 11. EXECUTIVE COMPENSATION

        The following table sets forth for the years ended December 31, 1998,
January 31, 2000 and January 31, 2001 the compensation earned by (a) 3dfx's
Chief Executive Officer during the fiscal year ended January 31, 2001, (b) each
of the other top four executive officers whose salary and bonus for the fiscal
year ended January 31, 2001 was in excess of $100,000 for services rendered in
all capacities to 3dfx for that year and (c) an individual for whom disclosure
would have been provided pursuant to clause (b) but for the fact that the
individual was not serving as an executive officer of 3dfx throughout the entire
fiscal year ended January 31, 2001 (collectively, the "Named Executive
Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                               LONG-TERM
                                                             ANNUAL COMPENSATION             COMPENSATION
                                                    -------------------------------------     ----------
                                                                                              SECURITIES
                                                                             OTHER ANNUAL     UNDERLYING      ALL OTHER
                                        FISCAL      SALARY                   COMPENSATION     OPTIONS (#)   COMPENSATION
NAME AND PRINCIPAL POSITION              YEAR       ($)(1)      BONUS ($)        (2)              (3)            ($)
---------------------------             ------     --------     ---------    ------------    -------------  ------------
<S>                                     <C>        <C>          <C>          <C>             <C>            <C>
Alex Leupp (4) ....................      2001      $375,000      $ 50,000      $  8,250              --           --
President, Chief Executive               2000        44,771        50,000         1,500         806,000(4)        --
Officer and Director                     1998            --            --            --          13,500(5)        --

Scott D. Sellers ..................      2001      $260,000            --            --         186,000           --
Executive Vice President,                2000       209,230        26,667            --         270,000           --
Chief Technical Officer and              1998       177,121        25,500            --          50,000           --
Director

Richard Burns (6) .................      2001      $205,961      $ 50,000      $118,245(7)      230,000           --
Senior Vice President of                 2000       148,077        25,000        56,630          70,000           --
World Wide Sales                         1998            --            --            --              --           --

Stephen A. Lapinski (8) ...........      2001      $175,383      $196,000            --         400,000           --
Senior Vice President, World             2000            --            --            --              --           --
Wide Marketing                           1998            --            --            --              --           --

Philip Carmack (9) ................      2001      $123,269      $203,140            --         160,000           --
Senior Vice President of                 2000            --            --            --              --           --
Engineering                              1998       112,961        40,000            --           5,000           --

Richard A. Heddleson (10)  ........      2001      $ 63,462            --            --         325,000           --
Chief Financial Officer                  2000            --            --            --              --           --
                                         1998            --            --            --              --           --
</TABLE>

        (1)     The salary for the month ended January 31, 1999 for Mr. Sellers
                was $15,385.

        (2)     Represents car allowances, except where otherwise indicated.

        (3)     Except as otherwise indicated, these shares are subject to
                exercise under stock options granted under 3dfx's 1995 Employee
                Stock Plan.

        (4)     Mr. Leupp became the President and Chief Executive Officer of
                3dfx in December 1999. Prior to that time he served as an
                independent director of 3dfx. Included within the number of
                options granted to Mr. Leupp as indicated in the table above in
                fiscal 2000 are 6,000 options granted to him in his capacity as
                a director of 3dfx under the Director Plan.

        (5)     The options were granted to Mr. Leupp under the Director Plan.

        (6)     Mr. Burns resigned from 3dfx in March 2001.

        (7)     Represents commission paid to Mr. Burns in fiscal year 2000.



                                       18
<PAGE>   20

        (8)     Mr. Lapinski's employment with 3dfx terminated without cause in
                March 2001.

        (9)     Mr. Carmack resigned from 3dfx in December 2000.

        (10)    Mr. Heddleson joined 3dfx on October 24, 2000; his current
                annualized salary is $275,000.

                        OPTION GRANTS IN LAST FISCAL YEAR

        The following table provides information relating to stock options
awarded to each of the Named Executive Officers during the year ended January
31, 2001. Except as otherwise noted, all such options were awarded under 3dfx's
1995 Employee Stock Plan.

<TABLE>
<CAPTION>

                                                    INDIVIDUAL GRANTS
                           ----------------------------------------------------------------------    POTENTIAL REALIZABLE VALUE AT
                           NUMBER OF           PERCENT OF                                                ASSUMED ANNUAL RATES OF
                           SECURITIES            TOTAL                                                         STOCK PRICE
                           UNDERLYING           OPTIONS              EXERCISE                                 APPRECIATION FOR
                            OPTIONS            GRANTED TO             PRICE                                   OPTION TERM (1)
                            GRANTED           EMPLOYEES IN             PER             EXPIRATION       -------------------------
NAME                       (2)(3)(4)         FISCAL 2001(5)           SHARE               DATE            5%                 10%
----                       ---------         --------------          --------          ----------        ---                 ---
<S>                        <C>               <C>                     <C>               <C>               <C>            <C>
Alex Leupp                   400,000               13.5%            $   3.09            03/31/03         194,825          409,116
Scott D. Sellers             186,000                6.3%            $   3.09            03/31/03          90,593          190,239
Richard Burns                 50,000(6)             1.7%            $   8.94            02/16/10         281,116          712,403
                             180,000                6.1%            $   3.09            03/31/03          87,671          184,102
Stephen A. Lapinski          150,000(6)             5.1%            $   6.88            05/30/10         843,348        1,644,742
                              75,000(6)             2.5%            $   4.47            09/05/10         421,674          534,302
                             175,000                5.9%            $   3.09            03/31/03          85,236          178,988
Philip Carmack               160,000                5.4%            $   3.09            03/31/03          77,930          163,646
Richard A. Heddleson         325,000               11.0%            $   4.13            10/23/10       1,827,253        2,139,201
</TABLE>

----------

        (1)     Potential gains are net of the exercise price but before taxes
                associated with the exercise. The 5% and 10% assumed annual
                rates of compounded stock appreciation based upon the exercise
                price per share are mandated by the rules of the SEC and do not
                represent 3dfx's estimate or projection of the future common
                stock price. Actual gains, if any, on stock option exercises are
                dependent on the future financial gains, if any, on stock option
                exercises are dependent on the future financial performance of
                3dfx, overall market conditions and the option holders'
                continued employment through the vesting period. This table does
                not take into account any appreciation in the fair market value
                of 3dfx common stock from the date of grant to the date of this,
                other than the columns reflecting assumed rates of appreciation
                of 5% and 10%.

        (2)     Except as otherwise indicated, options become exercisable 50% on
                June 30, 2001, and the remaining 50% on March 31, 2002.

        (3)     Options were granted at an exercise price equal to the fair
                market value of 3dfx's common stock on the date of grant. The
                exercise price may be paid in cash, check, promissory note,
                delivery of already-owned shares of 3dfx's common stock subject
                to some conditions, authorization to 3dfx to retain from the
                total number of shares for which the option is exercised that
                number of shares having a fair market value on the date of
                exercise equal to the exercise price for the total number of
                shares as to which the option is exercised, delivery of a
                properly executed exercise notice together with irrevocable
                instructions to a broker to promptly deliver to 3dfx the amount
                of sale or loan proceeds required to pay the exercise price, or
                any combination of the foregoing methods of payment or such
                other consideration or method of payment to the extent permitted
                under applicable law.

        (4)     These shares are subject to exercise under stock options granted
                under 3dfx's 1995 Employee Stock Plan.

        (5)     The calculation is based on the aggregate number of options
                granted to employees in fiscal 2001, excluding the options that
                were canceled in October 2000.

        (6)     The options vest 25% in the first year following the date of
                grant and 2.083% per month thereafter.


                                       19
<PAGE>   21

                 AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

        None of the Named Executive Officers exercised any Options in fiscal
year ended January 31, 2001. The following table sets forth some information
regarding the stock options held as of January 31, 2001 by the Named Executive
Officers.

<TABLE>
<CAPTION>
                                                                   NUMBER OF SECURITIES
                                                                  UNDERLYING UNEXERCISED
                                   SHARES                               OPTIONS AT                        VALUE OF UNEXERCISED
                                  ACQUIRED                           JANUARY 31, 2001                   IN-THE-MONEY OPTIONS AT
                                    ON                                    (#) (1)                       JANUARY 31, 2001 ($) (2)
                                  EXERCISE       VALUE         ------------------------------       -------------------------------
NAMES                               (#)       REALIZED ($)     EXERCISABLE      UNEXERCISABLE       EXERCISABLE       UNEXERCISABLE
-----                             --------    ------------     -----------      -------------       -----------       -------------
<S>                               <C>         <C>              <C>              <C>                 <C>               <C>
Alex Leupp ...............           --            --             7,906            400,000                 --                --
Scott D. Sellers .........           --            --                --            211,000                 --                --
Richard Burns ............           --            --                --            180,000                 --                --
Stephen A. Lapinski ......           --            --                --            175,000                 --                --
Philip Carmack ...........           --            --                --                 --                 --                --
Richard A. Heddleson .....           --            --                --            325,000                 --                --
</TABLE>

        (1)     Options granted under 3dfx's 1995 Employee Stock Plan may be
                exercised by the holder thereof prior to vesting with the shares
                purchased thereby subject to repurchase by 3dfx until fully
                vested. The table presents options as exercisable according to
                the vesting schedule of the option.

        (2)     Based upon the last sale price of 3dfx's common stock on January
                31, 2001, $0.34 per share, minus the exercise price.

EMPLOYMENT AGREEMENTS, SEVERANCE ARRANGEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

        3dfx is a party to employment agreements with some of its senior
executive officers, including Alex Leupp, Scott Sellers, Stephen Lapinski,
Richard Burns and Al Woodhull. These employment agreements were amended
effective February 1, 2001. Prior to their amendment, these agreements provided
for limited severance and other benefits (continued payment of base pay for up
to one year and reimbursement of COBRA premiums for group medical coverage) if
3dfx terminated the executive's employment without cause, and before the
occurrence of a change of control. Following a change of control, which was
defined to include the closing of certain types of transactions that would
include the asset sale with NVIDIA Sub, the agreements provided for a lump sum
severance payment equal to one times the executive's base salary (1.25x in the
case of 3dfx's chief executive officer, Dr. Leupp) plus one times the
executive's targeted bonus for the year (1.25x in the case of Dr. Leupp). As
amended, these agreements provide for a smaller lump sum severance payment and
COBRA premium reimbursement benefits. Except with respect to Mr. Burns, who was
entitled to receive a lump sum severance benefit immediately upon termination of
his employment, the lump sum severance benefits to be paid to the other senior
executive officers are not payable until after 3dfx's payment of all of its
fixed and ascertainable debts and liabilities.

        On December 21, 2000, Mr. Carmack resigned from 3dfx. On March 9, 2001,
Messrs. Woodhull and Lapinski were terminated by 3dfx without cause, and on
March 2, 2001, Mr. Burns' employment with 3dfx expired pursuant to the terms of
his employment agreement with 3dfx.

        Pursuant to a letter agreement entered into with Scott Sellers, in the
event there is a change of control of 3dfx and such executive is terminated
other than for cause within one year following the effective date of such change
of control, 25% of Mr. Sellers' stock subject to 3dfx's repurchase option under
a restricted stock purchase agreement shall be released from this repurchase
option (or all of such stock if less than 25% of Mr. Sellers' stock remains
subject to 3dfx's repurchase option). For purposes of this letter agreement a
"change of control" means the (i) the sale of all or substantially all of 3dfx's
assets, or (ii) a consolidation or merger of 3dfx with or into any other
corporation (other than a wholly-owned subsidiary of 3dfx) or engagement in a
transaction or series of transactions in which more than 50% of the voting power
of 3dfx is disposed. Termination other than for cause includes constructive
termination resulting from (i) the reduction of such employee's rate of
compensation, (ii) the reduction of such employee's scope of engagement or (iii)
the requirement that such employee provide services at a location more than 50
miles from the employee's office location as of the date of the letter
agreement.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

        3dfx has adopted provisions in its articles of incorporation that
eliminate to the fullest extent permissible under California law the liability
of its directors to 3dfx for monetary damages. Such limitation of liability does
not affect the availability of equitable remedies such as injunctive relief or
rescission. 3dfx's bylaws provide that 3dfx shall indemnify its directors and
officers to the fullest extent permitted by California law, including in
circumstances in which indemnification is otherwise discretionary under
California law. 3dfx has entered into indemnification agreements with its
officers and directors containing provisions which may require 3dfx, among other



                                       20
<PAGE>   22

things, to indemnify the officers and directors against some liabilities that
may arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.

        At the present time, there is no pending litigation or proceeding
involving a director, officer, employee or other agent of 3dfx in which
indemnification would be required or permitted. 3dfx is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

        Notwithstanding any statement to the contrary in any of 3dfx's previous
or future filings with the Securities and Exchange Commission, this Report of
the Compensation Committee of the Board of Directors shall not be deemed "filed"
with the Securities and Exchange Commission and shall not be incorporated by
reference into any such filings.

        Introduction

        Prior to 3dfx's initial public offering in June 1997, the 3dfx board of
directors was primarily responsible for establishing and administering 3dfx's
compensation policies. In this role, and consistent with 3dfx's status as a
privately held corporation, the board of directors determined the Chief
Executive Officer's salary directly and reviewed and approved employment
compensation matters for other management personnel. The Compensation Committee
was established in March 1997. During fiscal 2001, the Compensation Committee
initially consisted of James Whims and George T. Haber, although Mr. Haber
resigned from 3dfx's board of directors and the Compensation Committee effective
December 15, 2000. Mr. Gordon Campbell was subsequently elected to serve on the
Compensation Committee together with Mr. Whims. In general, the Committee is
responsible for reviewing and recommending for approval by the board of
directors of 3dfx's compensation practices, including executive salary levels
and variable compensation programs. With respect to the compensation of 3dfx's
Chief Executive Officer, the Committee reviews and submits to the board of
directors for approval the various elements of the Chief Executive Officer's
compensation. With respect to other executive officers, the Committee reviews
the recommendations for such individuals presented by the Chief Executive
Officer and the basis therefor and approves or modifies the compensation
packages for such individuals.

        The board of directors administers 3dfx's 1995 Employee Stock Option
Plan, the 1997 Supplementary Stock Option Plan, the 1999 Supplementary Stock
Option Plan, the Directors Option Plan and the 1997 Employee Stock Purchase
Plan, although the board of directors has delegated to the Compensation
Committee the authority to act as administrator under the 1995 Employee Stock
Option Plan, the 1997 Supplementary Stock Option Plan and the 1999 Supplementary
Stock Option Plan with respect to option grants to non-executive officer
employees.

        General Compensation Philosophy

        The primary objectives of 3dfx's historical executive compensation
policies included the following:

        -       To attract, motivate and retain a highly qualified executive
                management team

        -       To link executive compensation to 3dfx's financial performance,
                as well as to defined individual management objectives
                established by the Committee

        -       To compensate competitively with the practices of similarly
                situated technology companies

        -       To create management incentives designed to enhance shareholder
                value

        The Committee's historical compensation philosophy sought to align the
interests of shareholders and management by tying compensation to 3dfx's
financial performance, either directly in the form of salary and bonuses paid in
cash or indirectly in the form of appreciation of stock options and stock
purchase rights granted to employees through 3dfx's equity incentive programs.
Following the 3dfx board of directors' adoption of a plan of dissolution and
approval of the asset sale to NVIDIA Sub, the Compensation Committee implemented
a modified compensation policy designed to incentivize 3dfx's executives to
expend all efforts necessary to maximize remaining shareholder value consistent
with the plan of dissolution, including all efforts necessary to close the sale
of assets to NVIDIA Sub, maximize of the value of other 3dfx assets, and settle
3dfx's and its subsidiaries' debts and liabilities.

        Executive Compensation

                3dfx's executive compensation programs consist of two principal
components: cash-based compensation and equity-based compensation. These
components are intended to retain, motivate and reward 3dfx executives who are
expected to perform their duties consistent with the goal of maximizing
shareholder value.



                                       21
<PAGE>   23

        Cash-based compensation. Cash-based compensation consists of salary
(base pay) and bonus pay, where the executive's target bonus pay is a percentage
of his salary.

        Equity Incentive Programs. Equity incentives, including stock options
and stock purchase rights granted pursuant to 3dfx's 1995 Employee Stock Option
Plan and the 1997 Employee Stock Purchase Plan, directly align the economic
interests of 3dfx's management and employees with those of its shareholders.
Additionally, grants may be made to executive officers under the 1997
Supplementary Stock Option Plan and under the 1999 Supplementary Stock Option
Plan in connection with the initial employment of such executive officer. Stock
options are a particularly strong incentive because they are valuable to
employees only if the fair market value of 3dfx's common stock increases above
the exercise price, which is set at the fair market value of 3dfx's common stock
on the date the option is granted.

        Executive Employment Agreements. 3dfx entered into employment agreements
with some of its senior executive officers in fiscal 2001, including Alex Leupp,
Scott Sellers, Stephen Lapinski, Richard Burns and Al Woodhull. These employment
agreements, which provide for both salary and target bonus compensation, were
amended effective February 1, 2001. Prior to their amendment, these agreements
provided for limited severance and other benefits (continued payment of base pay
for up to one year and reimbursement of COBRA premiums for group medical
coverage) if 3dfx terminated the executive's employment without cause, and
before the occurrence of a change of control. Following a change of control,
which was defined to include the closing of certain types of transactions that
would include the asset sale with NVIDIA Sub, the agreements provided for a lump
sum severance payment equal to one times the executive's base salary (1.25x in
the case of 3dfx's chief executive officer, Dr. Leupp) plus one times the
executive's targeted bonus for the year (1.25x in the case of Dr. Leupp).

        Upon the announcement of the proposed asset sale to NVIDIA Sub and the
dissolution of 3dfx, 3dfx laid off a substantial portion of its workforce in
order to conserve its resources. In order to assure the dedication and continued
efforts of 3dfx's executives through the critical transition period up to the
closing of the asset sale, the Compensation Committee, as well as another
independent director (James L. Hopkins), and 3dfx's executives negotiated
amendments to the employment agreements. The purpose of the amendments was
twofold: first, to create an incentive for each executive to continue his
employment until the closing of the asset sale, and during this period to devote
substantially all of his efforts to the enhancement of shareholder value; and
second, to conserve resources by reducing the amount of the severance benefit to
which the executive would be entitled if he continued in the employment of 3dfx
through the closing of the asset sale. The amended agreements were effective as
of February 1, 2001.

        For all executives except Mr. Burns, the amended agreements provide, in
lieu of the prior severance arrangements, that lump sum severance and COBRA
premium reimbursement benefits will be paid to the executive if (i) the closing
of the asset sale occurs within 12 months following the amendment (which it
did), and (ii) the executive remains employed through the closing of the asset
sale or 3dfx otherwise elects to terminate the executive without cause. The
amount of the lump sum severance benefit is equal to one times (1.25x in the
case of Dr. Leupp) the sum of the executive's base salary and 50% of his
targeted bonus, reduced by the base salary paid to the executive during the
period from February 1 through the closing date of the asset sale. The lump sum
severance benefit is not payable to the executives until after 3dfx's payment of
all of its fixed and ascertainable debts and liabilities. The amended agreements
also specify the board of directors' expectations for each executive to devote
his efforts to collection of outstanding receivables, negotiation of favorable
terms for the settlement of 3dfx liabilities, increasing cash recovered in the
sale of remaining inventories, and other specific duties.

        In the case of Mr. Burns, the amended agreement provides, in lieu of the
prior severance arrangement, that he will receive a lump sum severance benefit
equal to one times his base salary upon termination of his employment. His
employment duties are limited to collecting or resolving certain outstanding
retail accounts receivable for which he is principally responsible. Upon
substantial completion of these duties, his employment terminated.

        The Compensation Committee and Mr. Hopkins determined that the amended
agreements were in the best interests of 3dfx because of the enhanced
shareholder value achievable through the targeted efforts of its executives. The
amended agreements created an incentive on the part of 3dfx's executives to work
toward achieving increased cash liquidity for 3dfx's creditors and shareholders,
while also reducing the severance obligation triggered by the closing of the
asset sale to NVIDIA Sub.

        Compensation of Chief Executive Officers

         In determining the CEO's compensation, the Committee considers
comparative financial and compensation data of selected peer companies. During
fiscal 2001, Alex Leupp, 3dfx's President and Chief Executive Officer, received
a salary of $375,000. For fiscal 2001, the Committee set a bonus of $187,500, of
which Dr. Leupp received $50,000. The Committee believes Dr. Leupp's
compensation is comparable to that paid to the chief executive officers of
3dfx's peer companies. The terms of Dr. Leupp's amended employment agreement, as
well as the bases for such terms, are otherwise set forth above.

        3dfx grants stock options to its Chief Executive Officer based primarily
on the Committee's evaluation of his ability to influence 3dfx's growth and
profitability. The Committee determines the size of the option grant based on
its estimate of the equity incentive value of the Chief Executive Officer's
existing unvested option position. In fiscal 2001, 3dfx granted Dr. Leupp
options to acquire 400,000 shares of 3dfx common stock.

        Tax Deductibility of Executive Compensation

        Section 162 of the Code limits the federal income tax deductibility of
compensation paid to 3dfx's Chief Executive Officer and to each of the other
four most highly-compensated executive officers. 3dfx may deduct such
compensation only to the extent that during any fiscal year the compensation
paid to such individual does not exceed $1 million or meet some specified
conditions (including



                                       22
<PAGE>   24

shareholder approval). Based on 3dfx's current compensation plans and policies
and regulations interpreting this provision of the Code, 3dfx and the Committee
believe that, for the near future, there is little risk that 3dfx will lose any
significant tax deduction for executive compensation.

        Summary

        The 3dfx board of directors and the Compensation Committee intend that
its compensation program shall be fair and motivating and shall be successful in
retaining qualified employees and in linking compensation directly to the
interests of 3dfx shareholders. The 3dfx board of directors and the Compensation
Committee intend to review this program on an ongoing basis to evaluate its
continued effectiveness.



                                       THE COMPENSATION COMMITTEE OF THE
                                       3DFX BOARD OF DIRECTORS


                                       James Whims
                                       Gordon A. Campbell


3DFX STOCK PRICE PERFORMANCE GRAPH

        The stock price performance graph set forth below under the caption
"Performance Graph" shall not be deemed to be incorporated by reference by any
general statement incorporating by reference this Report into any filing under
the Securities Act or under the Exchange Act, except to the extent that 3dfx
specifically incorporates this information by reference, and shall not otherwise
be deemed "filed with" or "soliciting material" under such laws. The following
graph compares 3dfx's cumulative total shareholder return with those of the
Nasdaq Stock Market (U.S.) Index and the Nasdaq Electronic Components Index. The
graph assumes that $100 was invested on June 25, 1997 (the effective date of
3dfx's initial public offering) in 3dfx's common stock, (ii) the Nasdaq Stock
Market (U.S.) Index and (iii) the Nasdaq Electronic Components Index, including
reinvestment of dividends. Note that historic stock price performance is not
necessarily indicative of future stock price performance.

        COMPARISON OF CUMULATIVE TOTAL RETURN AMONG 3DFX INTERACTIVE, INC., THE
NASDAQ STOCK MARKET (U.S.) INDEX AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
PERFORMANCE GRAPH

        3DFX INTERACTIVE, NASDAQ STOCK NASDAQ ELECTRONIC INC. MARKET (U.S.)
COMPONENTS


                               [PERFORMANCE GRAPH]


<TABLE>
<CAPTION>
                          3dfx              Nasdaq Stock Market           Nasdaq Electronic
                    Interactive, Inc.              (U.S.)                     Components
                    ------------------      ---------------------       -----------------------
<S>                 <C>                     <C>                         <C>
6/25/97                  100.00                    100.00                       100.00
6/97                     121.59                    99.81                        98.17
9/97                     152.27                    116.70                       127.43
12/97                    204.55                    109.29                       95.53
3/98                     256.82                    127.90                       105.12
6/98                     155.68                    131.41                       97.73
9/98                     102.27                    118.58                       101.54
12/98                    114.77                    154.10                       147.58
4/99                     157.95                    178.25                       161.81
7/99                     121.59                    185.64                       192.92
10/99                     87.50                    208.66                       230.61
</TABLE>



                                       23
<PAGE>   25

<TABLE>
<S>                       <C>                      <C>                          <C>
1/00                      77.27                    278.08                       332.61
</TABLE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth as of May 9, 2001 information regarding
the beneficial ownership of 3dfx's outstanding common stock by:

        -       Each person known by 3dfx to own beneficially more than 5% of
                the outstanding common stock

        -       Each director and each Named Executive Officer

        -       All directors and executive officers of 3dfx as a group

        The following calculations of the percentage of outstanding shares are
based on 39,799,364 shares of 3dfx's common stock outstanding as of May 9, 2001.

        Beneficial ownership is determined in accordance with the rules of the
Securities Exchange Commission and generally includes voting or investment power
with respect to securities, subject to community property laws, where
applicable. Information for each five percent shareholder is derived solely from
filings with the SEC on or before May 9, 2001.

        Shares of the common stock subject to options that are presently
exercisable or exercisable within 60 days of May 9, 2001 are deemed outstanding
and beneficially owned by the person holding such options for the purpose of
computing the percentage of ownership of such person but are not treated as
outstanding for the purpose of computing the percentage of any other person.
These options are separately set forth below in the column titled "Options."

<TABLE>
<CAPTION>
NAME AND ADDRESS (1)                                      SHARES                OPTIONS              TOTAL          PERCENTAGE
--------------------                                     ---------              -------            ---------        ----------
<S>                                                      <C>                    <C>                <C>              <C>
 FIVE PERCENT SHAREHOLDERS:

 CTI Limited ................................            3,908,472                   --            3,908,472            9.8%
    1775 Broadway, 26th Floor
    New York, NY 10019

 David A. Rocker (3) ........................            3,587,590                   --            3,587,590            9.0%
    c/o Rocker Partners, L.P
    45 Rockerfeller Plaza, Suite 1759
    New York, New York 10111

 George T. Haber ............................            2,430,972                   --            2,430,972            6.1%
    890 Robb Road
    San Jose, California 94306

 DIRECTORS AND OFFICERS:

 Alex Leupp .................................                   --               12,469               12,469              *
 Gordon A. Campbell .........................              381,632(4)            82,000              463,632            1.2%
 James Whims ................................                2,400               60,750               63,150              *
 James L. Hopkins ...........................                2,498               82,985               85,483              *
 Richard Burns ..............................                   --                   --                   --             --
 Scott D. Sellers ...........................                   --              171,720              171,720             --
 Stephen A. Lapinski ........................                   --                   --                   --             --
 Philip Carmack..............................                   --                   --                   --             --
 Richard A. Heddleson .......................                   --                   --                   --             --
 All executive officers and
 directors as a group (9 persons) ...........              386,530              409,924              796,454            2.0%
</TABLE>

----------



                                       24
<PAGE>   26

        *       Less than 1%.

        (1)     Except as otherwise noted, address is c/o 3dfx Interactive,
                Inc., 4435 Fortran Drive, San Jose, CA 95134.

        (2)     Information with respect to CTI Limited was obtained from a
                Schedule 13G filed with the SEC, which indicates that CTI
                Limited has no voting power with respect to the shares
                beneficially held, but does share dispositive power over these
                shares that are held in customer accounts.

        (3)     Information with respect to David A. Rocker was obtained from a
                Schedule 13G filed with the SEC, which indicates that Mr. Rocker
                has sole dispositive power over all of the shares indicated by
                virtue of his position as the sole managing partner of Rocker
                Partners, L.P., and through Rocker Offshore Management Company,
                Inc., an investment advisor to Compass Holdings, Ltd.

        (4)     Includes 77,084 shares held by Techfarm, L.P., 3,854 held by
                Techfarm Management Inc. (dba Techfarm, Inc.), and 300,694
                shares held by Gordon A. Campbell. Mr. Campbell is President of
                Techfarm, Inc., the general partner of Techfarm, L.P.
                ("Techfarm"), and Mr. Campbell disclaims beneficial ownership of
                the shares held by Techfarm, L.P. and Techfarm Management Inc.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Techfarm provides management services to 3dfx for which 3dfx pays a fee
of $5,000 per month. Gordon Campbell, the Chairman of the board of directors of
3dfx, and James Whims, a director of 3dfx, are each officers of Techfarm. 3dfx
made total payments to Techfarm for such management services during fiscal years
2001, 2000 and 1998 of $65,000, $55,000 and $60,000, respectively. In addition,
Mr. Whims provides consulting services to 3dfx for which 3dfx pays a fee of
$5,000 per month. 3dfx made total payments to Mr. Whims in fiscal years 2001,
2000 and 1998 of $45,000, $45,000 and $60,000, respectively.

        3dfx has an agreement with Quantum3D, a supplier of advanced graphics
subsystems based on 3dfx's technology, pursuant to which 3dfx will supply
graphic boards and components to Quantum3D. Gordon Campbell, Chairman of the
board of directors of 3dfx, is a director, significant investor in and
shareholder of Quantum3D. Sales to Quantum3D fiscal years 2001, 2000 and 1998 of
$2.8 million, $1.6 million and $670,000, respectively. As of January 31, 2001,
3dfx had an outstanding trade receivable from Quantum3D of approximately
$85,000.

        During fiscal year 2001, George T. Haber, a significant shareholder and
former member of the Company's board of directors, provided consulting services
to 3dfx for $400,000. At January 31, 2001, 3dfx had an outstanding receivable
due from this shareholder of $1.1 million.

        In April 1999, 3dfx invested an amount of $3.1 million in exchange for a
minority interest in Quantum 3D in the form of Convertible Preferred Shares in
connection with Quantum 3D's private round of financing. These terms and pricing
of these shares was equivalent to other unaffiliated third participants in the
financing round.

        In March 2000, 3dfx sold the Specialized Technology Group (STG), a
business unit that provides digital video products, multi-output MPEG decoder
cards and multi-monitor display adapters to a company of which Vanessa Ogle is
President, Enseo, Inc. ("Enseo"). Ms. Ogle is a former employee of 3dfx and is
the daughter of William E. Ogle. Mr. Ogle served as the Executive Vice President
and Vice Chairman of the board of directors of 3dfx until he resigned these
positions in January 2000. The transaction was accounted for as an asset sale,
comprised primarily of inventory and accounts receivable, in a leveraged buyout
by the STG management group. 3dfx will maintain a minority equity interest in
STG following the sale. The amount of the transaction was $5.1 million, and as a
result, 3dfx recorded a note receivable in the amount of $3.0 million. The note
is payable in accordance with a payment schedule, beginning February 1, 2001 and
concluding November 1, 2004.

        3dfx and William Ogle, a former Executive Vice President and Vice
Chairman of the Board of Directors until his resignation in January 2000,
brought claims against each other before the American Arbitration Association
relating to the employment agreement, as amended, between the parties and other
matters relating to Mr. Ogle's relationship with 3dfx. On November 29, 2000,
3dfx and Mr. Ogle executed a Settlement Agreement and Mutual Release, which has
been approved by the arbitrator on December 4, 2000. Pursuant to the terms of
the settlement agreement, 3dfx paid Mr. Ogle $300,000 as a parachute payment
pursuant to his employment agreement with 3dfx, and released Mr. Ogle from all
obligations under his employment agreement. In lieu of making the $300,000
parachute payment to Mr. Ogle, 3dfx transferred a condominium owned by 3dfx and
all personal property therein to Mr. Ogle, as well as paid to Mr. Ogle an amount
equal to all unpaid taxes and assessments accrued or accruing for the fiscal
year 2000, pro-rated to November 29, 2000. Additionally, beginning in February
2001, 3dfx assigned 50% of all future principal and interest payments payable by
Enseo under that certain promissory note dated March 1, 2000, executed by Enseo
in favor of 3dfx in the principal amount of $3.0 million. 3dfx also agreed that
any indemnification agreements executed between 3dfx or STB and Mr. Ogle will
remain in full force and effect as it relates to claims asserted against Mr.
Ogle in his capacity as an officer or director of 3dfx or STB for acts taking
place prior to Mr. Ogle's resignation.

    3dfx believes that all of the transactions set forth above were made on
terms no less favorable to 3dfx than could have been obtained from unaffiliated
third parties. All future transactions between 3dfx and its officers, directors,
principal shareholders and their affiliates will be approved by a majority of
the board of directors, including a majority of the independent and
disinterested outside directors, and will continue to be on terms no less
favorable to 3dfx than could be obtained from unaffiliated third parties.



                                       25
<PAGE>   27

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

        (a)(1) Financial Statements.

The following financial statements are filed as part of this Report.

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----
<S>                                                                                                       <C>
Report of Independent Accountants .............................................................            F-1
Consolidated Balance Sheets as of January 31, 2000 and January 31, 2001 .......................            F-2
Consolidated Statements of Operations for the years ended December 31, 1998, January 31,
2000 and January 31, 2001 and for the month ended January 31, 1999 ............................            F-3
Consolidated Statement of Changes in Shareholders' Equity for the years ended
December 31, 1998, January 31, 2000 and January 31, 2001 and for the month ended
January 31, 1999 ..............................................................................            F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1998, January 31,
2000 and January 31, 2001 and for the month ended January 31, 1999 ............................            F-5
Notes to Consolidated Financial Statements ....................................................            F-6
</TABLE>

        (a)(2) Financial Statement Schedules.

<TABLE>
<S>                                                                                                        <C>
Report of Independent Accountants on Financial Statement Schedule .............................            S-1
Schedule II Valuation and Qualifying Accounts for the years ended December 31, 1998,
January 31, 2000 and January 31, 2001 and for the month ended January 31, 1999 ................            S-2
</TABLE>

        (b) Reports on Form 8-K.

                Current Report on Form 8-K filed on January 26, 2001 discussing
        the amendment to employment agreements between the Registrant and each
        of Alex Leupp, Scott D. Sellers, Richard Burns, Stephen A. Lapinski and
        Alfred R. Woodhull relating to severance payments and COBRA premium
        reimbursement benefits. The Current Report also discussed the amendment
        to the report of PricewaterhouseCoopers LLP relating to the Registrant's
        2000 consolidated financial statements to add an explanatory paragraph
        regarding the Registrant's ability to continue as a going concern.

        (c) Exhibits.

<TABLE>
<CAPTION>
 EXHIBIT NUMBER                             DESCRIPTION
 --------------                             -----------
 <S>             <C>
      2.1(1)     Agreement and Plan of Reorganization by and between the
                 Registrant and STB Systems, Inc. dated as of December 13, 1998
                 and the related Stock Option Agreement and form of Voting
                 Agreement

      2.2(9)     Agreement and Plan of Reorganization by and between the
                 Registrant and GigaPixel Corporation dated as of March 27,
                 2000, including selected annexes (attached as Appendix A to the
                 Proxy Statement/Prospectus/Information Statement)

      2.3(11)    Asset Purchase Agreement, dated December 15, 2000, by and among
                 the Registrant, NVIDIA Corporation and Titan Acquisition Corp.
                 No. 2

      2.4*       Registrant's Plan of Dissolution, as approved by Registrant's
                 shareholders on March 27, 2001

      3.1(9)     The Registrant's Restated Articles of Incorporation

      3.2(5)     Certificate of Determination of Rights Preferences and
                 Privileges of Series A Participating Preferred Stock of
                 Registrant

      3.3(12)    The Registrant's Amended and Restated Bylaws

      4.1(2)     Specimen Common Stock Certificate

      4.2(5)     Preferred Shares Rights Agreement dated October 30, 1998,
                 between Registrant and BankBoston, N.A., Rights Agent

      10.1(2)    Form of Indemnification Agreement between the Registrant and
                 each of its directors and officers

      10.2(13)   1995 Employee Stock Plan, as amended

      10.3(2)    1997 Director Option Plan and form of Director Stock Option
                 Agreement thereunder

      10.4(13)   1997 Employee Stock Purchase Plan, as amended
</TABLE>



                                       26
<PAGE>   28
<TABLE>
      <S>        <C>
      10.5(2)    Lease Agreement dated August 7, 1996 between Registrant and
                 South Bay/Fortan, and Tenant Estoppel Certificate dated March
                 25, 1997 between Registrant and CarrAmerica Realty Corporation
                 for San Jose, California office

      10.6(2)    Investors' Rights Agreement dated September 12, 1996, Amendment
                 No. 1 to Investors' Rights Agreement dated November 25, 1996,
                 Amendment No. 2 to Investors' Rights Agreement dated December
                 18, 1996 and Amendment No. 3 to Investors' Rights Agreement
                 dated March 27, 1997 by and among the Registrant and holders of
                 the Registrant's Series A, Series B and Series Preferred Stock

      10.7(3)    Warrant to purchase shares of Common Stock issued to Creative
                 Labs, Inc.

      10.8(2)    Form of Restricted Stock Purchase Agreement between the
                 Registrant and certain shareholders

      10.9(2)    Change of Control Letter Agreement between the Registrant and
                 Scott D. Sellers

      10.10(4)   Software License and Co-marketing Agreement made as of June,
                 1997 by and between Electronic Arts, Inc. and the Registrant

      10.11(4)   Master Equipment Lease dated July 1, 1997 by and between the
                 Registrant and Pentech Financial Services, Inc.]

      10.12(3)   Lease Agreement dated as of January 6, 1998 by and between the
                 Registrant and GEOMAXX

      10.13(3)   1997 Supplementary Stock Option Plan and form of Stock Option
                 Agreement thereunder

      10.14(8)   1999 Supplementary Stock Option Plan and form of Stock Option
                 Agreement thereunder

      10.15(12)  Indemnity Escrow Agreement dated as of July 20, 2000, by and
                 among the Registrant, GigaPixel Corporation, Galapagos
                 Acquisition Corp. and U.S. Trust Company, N.A.

      10.16(12)  Consulting Agreement dated as of July 20, 2000, by and between
                 the Registrant and George T. Haber

      10.17(12)  Noncompetition Agreement dated as of July 20, 2000, by and
                 between the Registrant and George T. Haber

      10.18(12)  Contingent Recourse Non-Negotiable Promissory Note dated as of
                 July 20, 2000, made by George T. Haber for the benefit of
                 GigaPixel Corporation

      10.19(12)  Lock Up Agreement dated as of July 20, 2000, by and between the
                 Registrant and George T. Haber

      10.20(12)  Employment Agreement for Executive Officer dated as of July 20,
                 2000, by and between Gigapixel Corporation and Philip Carmack

      10.21(12)  Contingent Recourse Non-Negotiable Promissory Note dated as of
                 July 20, 2000, made by Philip Carmack for the benefit of
                 GigaPixel Corporation

      10.22(12)  Performance Bonus Agreement dated as of July 20, 2000, by and
                 between GigaPixel Corporation and Philip Carmack

      10.23(14)  GigaPixel Corporation 1997 Employee Incentive Plan
</TABLE>



                                       27

<PAGE>   29
<TABLE>
      <S>        <C>
      10.24(10)  Employment Agreement by and between the Registrant and Alex M.
                 Leupp, as amended effective February 1, 2001

      10.25(10)  Employment Agreement by and between the Registrant and Scott D.
                 Sellers, as amended effective February 1, 2001

      10.26(10)  Employment Agreement by and between the Registrant and Richard
                 Burns, as amended effective February 1, 2001

      10.27(10)  Employment Agreement by and between the Registrant and Stephen
                 A. Lapinski, as amended effective February 1, 2001

      10.28(10)  Employment Agreement by and between the Registrant and Alfred
                 R. Woodhull, as amended effective February 1, 2001

      10.29(11)  Credit Agreement dated December 15, 2000 by and between the
                 Registrant and Titan Acquisition Corp. No. 2

      10.30(11)  Security Agreement dated December 15, 2000 by and between the
                 Registrant and Titan Acquisition Corp. No. 2

      10.31(11)  Trademark Assignment Agreement, by and between 3dfx Interactive
                 Inc. and Titan Acquisition Corp. No. 2

      10.32(11)  Patent License Agreement dated December 15, 2000 by and
                 between the Registrant, NVIDIA Corporation and Titan
                 Acquisition Corp. No. 2

      10.33(11)  Patent Standstill Agreement, dated as of December 15, 2000, by
                 and between NVIDIA Corporation and the Registrant

      10.34(15)  Lease Agreement dated December 6, 1988 by and between STB de
                 Mexico S.A. C.V. (formerly known as Industrias Fronterizas de
                 Chihuahua, S.A. de C.V.) (a subsidiary of STB Systems, Inc., as
                 lessee) and Complejo Industrial Fuentes, S.A. de C.V. lessor),
                 including an Agreement for Modification dated February 25, 1994
                 by and between the same parties

      10.35(16)  Modification Agreement dated October 4, 1996 by and between STB
                 de Mexico, S.A. de C.V. and Complejo Industrial Fuentes, S.A.
                 de C.V.

      10.36(16)  Lease Contract dated October 4, 1996 by and between STB de
                 Mexico, S.A. de C.V. (as lessee) and Complejo Industrial
                 Fuentes, S.A. de C.V. (as lessor)

      10.37(7)   Amendment to Lease Agreement dated January 30, 1997 by and
                 between STB de Mexico, S.A. de C.V. (as lessee) and Complejo
                 Industrial Fuentes, S.A. de C.V.

      10.38*     Settlement Agreement and Mutual Release dated November 29, 2000
                 by and between the Registrant and William E. Ogle

      10.39*     Lease Agreement dated July 23, 1998 by and between CarrAmerica
                 Realty L.P. and the Registrant, and an amendment thereto

      10.40*     Lease Agreement dated May 27, 1999 by and between Balstones
                 Estate Limited and STB Systems, Inc.

      10.41*     Lease Schedule No. 1000063905 dated December 15, 1997 by and
                 between Banc One Leasing Corporation and STB Systems, Inc.

      10.42*     Lease Schedule No. 1000064617 dated April 17, 1998 by and
                 between Banc One Leasing Corporation and STB Systems, Inc.

      10.43*     Lease Schedule No. 1000063259 dated October 31, 1997 by and
                 between Banc One Leasing Corporation and STB Systems, Inc.


      21.1       Subsidiaries of the Registrant

                 (a)     STB Systems, Inc.

                 (b)     3dfx International

                 (c)     GigaPixel Corporation

                 (d)     STB Assembly, Inc.

                 (e)     STB de Mexico, S.A. de C.V.

      23.1*      Consent of PricewaterhouseCoopers LLP, Independent Accountants

      24.1*      Power of Attorney (included on signature page)
</TABLE>

+       Confidential treatment has been granted for portions of these
        agreements. Omitted portions have been filed separately with the
        Commission.

*       Filed herewith.

(1)     Incorporated by reference to Schedule 13D filed by STB Systems, Inc.
        dated December 23, 1998 with respect to the Registrant.

(2)     Incorporated by reference to the exhibits filed with the Registrant's
        Registration Statement on Form S-1 (File No. 333-25365) which was
        declared effective on June 25, 1997.

(3)     Incorporated by reference to the exhibits filed with the Registrant's
        Registration Statement on Form S-1 (File No. 333-46119) filed with the
        Commission on February 11, 1998.

(4)     Incorporated by reference to the exhibits filed with the Registrant's
        Quarterly Report on Form 10-Q for the period ended June 30, 1997.

(5)     Incorporated by reference to the exhibits filed with the Registrant's
        Registration Statement on Form 8-A which was filed with the Commission
        on November 9, 1998.

(6)     Incorporated by reference to the exhibits filed with the Registrant's
        Quarterly Report on Form 10-Q for the period ended June 30, 1998.

(7)     Incorporated by reference to exhibits filed with STB Systems, Inc.'s
        Annual Report on Form 10-K for the fiscal year ended October 31, 1997.

(8)     Incorporated by reference to Exhibit 4.1 filed with the Registrant's
        Registration Statement on Form S-8 (File No. 333-86661) which was filed
        with the Commission on September 7, 1999.

(9)     Incorporated by reference to exhibits filed with the Registrant's
        Registration Statement on Form S-4 (File No. 333-38678) which was filed
        with the Commission on June 6, 2000.

(10)    Incorporated by reference to exhibits filed with the Registrant's
        Current Report on Form 8-K filed on January 26, 2001.

(11)    Incorporated by reference to exhibits filed with NVIDIA Corporation's
        Registration Statement on Form S-4 (File No. 333-54406) which was filed
        with the Commission on January 26, 2001.



                                       28
<PAGE>   30

(12)    Incorporated by reference to exhibits filed with the Registrant's
        Quarterly Report on Form 10-Q filed on September 14, 2000.

(13)    Incorporated by reference to the Registrant's Registration Statement on
        Form S-8 (File No. 333-42156), which was filed with the Commission on
        July 25, 2000.

(14)    Incorporated by reference to the Registrant's Registration Statement on
        Form S-8 (File No. 333-42152) which was filed with the Commission on
        July 25, 2000.

(15)    Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
        Registration Statement on Form S-1 (File No. 333-87612) filed with the
        Commission on December 21, 1994.

(16)    Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
        Registration Statement (File No. 333-14313) filed with the Commission
        on October 17, 1996.


                                       29
<PAGE>   31

                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.

Date:   May 16, 2001

                                       3dfx INTERACTIVE, INC.


                                       By: /s/ ALEX LEUPP
                                           -------------------------------------
                                           Alex Leupp
                                           President and Chief Executive Officer

                                POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Alex Leupp and Richard A. Heddleson, and
each of them, his true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, to sign any and all amendments to this
Annual Report on Form 10-K and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, or any of them, shall do or cause to be done by virtue hereof.

        PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:

<TABLE>
<CAPTION>
              SIGNATURE                                    TITLE                                DATE
              ---------                                    -----                                ----
<S>                                       <C>                                                <C>
            /s/ ALEX LEUPP                President, Chief Executive Officer and Director    May 16, 2001
-------------------------------------     Director (Principal Executive Officer)
             (Alex Leupp)


       /s/ RICHARD A. HEDDLESON           Vice President, Administration and Chief           May 16, 2001
-------------------------------------     Financial Officer (Principal Financial and
        (Richard A. Heddleson)            Accounting Officer)


        /s/ GORDON A. CAMPBELL            Chairman of the board                              May 16, 2001
-------------------------------------
         (Gordon A. Campbell)


          /s/ JAMES HOPKINS               Director                                           May 16, 2001
-------------------------------------
           (James Hopkins)


         /s/ SCOTT D. SELLERS             Director                                           May 16, 2001
-------------------------------------
          (Scott D. Sellers)


           /s/ JAMES WHIMS                Director                                           May 16, 2001
-------------------------------------
            (James Whims)
</TABLE>



                                       30
<PAGE>   32

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of 3dfx Interactive, Inc.

                In our opinion, the accompanying consolidated balance sheets of
discontinued operations and the related consolidated statements of discontinued
operations, of shareholders' equity of discontinued operations and of cash flows
of discontinued operations present fairly, in all material respects, the
financial position of 3dfx Interactive, Inc. and its subsidiaries, at January
31, 2001 and 2000, and the results of their discontinued operations and their
cash flows for each of the years ended January 31, 2001, January 31, 2000 and
December 31, 1998, and for the one month ended January 31, 1999, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

        As discussed in Note 1, in March 2001, the Company's shareholders
approved proposals to liquidate, wind-up and dissolve the Company pursuant to a
plan of dissolution. The Company is proceeding to wind-up its affairs and
dissolve. Accordingly, all activities of the Company are presented as
discontinued operations in the accompanying consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Jose, California
March 27, 2001, except for Note 1 and Note 10,
which are as of April 26, 2001



                                      F-1
<PAGE>   33

                             3DFX INTERACTIVE, INC.

             CONSOLIDATED BALANCE SHEETS OF DISCONTINUED OPERATIONS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           JANUARY 31,           JANUARY 31,
                                                                                              2001                  2000
                                                                                           ----------            ----------
<S>                                                                                        <C>                   <C>
ASSETS
Current Assets:
        Cash and cash equivalents ..............................................            $   9,391             $  41,818
        Short-term investments .................................................                   --                24,012
        Accounts receivable less allowance for doubtful accounts
               of  $9,992 and $6,681 ...........................................                6,398                66,160
        Inventory, net .........................................................               22,358                45,065
        Deferred tax assets ....................................................               35,000                13,082
        Other current assets ...................................................                1,214                15,325
        Other assets held for sale .............................................               45,245                    --
                                                                                            ---------             ---------
                         Total current assets ..................................              119,606               205,462
Property and equipment, net ....................................................                   --                40,269
Goodwill and other intangibles .................................................                   --                45,651
Other assets ...................................................................                   --                 4,729
                                                                                            ---------             ---------
                                                                                            $ 119,606             $ 296,111
                                                                                            =========             =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
        Line of credit .........................................................            $      --             $  25,000
        Accounts payable .......................................................               64,245                60,879
        Accrued liabilities ....................................................               11,642                20,385
        Nvidia term loan .......................................................               15,000                    --
        Other current liabilities ..............................................                6,366                   732
                                                                                            ---------             ---------
                     Total current liabilities .................................               97,253               106,996
                                                                                            ---------             ---------

Capital lease obligations, less current portion ................................                   --                 1,881
                                                                                            ---------             ---------

Commitments and Contingencies (Note 10)

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;
                39,787,740 and 24,442,370 shares issued and outstanding ........              430,922               251,883
         Warrants ..............................................................                  242                   242
         Deferred compensation .................................................                   --                  (172)
         Accumulated other comprehensive income (loss) .........................               (1,722)                1,844
         Accumulated deficit ...................................................             (407,089)              (66,563)
                                                                                            ---------             ---------
                     Total shareholders' equity ................................               22,353               187,234
                                                                                            ---------             ---------
                                                                                            $ 119,606             $ 296,111
                                                                                            =========             =========
</TABLE>


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



                                      F-2
<PAGE>   34

                             3DFX INTERACTIVE, INC.

               CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>


                                                                            FISCAL YEAR ENDED                        ONE
                                                              ----------------------------------------------      MONTH ENDED
                                                              JANUARY 31,       JANUARY 31,      DECEMBER 31,     JANUARY 31,
                                                                 2001              2000              1998            1999
                                                              ----------        ----------       -----------      ---------
<S>                                                           <C>               <C>              <C>              <C>
Revenues ..............................................        $ 233,067         $ 360,523         $202,601        $ 17,048
Cost of revenues ......................................          242,989           287,872          119,618          14,527
                                                               ---------         ---------         --------        --------
Gross profit (loss) ...................................           (9,922)           72,651           82,983           2,521
                                                               ---------         ---------         --------        --------
Operating expenses:
   Research and development ...........................           65,394            66,062           34,045           3,340
   Selling, general and administrative ................           89,106            63,468           35,441           4,614
   In-process research and development ................           66,250             4,302               --              --
   Amortization of goodwill and other intangibles .....           24,449            10,228               --              --
   Impairment of goodwill and other intangibles .......          117,065                --               --              --
   Restructuring expense ..............................               --             4,382               --              --
                                                               ---------         ---------         --------        --------
           Total operating expenses ...................          362,264           148,442           69,486           7,954
                                                               ---------         ---------         --------        --------
Income (loss) from discontinued operations ............         (372,186)          (75,791)          13,497          (5,433)
Interest and other income (expense), net ..............           (4,812)            2,180           15,869             322
                                                               ---------         ---------         --------        --------
Income (loss) from discontinued operations before
   income taxes .......................................         (376,998)          (73,611)          29,366          (5,111)
Provision (benefit) for income taxes ..................          (36,472)          (10,324)           7,663          (1,636)
                                                               ---------         ---------         --------        --------
Net income (loss) from discontinued operations ........        $(340,526)        $ (63,287)        $ 21,703        $ (3,475)
                                                               =========         =========         ========        ========
Net income (loss) per share from discontinued
 operations:
   Basic ..............................................        $  (10.63)        $   (2.81)        $   1.45        $  (0.22)
                                                               =========         =========         ========        ========
   Diluted ............................................        $  (10.63)        $   (2.81)        $   1.33        $  (0.22)
                                                               =========         =========         ========        ========
Shares used in net income (loss) per share from
discontinued operations calculations:
   Basic ..............................................           32,041            22,536           14,917          15,641
                                                               ---------         ---------         --------        --------
   Diluted ............................................           32,041            22,536           16,353          15,641
                                                               ---------         ---------         --------        --------
</TABLE>

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



                                      F-3
<PAGE>   35

                             3DFX INTERACTIVE, INC.

  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY OF DISCONTINUED DISCONTINUED
                                   OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                   CONVERTIBLE
                                                                 PREFERRED STOCK                 COMMON STOCK
                                                              ----------------------      ----------------------------
                                                              SHARES          AMOUNT        SHARES            AMOUNT        WARRANTS
                                                              ------          ------      -----------        ---------      --------
<S>                                                           <C>             <C>         <C>                <C>              <C>
Balance at December 31, 1997 .....................                --            --         12,566,630        $  66,717        $242
Issuance of common stock in connection
  with secondary public offering, less
  issuance costs .................................                                          2,463,140           54,752
Issuance of common stock under stock
  option and purchase plans ......................                                            643,451            2,301
Common stock repurchased .........................                                             (2,154)              (1)
Tax benefit related to exercise of
  stock options ..................................                                                               2,800
Amortization of deferred compensation ............
Net income from discontinued operations ..........
                                                              ------        ------        -----------        ---------        ----
Balance at December 31, 1998 .....................                --            --         15,671,067          126,569         242
Issuance of common stock under stock
  option plan ....................................                                             44,815              140
Amortization of deferred compensation ............
Net loss from discontinued operations ............
                                                              ------        ------        -----------        ---------        ----
Balance at January 31, 1999 ......................                --            --         15,715,882          126,709         242
Issuance of common stock under stock
  option and purchase plans ......................                                            977,235            4,899
Common stock repurchased .........................                                           (517,501)          (6,775)
Amortization of deferred compensation ............
STB acquisition ..................................                                          8,266,754          127,050
Components of comprehensive loss from
  discontinued operations:
  Net loss from discontinued operations ..........
  Unrealized gain on investment ..................

Total comprehensive loss from
  discontinued operations
                                                              ------        ------        -----------        ---------        ----
Balance at January 31, 2000 ......................                                         24,442,370          251,883         242
Issuance of common stock under stock
  option and purchase plans ......................                                            791,618            4,108
Common stock repurchased .........................                                             (1,224)              (3)
GigaPixel acquisition ............................                                         14,554,976          174,934
Amortization of deferred compensation ............
Cancellation of unvested GigaPixel options .......
Components of comprehensive loss from
  discontinued operations:
  Net loss from discontinued operations ..........
  Unrealized loss on investment ..................

Total comprehensive loss from
  discontinued operations ........................
                                                              ------        ------        -----------        ---------        ----
Balance at January 31, 2001 ......................                --            --         39,787,740        $ 430,922        $242
                                                              ======        ======        ===========        =========        ====
</TABLE>

<TABLE>
<CAPTION>
                                                                                ACCUMULATED
                                                                                  OTHER
                                                                DEFERRED       COMPREHENSIVE        ACCUMULATED
                                                              COMPENSATION      INCOME (LOSS)         DEFICIT              TOTAL
                                                              ------------     --------------       -----------          ---------
<S>                                                           <C>              <C>                  <C>                  <C>
Balance at December 31, 1997 .....................               $(1,181)          $    --           $ (21,504)          $  44,274
Issuance of common stock in connection
  with secondary public offering, less
  issuance costs .................................                                                                          54,752
Issuance of common stock under stock
  option and purchase plans ......................                                                                           2,301
Common stock repurchased .........................                                                                              (1)
Tax benefit related to exercise of
  stock options ..................................                                                                           2,800
Amortization of deferred compensation ............                   484                                                       484
Net income from discontinued operations ..........                                                      21,703              21,703
                                                                 -------           -------           ---------           ---------
Balance at December 31, 1998 .....................                  (697)                                  199             126,313
Issuance of common stock under stock
  option plan ....................................                                                                             140
Amortization of deferred compensation ............                    41                                                        41
Net loss from discontinued operations ............                                                      (3,475)             (3,475)
                                                                 -------           -------           ---------           ---------
Balance at January 31, 1999 ......................                  (656)                               (3,276)            123,019
Issuance of common stock under stock
  option and purchase plans ......................                                                                           4,899
Common stock repurchased .........................                                                                          (6,775)
Amortization of deferred compensation ............                   484                                                       484
STB acquisition ..................................                                                                         127,050
Components of comprehensive loss from
  discontinued operations:
  Net loss from discontinued operations ..........                                                     (63,287)            (63,287)
  Unrealized gain on investment ..................                                   1,844                                   1,844
                                                                                                                         ---------
Total comprehensive loss from
  discontinued operations ........................                                                                         (61,443)
                                                                 -------           -------           ---------           ---------
Balance at January 31, 2000 ......................                  (172)            1,844             (66,563)            187,234
Issuance of common stock under stock
  option and purchase plans ......................                                                                           4,108
Common stock repurchased .........................                                                                              (3)
GigaPixel acquisition ............................                (6,946)                                                  167,988
Amortization of deferred compensation ............                 1,741                                                     1,741
Cancellation of unvested GigaPixel options .......                 5,377                                                     5,377
Components of comprehensive loss from
  discontinued operations:
  Net loss from discontinued operations ..........                                                    (340,526)           (340,526)
  Unrealized loss on investment ..................                                  (3,566)                                 (3,566)
                                                                                                                         ---------
Total comprehensive loss from
  discontinued operations ........................                                                                        (344,092)
                                                                 -------           -------           ---------           ---------
Balance at January 31, 2001 ......................               $    --           $(1,722)          $(407,089)          $  22,353
                                                                 =======           =======           =========           =========
</TABLE>


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



                                      F-4
<PAGE>   36

                             3DFX INTERACTIVE, INC.

        CONSOLIDATED STATEMENTS OF CASH FLOWS OF DISCONTINUED OPERATIONS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  FISCAL YEAR ENDED                    ONE MONTH
                                                                    ---------------------------------------------         ENDED
                                                                    JANUARY 31,      JANUARY 31,      DECEMBER 31,     JANUARY 31,
                                                                      2001              2000             1998             1999
                                                                    ----------       ----------       -----------      ----------
<S>                                                                 <C>              <C>              <C>              <C>
Cash flows from operating activities:
   Net income (loss) from discontinued operations ..........        $(340,526)        $(63,287)        $ 21,703         $ (3,475)
   Adjustments to reconcile net income (loss) from
      discontinued operations tonet cash used in
      discontinued operating activities:
        Depreciation .......................................           24,126           14,930            5,249              675
        Amortization of goodwill and other intangibles .....           24,449           10,228               --               --
        Amortization of deferred stock compensation ........            1,741              484              484               40
        Write-off of acquired in-process research and
          development ......................................           66,250            4,302               --               --
        Write-down of fixed assets .........................            5,521               --               --               --
        Impairment of goodwill and other intangibles .......          117,065               --               --               --
        Increase (decrease) in allowance for doubtful
          accounts .........................................            3,311             (646)           1,972            4,449
        Gain on disposal of property and equipment, net ....             (711)              --               --               --
        Tax benefit related to exercise of stock options ...               --               --            2,800               --
        Deferred income taxes ..............................          (27,989)             398           (7,171)              --
        Changes in assets and liabilities:
           Accounts receivable .............................           58,823            7,087          (24,920)           4,341
           Inventory .......................................           22,707            5,339          (20,146)           6,008
           Other assets ....................................            8,971           (5,318)          (2,285)             327
           Accounts payable ................................            3,155            1,765           28,531          (11,195)
           Accrued and other liabilities ...................          (16,619)          (8,738)          13,346             (869)
                                                                    ---------         --------         --------         --------
        Net cash provided by/(used in) discontinued
          operating activities .............................          (49,726)         (33,456)          19,563              301
                                                                    ---------         --------         --------         --------
Cash flows from investing activities:
        Sales (purchases) of short-term investments, net ...           24,012             (893)           2,926          (18,330)
        Purchases of property and equipment ................          (17,683)         (25,733)         (13,844)          (1,459)
        Proceeds from disposal of property and equipment ...            9,117               --               --               --
        Acquisitions of GigaPixel and STB Systems ..........            5,319           21,243               --               --
                                                                    ---------         --------         --------         --------
        Net cash provided by/(used in) investing
          activities .......................................           20,765           (5,383)         (10,918)         (19,789)
                                                                    ---------         --------         --------         --------
Cash flows from financing activities:
        Proceeds from secondary public offering, net .......               --               --           54,752               --
        Proceeds from issuance (repurchase) of common
          stock, net .......................................            4,105           (1,876)           2,300              140
        Principal payments of capitalized lease
          obligations, net .................................           (2,081)            (358)            (935)             108
        Proceeds from Nvidia term loan .....................           15,000               --               --               --
        Proceeds (payments) on line of credit, net .........          (20,490)           9,209             (777)              --
                                                                    ---------         --------         --------         --------
        Net cash provided by/(used in) financing
          activities .......................................           (3,466)           6,975           55,340              248
                                                                    ---------         --------         --------         --------
Net (decrease) increase in cash and cash equivalents .......          (32,427)         (31,864)          63,985          (19,240)
Cash and cash equivalents at beginning of period ...........           41,818           73,682           28,937           92,922
                                                                    ---------         --------         --------         --------
Cash and cash equivalents at end of period .................        $   9,391         $ 41,818         $ 92,922         $ 73,682
                                                                    =========         ========         ========         ========
SUPPLEMENTAL INFORMATION:
        Cash paid during the period for interest ...........        $   1,804         $  1,289         $    141         $      3
        Cash paid during the period for income taxes .......              390            2,361            6,200               --
</TABLE>


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



                                      F-5
<PAGE>   37

                             3DFX INTERACTIVE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -- 3DFX AND ITS SIGNIFICANT ACCOUNTING POLICIES:

3dfx

        3dfx Interactive, Inc. ("3dfx" or "the Company") was incorporated in
California on August 24, 1994. 3dfx developed high performance, cost-effective
graphics chips, graphics boards, software and related technology that enable an
interactive and realistic 3D experience across multiple hardware platforms. 3dfx
has subsidiaries in the United States, Mexico, and other key markets in the
world. The consolidated financial statements include the financial statements of
3dfx and its wholly owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.

        In March 1999, the Company's board of directors determined that it would
be in the best interest of 3dfx and its shareholders to change its fiscal year
from a December fiscal year to a year beginning on February 1 and ending on
January 31, beginning on February 1, 1999. Accordingly, 3dfx has separately
presented the results of discontinued operations and cash flows for the one
month period ended January 31, 1999.

        As described below, on March 27, 2001, 3dfx's shareholders approved
proposals to liquidate, wind-up and dissolve 3dfx pursuant to a plan of
dissolution. 3dfx is proceeding to wind-up its affairs and dissolve.
Accordingly, all activities of 3dfx are presented as discontinued operations in
the accompanying consolidated financial statements.

Asset Sale and Plan of Dissolution

        In the fall of 2000, 3dfx began experiencing financial difficulties due
in part to substantially reduced demand in the retail channel for its products.
This reduced demand is attributable to a number of factors, including, in part,
its failure to introduce products in a timely manner and from disappointing
customer response to its existing products, as well as reduced demand in the
retail channel in general and the add-in graphics segment in particular. In
addition, 3dfx's high research and development costs and substantial debt
burden, together with the loss of several large customers due to 3dfx's May 1999
acquisition of STB Systems, Inc. and its inability to refinance its debt on
commercially reasonable terms, aggravated its financial difficulties. After
extensive exploration and evaluation of various strategic alternatives, the 3dfx
board of directors concluded that the liquidation, winding up and dissolution of
3dfx provided the best protection to 3dfx's creditors and was in the best
interests of its shareholders.

        On December 15, 2000, 3dfx entered into an asset purchase agreement with
Nvidia Corporation ("Nvidia") and a subsidiary of Nvidia ("Nvidia Sub") under
which Nvidia Sub would acquire certain of 3dfx's assets, including its core
graphics processor assets. Under the terms of the asset purchase agreement,
Nvidia agreed to pay 3dfx $70.0 million in cash and 1,000,000 shares of
registered Nvidia common stock, subject to the satisfaction of certain
conditions specified in the asset purchase agreement as described below. Upon
signing the asset purchase agreement, Nvidia loaned to 3dfx $15.0 million in
cash for working capital.

        The asset sale to Nvidia Sub was approved by 3dfx shareholders on March
27, 2001, and on April 18, 2001 substantially all of 3dfx's assets were sold to
Nvidia Sub. Upon closing, 3dfx received $55.0 million in cash, which amount was
net of repayment of the $15.0 million cash loan 3dfx received upon signing the
asset purchase agreement. In addition, under the terms of the asset purchase
agreement, 3dfx and Nvidia caused the pending patent litigation between the
parties to be dismissed with prejudice. Under the terms of the asset purchase
agreement, 3dfx may receive part or all of a one-time post-closing cash advance
of up to $25.0 million upon its request if it is not in breach of the asset
purchase agreement and it has expended all or substantially all of the $70.0
million cash consideration in payment of its liabilities and determines in good
faith that (i) the remaining portion of the cash



                                      F-6
<PAGE>   38

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


consideration previously received by it is not sufficient to pay its remaining
liabilities, and (ii) such remaining liabilities could and would be satisfied if
3dfx received the post-closing cash advance and applied it to the payment of
such liabilities, and if Nvidia does not determine in good faith that the
requested amount would not permit 3dfx to pay in full its remaining liabilities.
In the event that 3dfx receives the post-closing cash advance, the 1,000,000
shares of Nvidia common stock comprising the remaining consideration otherwise
payable to 3dfx under the asset purchase agreement will be reduced by the number
of shares equal to the quotient determined by dividing the amount of the
post-closing cash advance by $50. Irrespective of whether 3dfx receives a
post-closing advance, the shares of Nvidia common stock will only become
deliverable to 3dfx upon satisfaction of certain conditions specified in the
asset purchase agreement, including the completion of the winding up of the
business of 3dfx pursuant to 3dfx's plan of dissolution, and 3dfx's
certification that (i) all liabilities of 3dfx and its subsidiaries have been
paid in full or otherwise provided for and (ii) 3dfx has or will be validly
dissolved.

        On December 15, 2000, the board of directors of 3dfx also approved a
plan of dissolution and on March 27, 2001 this plan of dissolution was approved
by 3dfx's shareholders. On March 30, 2001, 3dfx filed a certificate of election
to liquidate, wind up and dissolve with the California Secretary of State's
office. 3dfx is proceeding to wind up its affairs and is no longer operating or
generating revenues in the normal course of business. Accordingly, all of the
activities of 3dfx have been presented as discontinued operations and assets
have been adjusted, as appropriate, to estimated net realizable value. During
the fiscal year ended January 31, 2001, 3dfx recorded a charge of $7.9 million
for the write-down of inventory and a charge of $5.5 million for the write-down
of property and equipment. 3dfx also recorded a charge of $117.1 million for the
impairment of goodwill and other intangibles during the fiscal year ended
January 31, 2001. In accordance with 3dfx's accounting policy, 3dfx assessed
impairment of its long-lived assets and determined that the carrying amount of
goodwill and other intangibles would not be recoverable due to the deteriorating
condition of its operations. The impairment loss was measured as the amount by
which the carrying amount of the assets exceeded the estimated fair value of the
assets, as determined using the present value of expected future cash flows.

        3dfx has substantially reduced its costs in order to conserve its
resources. These cost cutting measures include a reduction of a significant
portion of 3dfx's workforce, reduction in office space and other efforts to
reduce non-essential expenses. 3dfx has also been providing manufacturing
services to third parties to help cover the overhead associated with its Juarez,
Mexico manufacturing facility pending the sale or shut-down of that facility.
Due to these cost-cutting measures, 3dfx's operations have been substantially
curtailed.

        3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. However, 3dfx believes that it will have
sufficient cash to pay all of its and its subsidiaries' known current and
determinable liabilities. However, the amount of unknown or contingent
liabilities cannot be quantified and could decrease or eliminate any remaining
assets available for distribution to 3dfx's shareholders. Further, if 3dfx or
its subsidiaries are subject to any contingent liabilities, this could require
that it establish reserves that could delay any distribution to 3dfx
shareholders. Because of the uncertainties as to the precise net realizable
value of 3dfx's assets and the settlement amount of 3dfx's and its subsidiaries'
debts and liabilities, 3dfx cannot at this time determine the timing or amount
of distributions that may be made to its shareholders, if any. Only if there are
assets remaining at the time of 3dfx's dissolution will 3dfx shareholders
receive a distribution of those assets.

Use of estimates

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Revenue recognition

        Revenue from product sales is generally recognized upon product
shipment. Revenue resulting from development contracts has been recognized under
the percentage of completion method based upon costs incurred relative to total
contract costs or when the related contractual obligations have been fulfilled
and fees were billable. Costs associated with development contracts are included
in research and development.

Cash equivalents and investments

        3dfx considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. At January 31, 2001 and
2000, approximately $5,000,000 and $30,291,000, respectively, of money market
funds and commercial paper instruments, the fair value of which approximate
cost, are included in cash and cash equivalents and short-term investments.




                                      F-7
<PAGE>   39

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


        Investments in debt and equity securities which have maturities greater
than three months from the date of acquisition are classified as "available for
sale". Investments classified as "available for sale" are reported at fair value
with unrealized gains and losses, net of related tax, if any, reported as a
separate component of shareholders' equity. The unrealized loss of $1.7 million
at January 31, 2001 and the unrealized gain of $1.8 million at January 31, 2000
related to an investment in common stock of a public company. This investment,
which totaled $1.2 million and $4.8 million at January 31, 2001 and 2000,
respectively, is included in other current assets.

Concentration of credit risk

        Financial instruments that potentially subject 3dfx to significant
concentrations of credit risk consist principally of cash equivalents and
accounts receivable.

        3dfx invests primarily in money market accounts, commercial paper
instruments and term notes. Cash equivalents and short-term investments are
maintained with high quality institutions and their composition and maturities
are regularly monitored by management.

        3dfx performs ongoing credit evaluations of its customers' financial
condition and maintains an allowance for uncollectible accounts receivable based
upon the expected collectibility of all accounts receivable. There were no
customers which accounted for greater than 10% of accounts receivable at January
31, 2001, and one customer accounted for 11.4% of accounts receivable at January
31, 2000.

        The following table summarizes the revenues from customers in excess of
10% of the total revenues:

<TABLE>
<CAPTION>
                                                  FISCAL YEAR ENDED                ONE MONTH
                                     ------------------------------------------       ENDED
                                     JANUARY 31,      JANUARY 31,   DECEMBER 31,   JANUARY 31,
                                        2001             2000          1998           1999
                                     -----------      -----------   ------------   -----------
<S>                                  <C>              <C>           <C>            <C>
A ............................            16%              13%           --             --
B ............................            10%              --            --             --
C ............................            --               --            32%            --
D ............................            --               --            26%            24%
E ............................            --               --            16%            25%
F ............................            --               --            --             12%
</TABLE>

Inventory

        Inventory is stated at the lower of cost or market, cost being
determined under the first-in, first-out method.

Other assets held for sale

        Other assets held for sale are stated at the lower of cost or
management's best estimate of net realizable value.

Property and equipment

        Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three years or less.

        Long-lived assets held and used by 3dfx are reviewed for impairment
whenever events or changes in circumstances indicate that their net book value
may not be recoverable. An impairment loss is recognized if the sum of the
expected future cash flows (undiscounted and before interest) from the use of
the asset is less than the net book value of the asset. The amount of the
impairment loss will generally be measured as the difference between net book
values of the assets and their estimated fair values.



                                      F-8
<PAGE>   40

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


        During the fiscal year ended January 31, 2001, the Company was 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. The Company previously
entered into an interest rate swap agreement that fixed the interest rate on a
majority of the lease obligation at 7.55%. During the fourth quarter of fiscal
2001, the swap agreement was canceled in exchange for a cash payment of
approximately $300,000. During January 2001, the Company exercised its option to
cause the building to be sold and entered into an operating lease for
approximately 50% of the space for the next six months. The proceeds of the sale
were used to retire the underlying debt. A net loss of $2.1 million was recorded
on the sale of the building, which is reflected in other income (expense) for
fiscal 2001.

        The Company held an option to purchase real estate adjoining its Texas
headquarters. The option entitled the Company to purchase the real estate for
$3.9 million, but the option would increase to the current market value of the
real estate if the option was not exercised before December 31, 2000. The
Company exercised the option in December 2000, and has sold the real estate to a
third party for $6.7 million, resulting in a gain of $2.8 million, which is
reflected in either income (expense) for fiscal 2001.

Research and software development costs

        Research and development costs are charged to operations as incurred.
Software development and prototype costs incurred prior to the establishment of
technological feasibility are included in research and development and are
expensed as incurred. Software development costs incurred subsequent to the
establishment of technological feasibility through the period of general market
availability of the product are capitalized, if material. To date, all software
development costs incurred subsequent to the establishment of technological
feasibility have been expensed as incurred due to their immateriality.

Stock-based compensation

        The Company accounts for its stock option plans and employee stock
purchase plan in accordance with provisions of the Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
complies with the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation". If there
is any compensation cost under the rules of APB 25, the expense is amortized
using a straight-line method over the vesting period. In accordance with SFAS
No. 123, the Company provides additional pro forma disclosures in Note 8.

Comprehensive income (loss) from discontinued operations

        For the fiscal year ended January 31, 2001, comprehensive loss from
discontinued operations, including net loss from discontinued operations and an
unrealized loss on an available for sale investment was $344.1 million. For the
fiscal year ended January 31, 2000, comprehensive loss from discontinued
operations, including net loss from discontinued operations and an unrealized
gain on an available for sale investment was $61.4 million.

Earnings (loss) per share from discontinued operations

        Basic earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the periods. Diluted earnings (loss)
per share is computed using the weighted average number of common and
potentially dilutive common shares outstanding during the periods, except those
that are antidilutive. Reconciliations of the numerators and denominators of the
basic and diluted per share computations are as follows (in thousands):



                                      F-9
<PAGE>   41

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                            FISCAL YEAR ENDED                           ONE MONTH
                                                           -----------------------------------------------------           ENDED
                                                           JANUARY 31,           JANUARY 31,         DECEMBER 31,       JANUARY 31,
                                                              2001                  2000                1998               1999
                                                           ----------            ----------          -----------        ----------
<S>                                                        <C>                   <C>                 <C>                <C>
Net income (loss) from discontinued
   operations available to common
   shareholders (numerator) ......................          $(340,526)            $(63,287)            $21,703            $ (3,475)
                                                            ---------             --------             -------            --------

Weighted average shares outstanding
   (denominator for basic computations) ..........             32,041               22,536              14,917              15,641
                                                            =========             ========             =======            ========

Effect of dilutive securities-common stock
   equivalents ...................................                 --                   --               1,436                  --

Weighted average shares outstanding
   (denominator for diluted computation) .........             32,041               22,536              16,353              15,641
                                                            =========             ========             =======            ========

Basic income (loss) per share from
   discontinued operations .......................          $  (10.63)            $  (2.81)            $  1.45            $  (0.22)
                                                            =========             ========             =======            ========

Diluted income (loss) per share from
   discontinued operations .......................          $  (10.63)            $  (2.81)            $  1.33            $  (0.22)
                                                            =========             ========             =======            ========
</TABLE>

        During the fiscal years ended January 31, 2001 and 2000, the one month
period ended January 31, 1999 and the fiscal year ended December 31, 1998,
options to purchase approximately 5,664,000, 6,484,389, 3,499,000, and 560,392
shares and warrants to purchase approximately 36,960, 36,960, 36,960, and 36,960
shares, respectively, were outstanding but are not included in the computation
because they are antidilutive.

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 3dfx has not entered into any
derivative contracts. The effective date of SFAS 133, as amended, is for fiscal
quarters of fiscal years beginning after June 15, 2000. As the Company holds no
derivative financial instruments at January 31, 2001, the Company does not
expect that the adoption of SFAS 133 will have a material effect on its
financial position or results of operations.

NOTE 2 -- ACQUISITION OF STB SYSTEMS, INC.:

        In May 1999, 3dfx completed a merger with STB Systems, Inc. ("STB"). As
a result of the merger, STB became 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 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-Scholes 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 certain intangibles acquired, $4.3
million to purchased in-process research and development ("IPR&D"), $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 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.



                                      F-10
<PAGE>   42

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


        As described in Note 1, the Company recorded a charge of $117.1 million
for the impairment of goodwill and other intangibles. A portion of the impaired
goodwill and other intangibles originally arose as a result of the STB
acquisition.

        Pro forma results of discontinued operations for the combined company as
if the transaction had been consummated at the beginning of the periods
presented are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                           FISCAL YEAR ENDED
                                                                                  -----------------------------------
                                                                                  JANUARY 31              DECEMBER 31,
                                                                                     2000                    1998
                                                                                  -----------             -----------
                                                                                              (unaudited)
<S>                                                                               <C>                     <C>
Revenues .............................................................            $   441,312             $   467,441
Net income (loss) from discontinued operations .......................            $   (81,061)            $     9,110
Basic net income (loss) per share from discontinued operations .......            $     (3.39)            $      0.40
Diluted net income (loss) per share from discontinued operations .....            $     (3.39)            $      0.37
</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.

NOTE 3 -- 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 3dfx stock for a period of a few
days before and after the announcement of the merger), $2.7 million in vested
GigaPixel stock option costs (being determined under the Black Scholes 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 had estimated and useful
lives and estimated first year amortization, as follows:

<TABLE>
<CAPTION>
                                                                      ESTIMATED             ANNUAL
                                                  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 ..........................             103,510,900            5 years             20,702,180
</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.

        As described in Note 1, the Company recorded a charge of $117.1 million
for the impairment of goodwill and other intangibles. A portion of the impaired
goodwill and other intangibles originally arose as a result of the GigPixel
acquisition.

        Net Cash Flows. The net cash flows from the identified projects were
based on management estimates of revenues, research and development costs,
selling, general and administrative costs, royalty costs and income taxes from
those projects. These estimates were based on the assumptions mentioned below.
The research and



                                      F-11
<PAGE>   43

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


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 were 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
were expected to peak in the year ending January 31, 2005 and decline in 2006 as
other new products were expected to become available. These projections were
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 were in line with comparable industry margins. Research and
development, as well as sales, general and administrative costs were consistent
with the industry averages of companies of comparable size and age.

        Discount Rate. Discounting the net cash flows back to their present
value was based on the industry WACC. The industry WACC was approximately 28%.
The discount rate used in discounting the net cash flows from IPR&D was 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 Company anticipates beginning to ship
product incorporating this technology in the calendar year 2001. The percentage
of completion related to GigaPixel technology was 72.

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

<TABLE>
<CAPTION>
                                                                             FISCAL YEAR ENDED
                                                                             JANUARY 31, 2001
                                                                             -----------------
                                                                                 (UNAUDITED)
<S>                                                                          <C>
Revenues .............................................................            $ 239,011
Net loss from discontinued operations ................................             (281,649)
Basic and diluted net loss per share from discontinued operations ....                (7.16)
</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 for the unvested portion of GigaPixel options assumed by
3dfx in the amount of approximately $6.9 million. This deferred compensation was
to be expensed over the remaining life of unvested the GigaPixel options assumed
by 3dfx. For the fiscal year ended January 31, 2001, the Company recorded
amortization of deferred compensation related to the GigaPixel acquisition of
$1.5 million which has been included in research and development expense. On
December 15, 2000, all of these employees were terminated and their unvested
options were canceled. Accordingly, the remaining unamortized deferred
compensation, all of which related to the unvested options, was reversed.

NOTE 4 -- BALANCE SHEET COMPONENTS (IN THOUSANDS):

<TABLE>
<CAPTION>
                                        JANUARY 31,        JANUARY 31,
                                           2001               2000
                                        ----------         ----------
<S>                                     <C>                <C>
Inventory, net:
   Raw material ..............            $ 1,972            $26,708
   Work-in-progress ..........                 70              8,940
   Finished goods ............             20,316              9,417
                                          -------            -------
                                          $22,358            $45,065
                                          -------            -------
</TABLE>



                                      F-12
<PAGE>   44

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
                                                            JANUARY 31,       JANUARY 31,
                                                               2001              2000
                                                            ----------        ----------
<S>                                                         <C>               <C>
Other assets held for sale:
    Computer equipment ...........................            $ 8,268            $ --
    Purchased computer software ..................              7,653              --
    Furniture and equipment ......................              4,428              --
    Goodwill and other intangibles ...............             20,765              --
    Other assets .................................              4,131              --
                                                              -------            ----
                                                              $45,245            $ --
                                                              =======            ====
</TABLE>

        As described in Note 1, during the fiscal year ended January 31, 2001,
the Company recorded a charge of $117.1 million for the impairment of goodwill
and other intangibles, as well as a charge of $5.5 million for the write-down of
computer equipment, purchased computer software, and furniture and equipment.

<TABLE>
<CAPTION>
                                                            JANUARY 31,        JANUARY 31,
                                                               2001               2000
                                                            ----------         ----------
<S>                                                         <C>                <C>
Property and equipment:
   Computer equipment ............................            $    --            $ 27,108
   Purchased computer software ...................                 --              18,035
   Furniture and equipment .......................                 --              28,113
                                                              -------            --------
                                                                                   73,256
   Less:  Accumulated depreciation ...............                 --             (32,987)
                                                              -------            --------
                                                              $    --            $ 40,269
                                                              =======            ========
</TABLE>

<TABLE>
<CAPTION>
                                                            JANUARY 31,        JANUARY 31,
                                                               2001               2000
                                                            ----------         ----------
<S>                                                         <C>                <C>
Accrued liabilities:
   Income taxes payable ..........................            $    96            $ 4,807
   Accrued salaries, wages and benefits ..........              3,524              4,150
   Sales returns reserves ........................                 --              1,245
   Accrued marketing costs .......................                 --              3,104
   Deferred tax liability ........................              4,735              5,513
   Other accrued liabilities .....................              3,287              1,566
                                                              -------            -------
                                                              $11,642            $20,385
                                                              =======            =======
</TABLE>

NOTE 5 -- RESTRUCTURING CHARGES:

        During the fiscal year ended January 31, 2000, 3dfx incurred
restructuring expenses totaling approximately $4,382,000. Approximately
$2,552,000 of these amounts related to downsizing the expense levels of 3dfx
given 3dfx's fiscal 2000 financial losses, and $1,830,000 related to a one-time
reduction in workforce related to the merger with STB.

NOTE 6 -- DEBT:

        As discussed in Note 1, upon signing the Asset Purchase Agreement on
December 15, 2000, Nvidia loaned to 3dfx $15 million for working capital under a
term loan with interest payable at a rate of 6.1% per annum. At January 31,
2001, the Company had accrued interest payable of approximately $114,000. The
full amount of this term loan was secured by the collateral identified to be
acquired under the Asset Purchase Agreement. Upon closing



                                      F-13
<PAGE>   45

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


of the asset sale to Nvidia on April 18, 2001, 3dfx received $55 million in
cash, which amount was net of repayment of the $15 million loan.

        During the fiscal year ended January 31, 2001, the Company recorded
liabilities of $5.9 million reflecting future payments due within twelve months
under software license agreements. At January 31, 2001, the full amount of this
liability remained outstanding and is presented as other current liabilities.

        3dfx had a line of credit agreement with a bank, which provided for
maximum borrowings in an amount up to the lesser of 80% of eligible accounts
receivable or $25.0 million. Borrowings under the line were secured by $25.0
million of cash and short-term investments and all of 3dfx's owned assets and
bore interest at Libor plus 100 basis points. The agreement required that 3dfx
maintain certain levels of tangible net worth and generally prohibited 3dfx from
paying cash dividends. In November 2000, the $25.0 million cash and short-term
investments previously pledged to secure the line of credit was used to payoff
the entire outstanding balance on the line of credit. The line of credit expired
on December 19, 2000. At January 31, 2001 and 2000, $0 and $25,000,000 was
outstanding under this line of credit.

        3dfx had a $3.0 million term loan which was payable in 60 monthly
installments of principal and interest beginning on November 1, 1997. The term
loan bore interest at Libor plus 250 basis points. At January 31, 2000,
$1,944,000, was outstanding under the term loan. The term loan was repaid during
fiscal 2001 and at January 31, 2001 there was no balance outstanding.

        3dfx has a lease line of credit with a bank, which provides for the
purchase of up to $5 million of property and equipment. Borrowings under this
line are secured by all of 3dfx's owned assets and bear interest at the bank's
prime rate plus 0.75% per annum. The agreement requires that 3dfx maintain
certain financial ratios and levels of tangible net worth, profitability and
liquidity. The equipment line of credit expires in December 2001. At January 31,
2001 and 2000, there were no borrowings outstanding under this equipment line of
credit.

NOTE 7 -- SHAREHOLDERS' EQUITY:

Common stock

        3dfx has issued 1,646,250 shares of its common stock to founders and
investors. The shares either vested immediately or vested on various dates
through 1999. 3dfx can buy back unvested shares at the original price paid by
the purchasers in the event the purchasers' employment with 3dfx is terminated
for any reason. There were no such repurchases in fiscal 2001, 2000 or 1998.

        During the year ended January 31, 2001, no employees exercised any
options to purchase shares of common stock which are subject to a right of
repurchase by 3dfx. However, during the fiscal years ended January 31, 2000 and
December 31, 1998, certain employees exercised options to purchase 22,041 and
44,640 shares of common stock, respectively, which are subject to a right of
repurchase by 3dfx at the original share issuance price. The repurchase right
lapses over a period generally ranging from two to four years. During the fiscal
years ended January 31, 2001 and 2000 and December 31, 1998, 1,224, 12,501 and
2,154 shares of common stock, respectively, were repurchased. At January 31,
2001 no shares of common stock were subject to repurchase. At January 31, 2000,
approximately 8,917 shares were subject to repurchase.

        On June 16, 1999, 3dfx announced a stock repurchase program, whereby
3dfx was authorized by its board of directors to repurchase shares of its common
stock in the open market. In accordance with the program, 3dfx subsequently
repurchased 505,000 shares of its common stock for approximately $6.8 million.

        In March 1998, 3dfx completed a secondary public offering of 2,900,000
shares of common stock at a price of $23.75 per share. Of the 2,900,000 shares
offered, 2,028,140 were sold by 3dfx and 871,860 were sold by selling
shareholders. 3dfx received cash of approximately $45.5 million, net of
underwriting discounts and commissions and other offering costs. 3dfx did not
receive any of the proceeds from the sale of shares by the selling shareholders.
On March 23, 1998, the 3dfx's underwriters exercised an option to purchase an
additional 435,000 shares of



                                      F-14
<PAGE>   46

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


common stock at a price of $23.75 per share to cover over-allotments. 3dfx
received cash of approximately $9.3 million, net of underwriting discounts and
commissions and other offering costs.

Convertible preferred stock

        For the fiscal years ended January 31, 2001 and 2000, there were
5,000,000 shares of preferred stock authorized, with none issued or outstanding.

Warrants

        In January 1996, 3dfx entered into a line of credit. To secure the line,
3dfx issued to the lessor a warrant to purchase 19,886 shares of Series B
Convertible Preferred Stock at an exercise price of $4.40. The warrant expires
on January 1, 2003. The warrant was deemed by management to have a nominal value
at the date of grant. Upon completion of 3dfx' IPO, this warrant was exchanged
for a warrant to purchase common stock. A portion of this warrant has been
executed and exchanged for 12,926 shares of 3dfx common stock. 3dfx has reserved
6,960 shares of common stock for the exercise of this warrant.

        In 1996, 3dfx issued to a university a warrant to purchase 5,000 shares
of Series C Convertible Preferred Stock at an exercise price of $7.50 per share.
This warrant was deemed to have a value of approximately $40,000 at the date of
grant and the related cost was recognized as other expense and research and
development expense, respectively, during 1996. The warrant for 5,000 shares
expires on December 31, 2001. Upon completion of 3dfx's IPO, the warrant for
5,000 shares was exchanged for a warrant to purchase common stock. 3dfx has
reserved 5,000 shares of common stock for the exercise of this warrant.

        On December 3, 1997, 3dfx issued a warrant to purchase 25,000 shares of
common stock at a exercise price of $13.875 per share in conjunction with
developing a relationship with another company. The warrant is fully exercisable
and expires December 3, 2002. 3dfx valued the warrant under the Black-Scholes
formula at approximately $200,000. The warrant value was amortized over a
one-year period as a cost of revenue. 3dfx has reserved 25,000 shares of common
stock for the exercise of this warrant.

        As of January 31, 2001, 3dfx had reserved 36,960 shares of common stock
for the exercise of warrants.

NOTE 8 -- STOCK OPTION PLANS:

The 1995 Plan

        In May 1995, 3dfx adopted a Stock Plan (the "1995 Plan") which provides
for granting of incentive and nonqualified stock options to employees,
consultants and directors of 3dfx. In May 1998, May 1999, and July 2000, 3dfx's
shareholders approved an increase of 1,700,000, 2,000,000, and 2,500,000 shares,
respectively, of common stock to be reserved for issuance under the 1995 Plan.
As of January 31, 2001, 8,875,000 shares of common stock have been reserved for
issuance under the 1995 Plan.

        Options granted under the 1995 Plan are generally for periods not to
exceed ten years, and are granted at prices not less than 100% and 85%, for
incentive and nonqualified stock options, respectively, of the fair market value
on the date of grant. Incentive stock options granted to shareholders who own
greater than 10% of the outstanding stock are for periods not to exceed five
years, and must be issued at prices not less than 110% of the fair market value
of the stock on the date of grant. Options granted under the 1995 Plan generally
vest 25% on the first anniversary of the grant date and 1/48th of the option
shares each month thereafter, with full vesting occurring on the fourth
anniversary of the grant date.

The 1997 Plan

        In October 1997, 3dfx adopted the 1997 Supplementary Stock Plan (the
"1997 Plan"), which provides for granting of nonqualified stock options to
employees (excluding officers, consultants and directors) of 3dfx. Under the
1997 Plan, 1,200,000 shares of common stock have been reserved for issuance at
January 31, 2001.



                                      F-15
<PAGE>   47

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


        Options granted under the 1997 Plan are generally for periods not to
exceed ten years and are granted at the fair market value of the stock on the
date of grant. Options granted under the 1997 Plan generally vest 25% on the
first anniversary of the grant date and 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the grant
date.

The 1999 Plan

        In July 1999, 3dfx adopted the 1999 Supplementary Stock Plan (the "1999
Plan"), which provides for granting of nonqualified stock options to employees
(excluding officers, consultants and directors) of 3dfx and reserved 1,000,000
shares of common stock for issuance under the 1999 Plan. At January 31, 2001,
1,000,000 shares of Common Stock have been reserved for issuance under the 1999
Plan.

        Options granted under the 1999 Plan are generally for periods not to
exceed ten years and are granted at the fair market value of the stock on the
date of grant. Options granted under the 1999 Plan generally vest 25% on the
first anniversary of the grant date and 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the grant
date.

Directors' Option Plan

        In March 1997, 3dfx adopted a 1997 Directors' Option Plan. Under this
plan options to purchase 150,000 shares of common stock may be granted. The plan
provides that options may be granted at a price not less than fair value of a
share at the date of grant. The Director's Option Plan provides for an initial
option grant to purchase 12,500 shares of common stock to each new non-employee
director of 3dfx at the date he or she becomes a director. Each non-employee
director and Chairman of the Board of Directors will annually be granted an
option to purchase 5,000 and 10,000 shares of common stock, respectively,
beginning with the 1998 annual meeting of shareholders. If a director serves on
either the Audit Committee or Compensation Committee, on an annual basis he or
she will be granted an option to purchase 1,000 shares of common stock,
beginning with the 1997 annual meeting of shareholders. Options granted under
the Directors' Plan are generally for ten years and are granted at the fair
market value of the stock on the date of grant. The initial 12,500 option grant
vests at a rate of 1/48 per month following the date of grant. The annual option
grant of 5,000, 10,000 or 1,000 vests at a rate of 1/12 per month following the
date of grant.

        The following is a summary of activity under the 1995 Plan, the 1997
Plan, the 1999 Plan and the Directors' Option Plan during the periods ended
December 31, 1998, January 31, 1999, January 31, 2000 and January 31, 2001:

<TABLE>
<CAPTION>
                                                               OPTIONS                                    WEIGHTED
                                                             AVAILABLE FOR            OPTIONS              AVERAGE
                                                                GRANT               OUTSTANDING         EXERCISE PRICE
                                                             -------------          -----------         --------------
<S>                                                          <C>                    <C>                 <C>
Balance at December 31, 1997 .....................               366,050              2,505,984             $ 6.38
Additional shares authorized .....................             2,400,000                     --                 --
    Granted ......................................            (3,617,765)             3,617,765             $15.72
    Exercised ....................................                    --               (478,104)            $ 1.34
    Canceled .....................................             2,098,488             (2,098,488)            $19.16
    Repurchased ..................................                 2,154                     --             $ 0.27
                                                              ----------             ----------
Balance at December 31, 1998 .....................             1,248,927              3,547,157             $ 9.02
    Grants in January 1999 .......................               (83,850)                83,850             $12.38
    Exercises in January 1999 ....................                    --                (44,815)            $ 3.13
    Cancellations in January 1999 ................                87,192                (87,192)            $ 7.80
                                                              ----------             ----------
Balance at January 31, 1999 ......................             1,252,269              3,499,000             $ 9.21
Additional shares authorized .....................             3,000,000                     --                 --
</TABLE>



                                      F-16
<PAGE>   48

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<S>                                                           <C>                    <C>                    <C>
     Options related to acquisition of STB .......              (566,913)               566,913             $10.72
     Grants ......................................            (4,800,897)             4,800,897             $11.68
     Exercised ...................................                    --               (692,088)            $ 3.60
     Canceled ....................................             1,677,832             (1,690,333)            $12.46
     Repurchased .................................                12,501                     --             $ 0.32
                                                              ----------             ----------
Balance at January 31, 2000 ......................               574,792              6,484,389             $10.92
Additional shares authorized .....................             3,350,000                     --                 --
     Options related to acquisition of GigaPixel .              (815,355)               815,355             $ 0.16
     Grants ......................................            (7,529,819)             7,529,819             $ 3.69
     Exercised ...................................                    --               (188,940)            $ 5.48
     Canceled ....................................             9,745,922             (9,745,922)            $ 7.38
     Repurchased .................................                 1,224                     --             $ 0.44
                                                              ----------             ----------
Balance at January 31, 2001 ......................             5,326,764              4,894,701             $ 5.64
                                                              ==========             ==========
</TABLE>

        At January 31, 2001 and 2000, and December 31, 1998, 4,807,044,
1,129,810,and 768,183, respectively, of common stock options were vested and
exercisable. On December 15, 2000, substantially all of 3dfx's United States and
European employees were terminated or given notice of termination and their
unvested options were correspondingly canceled. Upon termination, employees have
90 days to exercise vested options. Therefore, at January 31, 2001, all vested
options related to these terminated employees remained outstanding.

        In connection with the grant of stock options to employees from
inception (August 1994) through the effective date of 3dfx's IPO, 3dfx 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 was
presented as a reduction of shareholders' equity and was amortized ratably over
the vesting period of the applicable options. The amortization of the deferred
compensation for each of the fiscal years ended January 31, 2000 and December
31, 1998 totaled $484,000 (of which $194,000 and $290,000 were recorded as a
charge to research and development expenses and selling, general and
administrative expenses, respectively). The remaining deferred compensation at
January 31, 2000 of $172,000 was fully amortized during the fiscal year ended
January 31, 2001 ($69,000 was recorded as a charge to research and development
expenses and $103,000 was recorded as a charge to selling, general and
administrative expenses).

        In October 1998, substantially all outstanding options with an exercise
price in excess of $10.88 per share were canceled and replaced with new options
having an exercise price of $10.88, the fair market value on the date that the
employees accepted the repricing. A total of 1,409,790 options were repriced.
This repricing excluded executive officers. In December 1998, a repricing for
executive officers occurred where substantially all outstanding options with an
exercise price in excess of $13.13 per share were canceled and replaced with new
options having an exercise price of $13.13, the fair market value on the date
that the executive officers accepted the repricing. A total of 330,000 options
were repriced. In both the October and December repricings, any option holder
accepting such offer was not permitted to exercise the repriced option (both
vested and unvested shares) in the first twelve months following the date of the
applicable repricing.

        On October 20, 2000, the Company undertook a stock option exchange
program, allowing employees the opportunity to surrender their existing stock
options in exchange for a new grant of 50% of the original options with a new
exercise price of $2.00 per share. The options were to become fully vested on
June 30, 2001, and expire on June 30, 2002. This program was offered to certain
active employees whose options were granted on September 5, 2000, or earlier. On
October 20, 2000, options for 4.70 million shares were canceled and options for
2.35 million shares were granted under this program. As the market value of 3dfx
stock at the date of grant exceeded the exercise price for these options the
Company recorded deferred compensation of $5.3 million to be amortized over the
vesting period. In accordance with Financial Accounting Standards Board
Interpretation No. 44 ("FIN 44") "Accounting for Certain transaction Involving
Stock Compensation" issued in March 2000, the repricing required the Company to
account for the options as variable from the date of modification to the date
the award was exercised, forfeited, or expired unexercised. On December 15,
2000, substantially all of 3dfx's United States and European employees were
terminated or given notice of termination and their unvested options were
correspondingly canceled. Amortization of deferred compensation taken for the
options, all of which were



                                      F-17
<PAGE>   49

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


unvested, totaling $0.9 million for the fiscal year ended January 31, 2001, was
reversed, as was the remaining deferred compensation.

        Information relating to stock options outstanding under the 1995 Plan,
the 1997 Plan, the 1999 Plan and the Directors' Plan at January 31, 2000 is as
follows:

<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING
                              --------------------------------------------------
                                                 WEIGHTED                                   OPTIONS EXERCISABLE
                                                 AVERAGE                                ----------------------------
                                                 REMAINING           WEIGHTED                            WEIGHTED
   RANGE OF                     NUMBER          CONTRACTUAL          AVERAGE              NUMBER         AVERAGE
EXERCISE PRICES               OUTSTANDING          LIFE           EXERCISE PRICE        EXERCISABLE   EXERCISE PRICE
---------------               -----------       -----------      ---------------        -----------   --------------
<S>                           <C>               <C>              <C>                    <C>           <C>
$         0.16                   623,860           9.50              $ 0.16                623,860        $ 0.16
$ 0.20 -  2.00                   588,431           2.70                1.60                588,431          1.60
$         3.09                   991,000           9.70                3.09                991,000          3.09
$ 3.46 -  4.47                   506,252           9.68                4.24                506,252          4.24
$ 6.87 -  8.50                   367,403           8.47                7.41                279,747          7.42
$         8.88                 1,117,646           8.83                8.88              1,117,645          8.88
$ 8.91 - 13.25                   511,403           7.54               11.33                511,403         11.33
$15.04 - 17.00                   167,806           7.92               16.73                167,806         16.73
$23.21 - 23.25                    20,900           7.18               23.24                 20,900         23.24
--------------                 ---------         ------              ------              ---------        ------
                               4,894,701           8.23                5.64              4,807,044          5.64
                               =========         ======              ======              =========        ======
</TABLE>


Employee Stock Purchase Plan

        In March 1997, 3dfx's board of directors approved an Employee Stock
Purchase Plan. Under this plan, employees of 3dfx can purchase common stock
through payroll deductions. A total of 1,600,000 shares have been reserved for
issuance under this plan. In July 2000, 3dfx's shareholders approved an increase
of 850,000 shares to be reserved for issuance under the Employee Stock Purchase
Plan and an annual increase to the number of shares reserved to take effect on
the date of the Annual Meeting of Shareholders commencing with the 2001 Annual
Meeting of Shareholders and ending with the 2006 Annual Meeting of Shareholders,
equal to the lesser of (i) 600,000 shares or (ii) 1.5% of the outstanding shares
of the Company on such date. As of January 31, 2001, 998,553 shares have been
purchased under the Employee Stock Purchase Plan.

Certain Pro Forma Disclosures

        3dfx accounts for its stock option plans and the Employee Stock Purchase
Plan in accordance with the provisions of APB 25. Had 3dfx recorded compensation
costs based on the estimated grant date fair value, as defined by SFAS 123, for
awards granted under its stock option plans and the Employee Stock Purchase
Plan, 3dfx's net income (loss) from discontinued operations and net income
(loss) per share from discontinued operations would have been (in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                                              YEAR                                ONE MONTH
                                                                              ENDED             YEAR ENDED         ENDED
                                                                            JANUARY 31,         DECEMBER 31,       JANUARY
                                                              ------------------------          -----------           31,
                                                                2001           2000                 1998             1999
                                                              ---------       --------          -----------       -----------
<S>                                                           <C>             <C>               <C>               <C>
Pro forma net income (loss) from discontinued
     operations .......................................       $(359,208)      $(75,915)            $16,067            $(3,913)
Pro forma basic net income (loss) per share from
</TABLE>



                                      F-18
<PAGE>   50

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<S>                                                                <C>                <C>                <C>               <C>
     discontinued operations ..........................            $(11.21)           $(3.37)            $ 1.08            $(0.25)
Pro forma diluted net income (loss) per share from
     discontinued operations ..........................            $(11.21)           $(3.37)            $ 0.98            $(0.25)
</TABLE>

        The pro forma effect on net income (loss) from discontinued operations
and net income (loss) per share from discontinued operations for fiscal 2001,
2000 and 1998 is not representative of the pro forma effect on net income (loss)
from discontinued operations and net income (loss) per share from discontinued
operations in future years because it does not take into consideration pro forma
compensation expense related to grants made prior to 1995.

        For the fiscal years ended January 31, 2001 and 2000 and December 31,
1998 the fair value of each option on the date of grant was determined utilizing
the Black-Scholes model.

        The following assumptions were used for the stock option plans and the
Employee Stock Purchase Plan for the years ended January 31, 2001 and 2000 and
December 31, 1998:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED                  YEAR ENDED
                                                                     JANUARY 31,                 DECEMBER 31,
                                                              -------------------------          ------------
                                                               2001               2000               1998
                                                              ------             ------          ------------
<S>                                                           <C>                <C>             <C>
Stock option plans:
Expected dividend yield ..........................                --                 --                 --
Expected stock price volatility ..................                70%                70%                70%
Risk free interest rate ..........................               4.6%               5.7%               5.1%
Expected life (years) ............................               0.5                6.5                5.9
Employee stock purchase plan:
Expected dividend yield ..........................                --                 --                 --
Expected stock price volatility ..................                70%                70%                70%
Risk free interest rate ..........................               4.6%               5.2%               4.8%
Expected life (years) ............................               0.5                0.5                0.5
</TABLE>

        The weighted average fair value of stock options granted in the fiscal
years ended January 31, 2001 and 2000 and December 31, 1998 was $4.82, $8.04 and
$13.12 per share, respectively.

Benefit Plan

        As of January 31, 2001, 3dfx had two 401(k) Savings Plans which plans
allow all United States employees to participate by making salary deferral
contributions to the 401(k) Savings Plans. 3dfx may make discretionary
contributions to the 401(k) Savings Plans upon approval by the board of
directors. Through January 31, 2001, 3dfx has contributed to one of the 401(k)
Savings Plans but not the other.

NOTE 9 -- INCOME TAXES:

        Income before income taxes and the significant components of the
provision for income taxes comprise the following (in thousands):

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR ENDED                        ONE MONTH
                                                            ------------------------------------------------           ENDED
                                                            JANUARY 31,        JANUARY 31,       DECEMBER 31,       JANUARY 31,
                                                               2001               2000               1998              1999
                                                            ---------          ---------         ------------       ----------
<S>                                                         <C>                <C>               <C>                <C>
Income (loss) from discontinued operations
</TABLE>



                                      F-19
<PAGE>   51

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<S>                                                         <C>                 <C>                <C>                <C>
      before income taxes ........................          $(376,998)          $(73,611)          $ 29,366           $(5,111)
                                                            =========           ========           ========           =======

Provision for income taxes
    Current:
        Federal ..................................          $  (2,925)          $ (8,936)          $ 12,309           $(1,513)
        State ....................................                 --             (1,558)             2,525              (124)
        Foreign ..................................                442                 --                 --                --
                                                            ---------           --------           --------           -------
                                                               (2,483)           (10,494)            14,834            (1,637)
                                                            ---------           --------           --------           -------
    Deferred:
        Federal ..................................            (29,740)               148             (6,252)                1
        State ....................................             (4,249)                22               (919)               --
                                                            ---------           --------           --------           -------
                                                              (33,989)               170              (7171)                1
                                                            ---------           --------           --------           -------
Total provision for income taxes .................          $ (36,472)          $(10,324)          $  7,663           $(1,636)
                                                            =========           ========           ========           =======
</TABLE>

        The components of net deferred income tax assets are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                             JANUARY 31,          JANUARY 31,
                                                                2001                 2000
                                                             ----------           ----------
<S>                                                          <C>                  <C>
Deferred Tax Assets:
       Net operating losses ......................            $ 63,370             $  9,876
       Expenses not currently deductible .........              15,976               11,867
       Tax credit carryforwards ..................               2,422                2,421
                                                              --------             --------
       Deferred Tax Assets .......................              81,768               24,164
Deferred Tax Liability:
       Intangible Assets .........................              (4,735)              (5,513)
                                                              --------             --------
Gross Deferred tax asset .........................              77,033               18,651
Less:  valuation allowance .......................             (46,768)             (11,082)
                                                              --------             --------
Net deferred income tax assets ...................            $ 30,265             $  7,569
                                                              ========             ========
</TABLE>

        3dfx's actual provision differs from the provision (benefit) computed by
applying the statutory federal income tax rate to income (loss) from
discontinued operations before income taxes as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                YEAR ENDED
                                                               ---------------------------------------------      MONTH ENDED
                                                               JANUARY 31,      JANUARY 31,      DECEMBER 31,     JANUARY 31,
                                                                  2001             2000             1998              1999
                                                               ----------       ----------       -----------      -----------
<S>                                                            <C>              <C>              <C>              <C>
Tax provision (benefit) at statutory federal tax rate ..        $(128,179)        $(25,028)        $ 10,278         $(1,738)
State taxes, net of federal tax benefit ................          (20,175)          (3,959)           1,687            (147)
R&D credit .............................................               --               --             (692)             --
In process research and development ....................           22,525            1,723               --              --
Amortization of goodwill and other intangibles .........            8,313            4,097               --              --
Impairment of goodwill and other intangibles ...........           39,802               --               --              --
Change in valuation allowance ..........................           35,686           12,577           (4,299)             --
Other, net .............................................            5,556              266              689             249
                                                                ---------         --------         --------         -------
Total provision (benefit) for taxes ....................        $ (36,472)        $(10,324)        $  7,663         $(1,636)
                                                                =========         ========         ========         =======
</TABLE>

        At January 31, 2001, 3dfx had net operating loss carryforwards for
federal and state income tax purposes of approximately $164 million and $128
million, respectively. If not utilized, the federal and state net operating
losses will begin to expire beginning in 2011 and 2001, respectively.


        Management has assessed the realizability of deferred tax assets
recorded at January 31, 2001 based upon the weight of available evidence,
including such factors as expected future taxable income primarily related to
the expected gain on sale of assets to Nvidia. Management believes that it is
more likely than not that the Company will



                                      F-20
<PAGE>   52

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


not realize a portion of its deferred tax assets and, accordingly, a valuation
allowance of $46.8 million has been established for such amounts at January 31,
2001.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES:

        3dfx leases, under noncancelable operating leases, certain of its
facilities and equipment. Rent expense on the operating leases for the fiscal
years ended January 31, 2001 and 2000 and December 31, 1998 was approximately
$6.0 million, $6.7 million, and $1.7 million, respectively. There were no
capital leases outstanding as of January 31, 2001. Future minimum lease payments
under operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
                                                          OPERATING LEASES
                                                          ----------------
<S>                                                       <C>
2002 .............................................            $ 7,142
2003 .............................................              5,845
2004 .............................................              3,925
2005 .............................................              3,360
2006 .............................................              3,331
Thereafter .......................................              5,551
                                                              -------
   Total minimum lease payments ..................            $29,154
                                                              =======
</TABLE>

Purchase Commitments

        3dfx's manufacturing relationship with Taiwan Semiconductor
Manufacturing Corporation ("TSMC") allows 3dfx to cancel all outstanding
purchase orders, but requires the repayment of all expenses incurred to date. As
of January 31, 2001, TSMC had incurred approximately $2.9 million of
manufacturing expenses on 3dfx's outstanding purchase orders, which has been
reflected within accrued liabilities at January 31, 2001.

Contingencies

        On December 21, 2000, CagEnt Technologies, Inc. filed suit against 3dfx
in the Northern California District Federal Court. The complaint alleges patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint seeks a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment and post-judgment interest, attorneys' fees and cost of suit. 3dfx
believes it has meritorious defenses to the claims against it and intends to
vigorously defend itself.

        On September 21, 1998, 3dfx filed suit against Nvidia in Northern
California District Federal Court. The complaint alleged patent infringement
relating to Nvidia's use of multi-texturing technology in its RIVA TNT product.
On August 28, 2000, Nvidia filed suit against 3dfx in Northern California
District Federal Court. The complaint alleged infringement by 3dfx of five
Nvidia patents in the Voodoo3, Voodoo4, Voodoo5 and VSA-100 families of 3dfx
products. Pursuant to the terms of the asset purchase agreement as discussed in
Note 1, 3dfx and Nvidia agreed to dismiss with prejudice the infringement
lawsuits that Nvidia and 3dfx had filed against each other. Both parties filed a
joint stipulation for dismissal with the Northern California District Federal
Court on April 19, 2001. On April 26, 2001, the Court signed an order granting
such dismissals.

        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.



                                      F-21
<PAGE>   53

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


        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 their actions. The settlement, which has been approved by
the Court, 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 which has been paid by insurance.

        3dfx is also a party to various legal proceedings involving collection
matters and other matters against it. 3dfx is currently seeking resolutions that
are mutually acceptable to the parties involved in each of these matters.
However, there is no assurance that resolutions will be achieved. 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.


NOTE 11 -- RELATED PARTY TRANSACTIONS:

        Since April 1995, a consulting company has been providing management
services to 3dfx for which 3dfx pays a monthly fee of $5,000. The Chairman and a
director of the board of directors of 3dfx are also officers of the consulting
company. Total payments or amounts accrued for such management services during
fiscal years 2001, 2000 and 1998 were $65,000, $55,000, and $60,000,
respectively.

        During fiscal years 2001, 2000 and calendar year 1998 a member of the
board of directors provided consulting services to 3dfx. Total payments for such
consulting services in fiscal years 2001, 2000 and calendar year 1998 were
$45,000, $45,000 and $60,000, respectively.

        During fiscal year 2001, a significant shareholder and former member of
the Company's board of directors provided consulting services to 3dfx for
$400,000. At January 31, 2001, 3dfx had an outstanding receivable due from this
shareholder of $1.1 million.

        In April 1997, an officer of 3dfx resigned and subsequently founded
Quantum3D, Inc., a supplier of advanced graphic subsystems based on 3dfx
technology. Sales to Quantum3D, Inc. during fiscal years 2001, 2000 and calendar
year 1998 totaled $2.8 million , $1.6 million and $0.7 million respectively. As
of January 31, 2001, 3dfx has an outstanding trade receivable from Quantum3D,
Inc. of approximately $85,000.

        In April 1999, 3dfx invested an amount of $3.1 million in exchange for a
minority interest in Quantum 3D in the form of convertible preferred shares in
connection with Quantum 3D's private round of financing. These terms and pricing
of these shares was equivalent to other unaffiliated third participants in the
financing round. During the fiscal year ended January 31, 2001, 3dfx fully
reserved for this investment, as management does not expect to be able to
recover the value of this investment. The charge taken for this investment is
included in interest and other income (expense).

        In March 2000, 3dfx sold the Specialized Technology Group (STG), a
business unit that provides digital video products, multi-output MPEG decoder
cards and multi-monitor display adapters to a company of which a former 3dfx
employee, and daughter of a former Executive Vice President and Vice Chairman of
the board of directors of 3dfx, is President. 3dfx maintains a minority equity
interest in STG of $2.1 million at January 31, 2001 and had an outstanding notes
receivable from STG of $1.5 million at January 31, 2001.

NOTE 12 -- SEGMENT AND GEOGRAPHIC INFORMATION:

        3dfx has adopted Statement of Financial Accounting Standards No. 131
"Disclosure about Segments of an Enterprise and Related Information". Based on
its operating management and financial reporting structure, 3dfx has



                                      F-22
<PAGE>   54

                             3DFX INTERACTIVE, INC.
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)


determined that it has one reportable business segment: the design, development
and sale of graphics boards incorporating 3dfx's proprietary graphics chips. The
following is a summary of product revenue by geographic area based on the
location of shipments (in thousands):

<TABLE>
<CAPTION>
                                                                              FISCAL YEAR ENDED                         ONE MONTH
                                                             ---------------------------------------------------           ENDED
                                                             JANUARY 31,         JANUARY 31,        DECEMBER 31,        JANUARY 31,
                                                                2001                2000                1998               1999
                                                             ----------          ----------         ------------        ----------
<S>                                                          <C>                 <C>                <C>                 <C>
United States ....................................            $139,141            $193,941            $144,415            $ 9,325
International ....................................              93,926             166,582              58,186              7,723
                                                              --------            --------            --------            -------
Total ............................................            $233,067            $360,523            $202,601            $17,048
                                                              ========            ========            ========            =======
</TABLE>

        All sales are denominated in United States dollars. For all periods
presented, substantially all of 3dfx's long-lived assets were located in the
United States.



                                      F-23
<PAGE>   55

                          SUPPLEMENTARY FINANCIAL DATA

                   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                           ------------------------------------------------------------------------
                                                           JANUARY 31,         OCTOBER 31,          JULY 31,             APRIL 30,
                                                              2001                2000                2000                 2000
                                                           ----------          ----------           ---------           -----------
<S>                                                        <C>                 <C>                  <C>                 <C>
Revenues .........................................          $  18,310           $  39,189           $  66,989           $   108,578
Gross profit (loss) ..............................            (24,775)            (21,746)             10,189                26,411
Net loss from discontinued operations ............            (49,020)           (178,573)           (100,496)              (12,431)
Basic net loss per share from discontinued
   operations ....................................          $   (1.24)          $   (4.53)          $   (3.81)          $     (0.51)
Diluted net loss per share from
   discontinued operations .......................          $   (1.24)          $   (4.53)          $   (3.81)          $     (0.51)
</TABLE>

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                           -----------------------------------------------------------------------
                                                           JANUARY 31,         OCTOBER 31,          JULY 31,             APRIL 30,
                                                              2000                1999                1999                 1999
                                                           ----------          ----------           ---------           ----------
<S>                                                        <C>                 <C>                  <C>                 <C>
Revenues .........................................          $ 109,388           $ 105,856           $ 104,836           $   40,444
Gross profit .....................................             12,638              17,232              28,528               14,254
Net loss from discontinued operations ............            (31,886)            (17,618)            (11,599)              (2,184)
Basic net loss per share from discontinued
   operations ....................................          $   (1.31)          $   (0.73)          $   (0.50)          $    (0.14)
Diluted  net loss per share from
   discontinued operations .......................          $   (1.31)          $   (0.73)          $   (0.50)          $    (0.14)
</TABLE>

        On March 27, 2001, 3dfx's shareholders approved proposals to liquidate,
wind-up and dissolve 3dfx pursuant to a plan of dissolution. 3dfx is proceeding
to wind-up its affairs and dissolve. Accordingly, all activities of 3dfx are
presented as discontinued operations. See Note 1 to Notes to Financial
Statements for further discussion.

        The quarterly financial information above reflects the following:

-       During the quarter ended October 31, 2000, 3dfx took a $117.1 million
        charge for the impairment of goodwill and other intangible assets.
        3dfx's results of discontinued operations for the year ended January 31,
        2001 and financial position at January 31, 2001 reflect the impact of
        this change. See Note 1 to Notes to Financial Statements for further
        discussion of the impairment charge.

-       3dfx's merger with GigaPixel Corporation was consummated on July 21,
        2000 and was treated as a purchase for financial reporting and
        accounting purposes. 3dfx's results of discontinued operations for the
        year ended January 31, 2001 and financial position at January 31, 2001
        reflect the impact of the GigaPixel merger. See Note 3 to Notes to
        Financial Statements for further discussion of the GigaPixel merger.

-       3dfx's merger with STB Systems, Inc., which was consummated on May 13,
        1999 and was treated as a purchase for financial reporting and
        accounting purposes. 3dfx's results of discontinued operations for the
        year ended January 31, 2000 and financial position at January 31, 2000
        reflect the impact of the STB merger. See Note 2 to Notes to Financial
        Statements for further discussion of the STB merger.



                                      F-24
<PAGE>   56



        REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders
of 3dfx Interactive, Inc.:

        Our audits of the consolidated financial statements referred to in our
report (which contains an emphasis of matter paragraph relating to the plan of
dissolution, as described in Note 1 to the consolidated financial statements)
dated March 27, 2001, except as to Note 1 and Note 10, which are as of April 26,
2001, appearing in the 2001 Annual Report on Form 10-K of 3dfx Interactive, Inc.
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Jose, California
March 27, 2001



                                      S-1
<PAGE>   57

                                   SCHEDULE II

                             3DFX INTERACTIVE, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
 FOR THE YEARS ENDED JANUARY 31, 2001, JANUARY 31, 2000, AND DECEMBER 31, 1998,
                      AND ONE MONTH ENDED JANUARY 31, 1999
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  Charged to     Assumed from
                                                 Beginning        costs and           STB                           Ending
                                                  balance         expenses        acquisition     Deductions        balance
                                                 ---------        ----------     ------------     ----------        -------
<S>                                              <C>              <C>            <C>              <C>               <C>
Allowance for Doubtful Accounts:
  Year ended January 31, 2001 ..........          $ 6,681          $11,872          $     0          $8,561          $ 9,992
  Year ended January 31, 2000 ..........          $ 6,729          $ 2,392          $   598          $3,038          $ 6,681
  Month ended January 31, 1999 .........          $ 2,280          $ 4,449          $     0          $    0          $ 6,729
  Year ended December 31, 1998 .........          $   308          $ 2,561          $     0          $  589          $ 2,280

Inventory Reserves:
  Year ended January 31, 2001 ..........          $18,496          $10,302          $     0          $3,415          $25,383
  Year ended January 31, 2000 ..........          $ 7,828          $   909          $18,000          $8,241          $18,496
  Month ended January 31, 1999 .........          $ 7,828          $     0          $     0          $    0          $ 7,828
  Year ended December 31, 1998 .........          $   661          $10,817          $     0          $3,650          $ 7,828
</TABLE>



                                      S-2
<PAGE>   58
                             3DFX INTERACTIVE, INC.

                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
 EXHIBIT NUMBER                             DESCRIPTION
 --------------                             -----------
 <S>             <C>
      2.1(1)     Agreement and Plan of Reorganization by and between the
                 Registrant and STB Systems, Inc. dated as of December 13, 1998
                 and the related Stock Option Agreement and form of Voting
                 Agreement

      2.2(9)     Agreement and Plan of Reorganization by and between the
                 Registrant and GigaPixel Corporation dated as of March 27,
                 2000, including selected annexes (attached as Appendix A to the
                 Proxy Statement/Prospectus/Information Statement)

      2.3(11)    Asset Purchase Agreement, dated December 15, 2000, by and among
                 the Registrant, NVIDIA Corporation and Titan Acquisition Corp.
                 No. 2

      2.4*       Registrant's Plan of Dissolution, as approved by Registrant's
                 shareholders on March 27, 2001

      3.1(9)     The Registrant's Restated Articles of Incorporation

      3.2(5)     Certificate of Determination of Rights Preferences and
                 Privileges of Series A Participating Preferred Stock of
                 Registrant

      3.3(12)    The Registrant's Amended and Restated Bylaws

      4.1(2)     Specimen Common Stock Certificate

      4.2(5)     Preferred Shares Rights Agreement dated October 30, 1998,
                 between Registrant and BankBoston, N.A., Rights Agent

      10.1(2)    Form of Indemnification Agreement between the Registrant and
                 each of its directors and officers

      10.2(13)   1995 Employee Stock Plan, as amended

      10.3(2)    1997 Director Option Plan and form of Director Stock Option
                 Agreement thereunder

      10.4(13)   1997 Employee Stock Purchase Plan, as amended
</TABLE>

<PAGE>   59
<TABLE>
      <S>        <C>
      10.5(2)    Lease Agreement dated August 7, 1996 between Registrant and
                 South Bay/Fortan, and Tenant Estoppel Certificate dated March
                 25, 1997 between Registrant and CarrAmerica Realty Corporation
                 for San Jose, California office

      10.6(2)    Investors' Rights Agreement dated September 12, 1996, Amendment
                 No. 1 to Investors' Rights Agreement dated November 25, 1996,
                 Amendment No. 2 to Investors' Rights Agreement dated December
                 18, 1996 and Amendment No. 3 to Investors' Rights Agreement
                 dated March 27, 1997 by and among the Registrant and holders of
                 the Registrant's Series A, Series B and Series Preferred Stock

      10.7(3)    Warrant to purchase shares of Common Stock issued to Creative
                 Labs, Inc.

      10.8(2)    Form of Restricted Stock Purchase Agreement between the
                 Registrant and certain shareholders

      10.9(2)    Change of Control Letter Agreement between the Registrant and
                 Scott D. Sellers

      10.10(4)   Software License and Co-marketing Agreement made as of June,
                 1997 by and between Electronic Arts, Inc. and the Registrant

      10.11(4)   Master Equipment Lease dated July 1, 1997 by and between the
                 Registrant and Pentech Financial Services, Inc.]

      10.12(3)   Lease Agreement dated as of January 6, 1998 by and between the
                 Registrant and GEOMAXX

      10.13(3)   1997 Supplementary Stock Option Plan and form of Stock Option
                 Agreement thereunder

      10.14(8)   1999 Supplementary Stock Option Plan and form of Stock Option
                 Agreement thereunder

      10.15(12)  Indemnity Escrow Agreement dated as of July 20, 2000, by and
                 among the Registrant, GigaPixel Corporation, Galapagos
                 Acquisition Corp. and U.S. Trust Company, N.A.

      10.16(12)  Consulting Agreement dated as of July 20, 2000, by and between
                 the Registrant and George T. Haber

      10.17(12)  Noncompetition Agreement dated as of July 20, 2000, by and
                 between the Registrant and George T. Haber

      10.18(12)  Contingent Recourse Non-Negotiable Promissory Note dated as of
                 July 20, 2000, made by George T. Haber for the benefit of
                 GigaPixel Corporation

      10.19(12)  Lock Up Agreement dated as of July 20, 2000, by and between the
                 Registrant and George T. Haber

      10.20(12)  Employment Agreement for Executive Officer dated as of July 20,
                 2000, by and between Gigapixel Corporation and Philip Carmack

      10.21(12)  Contingent Recourse Non-Negotiable Promissory Note dated as of
                 July 20, 2000, made by Philip Carmack for the benefit of
                 GigaPixel Corporation

      10.22(12)  Performance Bonus Agreement dated as of July 20, 2000, by and
                 between GigaPixel Corporation and Philip Carmack

      10.23(14)  GigaPixel Corporation 1997 Employee Incentive Plan
</TABLE>




<PAGE>   60
<TABLE>
      <S>        <C>
      10.24(10)  Employment Agreement by and between the Registrant and Alex M.
                 Leupp, as amended effective February 1, 2001

      10.25(10)  Employment Agreement by and between the Registrant and Scott D.
                 Sellers, as amended effective February 1, 2001

      10.26(10)  Employment Agreement by and between the Registrant and Richard
                 Burns, as amended effective February 1, 2001

      10.27(10)  Employment Agreement by and between the Registrant and Stephen
                 A. Lapinski, as amended effective February 1, 2001

      10.28(10)  Employment Agreement by and between the Registrant and Alfred
                 R. Woodhull, as amended effective February 1, 2001

      10.29(11)  Credit Agreement dated December 15, 2000 by and between the
                 Registrant and Titan Acquisition Corp. No. 2

      10.30(11)  Security Agreement dated December 15, 2000 by and between the
                 Registrant and Titan Acquisition Corp. No. 2

      10.31(11)  Trademark Assignment Agreement, by and between 3dfx Interactive
                 Inc. and Titan Acquisition Corp. No. 2

      10.32(11)  Patent License Agreement dated December 15, 2000 by and
                 between the Registrant, NVIDIA Corporation and Titan
                 Acquisition Corp. No. 2

      10.33(11)  Patent Standstill Agreement, dated as of December 15, 2000, by
                 and between NVIDIA Corporation and the Registrant

      10.34(15)  Lease Agreement dated December 6, 1988 by and between STB de
                 Mexico S.A. C.V. (formerly known as Industrias Fronterizas de
                 Chihuahua, S.A. de C.V.) (a subsidiary of STB Systems, Inc., as
                 lessee) and Complejo Industrial Fuentes, S.A. de C.V. lessor),
                 including an Agreement for Modification dated February 25, 1994
                 by and between the same parties

      10.35(16)  Modification Agreement dated October 4, 1996 by and between STB
                 de Mexico, S.A. de C.V. and Complejo Industrial Fuentes, S.A.
                 de C.V.

      10.36(16)  Lease Contract dated October 4, 1996 by and between STB de
                 Mexico, S.A. de C.V. (as lessee) and Complejo Industrial
                 Fuentes, S.A. de C.V. (as lessor)

      10.37(7)   Amendment to Lease Agreement dated January 30, 1997 by and
                 between STB de Mexico, S.A. de C.V. (as lessee) and Complejo
                 Industrial Fuentes, S.A. de C.V.

      10.38*     Settlement Agreement and Mutual Release dated November 29, 2000
                 by and between the Registrant and William E. Ogle

      10.39*     Lease Agreement dated July 23, 1998 by and between CarrAmerica
                 Realty L.P. and the Registrant, and an amendment thereto

      10.40*     Lease Agreement dated May 27, 1999 by and between Balstones
                 Estate Limited and STB Systems, Inc.

      10.41*     Lease Schedule No. 1000063905 dated December 15, 1997 by and
                 between Banc One Leasing Corporation and STB Systems, Inc.

      10.42*     Lease Schedule No. 1000064617 dated April 17, 1998 by and
                 between Banc One Leasing Corporation and STB Systems, Inc.

      10.43*     Lease Schedule No. 1000063259 dated October 31, 1997 by and
                 between Banc One Leasing Corporation and STB Systems, Inc.

      21.1       Subsidiaries of the Registrant

                 (a)     STB Systems, Inc.

                 (b)     3dfx International

                 (c)     GigaPixel Corporation

                 (d)     STB Assembly, Inc.

                 (e)     STB de Mexico, S.A. de C.V.

      23.1*      Consent of PricewaterhouseCoopers LLP, Independent Accountants

      24.1*      Power of Attorney (included on signature page)
</TABLE>

+       Confidential treatment has been granted for portions of these
        agreements. Omitted portions have been filed separately with the
        Commission.

*       Filed herewith.

(1)     Incorporated by reference to Schedule 13D filed by STB Systems, Inc.
        dated December 23, 1998 with respect to the Registrant.

(2)     Incorporated by reference to the exhibits filed with the Registrant's
        Registration Statement on Form S-1 (File No. 333-25365) which was
        declared effective on June 25, 1997.

(3)     Incorporated by reference to the exhibits filed with the Registrant's
        Registration Statement on Form S-1 (File No. 333-46119) filed with the
        Commission on February 11, 1998.

(4)     Incorporated by reference to the exhibits filed with the Registrant's
        Quarterly Report on Form 10-Q for the period ended June 30, 1997.

(5)     Incorporated by reference to the exhibits filed with the Registrant's
        Registration Statement on Form 8-A which was filed with the Commission
        on November 9, 1998.

(6)     Incorporated by reference to the exhibits filed with the Registrant's
        Quarterly Report on Form 10-Q for the period ended June 30, 1998.

(7)     Incorporated by reference to exhibits filed with STB Systems, Inc.'s
        Annual Report on Form 10-K for the fiscal year ended October 31, 1997.

(8)     Incorporated by reference to Exhibit 4.1 filed with the Registrant's
        Registration Statement on Form S-8 (File No. 333-86661) which was filed
        with the Commission on September 7, 1999.

(9)     Incorporated by reference to exhibits filed with the Registrant's
        Registration Statement on Form S-4 (File No. 333-38678) which was filed
        with the Commission on June 6, 2000.

(10)    Incorporated by reference to exhibits filed with the Registrant's
        Current Report on Form 8-K filed on January 26, 2001.

(11)    Incorporated by reference to exhibits filed with NVIDIA Corporation's
        Registration Statement on Form S-4 (File No. 333-54406) which was filed
        with the Commission on January 26, 2001.




<PAGE>   61

(12)    Incorporated by reference to exhibits filed with the Registrant's
        Quarterly Report on Form 10-Q filed on September 14, 2000.

(13)    Incorporated by reference to the Registrant's Registration Statement on
        Form S-8 (File No. 333-42156), which was filed with the Commission on
        July 25, 2000.

(14)    Incorporated by reference to the Registrant's Registration Statement on
        Form S-8 (File No. 333-42152) which was filed with the Commission on
        July 25, 2000.

(15)    Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
        Registration Statement on Form S-1 (File No. 333-87612) filed with the
        Commission on December 21, 1994.

(16)    Incorporated by reference to Exhibit 10.1 of the STB Systems, Inc.'s
        Registration Statement (File No. 333-14313) filed with the Commission
        on October 17, 1996.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.4
<SEQUENCE>2
<FILENAME>f72487ex2-4.txt
<DESCRIPTION>EXHIBIT 2.4
<TEXT>

<PAGE>   1

                                                                     EXHIBIT 2.4

                               PLAN OF DISSOLUTION

        This Plan of Dissolution (this "Plan") is for the purpose of effecting
the complete liquidation and dissolution of 3dfx Interactive, Inc., a California
corporation (the "Company").

        1. Approval of this Plan. In accordance with Section 1900(a) of the
California Corporations Code, this Plan shall be submitted to the shareholders
of the Company for approval at the Special Meeting of Shareholders to be held
for that purpose. This Plan shall become effective and voluntary proceedings for
winding up shall commence on such date, after the approval of the holders of a
majority of the Company's outstanding shares of stock, as the Board of Directors
(the "Board") may designate (the "Effective Date").

        2. Consummation of the Purchase Agreement Transaction; Cessation of
Business. Following the effectiveness of this Plan, and in the event the
Company's shareholders approve the transaction (the "Asset Sale") contemplated
by that certain Asset Purchase Agreement dated as of December 15, 2000, between
the Company, nVidia Corporation and a subsidiary of nVidia Corporation (as it
may be amended, the "Purchase Agreement"), the Company shall consummate the
Asset Sale, and then continue with its winding up pursuant to this Plan and
shall not engage in any further business activities, except for the purpose of
managing its investments in cash, cash equivalents and other marketable
securities, completing work in process, disposing of its assets, providing for
satisfaction of its obligations, adjusting and winding up its business and
affairs, and distributing the proceeds from the disposition of its assets in
accordance with this Plan. The Board then in office shall continue in office
solely for that purpose. The Board shall dissolve the Company as soon as it
deems feasible.

        3. Continuing Employees and Consultants. For the purpose of effecting
the liquidation of the Company's assets, the Company shall hire or retain, at
the discretion of the Board, such employees and consultants as the Board deems
necessary or advisable to supervise the liquidation.

        4. Expenses of Liquidation. The Board shall provide, from the assets of
the Company, reasonable funds for payment of the expenses of the dissolution and
liquidation of the Company, including filing fees and other expenses relating to
the holding of the Special Meeting of Shareholders to consider this Plan and
other documentation required in connection with this Plan, continuation of
employees and/or consultants engaged in the liquidation process, accountants'
and attorneys' fees and expenses, and other reasonable fees and expenses
incurred in connection with the liquidation process.

        5. Payment of Legally Enforceable Claims. The Company shall satisfy, or
adequately provide for the satisfaction of, all its legally enforceable debts
and liabilities in an orderly manner (as well as the debts and liabilities of
its subsidiaries that are legally enforceable



<PAGE>   2

against the Company or which in the opinion of the board should be paid or
provided for in order to maximize assets ultimately available to the Company's
shareholders).

        6. Provision for Continued Indemnification of Board and Officers. The
Company may reserve sufficient assets and/or obtain and maintain such insurance
as shall be necessary to provide for continued indemnification of the members of
the Board, officers and agents of the Company, and other parties whom the
Company has agreed to indemnify, to the full extent provided by the articles of
incorporation and bylaws of the Company, any existing indemnification agreements
between the Company and any of such persons, and applicable law. At the
discretion of the Board, such insurance may include coverage for periods after
the dissolution of the Company, including periods after the termination of any
Liquidating Trust (as defined below), and may include coverage for trustees,
employees and agents of such Liquidating Trust.

        7. Distributions to Shareholders. After paying or adequately providing
for the expenses of liquidation and lawful debts and liabilities and reserving
sufficient assets and/or obtaining insurance as set forth in Section 6, the
Board is authorized to make a distribution to shareholders from the proceeds of
the Asset Sale. Any remaining assets will thereafter be distributed to the
shareholders of the Company in accordance with their respective shareholdings.

        8. Liquidating Trust. If it is deemed advisable by the Board for any
reason, the Board may cause the Company to create a liquidating trust (the
"Liquidating Trust") and to distribute beneficial interests in the Liquidating
Trust to the shareholders as part of the liquidation process. The Liquidating
Trust shall be constituted pursuant to a liquidating trust agreement in such
form as the Board may approve, it being intended that the transfer and
assignment to the Liquidating Trust pursuant hereto and the distribution to
shareholders of the beneficial interests therein shall constitute a part of the
final liquidating distribution by the Company to the shareholders of their pro
rata interests in the remaining amount of cash and other property held by or for
the account of the Company. From and after the date of the Company's transfer of
cash and property to the Liquidating Trust, the Company shall have no interest
of any character in and to any such cash and property and all of such cash and
property shall thereafter be held by the Liquidating Trust solely for the
benefit of and ultimate distribution to the shareholders, subject to any
unsatisfied debts, liabilities and expenses.

        9. Authorization. The Board or the trustees of the Liquidating Trust,
and such officers of the Company as the Board may direct shall have the powers
and duties specified in Section 2001 of the California Corporations Code and are
hereby authorized to interpret the provisions of this Plan and are hereby
authorized and directed to take such further actions, to execute such
agreements, conveyances, assignments, transfers, certificates and other
documents, as may in their judgment be necessary or desirable in order to wind
up expeditiously the affairs of the Company and complete the liquidation
thereof, including, without limitation, (i) the execution of any contracts,
deeds, assignments or other instruments necessary or appropriate to sell or
otherwise dispose of, any and all property of the Company remaining after the



<PAGE>   3

consummation of the Asset Sale, whether real or personal, tangible or
intangible, (ii) the appointment of other persons to carry out any aspect of
this Plan, (iii) the temporary investment of funds in such medium as the Board
may deem appropriate, and (iv) the modification of this Plan as may be necessary
to implement this Plan. The death, resignation or other disability of any
director or officer of the Company shall not impair the authority of the
surviving or remaining directors or officers of the Company (or any persons
appointed as substitutes therefor) to exercise any of the powers provided for in
this Plan. Upon such death, resignation or other disability, the surviving or
remaining directors shall have the authority to fill the vacancy or vacancies so
created, but the failure to fill such vacancy or vacancies shall not impair the
authority of the surviving or remaining directors or officers to exercise any of
the powers provided for in this Plan.

        10. Amendment or Delay of Implementation of this Plan. The Board may, by
vote of the majority of the Board then in office, amend this Plan or delay the
implementation of this Plan, whether or not a vote of the shareholders has
previously occurred, unless the Board determines that such amendment or delay
would materially and adversely affect the shareholders' interests.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>3
<FILENAME>f72487ex10-38.txt
<DESCRIPTION>EXHIBIT 10.38
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.38

                        AMERICAN ARBITRATION ASSOCIATION

                                  DALLAS, TEXAS

WILLIAM E. OGLE,                     )
                                     )
   CLAIMANT,                         )
                                     )
V.                                   )      ARBITRATION NO.  71 160 00207 00
                                     )
3Dfx INTERACTIVE, INC. AND           )
STB SYSTEMS, INC.                    )
                                     )
   RESPONDENT.                       )


                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE

        This Settlement Agreement is entered into by and between William E. Ogle
("Ogle") on the one hand, and 3dfx Interactive, Inc. and STB Systems, Inc.
(collectively, "3dfx") on the other hand.

                                   ARTICLE I.

        DEFINITIONS: As used in the Settlement Agreement, the following terms
shall have the definition indicated throughout.

        1.1     "Agreement" shall mean this Settlement Agreement.

        1.2     "3dfx" shall mean Respondents 3dfx Interactive, Inc. and STB
                Systems, Inc., together with any of their parents, subsidiaries,
                affiliates, and all of their officers, directors, agents,
                representatives, employees, and/or attorneys.

        1.3     "Ogle" shall mean William E. Ogle, together with any of his
                agents, representatives, employees, and/or attorneys.

        1.4     "Party" or "Parties" shall mean "3dfx" and "Ogle" as those terms
                are herein defined.

        1.5     "Transaction in Question" shall mean all of the underlying
                facts: events, transactions, facts, agreements, and disputes
                referenced in or pertaining to the arbitration styled WILLIAM E.
                OGLE V. 3Dfx INTERACTIVE, INC. AND STB SYSTEMS, INC.;
                Arbitration No. 71 160 00207 00; before the American Arbitration
                Association, including all claims and counterclaims arising out
                of any



                                                                          PAGE 1
<PAGE>   2

                employment agreements or amendments between the Parties,
                representations made by any Party, any claims for stock options,
                profit sharing incentive compensation, commissions, any claims
                arising out of Ogle's relationship with 3dfx, including his
                employment and departure from 3dfx, and including Ogle's claims
                for libel, slander, and defamation, regardless of whether such
                claims are pending in or subject to this arbitration.

        1.6     "Closing Date" is the date this Agreement is signed by the
                Parties and an executed original counterpart of this Agreement
                is delivered to Stewart H. Thomas and Brenda Collier.

                                   ARTICLE II.

RECITALS AND PURPOSES

        2.1     Bona fide disputes and controversies exist between the Parties
                both as to liability and the amount of damages thereof, if any,
                by reason of such disputes and controversies, and the Parties
                desire to compromise and settle all claims and causes of action
                hereto of any kind whatsoever, which the Parties had, now have,
                or may have in the future, arising, out of any part of the
                Transaction in Question and intend that the full terms and
                conditions of the compromise and settlement be set forth in this
                Agreement.

                                  ARTICLE III.

        Upon execution of this Agreement, and in consideration of the Mutual
Promises contained herein, the Recitals contained herein, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, Parties
agree to the following:

        3.1     DISPOSITION OF LITIGATION: Upon the execution of this Agreement
                and Mutual Release, 3dfx and Ogle agree to enter into an Agreed
                Order of Dismissal with Prejudice (Exhibit A) in WILLIAM OGLE V.
                3Dfx INTERACTIVE, INC. AND STB SYSTEMS, INC.; Arbitration No. 71
                160 00207 00; before the American Arbitration Association
                ("AAA").

        3.2     3Dfx'S CONSIDERATION: In consideration for signing and abiding
                by this Agreement and for dismissing the pending lawsuit, 3dfx
                shall tender to Ogle the following:

                (a)     Three hundred thousand dollars ($300,000) as payment of
                        his Parachute Payment as that term is defined in the
                        Employment Agreement as Amended payable as 3dfx's entire
                        fee simple interest in that certain condominium and
                        personal property therein known as Unit 611, located at
                        the Texas Motor Speedway, free and clear of all liens
                        and encumbrances, together with all rights and
                        privileges associated with ownership of said



                                                                          PAGE 2
<PAGE>   3

                        condominium. Pursuant to this transfer, 3dfx will
                        execute a General Warranty Deed transferring the
                        condominium and all personal property therein to William
                        E. Ogle, and pay to William E. Ogle a sum equal to all
                        unpaid taxes and assessments accrued or accruing for the
                        year 2000, pro-rated through November 29, 2000. The
                        Parties agree to a fair market valuation of three
                        hundred thousand dollars ($300,000) for the condominium
                        and all personal property located therein. A copy of
                        said General Warranty Deed shall be attached to this
                        Settlement Agreement as Exhibit B and incorporated
                        herein, and all personal property found in that certain
                        condominium known as Unit 611, located at the Texas
                        Motor Speedway, listed on Exhibit C

                (b)     An assignment of fifty percent (50%) of all future
                        principal and interest payments payable by Enseo, Inc.
                        beginning February 2001 (the "Assignment") under that
                        certain promissory note executed by Enseo, Inc.
                        ("Enseo") owed to 3dfx in the principal amount of
                        $3,000,000 dated March 1, 2000 (the "Note") and the
                        security agreement entered into as collateral for such
                        Note, as payment for any remaining claims made by Ogle
                        against 3dfx in the Arbitration or otherwise released
                        pursuant to this Agreement. A copy of such assignment of
                        the payments due under the Note and security interest is
                        attached here to as Exhibit D. Such assignment is
                        without recourse against 3dfx for collection of those
                        amounts from Enseo unless such payment(s) are actually
                        received by 3dfx, in which case 3dfx shall hold Ogle's
                        share of such payment(s) in trust for Ogle and forward
                        them to Ogle within five business days of receipt from
                        Enseo. 3dfx agrees to instruct Enseo to pay directly to
                        Ogle the entire principal and interest from Enseo's
                        payments of the next three (3) Note payments, namely,
                        the principal and interest payments made in February
                        2001, May 2001, and August, 2001 and forty-three and
                        65/100 percent (43.65%) of all such future payments made
                        by Enseo under the Note. Such letter of instruction is
                        attached hereto as Exhibit E with a payment schedule
                        outlining the percentages and amounts to be paid
                        attached thereto. It is expressly agreed and understood
                        among the Parties that, in the event Enseo defaults on
                        any or all of its Note payments, Ogle shall have no
                        recourse against 3dfx, and any default by Enseo does not
                        constitute a breach of this Agreement. In the event of a
                        default by Enseo, under the Note, however, both 3dfx and
                        Ogle retain a right to sue Enseo on the Note and to
                        foreclose the security interest to the extent of their
                        fifty percent (50%) interest in Enseo's obligations
                        under the Note.

                (c)     As additional consideration, 3dfx hereby releases Ogle
                        from all obligations under the Employment Agreement as
                        Amended.

                (d)     As additional consideration, 3dfx hereby agrees that any
                        Indemnification Agreement executed between Ogle and 3dfx
                        or STB will remain in full force and effect as relates
                        to claims asserted against Ogle as an officer or
                        director of 3dfx or STB for acts taking place prior to
                        Ogle's resignation.



                                                                          PAGE 3
<PAGE>   4

        3.3     OGLE'S CONSIDERATION: In consideration for signing and abiding
                by this Agreement and for dismissing the pending lawsuit, Ogle
                makes the following promises and representations to 3dfx:

                a.      Ogle agrees to sign and abide by the Agreed Order of
                        Dismissal to be filed with the AAA.

                b.      Ogle acknowledges and agrees that he has the right to
                        discuss all aspects of this Agreement with a private
                        attorney, has been encouraged to do so by 3dfx, and has
                        done so to the extent he desires. Further, Ogle
                        understands that he has twenty-one (21) days to sign
                        this Agreement after receipt of it in order to consider
                        all of its terms fully. This Agreement may be revoked by
                        Ogle only by delivering a written Notice of Revocation
                        to 3dfx's attorney, Stewart H. Thomas, Beckham & Thomas,
                        2626 Cole Ave.; Suite 950, Dallas Texas 75204 before
                        5:00 p.m. on Wednesday, December 6, 2000, and this
                        Agreement shall not become effective or enforceable
                        until the revocation period has expired. If Ogle does
                        not agree with and sign this Agreement within twenty-one
                        (21) days of receipt of this Agreement, this Agreement
                        is automatically withdrawn and is null and void.

        3.4     COVENANT NOT TO SUE: Upon the execution of this Agreement and
                Mutual Release, the Parties agree not to sue one another over
                any matter relating to or arising out of any part of the
                Transaction in Question.

        3.5     ATTORNEY'S FEES AND COSTS: The Parties shall bear his or its own
                costs and attorneys fees.

        3.6     RELEASES: The Parties execute the following Releases except as
                to their obligations set forth in this Agreement:

                (a)     3dfx forever releases, discharges, acquits, and
                        relinquishes Ogle, together with his agents,
                        representatives, employees, assigns, successors,
                        trustees, administrators, attorneys, and legal
                        representatives, of and from any and all claims,
                        demands, suits, damages, actions, causes of action, of
                        any kind or nature whatsoever, both at law and in
                        equity, whether heretofore or hereafter accruing,
                        whether now known or not known, whether foreseen or
                        unforeseen, for or because of any matter or thing done,
                        omitted, or suffered to be done by any of the Parties,
                        prior to and including the date hereof, including all
                        claims in any way directly or indirectly arising out of
                        the actions made the basis of Arbitration referenced in
                        paragraph 1.5 above, or any part of the Transaction in
                        Question, including claims for breach of Ogle's
                        Employment Agreement or its Amendment, fraud, fraud in
                        the inducement (both of the Ogle Employment Agreement
                        Amendment and of the merger between STB Systems, Inc.
                        and 3dfx Interactive, Inc.), or any other
                        representations made by Ogle, 3dfx, or STB, or any of
                        their agents, attorneys and affiliates at any time, and
                        attorneys fees.



                                                                          PAGE 4
<PAGE>   5

                (b)     Ogle forever releases, discharges, acquits, and
                        relinquishes 3dfx, together with their parents,
                        subsidiaries, affiliates, and all of their agents,
                        representatives, officers, directors, employees,
                        assigns, successors, trustees, administrators,
                        attorneys, and legal representatives, of and from any
                        and all claims, demands, suits, damages, actions, causes
                        of action, of any kind or nature whatsoever, both at law
                        and in equity, whether heretofore or hereafter accruing,
                        whether now known or not known, whether foreseen or
                        unforeseen, for or because of any matter or thing done,
                        omitted, or suffered to be done by any of the Parties,
                        prior to and including the date hereof, including all
                        claims in any way directly or indirectly arising out of
                        the actions made the basis of the Arbitration referenced
                        in paragraph 1.5 above, or any part of the Transaction
                        in Question, including claims for breach of Ogle's
                        Employment Agreement or its Amendment, fraud, fraud in
                        the inducement (both of the Ogle Employment Agreement
                        Amendment and of the merger between STB Systems, Inc.
                        and 3dfx Interactive, Inc.), libel, slander, defamation,
                        or any other representations made by Ogle or 3dfx, or
                        any of their agents, attorneys and affiliates at any
                        time, and any claim for attorneys fees.

                (c)     In consideration of the above agreements,
                        understandings, arrangements, and obligations made by
                        each of the Parties, including but not limited to those
                        set forth in paragraphs 3.2 and 3.3, both Parties
                        voluntarily and knowingly waive, release, and discharge
                        each other, their predecessors, successors, affiliates,
                        employees, officers, directors, shareholders, partners,
                        assigns, employee retirement, health and welfare benefit
                        plans and the fiduciaries thereof, and agents from all
                        claims, liabilities, demands, and causes of action,
                        known or unknown, fixed or contingent, which each may
                        have against the other or may have or claim to have
                        against any of them as a result of Ogle's employment
                        and/or separation from employment (excluding breach of
                        this Agreement), as well as all claims or causes of
                        action of any kind arising out of Ogle's employment
                        agreements with 3dfx or STB. Ogle and 3dfx and STB agree
                        not to file any future action to assert such claims.
                        This includes, but is not limited to:

                        (i)     claims concerning Ogle's employment with 3dfx
                                and/or separation therefrom;

                        (ii)    claims arising, under federal, state, or local
                                laws prohibiting discrimination such as, without
                                limitation, the Civil Rights Acts of 1964 and
                                1991, the Age Discrimination in Employment Act
                                of 1967 (for all claims arising through the date
                                you sign this Agreement), the Americans with
                                Disabilities Act, the Equal Pay Act, the Texas
                                Commission on Human Rights Act, and the Family
                                and Medical Leave Act;

                        (iii)   claims for breach of contract, excluding breach
                                of this Agreement by 3dfx, quasi-contract, or
                                wrongful or constructive discharge;



                                                                          PAGE 5
<PAGE>   6

                        (iv)    claims for personal injury, harm, or damages
                                (whether intentional or unintentional),
                                including but not limited to, libel, slander,
                                assault, battery, invasion of privacy, negligent
                                or intentional infliction of emotional distress,
                                or interference with business opportunity or
                                with contracts;

                        (v)     claims arising out of any legal restrictions on
                                3dfx's right to terminate its employees;

                        (vi)    claims arising under the Employee Retirement
                                Income Security Act:

                        (vii)   for salary, vacation pay, sick pay, bonus,
                                profit sharing, incentive compensation, stock
                                options, severance pay, future pay, compensation
                                of any kind, retirement, health insurance,
                                long-term disability, AD&D, life insurance, or
                                any other employee benefit; or

                        (viii)  claims arising out of any exercise and/or sale
                                of any incentive stock options or stock in 3dfx.

        3.7     SURVIVABILITY: It is understood and agreed that this Agreement
                shall be binding upon and inure to the benefit of all the
                Parties and their respective heirs, spouses, representatives,
                successors, and assigns in each and all capacities of each
                Party.

        3.8     OTHER DOCUMENTATION: Each of the Parties agrees promptly to
                execute, acknowledge and deliver all further documents and
                instruments that may be necessary to consummate this Agreement
                and to execute, acknowledge, attest, and deliver all additional
                documents, instruments, consents and approvals necessary or
                advisable to fully evidence and perfect each Parties rights and
                obligation described in paragraphs 3.1 to 3.6 of this Agreement.

        3.9     ENTIRE AGREEMENT: It is understood and agreed that this
                Agreement contains the entire agreement between the Parties and
                supersedes any and all prior agreements or undertakings between
                the Parties relating to the subject matter of this Agreement or
                relating in any way to the Transaction in Question. No oral
                understandings, statements, promises or inducements that tend to
                alter or are contrary to the terms of this Agreement exist. This
                Agreement cannot be changed orally. Any changes or amendments
                must be signed by all Parties affected by the amendment.

        3.10    NO ADMISSION OF LIABILITY: It is understood and agreed that this
                a compromise of disputed claims and that nothing contained
                herein shall be construed as an admission of liability by, or on
                behalf of any Party, any such liability being expressly denied.
                The Parties further recognize that this Agreement has been
                entered into for the release and compromise of any claims which
                might be asserted by any Party and to avoid the expense and
                burden of litigation.



                                                                          PAGE 6
<PAGE>   7

        3.11    GOVERNING LAW AND VENUE: It is understood and agreed that this
                Agreement shall be governed by, construed, and enforced in
                accordance with the laws of the State of Texas applicable to
                contracts made and to be fully performable therein. Any dispute
                regarding this Agreement shall be filed in Dallas County, Texas.

        3.12    COUNTERPARTS: It is understood and agreed that this Agreement
                may be executed in multiple originals and or counterparts each
                of which shall be deemed an original for all purposes but such
                counterparts together shall constitute one and the same
                instrument.

        3.13    HEADINGS: The headings of this agreement are for purposes of
                reference only and shall not limit or define the meaning of the
                provisions of this Agreement.

        3.14    SEVERABILITY: If any section, paragraphs, sentence, clause or
                phrase contained in this Agreement shall become illegal, null or
                void, or shall be found to be against public policy for any
                reason or shall be held by any Court of competent jurisdiction
                to be illegal, null or void or found to be against public policy
                the remaining sections, paragraphs, sentences, clauses or
                phrases contained in this Agreement shall not be affected
                thereby. In the event Ogle is required to repay or reassign any
                portion of the consideration, or any part of the consideration
                is voided, Ogle retains a claim against 3dfx to the extent of
                the repaid, reassigned, or voided consideration, notwithstanding
                the releases contained in this Agreement or other provisions
                contained in this paragraph.

        3.15    WAIVER: The waiver of any beach of any provision hereunder by
                any Party to this Agreement shall not be deemed to be a waiver
                of any proceeding or subsequent breach hereunder.

        3.16    BINDING CONTRACT: It is expressly agreed and understood that the
                terms of this Agreement are contractual, and not mere recitals
                of the Parties hereto, and the Parties intend to be hereby bound
                by its terms.

        3.17    AUTHORITY: Each Party hereto and each Party's authorized agents
                or representatives, if any, hereby acknowledge and expressly
                warrant and represent for himself or itself and for his or its
                predecessors, successors, assigns, heirs, administrators, and
                legal representatives that he or it:

                (a)     is legally competent and authorized to execute this
                        Agreement;

                (b)     has not assigned, sold, or transferred, either by
                        instrument in writing or otherwise, any right, title,
                        interest or ownership in any asset or thing to be
                        conveyed or released in this Agreement;

                (c)     has read and understands the effect of this Agreement;

                (d)     is represented by independent legal counsel of the
                        Party's choice;



                                                                          PAGE 7
<PAGE>   8

                (e)     has received all additional information requested prior
                        to executing this Agreement;

                (f)     executes this Agreement of the Party's own free will and
                        accord for the purposes and consideration set forth
                        herein without reliance upon any statement,
                        representation or inducement of any other Party not
                        contained herein;

                (g)     has the full right and authority to enter into this
                        Agreement and to consummate the transfer and assignments
                        contemplated herein;

                (h)     has obtained all consents or waivers from all lending
                        institutions sufficient to transfer the consideration
                        expressed on paragraph 3.2 free and clear of all liens
                        or superior security interests; and

                (i)     is authorized to sign this Agreement on behalf of any of
                        the Parties hereto.

        3.18    RETURN OF DOCUMENTS: The Parties shall return all documents
                marked "Confidential" and produced by the opposing Party or its
                counsel to the offices of the producing Party's counsel for
                disposal within fourteen (14) days from the execution of this
                document, together with a letter certifying its compliance with
                this paragraph and with paragraph 13 of the Stipulation and
                Protective Order dated July 13, 2000.



                                                                          PAGE 8
<PAGE>   9

IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT on the 29th day of
November 2000.

3Dfx INTERACTIVE, INC.                      STB SYSTEMS, INC.



By /s/ BRYAN F. KEYES                        By /s/ BRYAN F. KEYES
   ---------------------------------------     ---------------------------------
   BRYAN F. KEYES                              BRYAN F. KEYES
   Its Vice President and General Counsel      Its Vice President and General
                                               Counsel



STATE OF TEXAS       )

COUNTY OF DALLAS     )


        BEFORE ME, the undersigned Notary Public, on this day personally
appeared BRYAN F. KEYES, the Vice President and General Counsel of 3dfx
Interactive, Inc., a Texas corporation, and the Vice President and General
Counsel of STB Systems, Inc., a Texas corporation, known to me (or
satisfactorily proven) to be the person and officer who executed the foregoing
instrument, and acknowledged that he executed the same as such officer, for the
purposes therein contained, as the free act and deed of said corporation, by its
authority.

        SUBSCRIBED AND SWORN TO BEFORE ME this 29th day of November 2000.

                                     /s/ MERNA BISHOP
                                     -------------------------------------------
                                     Notary Public in and for the State of Texas
                                     My Commission Expires: 08-10-04
                                                            --------------------



                                                                          PAGE 9
<PAGE>   10
/s/ WILLIAM E. OGLE
-----------------------------
WILLIAM E. OGLE




STATE OF TEXAS       )

COUNTY OF DALLAS     )


        BEFORE ME, the undersigned Notary Public, on this day personally
appeared WILLIAM E. OGLE, known to me (or satisfactorily proven) to be the
person and officer who executed the foregoing instrument, and acknowledged that
he executed the same for the purposes therein contained, as the free act and
deed.

        SUBSCRIBED AND SWORN TO BEFORE ME this 29th day of November 2000.


                                     /s/ MERNA BISHOP
                                     -------------------------------------------
                                     Notary Public in and for the State of Texas
                                     My Commission Expires: 08-10-04
                                                            --------------------



                                                                         PAGE 10
<PAGE>   11

                        AMERICAN ARBITRATION ASSOCIATION

                                  DALLAS, TEXAS

WILLIAM E. OGLE,                     )
                                     )
   CLAIMANT,                         )
                                     )
V.                                   )      ARBITRATION NO.  71 160 00207 00
                                     )
3Dfx INTERACTIVE, INC. AND           )
STB SYSTEMS, INC.                    )
                                     )
    RESPONDENT.                      )

                    AGREED ORDER OF DISMISSAL WITH PREJUDICE

        Today, Claimant WILLIAM E. OGLE and Respondents 3Dfx INTERACTIVE, INC.
AND STB SYSTEMS, INC. presented this Agreed Order of Dismissal with Prejudice to
the arbitrator, Mr. George Allen Butler, representing to Mr. Butler that
Claimant and Respondents have compromised and settled all claims and disputes
between and among them., and that, as a result of such settlement, they no
longer desire or require such disputes to be adjudicated in this or any other
forum.

        The arbitrator finds that, in light of such settlement, this case should
be dismissed with prejudice,

        IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that this case, including
all claims or counter-claims asserted herein, or which could have been asserted
herein, are hereby dismissed with prejudice to the refiling of same.

        SO ORDERED this _____ day of _______________________, 2000.



                                       -----------------------------------------
                                       GEORGE ALLEN BUTLER, Arbitrator



                                                                          PAGE 1
<PAGE>   12

Agreed and Accepted as to Form and Content:




By                                     By
   -------------------------------        --------------------------------------
   Brenda Collier                         Stewart H. Thomas
   Attorney for Claimant                  Attorney for Respondents
   William E. Ogle                        3dfx Interactive, Inc.
                                          and STB Systems, Inc.



                                                                          PAGE 2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>4
<FILENAME>f72487ex10-39.txt
<DESCRIPTION>EXHIBIT 10.39
<TEXT>

<PAGE>   1

                                                                   EXHIBIT 10.39

                          AMENDMENT TO LEASE AGREEMENT


        THIS AMENDMENT TO LEASE AGREEMENT (this "Amendment") is entered into to
be effective as of July 1, 1999, by and between CARRAMERICA REALTY, L.P., t/a
Riata Corporate Park ("Landlord"), and 3DFX INTERACTIVE, INC., a California
corporation ("Tenant").

                                   WITNESSETH:

        WHEREAS, Landlord and Tenant entered into that certain Lease dated as of
July 23, 1998 (the "Lease"), pertaining to the lease of certain premises (the
"Premises") located in Building 5 of that certain office building project
locally known as "Riata Corporate Park" and having the local address of 12357
Riata Trace Parkway, Building 1, Austin, Texas (the "Building");

        WHEREAS, Tenant desires to lease from Landlord certain other space
situated in the Building, and Landlord has agreed to lease to Tenant such other
space, and, accordingly, Landlord and Tenant desire to further modify the terms
and provisions of the Lease as hereinafter provided.

        NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:

        1. Expansion Space. For a term commencing on the Effective Date (as
hereinafter defined) and continuing until the expiration of the term of the
Lease (as herein modified), Landlord hereby leases and demises to Tenant, and
Tenant hereby leases from Landlord, an aggregate of 16,741 rentable square feet
of space in the Building (the "Expansion Space"), such space being known as
Suite 210 and being more particularly depicted on the floor plan attached hereto
as Exhibit A. As of the Effective Date, the Expansion Space shall, for all
purposes, be deemed to be included within the term "Premises" as used in the
Lease and shall be subject in all respect to the terms, provisions and
conditions set forth therein.

        2. Rentable Square Footage; Proportionate Share. Landlord and Tenant
hereby acknowledge and agree that, as of the Effective Date, the "Rentable
Square Footage" of the Premises shall comprise a total of 27,165 square feet,
and that "Tenant's Proportionate Share" shall thereupon equal 29.74% (based upon
a total of 91,332 Rentable Square Feet in the Building).

        3. Termination Date. Notwithstanding anything to the contrary in the
Lease, Landlord and Tenant hereby agree that the initial Term of the Lease shall
expire, as to the entire Premises (as modified by this Amendment), on August 31,
2004 (the "Termination Date").

        4. Lease Year. Landlord and Tenant agree that the term "Lease Year"
shall have the meaning ascribed to it under the Lease, except that the last
Lease Year shall consist only of the number of months necessary to permit the
Lease to end on the Termination Date.



<PAGE>   2

        5. Base Rent. Notwithstanding anything to the contrary in the Lease,
Landlord and Tenant hereby agree that, commencing on the Effective Date and
continuing through and including the Termination Date, the annual Base Rent
applicable to the Premises and payable by Tenant shall be as follows:

<TABLE>
<CAPTION>
                                          Monthly                 Annual
                  Period                 Base Rent              Base Rent
             ---------------            -----------            -----------
             <S>                        <C>                    <C>
             Lease Years 1-3            $ 37,786.20            $453,434.50
             Lease Years 4-6            $ 38,220.54            $458,646.50
</TABLE>

        6. Tenant Improvements. Landlord shall improve the Expansion Space in
accordance with the applicable terms and provisions of Appendix C attached to
the Lease; provided, however, that "Landlord's Contribution" with respect to the
Expansion Space shall equal $10.00 per Rentable Square Foot within the Expansion
Space. Landlord agrees that it shall diligently pursue the completion of such
improvements on or before September 1, 1999, and Tenant covenants to use good
faith efforts to assist Landlord in the pursuit of such completion.

        7. Acceptance; Effective Date. Tenant shall be required to accept the
Expansion Space and to commence payment of the Base Rent specified in paragraph
5 above as of the Effective Date. For purposes hereof, the "Effective Date"
shall mean the first to occur of (i) the date that Tenant first occupies the
Expansion Space for its intended purpose or (ii) the date that Landlord
substantially completes the improvements contemplated under Paragraph 6 above
and tenders the Expansion Space to Tenant.

        8. Miscellaneous.

                a. All terms and conditions of the Lease not expressly modified
by this Amendment shall remain in full force and effect, and, in the event of
any inconsistencies between this Amendment and the terms of the Lease, the terms
set forth in this Amendment shall govern and control. Except as expressly
amended hereby, the Lease shall remain in full force and effect as of the date
thereof.

                b. This Amendment may be executed in one or more counterparts
which shall be construed together as one document.

                c. Captions used herein are for convenience only and are not to
be utilized to ascribe any meaning to the contents thereof. Unless defined
differently herein or the context clearly requires otherwise, all terms used in
this Amendment shall have the meanings ascribed to them under the Lease.

                d. This Amendment (i) shall be binding upon and shall inure to
the benefit of each of the parties and their respective successors, assigns,
receivers and trustees; (ii) may be modified or amended only by a written
agreement executed by each of the parties; and (iii) shall be governed by and
construed in accordance with the laws of the State of Texas.

        EXECUTED as of the date first written above.



                                       2
<PAGE>   3

                                   LANDLORD:

                                   CARRAMERICA REALTY, L.P., t/a Riata
                                   Corporate Park

                                   By: CarrAmerica Realty G.P. Holdings, Inc., a
                                       Delaware corporation, its general partner


                                       By: /s/ PHILIP L. HAWKINS
                                          --------------------------------------
                                       Name: Philip L. Hawkins
                                            ------------------------------------
                                       Title: Managing Director
                                             -----------------------------------

                                   TENANT:

                                   3DFX INTERACTIVE, INC., a California
                                   corporation


                                   By: /s/ DAVID ZACARIAS
                                      ------------------------------------------
                                   Name: David Zacarias
                                        ----------------------------------------
                                   Title: V.P. Admin./CFO
                                         ---------------------------------------


Attachments: Exhibit A



                                       3
<PAGE>   4

                     * * * * * * * * * * * * * * * * * * * *

                                      Lease


                              RIATA CORPORATE PARK


                     * * * * * * * * * * * * * * * * * * * *

                                     Between


                             3DFX INTERACTIVE, INC.
                                    (Tenant)


                                       and


                            CARRAMERICA REALTY, L.P.
                            T/A RIATA CORPORATE PARK
                                   (Landlord)



<PAGE>   5

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>                                                                                         <C>
1.      LEASE AGREEMENT......................................................................2
        A.     Lease of Premises.............................................................2
        B.     Determination of Rentable Square Fee..........................................2
        C.     Definitions...................................................................2
               (1)    Usable Area............................................................2
               (2)    General Common Areas...................................................2
               (3)    Floor Common Areas.....................................................2

2.      RENT.................................................................................2
        A.     Types f Rent..................................................................2
               (1)    Base Rent..............................................................3
               (2)    Operating Cost Share Rent..............................................3
               (3)    Additional Rent........................................................3
               (4)    Rent...................................................................3
        B.     Payment of Operating Cost Share Rent..........................................3
               (1)    Payment of Estimated Operating Cost Share Rent.........................3
               (2)    Correction of Operating Cost Share Rent................................3
        C.     Definitions...................................................................4
               (1)    Included Operating Costs...............................................4
               (2)    Excluded Operating Costs...............................................4
               (3)    Taxes..................................................................5
               (4)    Lease Year.............................................................6
               (5)    Fiscal Year............................................................6
        D.     Computation of Base Rent and Rent Adjustments.................................6
               (1)    Prorations.............................................................6
               (2)    Default Interest.......................................................6
               (3)    Rent Adjustments.......................................................6
               (4)    Miscellaneous..........................................................6

3.      PREPARATION AND CONDITION OF PREMISES; POSSESSION SURRENDER
        OF PREMISES..........................................................................7
        A.     Condition of Premises.........................................................7
        B.     Tenant's Possession...........................................................7
        C.     Maintenance...................................................................7

4.      PROJECT SERVICES.....................................................................7
        A.     Heating and Air Conditioning..................................................7
        B.     Elevators.....................................................................7
        C.     Electricity...................................................................8
        D.     Water.........................................................................8
        E.     Janitorial Service............................................................8
        F.     Parking.......................................................................8
        G.     Interruption of Services......................................................8
</TABLE>



                                       i
<PAGE>   6

<TABLE>
<S>                                                                                         <C>
5.      ALTERATIONS AND REPAIRS..............................................................9
        A.     Landlord's Consent and Conditions.............................................9
        B.     Damage to Systems............................................................10
        C.     No Liens.....................................................................10
        D.     Ownership of Improvements....................................................10
        E.     Removal at Termination.......................................................11

6.      USE OF PREMISES.....................................................................11

7.      GOVERNMENTAL REQUIREMENTS AND BUILDING RULES........................................11

8.      WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE........................................11
        A.     Waiver of Claims.............................................................11
        B.     Indemnification..............................................................12
        C.     Tenant's Insurance...........................................................12
        D.     Insurance Certificates.......................................................13
        E.     Landlord's Insurance.........................................................13

9.      FIRE AND OTHER CASUALTY.............................................................14
        A.     Termination..................................................................14
        B.     Restoration..................................................................14

10.     EMINENT DOMAIN......................................................................14

11.     RIGHTS RESERVED TO LANDLORD.........................................................14
        A.     Name.........................................................................14
        B.     Signs........................................................................14
        C.     Window Treatments............................................................14
        D.     Keys.........................................................................15
        E.     Access.......................................................................15
        F.     Preparation for Reoccupancy..................................................15
        G.     Heavy Articles...............................................................15
        H.     Show Premises................................................................15
        I.     Relocation of Tenant.........................................................15
        J.     Use of Lockbox...............................................................15
        K.     Repairs and Alterations......................................................15
        L.     Landlord's Agents............................................................16
        M.     Building Services............................................................16
        N.     Other Actions................................................................16

12.     TENANT'S DEFAULT....................................................................16
        A.     Rent Default.................................................................16
        B.     Assignment/Sublease or Hazardous Substances Default..........................16
        C.     Other Performance Default....................................................16
        D.     Credit Default...............................................................16
        E.     Vacation or Abandonment Default..............................................17
</TABLE>



                                       ii
<PAGE>   7

<TABLE>
<S>                                                                                         <C>
13.     LANDLORD REMEDIES...................................................................17
        A.     Termination of Lease or Possession...........................................17
        B.     Lease Termination Damages....................................................17
        C.     Possession Termination Damages...............................................17
        D.     Landlord's Remedies Cumulative...............................................17
        E.     Waiver of Trial by Jury......................................................18
        F.     Litigation Costs.............................................................18

14.     SURRENDER...........................................................................18

15.     HOLDOVER............................................................................18

16.     SUBORDINATION TO GROUND LEASES AND MORTGAGES........................................18
        A.     Subordination................................................................18
        B.     Termination of Ground Lease or Foreclosure of Mortgage.......................19
        C.     Security Deposit.............................................................19
        D.     Notice and Right to Cure.....................................................19
        E.     Definitions..................................................................19

17.     ASSIGNMENT AND SUBLEASE.............................................................19
        A.     In General...................................................................19
        B.     Landlord's Consent...........................................................20
        C.     Procedure....................................................................20
        D.     Transfers to Affiliates......................................................20
        E.     Excess Payments..............................................................20
        F.     Recapture....................................................................21

18.     CONVEYANCE BY LANDLORD..............................................................21

19.     ESTOPPEL CERTIFICATE................................................................21

20.     SECURITY DEPOSIT....................................................................21

21.     FORCE MAJEURE.......................................................................22

22.     NOTICES.............................................................................22
        A.     Landlord.....................................................................22
        B.     Tenant.......................................................................22

23.     QUIET POSSESSION....................................................................23

24.     REAL ESTATE BROKER..................................................................23

25.     MISCELLANEOUS.......................................................................23
        A.     Successors and Assigns.......................................................23
        B.     Date Payments Are Due........................................................23
        C.     Meaning of "Landlord," "Re-Entry," "including" and "Affiliate"...............23
        D.     Time of the Essence..........................................................23
</TABLE>



                                      iii
<PAGE>   8

<TABLE>
<S>                                                                                         <C>
        E.     No Option....................................................................23
        F.     Severability.................................................................23
        G.     Governing Law................................................................23
        H.     Lease Modification...........................................................24
        I.     No Oral Modification.........................................................24
        J.     Landlord's Right to Cure.....................................................24
        K.     Captions.....................................................................24
        L.     Authority....................................................................24
        M.     Landlord's Enforcement of Remedies...........................................24
        N.     Entire Agreement.............................................................24
        O.     Landlord's Title.............................................................24
        P.     Light and Air Rights.........................................................24
        Q.     Singular and Plural..........................................................24
        R.     No Recording by Tenant.......................................................24
        S.     Exclusivity..................................................................24
        T.     No Construction Against Drafting Party.......................................25
        U.     Survival.....................................................................25
        V.     Rent Not Based on Income.....................................................25
        W.     Building Manager and Service Providers.......................................25
        X.     Late Charge and Interest on Late Payments....................................25
        Y.     Tenant's Financial Statements................................................25
        Z.     Usury Savings................................................................25
        AA.    Waiver of Warranties.........................................................25

26.     UNRELATED BUSINESS INCOME...........................................................26

27.     HAZARDOUS SUBSTANCES................................................................26

28.     EXCULPATION.........................................................................26

29.     LANDLORD'S LIEN.....................................................................26

30.     TENANT'S EQUIPMENT..................................................................27
</TABLE>

APPENDIX A - LEGAL DESCRIPTION OF LAND AND PLAN OF THE PREMISES
APPENDIX B - RULES AND REGULATIONS
APPENDIX C - TENANT IMPROVEMENT AGREEMENT
APPENDIX D - MORTGAGES CURRENTLY AFFECTING THE PROJECT
APPENDIX E - COMMENCEMENT DATE CONFIRMATION
APPENDIX F - SPECIAL PROVISIONS



                                       iv
<PAGE>   9

                                      LEASE

        THIS LEASE (the "Lease") is made as of July 23, 1998 between CarrAmerica
Realty, L.P., a Delaware limited partnership, t/a Riata Corporate Park (the
"Landlord"), and the Tenant as named in the Schedule below. The term "Building"
means the building known as "Riata Corporate Park Building 5" with a local
address of 12357 Riata Trace Parkway, Building 1, Austin, Texas, and situated on
the land legally described in Appendix A. "Premises" means that part of the
Building leased to Tenant described in the Schedule and outlined on Appendix A.
The Building is part of an office development (the "Project") known as "Riata
Corporate Park," the extent and configuration of which shall be determined by
Landlord from time to time.

        The following schedule (the "Schedule") is an integral part of this
Lease. Terms defined in this Schedule shall have the same meaning throughout the
Lease.

                                    SCHEDULE

        1.      Tenant: 3DFX Interactive, Inc.

        2.      Premises: A portion of the 1st floor of the Building

        3.      Rentable Square Feet: Approximately 10,424

        4.      Tenant's Proportionate Share: 11.4% (based upon a total of
                91,332 rentable square feet in the Building)

        5.      Security Deposit: See Section 20

        6.      Tenant's Real Estate Broker for this Lease: ACRE Solutions, LLP

        7.      Landlord's Real Estate Broker for this Lease: Colliers Oxford,
                Inc.

        8.      Tenant Improvements, if any: See the Tenant Improvement
                Agreement attached hereto as Appendix C

        9.      Commencement Date: September 1, 1998, or the Completion Date (as
                defined in Appendix Q if it is later; Landlord and Tenant shall
                execute a Commencement Date Confirmation substantially in the
                form of Appendix E promptly following the Commencement Date.

        10.     Termination Date/Term: Five (5) years after the Commencement
                Date, or if the Commencement Date is not the first day of after
                the first day of a month, then after the following month.

        11.     Base Rent:

<TABLE>
<CAPTION>
                                                                            Estimated Monthly
                      Period                   Annual Base Rent                 Base Rent
                  ---------------      -------------------------------      -----------------
                  <S>                  <C>                                  <C>
                  Lease Years 1-3      $17.00 per Rentable Square Foot         $14,767.33
                  Lease Years 4-5      $17.50 per Rentable Square Foot         $15,201.67
</TABLE>

        13.     Initial estimated Operating Cost Share Rent: $7.00 per Rentable
                Square Foot per year ($72,968 per year/$6,080.67 per month).



                                       1
<PAGE>   10

        1. LEASE AGREEMENT.

        A. Lease of Premises. On the terms stated in this Lease, Landlord leases
the Premises to Tenant, and Tenant leases the Premises from Landlord, for the
Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.

        B. Determination of Rentable Square Fee. Landlord and Tenant acknowledge
and agree that the Rentable Square Footage as stated in the Schedule is an
approximation and cannot be conclusively determined until after completion of
construction of the Premises and the Building. Within sixty (60) days of the
Completion Date, the Rentable Square Footage of the Premises shall be determined
and certified in writing by Landlord's architect using the modified "BOMA"
standard, as described below. Upon Tenant's receipt of such certification, Base
Rent, Tenant's Proportionate Share and other appropriate terms contained herein
shall be adjusted accordingly. For purposes of this determination, Rentable
Square Footage for the Premises shall be the sum of (i) the square footage of
Tenant's Usable Area within the first (1st) floor of the Building plus (ii) an
"add-on factor" for Tenant's share of General Common Area and the Floor Common
Area for the 1st floor. The current estimate for the add-on-factor for the 1st
floor of the Building is 18.6 % times Tenant's Usable Area within the 1st floor.

        C. Definitions.

                (1) Usable Area. "Usable Area" is computed by measuring to the
        finished surface of the office side of the corridor and other permanent
        walls, to the center of partitions that separate the Premises from
        adjoining Usable Areas, and to the inside finished surface of the
        dominant portion of the permanent outer building walls. Deductions are
        not made for columns and projections necessary to the building.

                (2) General Common Areas. "General Common Areas" are defined as
        all areas intended for use by all building tenants (including building
        lobby, mailroom, elevator equipment rooms, security office and fire
        sprinkler rooms).

                (3) Floor Common Areas. "Floor Common Areas" are defined as all
        areas for use by tenants of a single floor only, and include restrooms,
        janitor's closets, mechanical, electrical, telephone rooms and building
        corridors, calculated by subtracting all Usable Area on a multi-tenant
        floor from the Usable Area for such floor as determined for occupancy by
        a single tenant.

        2. RENT.

        A. Types f Rent. Tenant shall pay the following Rent in the form of a
check to Landlord at the following address:

               CarrAmerica Realty, L.P.
               t/a Riata Corporate Park
               P.O. Box 277709
               Atlanta, GA 30384-0566



                                       2
<PAGE>   11

or by wire transfer as follows:

               NationsBank, N.A. (South)
               ABA Number 061-000-052
               Account Number 3261312955

or in such other manner as Landlord may notify Tenant:

                (1) Base Rent in monthly installments in advance, the first
        monthly installment payable concurrently with the execution of this
        Lease and thereafter on or before the first day of each month of the
        Term in the amount set forth on the Schedule.

                (2) Operating Cost Share Rent in an amount equal to the Tenant's
        Proportionate Share of the Operating Costs for the applicable Fiscal
        Year of the Lease, paid monthly in advance in an estimated amount.
        Definitions of Operating Costs and Tenant's Proportionate Share, and the
        method for billing and payment of Operating Cost Share Rent are set
        forth in Sections 2B, 2C and 2D.

                (3) Additional Rent in the amount of all costs, expenses,
        liabilities, and amounts which Tenant is required to pay under this
        Lease, excluding Base Rent and Operating Cost Share Rent, but including
        any interest for late payment of any item of Rent.

                (4) Rent as used in this Lease means Base Rent, Operating Cost
        Share Rent and Additional Rent. Tenant's"agreement to pay Rent is an
        independent covenant, with no right of setoff, deduction or counterclaim
        of any kind.

        B. Payment of Operating Cost Share Rent.

                (1) Payment of Estimated Operating Cost Share Rent. Landlord
        shall estimate the Operating Costs of the Project (including Taxes, as
        defined below) by April 1 of each Fiscal Year, or as soon as reasonably
        possible thereafter. Landlord may revise these estimates whenever it
        obtains more accurate information, such as the final real estate tax
        assessment or tax rate for the Project.

                Within ten (10) days after receiving the original or revised
        estimate from Landlord, Tenant shall pay Landlord one-twelfth (1/12th)
        of Tenant's Proportionate Share of the estimated Operating Costs,
        multiplied by the number of months that have elapsed in the applicable
        Fiscal Year to the date of such payment including the current month,
        minus payments previously made by Tenant for the months elapsed. On the
        first day of each month thereafter, Tenant shall pay Landlord
        one-twelfth (1/12th) of Tenant's Proportionate Share of this estimate,
        until a new estimate becomes applicable.

                (2) Correction of Operating Cost Share Rent. Landlord shall
        deliver to Tenant a report for the previous Fiscal Year (the "Operating
        Cost Report") by May 15 of each year, or as soon as reasonably possible
        thereafter, setting forth (a) the actual Operating Costs incurred, (b)
        the amount of Operating Cost Share Rent due from Tenant, and (c) the
        amount of Operating Cost Share Rent paid by Tenant. Within twenty (20)
        days after such



                                       3
<PAGE>   12

        delivery, Tenant shall pay to Landlord the amount due minus the amount
        paid. If the amount paid exceeds the amount due, Landlord shall apply
        the excess to Tenant's payments of Operating Cost Share Rent next coming
        due.

        C. Definitions.

                (1) Included Operating Costs. "Operating Costs" means any
        expenses, costs and disbursements of any kind, paid or incurred by
        Landlord in connection with the management [including an annual
        management fee, which shall not exceed five percent (5 %) of Rent (net
        of the management fee) for such year], maintenance, operation,
        insurance, repair, replacement and other related activities in
        connection with any part of the Building or the Project and of the
        personal property, fixtures, machinery, equipment, systems and apparatus
        used in connection therewith, including the cost of providing those
        services required to be furnished by Landlord under this Lease.
        Operating Costs shall also include Taxes and the costs of any capital
        improvements which reduce Operating Costs or improve safety, and those
        made to keep the Project in compliance with governmental requirements
        applicable from time to time (collectively, "Included Capital Items");
        provided, that the costs of any Included Capital Item shall be amortized
        by Landlord, together with an amount equal to interest at ten percent
        (10%) per annum, over the estimated useful life of such item and such
        amortized costs are only included in Operating Costs for that portion of
        the useful life of the Included Capital Item which falls within the
        Term.

                If the Building is not fully occupied during any portion of any
        Fiscal Year, Landlord may adjust (an "Equitable Adjustment") Operating
        Costs to equal what would have been incurred by Landlord had the
        Building been fully occupied. This Equitable Adjustment shall apply only
        to Operating Costs which are variable and therefore increase as
        occupancy of the Building increases. Landlord may incorporate the
        Equitable Adjustment in its estimates of Operating Costs.

                If Landlord does not furnish any particular service whose cost
        would have constituted an Operating Cost to a tenant other than Tenant
        who has undertaken to perform such service itself, Operating Costs shall
        be increased by the amount which Landlord would have incurred if it had
        furnished the service to such tenant.

                (2)     Excluded Operating Costs. Operating Costs shall not
                        include:

                (a)     costs of alterations of tenant premises;

                (b)     costs of capital improvements other than Included
                        Capital Items;

                (c)     interest and principal payments on mortgages or any
                        other debt costs, or rental payments on any ground lease
                        of the Project;

                (d)     real estate brokers' leasing commissions;

                (e)     legal fees, space planner fees and advertising expenses
                        incurred with regard to leasing the Building or portions
                        thereof;



                                       4
<PAGE>   13

                (f)     any cost or expenditure for which Landlord is
                        reimbursed, by insurance proceeds or otherwise, except
                        by Operating Cost Share Rent;

                (g)     the cost of any service furnished to any office tenant
                        of the Building which Landlord does not make available
                        to Tenant;

                (h)     depreciation (except on any Included Capital Items);

                (i)     franchise or income taxes imposed upon Landlord, except
                        to the extent imposed in lieu of all or any part of
                        Taxes;

                (j)     costs of correcting defects in construction of the
                        Building (as opposed to the cost of normal repair,
                        maintenance and replacement expected with the
                        construction materials and equipment installed in the
                        Building in light of their specifications);

                (k)     legal and auditing fees which are for the benefit of
                        Landlord such as collecting delinquent rents, preparing
                        tax returns and other financial statements, and audits
                        other than those incurred in connection with the
                        preparation of reports required pursuant to Section 2B
                        above;

                (l)     the wages of any employee for services not related
                        directly to the management, maintenance, operation and
                        repair of the Project; and

                (m)     fines, penalties and interest.

                (3) Taxes. "Taxes" means any and all taxes, assessments and
        charges of any kind, general or special, ordinary or extraordinary,
        levied against the Project, which Landlord shall pay or become obligated
        to pay in connection with the ownership, leasing, renting, management,
        use, occupancy, control or operation of the Project or of the personal
        property, fixtures, machinery, equipment, systems and apparatus used in
        connection therewith. Taxes shall include real estate taxes, personal
        property taxes, sewer rents, water rents, special or general
        assessments, transit taxes, ad valorem taxes, assessments by any
        property owners association or under any deed or other restrictive
        covenants and any tax levied on the rents hereunder or the interest of
        Landlord under this Lease (the "Rent Tax"). Taxes shall also include all
        fees and other costs and expenses paid by Landlord in reviewing any tax
        and in seeking a refund or reduction of any Taxes, whether or not the
        Landlord is ultimately successful.

                For any year, the amount to be included in Taxes (a) from taxes
        or assessments payable in installments, shall be the amount of the
        installments (with any interest) due and payable during such year, and
        (b) from all other Taxes, shall at Landlord's election be the amount
        accrued, assessed, or otherwise imposed for such year or the amount due
        and payable in such year. Any refund or other adjustment to any Taxes by
        the taxing authority, shall apply during the year in which the
        adjustment is made.



                                       5
<PAGE>   14

                Taxes shall not include any net income (except Rent Tax),
        capital, stock, succession, transfer, franchise, gift, estate or
        inheritance tax, except to the extent that such tax shall be imposed in
        lieu of any portion of Taxes.

                (4) Lease Year. "Lease Year" means each consecutive twelve-month
        period beginning with the Commencement Date, except that if the
        Commencement Date is not the first day of a calendar month, then the
        first Lease Year shall be the period from the Commencement Date through
        the final day of the twelve months after the first day of the following
        month, and each subsequent Lease Year shall be the twelve months
        following the prior Lease Year.

                (5) Fiscal Year. "Fiscal Year" means the calendar year, except
        that the first Fiscal Year and the last Fiscal Year of the Term may be a
        partial calendar year.

        D. Computation of Base Rent and Rent Adjustments.

                (1) Prorations. If this Lease begins on a day other than the
        first day of a month, Base Rent and Operating Cost Share Rent shall be
        prorated for such partial month based on the actual number of days in
        such month. If this Lease begins on a day other than the first day, or
        ends on a day other than the last day, of the Fiscal Year, Operating
        Cost Share Rent shall be prorated for the applicable Fiscal Year.

                (2) Default Interest. Any sum due from Tenant to Landlord not
        paid when due shall bear interest from the date due until paid at
        eighteen percent (18%) per annum.

                (3) Rent Adjustments. The square footage of the Premises and the
        Building set forth in the Schedule are conclusively deemed to be the
        actual square footage thereof, without regard to any subsequent
        remeasurement of the Premises or the Building. If any Operating Cost
        paid in one Fiscal Year relates to more than one Fiscal Year, Landlord
        may proportionately allocate such Operating Cost among the related
        Fiscal Years. Operating Costs allocable to the Project as a whole (as
        opposed to a single building within the Project), including all
        maintenance, repair, replacement, insurance, Taxes and other Operating
        Costs associated with the parking and driveway areas, landscaping,
        project and directional signage and other common areas within the
        Project, shall be allocated among the completed buildings in the Project
        based upon the relative Rentable Square Feet within such buildings, and
        Operating Cost Share Rent shall include Tenant's Proportionate Share of
        such Operating Costs allocated to the Building.

                (4) Miscellaneous. So long as Tenant is in default of any
        obligation under this Lease, Tenant shall not be entitled to any refund
        of any amount from Landlord. If this Lease is terminated for any reason
        prior to the annual determination of Operating Cost Share Rent, either
        party shall pay the full amount due to the other within fifteen (15)
        days after Landlord's notice to Tenant of the amount when it is
        determined. Landlord may commingle any payments made with respect to
        Operating Cost Share Rent, without payment of interest.



                                       6
<PAGE>   15

        3. PREPARATION AND CONDITION OF PREMISES; POSSESSION SURRENDER OF
PREMISES.

        A. Condition of Premises. Except to the extent of the Tenant
Improvements item on the Schedule, Landlord is leasing the Premises to Tenant
"as is", without any obligation to alter, remodel, improve, repair or decorate
any part of the Premises. Landlord shall cause the Premises to be completed in
accordance with the Tenant Improvement Agreement attached as Appendix C.

        B. Tenant's Possession. Tenant's taking possession of any portion of the
Premises shall be conclusive evidence that the Premises was in good order,
repair and condition. If Landlord authorizes Tenant to take possession of any
part of the Premises prior to the Commencement Date for purposes of doing
business, all terms of this Lease shall apply to such pre-Term possession,
including Base Rent at the rate set forth for the First Lease Year in the
Schedule prorated for any partial month.

        C. Maintenance. Throughout the Term, Tenant shall maintain the Premises
in their condition as of the Completion Date, loss or damage caused by the
elements, ordinary wear, and fire and other casualty excepted, and at the
termination of this Lease, or Tenant's right to possession, Tenant shall return
the Premises to Landlord in broom-clean condition. To the extent Tenant fails to
perform either obligation, Landlord may, but need not, restore the Premises to
such condition and Tenant shall pay the cost thereof.

        4. PROJECT SERVICES. Landlord shall furnish services as follows:

        A. Heating and Air Conditioning. During the normal business hours of
7:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m. to 1:00 p.m. on
Saturday, excluding New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, and any other holiday taken by tenants
occupying at least one-half (1/2) of the Rentable Square Feet of office space in
the Building, as announced from time to time by Landlord. Landlord shall furnish
heating and air conditioning to provide a comfortable temperature, in Landlord's
judgment, for normal business operations, except to the extent Tenant installs
equipment which adversely affects the temperature maintained by the air
conditioning system. If Tenant installs such equipment, Landlord may install
supplementary air conditioning units in the Premises, and Tenant shall pay to
Landlord upon demand as Additional Rent the cost of installation, operation and
maintenance thereof.

        Landlord shall furnish heating and air conditioning after business hours
if Tenant provides Landlord reasonable prior notice, and pays Landlord all then
current charges for such additional heating or air conditioning.

        B. Elevators. Landlord shall provide passenger elevator service during
normal business hours to Tenant in common with Landlord and all other tenants.
Landlord shall provide limited passenger service at other times, except in case
of an emergency. Subject to any contrary specifications set forth in the Plans
(as defined in Appendix C), the Building will be serviced by three (3) 3,000
pound hydraulic passenger elevators rated at 150 feet per minute, featuring a
cardkey access system for after-hours use.



                                       7
<PAGE>   16

        C. Electricity. Landlord shall make available to the Premises
electricity with a minimum capacity of eight (8) watts per Rentable Square Feet.
Tenant shall not install or operate in the Premises any electrically operated
equipment or other machinery, other than business machines and equipment
normally employed for general office use which do not require high electricity
consumption for operation, without obtaining the prior written consent of
Landlord. If any or all of Tenant's equipment requires electricity consumption
in excess of that which is necessary to operate normal office equipment, such
consumption (including consumption for computer or telephone rooms and special
HVAC equipment) shall be submetered by Landlord at Tenant's expense, and Tenant
shall reimburse Landlord as Additional Rent for the cost of its submetered
consumption based upon Landlord's average cost of electricity. Such Additional
Rent shall be in addition to Tenant's obligations pursuant to Section 2A(2) to
pay its Proportionate Share of Operating Costs.

        D. Water. Landlord shall furnish hot and cold tap water for drinking and
toilet purposes. Tenant shall pay Landlord for water furnished for any other
purpose as Additional Rent at rates fixed by Landlord. Tenant shall not permit
water to be wasted.

        E. Janitorial Service. Landlord shall furnish janitorial service as
generally provided to other tenants in the Building, such service to be provided
no less than five (5) days per week on an after-normal-business-hours schedule.

        F. Parking. Landlord shall provide parking areas for the Project, as
designated by Landlord from time to time, for the nonexclusive use by Tenant and
its employees and other invitees, without charge, in common with Landlord and
other tenants of Project and their respective employees and other invitees.
Tenants shall not use greater than four (4) parking spaces within the Project
(including visitor parking spaces) for every one thousand(1,000) Rentable Square
Feet contained within the Premises. Tenant shall have no right to exclusive
parking with respect to any parking spaces within the Project, and Tenant shall
not tow cars or otherwise enforce its parking rights against third parties.
Tenant shall not allow its employees or other invitees to park within any public
streets adjacent to the Project. Landlord shall not be responsible for enforcing
Tenant's parking rights against third parties and Landlord shall have no
liability to Tenant due to Tenant's inability to utilize parking spaces within
the Project; however, Landlord shall have the right, but not the obligation, to
impose reasonable rules and regulations as Landlord may deem necessary to
regulate parking within the Project, including registration of license plate
numbers for vehicles driven by Tenant's employees, issuance and monitoring of
parking tags or permits and/or designation of exclusive parking spaces.

        G. Interruption of Services. If any of the Building equipment or
machinery ceases to function properly for any cause Landlord shall use
reasonable diligence to repair the same promptly. Landlord's inability to
furnish, to any extent, the Project services set forth in this Section 4, or any
cessation thereof resulting from any causes, including any entry for repairs
pursuant to this Lease, and any renovation, redecoration or rehabilitation of
any area of the Project shall not render Landlord liable for damages to either
person or property or for interruption or loss to Tenant's business, nor be
construed as an eviction of Tenant, nor work an abatement of any portion of
Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
However, in the event of an interruption in any of the Project services
described in Sections 4A, 4C, 4D and 4E which renders a material portion of the
Premises



                                       8
<PAGE>   17

untenantable for a period of five (5) consecutive business days or more, then,
provided the restoration of such service(s) is within Landlord's reasonable
control, monthly Rent shall be abated proportionately from the date such
interruption exceeds the 5-business day period until such service(s) are
restored.

        5. ALTERATIONS AND REPAIRS.

        A. Landlord's Consent and Conditions. Tenant shall not make any
improvements or alterations to the Premises (the "Work") without in each
instance submitting plans and specifications for the Work to Landlord and
obtaining Landlord's prior written consent. Tenant shall pay Landlord's standard
charge for review of the plans and all other items submitted by Tenant. Landlord
will be deemed to be acting reasonably in withholding its consent for any Work
which (a) impacts the base structural components or systems of the Building, (b)
impacts any other tenant's premises, or (c) is visible from outside the
Premises.

        Tenant shall reimburse Landlord for actual costs incurred for review of
the plans and all other items submitted by Tenant. Tenant shall pay for the cost
of all Work, provided that Work in connection with the Initial Improvements
shall be subject to the Tenant Improvement Agreement. All Work shall become the
property of Landlord upon its installation, except for Tenant's trade fixtures
and for items which Landlord requires Tenant to remove at Tenant's cost at the
termination of the Lease pursuant to Section 5E. Tenant shall designate those
items which it considers to be its trade fixtures in any request for Landlord's
approval of alterations. Any alterations not designated as such in Tenant's
request shall be deemed not to be trade fixtures. All Initial Improvements
constructed under Appendix C shall become the property of Landlord upon
installation, and shall be surrendered to Landlord with the Premises at the
termination of this Lease or of Tenant's right to possession.

        The following requirements shall apply to all Work:

                (1) Prior to commencement, Tenant shall furnish to Landlord
        building permits, certificates of insurance satisfactory to Landlord,
        and, at Landlord's request, security for payment of all costs.

                (2) Tenant shall perform all Work so as to maintain peace and
        harmony among other contractors serving the Project and shall avoid
        interference with other work to be performed or services to be rendered
        in the Project.

                (3) The Work shall be performed in a good and workmanlike
        manner, meeting the standard for construction and quality of materials
        in the Building, and shall comply with all insurance requirements and
        all applicable governmental laws, ordinances and regulations
        ("Governmental Requirements").

                (4) Tenant shall perform all Work so as to minimize or prevent
        disruption to other tenants, and Tenant shall comply with all reasonable
        requests of Landlord in response to complaints from other tenants.



                                       9
<PAGE>   18

                (5) Tenant shall perform all Work in compliance with Landlord's
        "Policies, Rules and Procedures for Construction Projects" in effect at
        the time the Work is performed.

                (6) Tenant shall permit Landlord to supervise all Work. Landlord
        may charge a supervisory fee not to exceed fifteen percent (15%) of
        labor, material, and all other costs of the Work, if Landlord's
        employees or contractors perform the Work.

                (7) Upon completion, Tenant shall furnish Landlord with
        contractor's affidavits and full and final statutory waivers of liens
        from all contractors and subcontractors, as-built plans and
        specifications, and receipted bills covering all labor and materials,
        and all other close-out documentation required in Landlord's "Policies,
        Rules and Procedures for Construction Projects".

        B. Damage to Systems. If any part of the mechanical, electrical or other
systems in the Premises shall be damaged, Tenant shall promptly notify Landlord,
and Landlord shall repair such damage. Landlord may also at any reasonable time
make any repairs or alterations which Landlord deems necessary for the safety or
protection of the Project, or which Landlord is required to make by any court or
pursuant to any Governmental Requirement. Tenant shall at its expense make all
other repairs necessary to keep the Premises, and Tenant's fixtures and personal
property, in good order, condition and repair; to the extent Tenant fails to do
so within ten (10) days after written demand by Landlord (or with no demand in
the case of an emergency), Landlord may make such repairs itself. The cost of
any repairs made by Landlord on account of Tenant's default, or on account of
the mis-use or neglect by Tenant or its invitees, contractors or agents anywhere
in the Project, shall become Additional Rent payable by Tenant on demand.

        C. No Liens. Tenant has no authority to cause or permit any lien or
encumbrance of any kind to affect Landlord's interest in the Project; any such
lien or encumbrance shall attach to Tenant's interest only. If any mechanic's
lien shall be filed or claim of lien made for work or materials furnished to
Tenant, then Tenant shall at its expense within ten (10) days thereafter either
discharge or contest the lien or claim. If Tenant contests the lien or claim,
then Tenant shall (i) within such ten (10) day period, provide Landlord adequate
security for the lien or claim by bonding in accordance with the Texas Property
Code, (ii) contest the lien or claim in good faith by appropriate proceedings
that operate to stay its enforcement, and (iii) pay promptly any final adverse
judgment entered in any such proceeding. If Tenant does not comply with these
requirements, Landlord may discharge the lien or claim, and the amount paid, as
well as attorney's fees and other expenses incurred by Landlord, shall become
Additional Rent payable by Tenant on demand.

        D. Ownership of Improvements. All Work as defined in this Section 5,
partitions, hardware, equipment, machinery and all other improvements and all
fixtures except trade fixtures, constructed in the Premises by either Landlord
or Tenant, (i) shall become Landlord's property upon installation without
compensation to Tenant, unless Landlord consents otherwise in writing, and (ii)
shall at Landlord's option either (a) be surrendered to Landlord with the
Premises at the termination of the Lease or of Tenant's right to possession, or
(b) be removed in accordance with Subsection 5E below (unless Landlord at the
time it gives its consent to the performance of such construction expressly
waives in writing the right to require such removal).



                                       10
<PAGE>   19

        E. Removal at Termination. Upon the termination of this Lease or
Tenant's right of possession Tenant shall remove from the Building its trade
fixtures, furniture, moveable equipment and other personal property, any
improvements which Landlord elects shall be removed by Tenant pursuant to
Section 5D, and any improvements made by Tenant to any portion of the Building
or the Project other than the Premises. Tenant shall repair all damage caused by
the installation or removal of any of the foregoing items. If Tenant does not
timely remove such property, then Tenant shall be conclusively presumed to have,
at Landlord's election (i) conveyed such property to Landlord without
compensation or (ii) abandoned such property, and Landlord may dispose of or
store any part thereof in any manner at Tenant's sole cost, without waiving
Landlord's right to claim from Tenant all expenses arising out of Tenant's
failure to remove the property, and without liability to Tenant or any other
person. Landlord shall have no duty to be a bailee of any such personal
property. If Landlord elects abandonment, Tenant shall pay to Landlord, upon
demand, any expenses incurred for removal, repair or disposition.

        6. USE OF PREMISES. Tenant shall use the Premises only for general
office purposes. Tenant shall not allow any use of the Premises which will
negatively affect the cost of coverage of Landlord's insurance on the Project.
Tenant shall not allow any inflammable or explosive liquids or materials to be
kept on the Premises. Tenant shall not allow any use of the Premises which would
cause the value or utility of any part of the Premises to diminish or would
interfere with any other tenant or with the operation of the Project by
Landlord. Tenant shall not permit any nuisance or waste upon the Premises, or
allow any offensive noise or odor in or around the Premises.

        If any governmental authority shall deem the Premises to be a "place of
public accommodation" under the Americans with Disabilities Act or any other
comparable law as a result of Tenant's use, Tenant shall either modify its use
to cause such authority to rescind its designation or be responsible for any
alterations, structural or otherwise, required to be made to the Building, the
Project or the Premises under such laws.

        7. GOVERNMENTAL REQUIREMENTS AND BUILDING RULES. Tenant shall comply
with all Governmental Requirements applying to its use of the Premises. Tenant
shall also comply with all reasonable rules established for the Project from
time to time by Landlord. The present rules and regulations are contained in
Appendix B. Failure by another tenant to comply with the rules or failure by
Landlord to enforce them shall not relieve Tenant of its obligation to comply
with the rules or make Landlord responsible to Tenant in any way. Landlord shall
use reasonable efforts to apply the rules and regulations uniformly with respect
to Tenant and tenants in the Project under leases containing rules and
regulations similar to this Lease. In the event of alterations and repairs
performed by Tenant, Tenant shall comply with the provisions of Section 5 of
this Lease and also Landlord's "Policies, Rules and Regulations for Construction
Projects".

        8. WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.

        A. Waiver of Claims. To the extent permitted by law, Tenant waives any
claims it may have against Landlord or its officers, directors, employees or
agents for business



                                       11
<PAGE>   20

interruption or damage to property sustained by Tenant as the result of any act
or omission of Landlord, to the extent typically covered under policies of "All
Risks" Property Insurance.

        To the extent permitted by law, Landlord waives any claims it may have
against Tenant or its officers, directors, employees or agents for loss of rents
(other than Rent) or damage to property sustained by Landlord as the result of
any act or omission of Tenant, to the extent typically covered under policies of
"All Risks" Property Insurance.

        B. Indemnification. Tenant shall indemnify, defend and hold harmless
Landlord and its officers, directors, employees and agents against any claim by
any third party for injury to any person or damage to or loss of any property
occurring in the Project and arising from the use or occupancy of the Premises
or from any other act or omission or negligence of Tenant or any of Tenant's
employees or agents. Tenant's obligations under this section shall survive the
termination of this Lease.

        Landlord shall indemnify, defend and hold harmless Tenant and its
officers, directors, employees and agents against any claim by any third party
for injury to any person or damage to or loss of any property occurring in the
Project and arising from any act or omission or negligence of Landlord or any of
Landlord's employees or agents. Landlord's obligations under this section shall
survive the termination of this Lease.

        C. Tenant's Insurance. Tenant shall maintain insurance as follows, with
such other terms, coverages and insurers, as Landlord shall reasonably require
from time to time:

                (1) Commercial General Liability Insurance, with (a) Contractual
        Liability including the indemnification provisions contained in this
        Lease, (b) a severability of interest endorsement, (c) limits of not
        less than Two Million Dollars ($2,000,000) combined single limit per
        occurrence and not less than Two Million Dollars ($2,000,000) in the
        aggregate for bodily injury, sickness or death, and property damage, and
        umbrella coverage of not less than Five Million Dollars ($5,000,000).

                (2) Property Insurance against "All Risks" of physical loss
        covering the replacement cost of all improvements, fixtures and personal
        property. Tenant waives all rights of subrogation, and Tenant's property
        insurance shall include a waiver of subrogation in favor of Landlord and
        its employees and agents.

                (3) Workers' compensation or similar insurance in form and
        amounts required by law, and Employer's Liability with not less than the
        following limits:

<TABLE>
                             <S>                                <C>
                             Each Accident                      $500,000
                             Disease--Policy Limit              $500,000
                             Disease--Each Employee             $500,000
</TABLE>

                Such insurance shall contain a waiver of subrogation provision
        in favor of Landlord and its employees and agents.

        Tenant's insurance shall be primary and not contributory to that carried
by Landlord, its agents, or mortgagee. Landlord, and if any, Landlord's building
manager or agent, mortgagee



                                       12
<PAGE>   21

and ground lessor shall be named as additional insureds as respects to insurance
required of the Tenant in Section 8C(l). The company or companies writing any
insurance which Tenant is required to maintain under this Lease, as well as the
form of such insurance, shall at all times be subject to Landlord's approval,
and any such company shall be licensed to do business in the state in which the
Building is located. Such insurance companies shall have an A.M. Best rating of
A VI or better.

        Tenant shall cause any contractor of Tenant performing work on the
Premises to maintain insurance as follows, with such other terms, coverages and
insurers, as Landlord shall reasonably require from time to time:

                (1) Commercial General Liability Insurance, including
        contractor's liability coverage, contractual liability coverage,
        completed operations coverage, broad form property damage endorsement,
        and contractor's protective liability coverage, to afford protection
        with limits, for each occurrence, of not less than One Million Dollars
        ($1,000,000) with respect to personal injury, death or property damage.

                (2) Workers' compensation or similar insurance in form and
        amounts required by law, and Employer's Liability with not less than the
        following limits:

<TABLE>
                             <S>                                <C>
                             Each Accident                      $500,000
                             Disease--Policy Limit              $500,000
                             Disease--Each Employee             $500,000
</TABLE>

                Such insurance shall contain a waiver of subrogation provision
        in favor of Landlord and its employees and agents.

        Tenant's contractor's insurance shall be primary and not contributory to
that carried by Tenant, Landlord, their agents or mortgagees. Tenant and
Landlord, and if any, Landlord's building manager or agent, mortgagee or ground
lessor shall be named as additional insured on Tenant's contractor's insurance
policies.

        D. Insurance Certificates. Tenant shall deliver to Landlord certificates
evidencing all required insurance no later than five (5) days prior to the
Commencement Date and each renewal date. Each certificate will provide for
thirty (30) days prior written notice of cancellation to Landlord and Tenant.

        E. Landlord's Insurance. Landlord shall maintain "All-Risk" property
insurance at replacement cost, including loss of rents, on the Building, and
Commercial General Liability insurance policies covering the common areas of the
Building and the Project, each with such terms, coverages and conditions as are
normally carried by reasonably prudent owners of properties similar to the
Project. With respect to property insurance, Landlord and Tenant mutually waive
all rights of subrogation, and the respective "All-Risk" coverage property
insurance policies carried by Landlord and Tenant shall contain enforceable
waiver of subrogation endorsements.



                                       13
<PAGE>   22

        9. FIRE AND OTHER CASUALTY.

        A. Termination. If a fire or other casualty causes substantial damage to
the Building or the Premises, Landlord shall engage a registered architect to
certify within one (1) month of the casualty to both Landlord and Tenant the
amount of time needed to restore the Building and the Premises to tenantability,
using standard working methods. If the time needed exceeds nine (9) months from
the beginning of the restoration, or two (2) months therefrom if the restoration
would begin during the last twelve (12) months of the Lease, then in the case of
the Premises, either Landlord or Tenant may terminate this Lease, and in the
case of the Building, Landlord may terminate this Lease, by notice to the other
party within ten (10) days after the notifying party's receipt of the
architect's certificate. The termination shall be effective thirty (30) days
from the date of the notice and Rent shall be paid by Tenant to that date, with
an abatement for any portion of the Premises which has been untenantable after
the casualty.

        B. Restoration. If a casualty causes damage to the Building or the
Premises but this Lease is not terminated for any reason, then subject to the
rights of any mortgagees or ground lessors, Landlord shall obtain the applicable
insurance proceeds and diligently restore the Building and the Premises subject
to current Governmental Requirements. Tenant shall replace its damaged
improvements, personal property and fixtures. Rent shall be abated on a per them
basis during the restoration for any portion of the Premises which is
untenantable, except to the extent that Tenant's negligence caused the casualty.

        10. EMINENT DOMAIN. If a part of the Project is taken by eminent domain
or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. If any
substantial portion of the Project is taken without affecting the Premises, then
Landlord may terminate this Lease as of the date of such taking. Rent shall
abate from the date of the taking in proportion to any part of the Premises
taken. The entire award for a taking of any kind shall be paid to Landlord.
Tenant may pursue a separate award for its trade fixtures and moving expenses in
connection with the taking, but only if such recovery does not reduce the award
payable to Landlord. All obligations accrued to the date of the taking shall be
performed by the party liable to perform said obligations, as set forth herein.

        11. RIGHTS RESERVED TO LANDLORD. Landlord may exercise at any time any
of the following rights respecting the operation of the Project without
liability to the Tenant of any kind:

        A. Name. To change the name or street address of the Project or the
Building or the suite number(s) of the Premises.

        B. Signs. To install and maintain any signs within the Project and on
the exterior and in the interior of the Building, and to approve at its sole
discretion, prior to installation, any of Tenant's signs in the Premises visible
from the common areas or the exterior of the Building.

        C. Window Treatments. To approve, at its discretion, prior to
installation, any shades, blinds, ventilators or window treatments of any kind,
as well as any lighting within the Premises that may be visible from the
exterior of the Building or any interior common area.



                                       14
<PAGE>   23

        D. Keys. To retain and use at any time passkeys to enter the Premises or
any door within the Premises. Tenant shall not alter or add any lock or bolt.

        E. Access. To have access to inspect the Premises, and to perform its
obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.

        F. Preparation for Reoccupancy. To decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy at any time after Tenant abandons
the Premises, without relieving Tenant of any obligation to pay Rent.

        G. Heavy Articles. To approve the weight, size, placement and time and
manner of movement within the Building of any safe, central filing system or
other heavy article of Tenant's property. Tenant shall move its property
entirely at its own risk.

        H. Show Premises. To show the Premises to prospective purchasers,
tenants, brokers, lenders, investors, rating agencies or others at any
reasonable time, provided that Landlord gives prior notice to Tenant and does
not materially interfere with Tenant's use of the Premises.

        I. Relocation of Tenant. To relocate the Tenant, upon thirty days' prior
written notice, from all or part of the Premises (the "Old Premises") to another
area in the Project (the "new premises"), provided that:

                (1) the size of the new premises is at least equal to the size
        of the Old Premises and (i) in the event of a partial relocation,
        contiguous space within the Old Premises on any single floor must remain
        intact; and (ii) if the Rentable Square Feet within the new premises is
        greater than the Old Premises, Base Rent and Tenant's Proportionate
        Share shall be increased proportionately;

                (2) Landlord pays the cost of moving the Tenant and improving
        the new premises to the standard of the Old Premises, including all
        costs of wiring, cabling and other costs necessary for the relocation of
        Tenant's telephones, data transmission and other business communications
        equipment. Tenant shall cooperate with Landlord in all reasonable ways
        to facilitate the move, including supervising the movement of files or
        fragile equipment, designating new locations for furniture, equipment
        and new telephone and electrical outlets, and determining the color of
        paint in the new premises.

        J. Use of Lockbox. To designate a lockbox. collection agent for
collections of amounts due Landlord. In that case, the date of payment of Rent
or other sums shall be the date of the agent's receipt of such payment or the
date of actual collection if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment. However, Landlord may reject
any payment for all purposes as of the date of receipt or actual collection by
mailing to Tenant within 21 days after such receipt or collection a check equal
to the amount sent by Tenant.

        K. Repairs and Alterations. To make repairs or alterations to the
Project or the Building and in doing so transport any required material through
the Premises, to close entrances, doors, corridors, elevators and other
facilities in the Project or the Building, to open



                                       15
<PAGE>   24

any ceiling in the Premises, or to temporarily suspend services or use of common
areas in the Project or the Building. Landlord may perform any such repairs or
alterations during ordinary business hours, except that Tenant may require any
Work in the Premises to be done after business hours if Tenant pays Landlord for
overtime and any other expenses incurred. Landlord may do or permit any work on
any nearby building, land, street, alley or way.

        L. Landlord's Agents. If Tenant is in default under this Lease,
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.

        M. Building Services. To install, use and maintain through the Premises,
pipes, conduits, wires and ducts serving the Building, provided that such
installation, use and maintenance does not unreasonably interfere with Tenant's
use of the Premises.

        N. Other Actions. To take any other action which Landlord deems
reasonable in connection with the operation, maintenance or preservation of the
Project or the Building.

        12. TENANT'S DEFAULT. Any of the following shall constitute a default by
Tenant:

        A. Rent Default. Tenant fails to pay any Rent when due;

        B. Assignment/Sublease or Hazardous Substances Default. Tenant defaults
in its obligations under Section 17 Assignment and Sublease or Section 28
Hazardous Substances;

        C. Other Performance Default. Tenant fails to perform any other
obligation to Landlord under this Lease, and, in the case of only the first five
(5) such failures during the Term of this Lease, this failure continues for ten
(10) days after written notice from Landlord, except that if Tenant begins to
cure its failure within the ten (10) day period but cannot reasonably complete
its cure within such period, then, so long as Tenant continues to diligently
attempt to cure its failure, the ten (10) day period shall be extended to thirty
(30) days, or such lesser period as is reasonably necessary to complete the
cure;

        D. Credit Default. One of the following credit defaults occurs:

                (1) Tenant commences any proceeding under any law relating to
        bankruptcy, insolvency, reorganization or relief of debts, or seeks
        appointment of a receiver, trustee, custodian or other similar official
        for the Tenant or for any substantial part of its property, or any such
        proceeding is commenced against Tenant and either remains undismissed
        for a period of thirty days or results in the entry of an order for
        relief against Tenant which is not fully stayed within seven days after
        entry;

                (2) Tenant becomes insolvent or bankrupt, does not generally pay
        its debts as they become due, or admits in writing its inability to pay
        its debts, or makes a general assignment for the benefit of creditors;

                (3) Any third party obtains a levy or attachment under process
        of law against Tenant's leasehold interest.



                                       16
<PAGE>   25

        E. Vacation or Abandonment Default. Tenant vacates or abandons the
Premises for more than sixty (60) consecutive days.

        13. LANDLORD REMEDIES.

        A. Termination of Lease or Possession. If Tenant defaults, Landlord may
elect by notice to Tenant either to terminate this Lease or to terminate
Tenant's possession of the Premises without terminating this Lease. In either
case, Tenant shall immediately vacate the Premises and deliver possession to
Landlord, and Landlord may repossess the Premises and may, at Tenant's sole
cost, remove any of Tenant's signs and any of its other property, without
relinquishing its right to receive Rent or any other right against Tenant.

        B. Lease Termination Damages. If Landlord terminates the Lease, Tenant
shall pay to Landlord all Rent due on or before the date of termination, plus
Landlord's reasonable estimate of the aggregate Rent that would have been
payable from the date of termination through the Termination Date, reduced by
the rental value of the Premises calculated as of the date of termination for
the same period, taking into account anticipated vacancy prior to reletting,
reletting expenses and market concessions, both discounted to present value at
the rate of five percent (5 %) per annum. If Landlord shall relet any part of
the Premises for any part of such period before such present value amount shall
have been paid by Tenant or finally determined by a court, then the amount of
Rent payable pursuant to such reletting (taking into account vacancy prior to
reletting and any reletting expenses or concessions) shall be deemed to be the
reasonable rental value for that portion of the Premises relet during the period
of the reletting.

        C. Possession Termination Damages. If Landlord terminates Tenant's right
to possession without terminating the Lease and Landlord takes possession of the
Premises itself, Landlord may relet any part of the Premises for such Rent, for
such time, and upon such terms as Landlord in its sole discretion shall
determine, without any obligation to do so prior to renting other vacant areas
in the Project. Any proceeds from reletting the Premises shall first be applied
to the expenses of reletting, including redecoration, repair, alteration,
advertising, brokerage, legal, and other reasonably necessary expenses. If the
reletting: proceeds after payment of expenses are insufficient to pay the full
amount of Rent under this Lease, Tenant shall pay such deficiency to Landlord
monthly upon demand as it becomes due. Any excess proceeds shall be retained by
Landlord.

        D. Landlord's Remedies Cumulative. All of Landlord's remedies under this
Lease shall be in addition to all other remedies Landlord may have at law or in
equity. Waiver by Landlord of any breach of any obligation by Tenant shall be
effective only if it is in writing, and shall not be deemed a waiver of any
other breach, or any subsequent breach of the same obligation. Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination. Acceptance of payment by Landlord
after commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment. Landlord may advance such monies and take such other
actions for Tenant's account as reasonably may be required to cure or mitigate
any default by Tenant. Tenant shall immediately reimburse Landlord for any such



                                       17
<PAGE>   26

advance, and such sums shall bear interest at the default interest rate under
Section 2D(2) above until paid.

        E. Waiver of Trial by Jury. EACH PARTY WAIVES TRIAL BY JURY IN THE EVENT
OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS LEASE. EACH
PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH THIS LEASE IN
A FEDERAL OR STATE COURT LOCATED IN TRAVIS COUNTY, TEXAS, CONSENTS TO THE
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT
FORUM.

        F. Litigation Costs. The non-prevailing party shall pay the prevailing
party's reasonable attorneys' fees and other costs in enforcing this Lease,
whether or not suit is filed.

        14. SURRENDER. Upon termination of this Lease or Tenant's right to
possession, Tenant shall return the Premises to Landlord in good order and
condition, ordinary wear and casualty damage excepted. If Landlord requires
Tenant to remove any alterations, then Tenant shall remove the alterations in a
good and workmanlike manner and restore the Premises to its condition prior to
their installation.

        15. HOLDOVER. Tenant shall have no right to holdover possession of the
Premises after the expiration or termination of this Lease without Landlord's
prior written consent, which consent may be withheld in Landlord's sole and
absolute discretion. If, however, Tenant retains possession of any part of the
Premises after the Term, Tenant shall become a month-to-month tenant for the
entire Premises upon all of the terms of this Lease as might be applicable to
such month-to-month tenancy, except that Tenant shall pay all of Base Rent and
Operating Cost Share Rent at 150% of the rate in effect immediately prior to
such holdover, computed on a monthly basis for each full or partial month Tenant
remains in possession. Tenant shall also pay Landlord all of Landlord's direct
and consequential damages resulting from Tenant's holdover. No acceptance of
Rent or other payments by Landlord under these holdover provisions shall operate
as a waiver of Landlord's right to regain possession upon demand, or any other
of Landlord's remedies.

        16. SUBORDINATION TO GROUND LEASES AND MORTGAGES.

        A. Subordination. This Lease shall be subordinate to any present or
future ground lease or mortgage respecting the Building or any other portion of
the Project, and any amendments to such ground lease or mortgage, at the
election of the ground lessor or mortgagee as the case may be, effected by
notice to Tenant in the manner provided in this Lease. The subordination shall
be effective upon such notice, but at the request of Landlord or ground lessor
or mortgagee, Tenant shall within ten (10) days of the request, execute and
deliver to the requesting party any reasonable documents provided to evidence
the subordination. Any mortgagee has the right, at its option, to subordinate
its mortgage to the terms of this lease, without notice to, nor the consent of,
Tenant.



                                       18
<PAGE>   27

        B. Termination of Ground Lease or Foreclosure of Mortgage. If any ground
lease is terminated or mortgage foreclosed or deed in lieu of foreclosure given
and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Building, at the option of such ground lessor,
mortgagee or purchaser, Tenant shall attorn to such ground lessor or mortgagee
or purchaser without any deduction or setoff by Tenant, and this Lease shall
continue in effect as a direct lease between Tenant and such ground lessor,
mortgagee or purchaser. The ground lessor or mortgagee or purchaser shall be
liable as Landlord only during the time such ground lessor or mortgagee or
purchaser is the owner of the Building. At the request of Landlord, ground
lessor or mortgagee, Tenant shall execute and deliver within ten (10) days of
the request any document furnished by the requesting party to evidence Tenant's
agreement to attorn.

        C. Security Deposit. Any ground lessor or mortgagee shall be responsible
for the return of any security deposit by Tenant only to the extent the security
deposit is received by such ground lessor or mortgagee.

        D. Notice and Right to Cure. The Building is subject to any ground lease
and mortgage identified with name and address of ground lessor or mortgagee in
Appendix D to this Lease (as the same may be amended from time to time by
written notice to Tenant). Tenant agrees to send by registered or certified mail
to any ground lessor or mortgagee identified either in such Appendix or in any
later notice from Landlord to Tenant a copy of any notice of default sent by
Tenant to Landlord. If Landlord fails to cure such default within the required
time period under this Lease, but ground lessor or mortgagee begins to cure
within ten (10) days after such period and proceeds diligently to complete such
cure, then ground lessor or mortgagee shall have such additional time as is
necessary to complete such cure, including any time necessary to obtain
possession if possession is necessary to cure, and Tenant shall not begin to
enforce its remedies so long as the cure is being diligently pursued.

        E. Definitions. As used in this Section 16, "mortgage" shall include
"deed of trust" and "mortgagee" shall include "beneficiary" under such deed of
trust, "mortgagee" shall include the mortgagee of any ground lessee, and "ground
lessor", "mortgagee", and "purchaser at a foreclosure sale" shall include, in
each case, all of its successors and assigns, however remote.

        17. ASSIGNMENT AND SUBLEASE.

        A. In General. Tenant shall not, without the prior consent of Landlord
in each case, (i) make or allow any assignment or transfer, by operation of law
or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or
allow any lien or encumbrance, by operation of law or otherwise, upon any part
of Tenant's interest in this Lease, (iii) sublet any part of the Premises, or
(iv) permit anyone other than Tenant and its employees to occupy any part of the
Premises. Tenant shall remain primarily liable for all of its obligations under
this Lease, notwithstanding any assignment or transfer. No consent granted by
Landlord shall be deemed to be a consent to any subsequent assignment or
transfer, lien or encumbrance, sublease or occupancy. Tenant shall pay all of
Landlord's attorneys' fees and other expenses incurred in connection with any
consent requested by Tenant or in reviewing any proposed assignment or
subletting. Any assignment or transfer, grant of lien or encumbrance, or
sublease or occupancy without Landlord's prior written consent shall be void. If
Tenant shall assign this Lease or sublet the



                                       19
<PAGE>   28

Premises in its entirety any rights of Tenant to renew this Lease, extend the
Term or to lease additional space in the Project shall be extinguished thereby
and will not be transferred to the assignee or subtenant, all such rights being
personal to the Tenant named herein.

        B. Landlord's Consent. Landlord will not unreasonably withhold its
consent to any proposed assignment or subletting. It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the proposed assignee or sublessee is a tenant
in the Project or an affiliate of such a tenant or a party that Landlord has
identified as a prospective tenant in the Project, (iii) the financial
responsibility, nature of business, and character of the proposed assignee or
subtenant are not all reasonably satisfactory to Landlord, (iv) in the
reasonable judgment of Landlord the purpose for which the assignee or subtenant
intends to use the Premises (or a portion thereof) is not in keeping with
Landlord's standards for the Project or the Building or are in violation of the
terms of this Lease or any other leases in the Project, (v) the proposed
assignee or subtenant is a government entity, or (vi) the proposed assignment is
for less than the entire Premises or for less than the remaining Term of the
Lease. The foregoing shall not exclude any other reasonable basis for Landlord
to withhold its consent.

        C. Procedure. Tenant shall notify Landlord of any proposed assignment or
sublease at least thirty (30) days prior to its proposed effective date. The
notice shall include the name and address of the proposed assignee or subtenant,
its corporate affiliates in the case of a corporation and its partners in a case
of a partnership, an execution copy of the proposed assignment or sublease, and
sufficient information to permit Landlord to determine the financial
responsibility and character of the proposed assignee or subtenant. As a
condition to any effective assignment of this Lease, the assignee shall execute
and deliver in form satisfactory to Landlord at least fifteen (15) days prior to
the effective date of the assignment, an assumption of all of the obligations of
Tenant under this Lease. As a condition to any effective sublease, subtenant
shall execute and deliver in form satisfactory to Landlord at least fifteen (15)
days prior to the effective date of the sublease, an agreement to comply with
all of Tenant's obligations under this Lease, and at Landlord's option, an
agreement (except for the economic obligations which subtenant will undertake
directly to Tenant) to attorn to Landlord under the terms of the sublease in the
event this Lease terminates before the sublease expires.

        D. Transfers to Affiliates. Notwithstanding any provision to the
contrary in this Lease, Tenant may assign this Lease or sublet all or any
portion of the Premises to an Affiliate without the prior written consent of
Landlord, provided that (i) Tenant notifies Landlord at least thirty (30) days
in advance of such transfer, which notice shall include the identity of the
transferee, (ii) such transferee agrees in writing to assume and fully perform
and observe all of the obligations of Tenant under this Lease, (iii) Tenant is
not then in default under this Lease, and (iv) Tenant remains liable for the
performance of Tenant's obligations under this Lease. As used herein,
"Affiliate" means any person or entity controlling, controlled by or under
common control with Tenant. "Control" as used herein means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of the controlled person or entity.

        E. Excess Payments. If Tenant shall assign this Lease or sublet any part
of the Premises for consideration in excess of the pro-rata portion of Rent
applicable to the space



                                       20
<PAGE>   29

subject to the assignment or sublet, then Tenant shall pay to Landlord as
Additional Rent 50% of any such excess immediately upon receipt.

        F. Recapture. Landlord may, by giving written notice to Tenant within
thirty (30) days after receipt of Tenant's notice of assignment or subletting,
terminate this Lease with respect to the space described in Tenant's notice, as
of the effective date of the proposed assignment or sublease and all obligations
under this Lease as to such space shall expire except as to any obligations that
expressly survive any termination of this Lease.

        18. CONVEYANCE BY LANDLORD. If Landlord shall at any time transfer its
interest in the Building or this Lease, Landlord shall be released of any
obligations occurring after such transfer, except the obligation to return to
Tenant any security deposit not delivered to its transferee, and Tenant shall
look solely to Landlord's successors for performance of such obligations. This
Lease shall not be affected by any such transfer.

        19. ESTOPPEL CERTIFICATE. Tenant shall, within ten (10) days of
receiving a request from Landlord, execute, acknowledge in recordable form, and
deliver to Landlord or its designee a certificate stating, subject to a specific
statement of any applicable exceptions, that the Lease as amended to date is in
full force and effect, that the Tenant is paying Rent and other charges on a
current basis, and that to the best of the knowledge of Tenant, Landlord has
committed no uncured defaults and Tenant has no offsets or claims. Tenant may
also be required to state the date of commencement of payment of Rent, the
Commencement Date, the Termination Date, the Base Rent, the current Operating
Cost Share Rent estimate, the status of any improvements required to be
completed by Landlord, the amount of any security deposit, and such other
matters as may be reasonably requested. Failure to deliver such certificate and
statement within the time required shall be conclusive evidence against Tenant
that this Lease, with any amendments identified by Landlord, is in full force
and effect, that there are no uncured defaults by Landlord, that not more than
one month's Rent has been paid in advance, that Tenant has not paid any security
deposit, and that Tenant has no claims or offsets against Landlord.

        20. SECURITY DEPOSIT. Tenant shall deposit with Landlord on the date of
this Lease security (the "Security Deposit") for the performance of all of its
obligations in the amount of $175,000.00, which security shall be in the form of
an unconditional and irrevocable letter of credit (the "Letter of Credit") (i)
in the form attached hereto as Appendix G, (ii) naming Landlord as beneficiary,
(iii) expressly allowing Landlord to draw upon it at any time from time to time
by delivering to the issuer notice that Landlord is entitled to draw thereunder,
(iv) drawable on an FDIC-insured financial institution satisfactory to Landlord,
and (v) redeemable in Austin, Texas. If Tenant does not provide Landlord with a
substitute Letter of Credit complying with all of the requirements hereof at
least ten (10) days before the stated expiration date of the current Letter of
Credit then Landlord shall have the right to draw upon the current Utter of
Credit and hold the funds drawn as the Security Deposit. Provided that no
default by Tenant shall then exist under this Lease and no event shall exist
which, with the giving of notice or the passage of time or both, would
constitute a default by Tenant under this Lease, at the end of each of the first
four (4) years of the Term of this Lease, Landlord shall accept a replacement
Letter of Credit or an amendment to the Letter of Credit pursuant to which the
Utter of Credit is reduced by $35,000.00. If Tenant defaults under this Lease,
Landlord may use any part of the Security Deposit to make any defaulted payment,
to pay for Landlord's cure of any defaulted



                                       21
<PAGE>   30

obligation, or to compensate Landlord for any loss or damage resulting from any
default. To the extent any portion of the Security Deposit is used, Tenant shall
within five (5) business days after demand from Landlord restore the Security
Deposit to its full amount. If Tenant shall perform all of its obligations under
this Lease and return the Premises to Landlord at the end of the Term, Landlord
shall cause the Letter of Credit to terminate according to its terms and return
any remaining Security Deposit to Tenant within thirty (30) days after the end
of the Term. The Security Deposit shall not serve as a measure of Landlord's
damages for any default under this Lease.

        21. FORCE MAJEURE. Landlord shall not be in default under this Lease to
the extent Landlord is unable to perform any of its obligations on account of
any strike or labor problem, energy shortage, governmental pre-emption or
prescription, national emergency, or any other cause of any kind beyond the
reasonable control of Landlord ("Force Majeure").

        22. NOTICES. All notices, consents, approvals and similar communications
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:

        A.     Landlord. To Landlord as follows:

               CarrAmerica Realty, L.P.
               t/a Riata Corporate Park
               8240 N. MoPac, Suite 105
               Austin, Texas  78759
               Attn:  Market Officer

               with a copy to:

               CarrAmerica Realty Corporation
               1850 K Street, N.W., Suite 500
               Washington, D.C.  20006
               Attn:  Lease Administration

or to such other person at such other address as Landlord may designate by
notice to Tenant.

        B.     Tenant.  To Tenant as follows:

               3DFX Interactive, Inc.
               4435 Fortran Drive
               San Jose, California  95134
               Attn:  Gerald Ruckman

or to such other person at such other address as Tenant may designate by notice
to Landlord.

        Mailed notices shall be sent by United States certified or registered
mail, or by a reputable national overnight courier service, postage prepaid.
Mailed notices shall be deemed to have been given on the earlier of actual
delivery or three (3) business days after posting in the



                                       22
<PAGE>   31

United States mail in the case of registered or certified mail, and one business
day in the case of overnight courier.

        23. QUIET POSSESSION. So long as Tenant shall perform all of its
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord.

        24. REAL ESTATE BROKER. Tenant represents to Landlord that Tenant has
not dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule, and no other broker is in any way entitled to
any broker's fee or other payment in connection with this Lease. Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease. Landlord shall
be responsible for all commissions owing to Landlord's Real Estate Broker and
Tenant's Real Estate Broker in connection with the Lease pursuant to separate
written agreements with such brokers.

        25. MISCELLANEOUS.

        A. Successors and Assigns. Subject to the limits on Tenant's assignment
contained in Section 17, the provisions of this Lease shall be binding upon and
inure to the benefit of all successors and assigns of Landlord and Tenant.

        B. Date Payments Are Due. Except for payments to be made by Tenant under
this Lease which are due upon demand or are due in advance (such as Base Rent),
Tenant shall pay to Landlord any amount for which Landlord renders a statement
of account within ten days of Tenant's receipt of Landlord's statement.

        C. Meaning of "Landlord," "Re-Entry," "including" and "Affiliate." The
term "Landlord" means only the owner of the Project and the lessor's interest in
this Lease from time to time. The words "re-entry" and "re-enter" are not
restricted to their technical legal meaning. The words "including" and similar
words shall mean "without limitation." The word "affiliate" shall mean a person
or entity controlling, controlled by or under common control with the applicable
entity. "Control" shall mean the power directly or indirectly, by contract or
otherwise, to direct the management and policies of the applicable entity.

        D. Time of the Essence. Time is of the essence of each provision of this
Lease.

        E. No Option. This document shall not be effective for any purpose until
it has been executed and delivered by both parties; execution and delivery by
one party shall not create any option or other right in the other party.

        F. Severability. The unenforceability of any provision of this Lease
shall not affect any other provision.

        G. Governing Law. This Lease shall be governed in all respects by the
laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.



                                       23
<PAGE>   32

        H. Lease Modification. Tenant agrees to modify this Lease in any way
requested by a mortgagee which does not cause increased expense to Tenant or
otherwise materially adversely affect Tenant's interests under this Lease.

        I. No Oral Modification. No modification of this Lease shall be
effective unless it is a written modification signed by both parties.

        J. Landlord's Right to Cure. If Landlord breaches any of its obligations
under this Lease, Tenant shall notify Landlord in writing and shall take no
action respecting such breach so long as Landlord promptly begins to cure the
breach and diligently pursues such cure to its completion. Landlord may cure any
default by Tenant; any expenses incurred shall become Additional Rent due from
Tenant on demand by Landlord.

        K. Captions. The captions used in this Lease shall have no effect on the
construction of this Lease.

        L. Authority. Landlord and Tenant each represents to the other that it
has full power and authority to execute and perform this Lease.

        M. Landlord's Enforcement of Remedies. Landlord may enforce any of its
remedies under this Lease either in its own name or through an agent.

        N. Entire Agreement. This Lease, together with all Appendices,
constitutes the entire agreement between the parties. No representations or
agreements of any kind have been made by either party which are not contained in
this Lease.

        O. Landlord's Title. Landlord's title shall always be paramount to the
interest of the Tenant, and nothing in this Lease shall empower Tenant to do
anything which might in any way impair Landlord's title.

        P. Light and Air Rights. Landlord does not grant in this Lease any
rights to light and air in connection with the Building or the Project. Landlord
reserves to itself, all land within the Project, the Building below the improved
floor of each floor of the Premises, the Building above the ceiling of each
floor of the Premises, the exterior of the Premises and the areas on the same
floor outside the Premises, along with the areas within the Premises required
for the installation and repair of utility lines and other items required to
serve other tenants of the Building.

        Q. Singular and Plural. Wherever appropriate in this Lease, a singular
term shall be construed to mean the plural where necessary, and a plural term
the singular. For example, if at any time two parties shall constitute Landlord
or Tenant, then the relevant term shall refer to both parties together.

        R. No Recording by Tenant. Tenant shall not record in any public records
any memorandum or any portion of this Lease.

        S. Exclusivity. Landlord does not grant to Tenant in this Lease any
exclusive right except the right to occupy its Premises.



                                       24
<PAGE>   33

        T. No Construction Against Drafting Party. The rule of construction that
ambiguities are resolved against the drafting party shall not apply to this
Lease.

        U. Survival. All obligations of Landlord and Tenant under this Lease
shall survive the termination of this Lease.

        V. Rent Not Based on Income. No rent or other payment in respect of the
Premises shall be based in any way upon net income or profits from the Premises.
Tenant may not enter into or permit any sublease or license or other agreement
in connection with the Premises which provides for a rental or other payment
based on net income or profit.

        W. Building Manager and Service Providers. Landlord may perform any of
its obligations under this Lease through its employees or third parties hired by
the Landlord.

        X. Late Charge and Interest on Late Payments. Without limiting the
provisions of Section 12A, if Tenant fails to pay any installment of Rent or
other charge to be paid by Tenant pursuant to this Lease within five (5)
business days after the same becomes due and payable, then Tenant shall pay a
late charge equal to the greater of five percent (5%) of the amount of such
payment or $250. In addition, interest shall be paid by Tenant to Landlord on
any late payments of Rent from the date due until paid at the rate provided in
Section 2D(2). Such late charge and interest shall constitute Additional Rent
due and payable by Tenant to Landlord upon the date of payment of the delinquent
payment referenced above.

        Y. Tenant's Financial Statements. Within ten (10) days after Landlord's
written request therefor, Tenant shall deliver to Landlord the current audited
annual and quarterly financial statements of Tenant, and annual audited
financial statements of the two (2) years prior to the current year's financial
statements, each with an opinion of a certified public accountant and including
a balance sheet and profit and loss statement, all prepared in accordance with
generally accepted accounting principles consistently applied.

        Z. Usury Savings. All agreements between Landlord and Tenant, whether
now existing or hereafter arising and whether written or oral, are hereby
expressly limited so that in no contingency or event whatsoever shall the amount
contracted for, charged or received by Landlord for the use, forbearance or
retention of money hereunder or otherwise exceed the maximum amount which
Landlord is legally entitled to contract for, charge or collect under the
applicable state or federal law. If, from any circumstance whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall be automatically reduced to the limit
of such validity, and if from any such circumstance Landlord shall ever receive
as interest or otherwise an amount in excess of the maximum that can be legally
collected, then such amount which would be excessive interest shall be applied
to the reduction of rent hereunder, and if such amount which would be excessive
interest exceeds such rent, then such additional amount shall be refunded to
Tenant.

        AA. Waiver of Warranties. TENANT HEREBY WAIVES THE BENEFIT OF ALL
WARRANTIES, EXPRESSED OR IMPLIED, WITH RESPECT TO THE PREMISES INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY



                                       25
<PAGE>   34

THAT THE PREMISES ARE SUITABLE FOR ANY COMMERCIAL OR OTHER PARTICULAR PURPOSE.

        26. UNRELATED BUSINESS INCOME. If Landlord is advised by its counsel at
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.

        27. HAZARDOUS SUBSTANCES. Tenant shall not cause or permit any Hazardous
Substances to be brought upon, produced, stored, used, discharged or disposed of
in or near the Project unless Landlord has consented to such storage or use in
its sole discretion. "Hazardous Substances" include those hazardous substances
described in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any
other applicable federal, state or local law, and the regulations adopted under
these laws (collectively, "Environmental Law"). If any lender or governmental
agency shall require testing for Hazardous Substances in the Premises, Tenant
shall pay for such testing. Tenant agrees to indemnify and hold Landlord
harmless from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from the contamination of the
Project with Hazardous Substances as a result of or arising out of the use or
occupancy of the Premises by Tenant. The foregoing indemnification shall survive
the termination or expiration of this Lease. To the best of Landlord's actual
knowledge, no Hazardous Substances are present within the Project as of the date
hereof in violation of Environmental Law, and Landlord does not intend to
utilize Hazardous Substances during construction activities within the Project
except in compliance with Environmental Law.

        28. EXCULPATION. Landlord shall have no personal liability under this
Lease; its liability shall be limited to its interest in the Building, and shall
not extend to any other property or assets of the Landlord. In no event shall
any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.

        29. LANDLORD'S LIEN. LANDLORD SHALL HAVE AND TENANT HEREBY GRANTS TO
LANDLORD A CONTINUING SECURITY INTEREST FOR ALL RENT AND OTHER SUMS OF MONEY
BECOMING DUE HEREUNDER FROM TENANT, UPON ALL GOODS, WARES, EQUIPMENT, FIXTURES,
FURNITURE, INVENTORY, ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER AND OTHER
PERSONAL PROPERTY OF TENANT SITUATED ON THE PREMISES, WHICH IS LOCATED AT 12357
RIATA TRACE PARKWAY, AUSTIN, TEXAS, AND SUCH PROPERTY SHALL NOT BE REMOVED
THEREFROM WITHOUT THE CONSENT OF LANDLORD UNTIL ALL ARREARAGES IN RENT AS WELL
AS ANY AND ALL OTHER SUMS OF MONEY THEN DUE TO LANDLORD HEREUNDER SHALL FIRST
HAVE BEEN PAID AND DISCHARGED. PRODUCTS OF COLLATERAL ARE ALSO COVERED. IN THE
EVENT OF A DEFAULT UNDER THIS LEASE, LANDLORD SHALL HAVE, IN ADDITION TO ANY
OTHER REMEDIES PROVIDED HEREIN OR BY LAW, ALL RIGHTS AND



                                       26
<PAGE>   35

REMEDIES UNDER THE UNIFORM COMMERCIAL CODE, INCLUDING WITHOUT LIMITATION THE
RIGHT TO SELL THE PROPERTY DESCRIBED IN THIS PARAGRAPH AT PUBLIC OR PRIVATE SALE
UPON FIVE (5) DAYS NOTICE TO TENANT. TENANT HEREBY AGREES TO EXECUTE SUCH OTHER
INSTRUMENTS NECESSARY OR DESIRABLE IN LANDLORD'S DISCRETION TO PERFECT THE
SECURITY INTEREST HEREBY CREATED. ANY STATUTORY LIEN FOR RENT IS NOT HEREBY
WAIVED, THE EXPRESS CONTRACTUAL LIEN HEREIN GRANTED BEING IN ADDITION AND
SUPPLEMENTARY THERETO. LANDLORD AND TENANT AGREE THAT THIS LEASE AND SECURITY
AGREEMENT SERVES AS A FINANCING STATEMENT AND THAT A COPY OR PHOTOGRAPHIC OR
OTHER REPRODUCTION OF THIS PORTION OF THIS LEASE MAY BE FILED OF RECORD BY
LANDLORD AND HAVE THE SAME FORCE AND EFFECT AS THE ORIGINAL. THIS SECURITY
AGREEMENT AND FINANCING STATEMENT ALSO COVERS FIXTURES LOCATED AT THE PREMISES,
AND MAY BE FILED FOR RECORD IN THE REAL ESTATE RECORDS. TENANT WARRANT THAT THE
COLLATERAL SUBJECT TO THE SECURITY INTEREST GRANTED HEREIN IS NOT PURCHASED OR
USED BY TENANT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES.

        30. TENANT'S EQUIPMENT. Tenant may, at its sole cost, install, maintain,
and from time to time replace telecommunication devices on the roof of the
Building ("Tenant's Equipment"). Tenant shall obtain Landlord's prior approval
of the proposed size, weight and location of Tenant's Equipment, method for
fastening Tenant's Equipment to the roof, and method for connecting Tenant's
Equipment to the Premises, and Tenant will at its sole cost comply with all
Governmental Requirements and the conditions of any bond or warranty maintained
by Landlord on the roof in connection therewith. Landlord may supervise any roof
penetration. Tenant shall repair any damage to the Building caused by Tenant's
installation, maintenance, replacement, use or removal of Tenant's Equipment.
Tenant's Equipment shall remain the property of Tenant, and Tenant may remove
Tenant's Equipment at its cost at any time during the Term. Tenant shall
protect, defend, indemnify and hold harmless Landlord from and against claims,
damages, liabilities, costs and expenses of every kind and nature, including
attorneys' fees, incurred by or asserted against Landlord arising out of
Tenant's installation, maintenance, replacement, use or removal of Tenant's
Equipment. Tenant shall not owe Rent to Landlord solely for use of the Building
roof for Tenant's Equipment in compliance with this Section 30.



                                       27
<PAGE>   36

        IN WITNESS WHEREOF, the parties hereto have executed this Lease.

                                    LANDLORD:

                                    CARRAMERICA REALTY, L.P., a Delaware limited
                                    partnership, t/a Riata Corporate Park

                                    By: CarrAmerica Realty GP Holdings, Inc., a
                                        Delaware corporation, General Partner


                                        By: /s/ PHILIP L. HAWKINS
                                           -------------------------------------
                                        Name: Philip L. Hawkins
                                             -----------------------------------
                                        Title: Managing Director
                                              ----------------------------------

                                   TENANT:

                                   3DFX INTERACTIVE, INC., a California
                                   corporation


                                   By: /s/ DAVID ZACARIAS
                                       -----------------------------------------
                                   Name: David Zacarias
                                         ---------------------------------------
                                   Title: V.P. Admin./CFO
                                          --------------------------------------



                                       28
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>5
<FILENAME>f72487ex10-40.txt
<DESCRIPTION>EXHIBIT 10.40
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.40



                              DATED 27th May 1999



                            BALSTONE ESTATES LIMITED


                                    -- to --


                                 STB SYSTEMS INC






                                    L E A S E

                                   relating to
                                 Meridian House
                              2/4 The Grove, Slough
                                    Berkshire
<PAGE>   2
                                      -1-



                                      INDEX

<TABLE>
<CAPTION>
                                                                             PAGE
CLAUSE                                                                     NUMBER
<S>                                                                        <C>
1    Definitions and interpretations
2    The demise and rent
3    Rental payment provisions
4    Rack rental ascertainment
5    Insurance premiums payable as additional rent
6    Interest on unpaid rent etc.
7    Landlord's covenants
8    Tenant's covenants (referred to the Third Schedule)
9    Provisos and agreements, exclusions and tenant's
     insurance warranty
10   Demise subject to easements etc.
11   Non waiver of breach of covenant
12   English Law
13   Operation of this Deed
14   No preceding agreement for lease

THE FIRST SCHEDULE   :  Description of the Demised Premises

THE SECOND SCHEDULE  :  Part I Rights granted
                        Part II Rights reserved

THE THIRD SCHEDULE   :  Tenant's Covenants

1    To pay rents
2    To pay rates etc.
3    To pay value added tax
4    To pay for electricity, gas, etc.
5    To repair and yield up in repair
6    To decorate and maintain open areas etc.
7    Not to make alterations etc.
8    Not to overload floors
9    Not to endanger drainage or electrical installations
10   Not to install noisy machinery etc.
11   To permit Landlord to enter and view state of repair
12   To carry out works on notice
13   To permit entry for repairs etc.
14   To pay landlord's costs of application for licences etc.
15   User, occupation etc.
16   No illegal use or nuisance etc.
17   Dangerous materials etc.
18   Insurance covenants
</TABLE>


<PAGE>   3
                                      -2-




                  1.1.7 "INTEREST" means interest calculated and compounded on a
                  day today basis during the period from the date on which the
                  payment is due to the date of payment both before and after
                  any judgment at the rate of four per centum per annum above
                  the base rate of Barclays Bank PLC (or some other Bank
                  nominated in writing from time to time by the Landlord) then
                  prevailing or should such Base Rate cease to exist then such
                  other rate of interest as is most closely comparable with the
                  said rate of four per centum (4%) per annum above such base
                  rate to be agreed between the parties or in default of
                  agreement to be determined by an accountant appointed by or
                  acting for the Landlord for that purpose who shall act as an
                  expert not an arbitrator and whose decision shall be binding
                  on the parties or ten per centum (10%) per annum whichever is
                  the higher.

                  1.1.8 "LANDLORD'S SURVEYOR" means any person or firm appointed
                  by the Landlord to perform any of the functions of the
                  Landlord's Surveyor under this Lease (including an employee of
                  the Landlord or a Group Company and including also the person
                  or firm appointed by the Landlord to collect the rents).

                  1.1.9 "LEASE TERM" means the term of ten years from (and
                  including) the 27th day of May One thousand nine hundred and
                  ninety nine.

                  1.1.10 "OTHER BUILDINGS" means any building or buildings now
                  or at any time during the Perpetuity Period erected on
                  Adjoining Property.

                  1.1.11 "PERPETUITY PERIOD" means the period of eighty years
                  from the date hereof which shall be the perpetuity period
                  applicable to this Lease and wherever in this Lease either
                  party is granted or reserved a future interest in property
                  there shall be deemed to be included in respect of every such
                  grant or reservation a provision requiring the future interest
                  to vest within the Perpetuity Period and for it to be void for
                  remoteness if it shall not have so vested.

                  1.1.12 "PIPES" means all pipes, sewers, drains, mains, ducts,
                  conduits, gutters, watercourses, wires, cables, channels,
                  flues, tanks and all other conducting media and includes any
                  fixing, louvres, cowls and any other ancillary apparatus.

                  1.1.13 "PLAN" means the Plan annexed hereto.

                  1.1.14 "PLANNING ACTS" means the Town and Country Planning Act
                  1990 the Planning (Listed Buildings and Conservation Areas)
                  Act 1990 the Planning (Hazardous Substances) Act 1990 the
                  Planning (Consequential Provisions) Act 1990 and the Planning
                  & Compensation Act 1991.

                  1.1.15 "RACK RENTAL VALUE" means the amount representing the
                  annual rent or (if at the Review Date the Demised Premises are
                  in multiple occupation) the aggregate annual rents which on
                  that date could reasonably be expected to be obtained in the
                  open market for the Demised Premises as a whole on making the
                  assumptions (if not a fact).



<PAGE>   4
                                      -3-




                           1.1.15.1 That they were then vacant and in good and
                           substantial repair and condition and fit and fitted
                           out and available for immediate, occupation and use

                           1.1.15.2 That the covenants conditions and
                           stipulations in this Lease contained and on the part
                           of the Tenant to be performed and observed bad been
                           performed and observed

                           1.1.15.3 That no work has been carried out thereon by
                           the Tenant or any undertenant or their respective
                           predecessors in title which has diminished the
                           letting value of the Demised Premises

                           1.1.15.4 That if the Demised Premises have been
                           destroyed or damaged they have been fully restored

                           1.1.15.5 That the Tenant would be in the market for
                           the Demised Premises at the Review Date with other
                           willing lessees

                           1.1.15.6 If a willing lessee would in the open market
                           be given a period of occupation of the Demised
                           Premises rent free or at a concessionary rent at the
                           commencement of a lease that the willing lessee would
                           have the benefit of such a period of occupation of
                           the Demised Premises prior to the grant of the lease
                           on the Review Date and that he would accordingly be
                           prepared to pay the full rent from the Review Date

                           1.1.15.7 That the use of the Demised Premises
                           permitted by the terms of this Lease is permitted
                           under the Planning Acts permanently and without
                           conditions restrictions or limitations

                           1.1.15.8 That the Building comprised within the
                           Demised Premises has a net internal area of Eleven
                           thousand six hundred and ninety five (11,695) square
                           feet

                  on the grant of a lease thereof by a willing landlord to a
                  willing tenant for a term of years equal to ten years but
                  calculated from the Review Date without any fine or premium
                  being taken and otherwise upon the terms and conditions of
                  this Lease (except as to the amount of rents hereby reserved
                  but including the provisions for a rent review after five
                  years) as varied from time to time and with the benefit of any
                  licences granted by the Landlord and ally waiver or variation
                  beneficial to the Tenant of any of the covenants and
                  conditions herein contained and taking no account of:

                           1.1.15.9 Any goodwill attributable to the Demised
                           Premises by reason of any trade or business carried
                           on therein by the Tenant or any undertenant or their
                           respective predecessors in title in their respective
                           businesses.


<PAGE>   5
                                      -4-



                           1.1.15.10 Any increase in rental value of the Demised
                           Premises attributable to the existence at the Review
                           Date of any improvements to the Demised Premises (to
                           which the Landlord shall where required have given
                           written consent) carried out otherwise than in
                           pursuance of an obligation to the Landlord or its
                           predecessors in title by the Tenant or any
                           undertenant or their respective predecessors in title
                           during the Lease Term or during any period of
                           occupation prior thereto arising out of an Agreement
                           to grant such term or by any Tenant or undertenant of
                           the Demised Premises before the commencement of the
                           Lease Term so long as the Landlord or its
                           predecessors in title have nor since the improvement
                           was carried out had vacant possession of the relevant
                           part of the Demised, Premises and

                           1.1.15.11 Any effect on rent of the fact that the
                           Tenant or any undertenant or their respective
                           predecessors in title have been in occupation of the
                           Demised Premises.

                  1.1.16 "REVIEW DATE" means the date of expiration of the fifth
                  year of the Lease Term and the expressions "Review Date" and
                  "Review Period" shall be construed accordingly.

                  1.1.17   "V.A.T." means value added tax and any other tax of a
                  similar nature.

         INTERPRETATIONS

         1.2      In this Lease:

                  1.2.1 Any reference to a specific statute includes any
                  statutory extension or modification or re-enactment of such
                  statute or any statute for similar purposes thereto and any
                  rules, regulations, orders or directions made thereunder and
                  any general reference to "statute" or "statutes" includes any
                  regulations or orders made thereunder and any legislative
                  provisions adopted by the European Union or any supra-national
                  legislation which has effect in the United Kingdom.

                  1.2.2 The expressions "the Landlord" and "the Tenant" wherever
                  the context so admits include their respective successors in
                  title.

                  1.2.3 Where the Landlord or the Tenant or the Guarantor (if
                  any) for the time being are two or more individuals or persons
                  the terms "the Landlord," "the Tenant" and "the Guarantor"
                  include the plural number and obligations expressed or implied
                  to be made by or with such party are deemed to be made by or
                  with such individuals jointly and severally.

                  1.2.4 Words importing one gender include all other genders.

                  1.2.5 References to the "Demised Premises" in the absence of
                  any provision to the contrary include any part of the Demised
                  Premises.


<PAGE>   6
                                      -5-



                  1.2.6 The expression "the Guarantor" includes not only the
                  person referred to herein (if any) but also any person who
                  enters into a covenant with the Landlord pursuant to Clauses
                  19.8 and 31 of the Third Schedule.

                  1.2.7 Any covenant by the Tenant not to do any act or thing
                  shall be deemed to include an obligation not to permit such
                  act or thing to be done and to use its best endeavours to
                  prevent such act or thing being done by a third party.

                  1.2.8 Wherever the consent or approval of the Landlord is
                  required or requested in relation to this Lease such
                  provisions shall be construed as also requiring the consent or
                  approval of any mortgagee of the Landlord where the same shall
                  be required except that nothing in the Lease shall be
                  construed as implying that any obligation is imposed upon any
                  mortgagee not unreasonably to refuse any such consent.

                  1.2.9 Where the expression "tenant covenants" or "authorised
                  guarantee agreement" are used in this Lease they are to have
                  the same meanings as is given by Section 28(1) of the Landlord
                  and Tenant (Covenants) Act 1995.

                  1.2.10 The index and clause or paragraph headings do not form
                  part of this Lease and shall not be taken into account in its
                  construction or interpretation.

                  1.2.11 The expression "the Lease Term" includes any period of
                  holding over or extension or continuation thereof whether by
                  agreement between the Landlord and the Tenant or by statute or
                  common law.

THE DEMISE AND RENT

2 IN consideration of the rent and covenants on the part of the Tenant
hereinafter reserved and contained the Landlord HEREBY DEMISES unto the Tenant
ALL THOSE the Demised Premises but EXCEPTING AND RESERVING to the Landlord and
others as specified in the Second Schedule the rights specified in the Second
Schedule TO HOLD the same unto the Tenant for the Least Term SUBJECT TO all
rights, easements, privileges, restrictions, covenants and stipulations of
whatever nature affecting the Demised Premises including the matters contained
or referred to in the documents specified in the Fifth Schedule YIELDING AND
PAYING therefor at the times and in manner hereinafter mentioned:

         2.1 From the date hereof until and including the Twenty first day of
         September One thousand nine hundred and ninety nine the annual rent of
         one peppercorn.

         2.2 From and including the Twenty second day of September One thousand
         nine hundred and ninety nine and during the remainder of the first five
         years of the Lease Term the Initial Rent and thereafter.

         2.3 During the remainder of the Lease Term an annual rent in respect of
         the Review Period of an amount equal to whichever is the greater of

                  2.3.1 the rent payable immediately preceding the Review Date
                  and


<PAGE>   7
                                      -6-




                  2.3.2 the Rack Rental Value of the Demised Premises on the
                  Review Date.

         2.4 As additional rent any V.A.T. which may be or become chargeable in
         respect of any rent payable under this Lease.

         2.5 As additional rent any other sums payable pursuant to this Lease.

RENTAL PAYMENT PROVISIONS

3 THE rent shall be paid by equal quarterly payments in advance on the usual
quarter days in each year without any deduction whatsoever except

         3.1 That the first payment shall be a proportionate payment for the
         period from the Twenty second day of September One thousand nine
         hundred and ninety nine to the Twenty fourth day of December One
         thousand nine hundred and ninety nine and shall be paid on the 4th June
         1999 and

         3.2 That if the rent payable for the Review Period has not been
         ascertained until the Final Date the Tenant shall until the quarter day
         next following such Final Date pay on account the like amount of rent
         as was payable immediately preceding the Review Date and shall on such
         quarter day pay to the Landlord the difference (if any) between the
         amounts so paid and the actual amount of rent payable for the period
         from the Review Date to such quarter day with interest thereon to the
         date of payment calculated on a day to day basis at the rate of two Per
         centum (2%) per annum above Barclays Bank PLC base rate for the time
         being and such interest shall be paid by the Tenant to the Landlord by
         way of additional rent.

4    RACK RENTAL ASCERTAINMENT

         4.1 THE Rack Rental Value on the Review Date shall be ascertained at
         any time by agreement in writing signed by or on behalf of the Landlord
         and the Tenant or in default of such agreement shall be determined and
         certified at the option of the Landlord either by an arbitrator or by
         an independent valuer (acting as expert and not as arbitrator) such
         arbitrator or valuer to be an independent Chartered Surveyor appointed,
         whether on before or after the Review Date, by agreement between the
         Landlord and the Tenant or, in default of agreement within fourteen
         days of one party giving notice to the other in writing of its
         nomination or nominations, nominated upon the application of the
         Landlord made not earlier than six months before the Review Date or at
         any time thereafter by the President for the time being of the Royal
         Institution of Chartered Surveyors PROVIDED THAT:

                  4.1.1 If the said President shall for any reason not be
                  available or be unable to make such appointment as aforesaid
                  at the time of application therefor the appointment may be
                  made by the Vice President or next senior officer of the said
                  Institution then available and able to make such appointment
                  or if no such officer of the said Institution shall be so
                  available and able to make such appointment then by such
                  officer of such independent professional body of surveyors as
                  the Landlord shall designate and


<PAGE>   8
                                      -7-




                  4.1.2 That if any valuer appointed to act as an expert shall
                  have unduly delayed his decision or shall relinquish his
                  appointment or die or if it shall become apparent that for any
                  reason he will be unable to complete his duties herein the
                  Landlord or the Tenant may apply to the said President for a
                  substitute to be appointed in his place which procedure may be
                  repeated as many times as necessary.

         4.2      4.2.1 Any arbitration hereunder shall be conducted in
                  accordance with the Arbitration Act 1996.

                  4.2.2 The decision of the valuer acting as an expert as to how
                  the costs and expenses including the costs of his appointment
                  are to be borne and as to the amount of the Rack Rental Value
                  shall be binding upon the Landlord and the Tenant.

                  4.2.3 The valuer acting as an expert shall afford to the
                  Landlord and the Tenant an opportunity to make representations
                  to him.

         4.3 On each occasion during the Lease Term that the operation of the
         above provisions for the ascertainment of the amount of rent payable in
         the Review Period or any installment or part thereof or the collection
         or retention thereof is prevented or prohibited by any statutory
         restriction either wholly or partially

                  4.3.1 The Review Date shall be postponed to take effect on the
                  earliest permissible date or dates thereafter and if there
                  shall be a partial relaxation there shall be a further review
                  of the rent hereby reserved on the earliest date as aforesaid
                  notwithstanding that the said rent may have been increased in
                  part on or since the previous Review Date and/or

                  4.3.2 The collection of any increase or increases in the rent
                  shall be postponed to take effect on the earliest date or
                  dates thereafter that such increase or increases may be
                  collected and/or retained in whole or in part and on as many
                  occasions as shall be required to ensure the collection of the
                  whole increase.

         AND until such statutory restrictions shall be relaxed either partially
         or wholly the total of the rent hereby reserved shall be the maximum
         sum from time to time lawfully applicable to the Demised Premises.

         4.4 For the avoidance of doubt the rent payable for the Review Period
         (whether agreed between the Landlord and the Tenant or determined by an
         arbitrator or valuer acting as an expert) may be a stepped rent.

         4.5 When the rent payable for the Review Period shall have been
         ascertained in accordance with the provisions of this Clause Memoranda
         thereof shall (if so required by the Landlord) be signed by or on
         behalf of the Landlord and the Tenant and annexed to this Lease and its
         Counterpart.


<PAGE>   9
                                      -8-




5    INSURANCE PREMIUMS

         5.1      THE Tenant shall also pay the Landlord:

                  5.1.1 Upon demand from time to time during the Lease Term sums
                  of money equal to the amounts which the Landlord may
                  reasonably expend or be liable to expend in effecting or
                  maintaining any such insurances as are referred to in Clause
                  7.2 hereof and for insuring in such amount and on such terms
                  as the Landlord shall reasonably consider appropriate against
                  all liability of the Landlord to third parties arising out of
                  or in connection with any matter involving or relating to the
                  Demised Premises and

                  5.1.2 All of any increased premium payable by reason of any
                  act or omission of the Tenant.

         5.2 Such payments shall be made without any deduction and in particular
         (but without prejudice to the generality of the foregoing) no deduction
         shall be made in respect of any agency or other commission paid or
         allowed by the insurers to the Landlord or otherwise but the full
         nominal amount of each premium shall be treated as having been expended
         in respect of the relevant insurances and the Landlord shall be
         entitled to retain for its own benefit any agency or other commission
         so paid or allowed.

INTEREST ON UNPAID RENT

6 IF and whenever during the Lease Term the said rents or any other monies from
time to time payable by the Tenant to the Landlord or any part or parts thereof
shall at any time be unpaid for a space of fourteen days next after becoming
payable the same shall until paid or until any earlier re-entry by the Landlord
upon the Demised Premises pursuant to the proviso in that behalf hereinafter
contained bear Interest PROVIDED that nothing in this clause shall entitle the
Tenant to withhold or delay any payment of rent or other monies as aforesaid
after the date upon which the same first falls due or in any way prejudice
affect or derogate from the rights of the Landlord in relation to the said
non-payment including (but without prejudice to the generality of the foregoing)
those under the proviso for re-entry hereinafter contained.

LANDLORD'S COVENANTS

7 THE Landlord HEREBY COVENANTS with the Tenant PROVIDED THAT the Landlord shall
not be liable itself for any breach of covenant occurring after it shall have
parted with the interest in the Demised Premises immediately expectant upon the
reversion to this Lease:

         QUIET ENJOYMENT

         7.1 That the Tenant paying the rents hereinbefore reserved and
         performing and observing the provisions and the covenants on the part
         of the Tenant herein contained shall peaceably hold and enjoy the
         Demised Premises for the Lease Term without any interruption by the
         Landlord or any person lawfully claiming under or in trust for it.


<PAGE>   10
                                      -9-




         INSURANCE

         7.2 Subject to the Tenant paying the insurance rent payable pursuant to
         clause 5 of this Lease to keep the Demised Premises insured against
         loss or damage by fire, lightning, explosion, tempest, flood, bursting
         and overflowing of water tanks, apparatus or pipes, impact and (in
         peace time) aircraft and other aerial devices and any articles dropped
         therefrom, riot, civil commotion, malicious damage, subsidence and
         heave and such other risks as the Landlord may reasonably decide or the
         Tenant may reasonably require at the Tenant's expense to insure against
         from time to time

                  7.2.1 unless such insurance shall be vitiated by any act of
                  the Tenant or by anyone at the Demised Premises expressly or
                  by implication with the Tenant's authority and

                  7.2.2 to the extent that such insurance may ordinarily be
                  arranged for properties such as the Demised Premises

         in some insurance office of repute or (if and so long as the Landlord
         for the time being is itself an insurance company or an insurance
         company is a Group Company and the Landlord so desires) in its own
         office or the office of any insurance company which is a Group Company
         in such a sum as the Landlord shall from time to time be advised by the
         Landlord's Surveyor represents the full amount of the costs (including
         any V.A.T. or other taxes payable in respect thereof and reasonable
         provision for escalation of such costs between the date of destruction
         or damage and the estimated date of rebuilding or reinstating the
         Demised Premises) from time to time of completely rebuilding,
         reinstating or replacing the Demised Premises as new in the event of
         total destruction thereof (including architects', engineers' and
         surveyors' fees on such costs at the current scales for the time being
         of the Royal Institute of British Architects, the Association of
         Structural Engineers and the Royal Institution of Chartered Surveyors,
         the cost of debris removal, demolition, site clearance and any works
         that may be required by statute and incidental expenses and also a sum
         equal to three years' (or such longer period as the Landlord may from
         time to time consider necessary) rent of the Demised Premises for the
         time being payable or prospectively payable as from the Review Date)
         and to make all payments necessary for the above purpose within seven
         days after the same shall respectively become payable and will produce
         to the Tenant on demand a copy of the insurance policy and of the
         current premium receipt (or other evidence that the insurance is in
         force and a summary of the cover) and will request (if required by the
         Tenant or its mortgagee) that a note of the interest of the Tenant
         and/or the Tenant's mortgagee be made on the insurance policy.

         TO LAY OUT INSURANCE MONIES IN REBUILDING AND REINSTATING

         7.3 In case the Demised Premises or any part thereof shall from time to
         time be destroyed or damaged by an Insured Risk so as to be unfit for
         occupation or use then as often as the same shall happen (unless
         payment of the policy monies shall be withheld in whole or in part by
         reason of any act neglect or default of the Tenant or by anyone at the
         Demised Premises expressly or by implication with the Tenant's
         authority) subject to

<PAGE>   11
                                      -10-




         clause 7.4 with all convenient speed to take such steps as may be
         requisite and proper to obtain any planning permission or other permits
         and consents that may be required under the Planning Acts to enable the
         Landlord to rebuild and reinstate the Demised Premises and to spend and
         lay out any insurance monies received by virtue of the aforementioned
         insurance (except in respect of loss of rent) in reinstating,
         restoring, replacing or rebuilding the Demised Premises or the parts
         thereof so destroyed or damaged with all convenient speed PROVIDED THAT
         the Landlord shall not be liable to rebuild or reinstate the Demised
         Premises if the Landlord is unable (having used all reasonable
         endeavours) to obtain all planning permissions, permits and consents
         necessary to execute such rebuilding and reinstating or if this Lease
         shall be frustrated or if the rebuilding or reinstating is prevented
         for any reason beyond the control of the Landlord in which event the
         Landlord shall be entitled to retain all insurance monies received by
         the Landlord.

         7.4 If during the last three years of the Lease Term the Demised
         Premises shall be so destroyed or damaged by an Insured Risk as to be
         unfit for occupation and use the Landlord may by not less than one
         month's prior written notice to the Tenant given to expire at any time
         ("the Determination Notice") determine the Lease and upon the expiry of
         the Determination Notice this Lease shall determine without prejudice
         to any rights and remedies which may then have accrued to either party
         against the other in respect of any breach of the covenants and
         conditions contained in this Lease and the Landlord shall be entitled
         to retain all insurance monies received by the Landlord and the Tenant.

TENANT'S COVENANTS

8 THE Tenant HEREBY COVENANTS with the Landlord to observe and perform the
covenants set out in the Third Schedule hereto.

PROVISOS AND AGREEMENTS, EXCLUSIONS AND TENANT'S INSURANCE WARRANTY

9    PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:

         9.1 Without prejudice to any other right or remedy or power herein
         contained or otherwise available to the Landlord:

                  9.1.1 if the said yearly or other rents or any part or parts
                  thereof shall at any time be unpaid for the space of fourteen
                  days next after becoming payable (whether the same shall have
                  been formally or legally demanded or not) or

                  9.1.2 if default shall be made in the performance or
                  observance of any of the covenants provisions and conditions
                  herein contained and on the part of the Tenant to be observed
                  and performed; or

                  9.1.3 if the Tenant or any guarantor of the Tenant's
                  obligation:

                           9.1.3.1 (being a company or if in partnership) enters
                           into voluntary liquidation (other than for the
                           purpose of reconstruction or amalgamation not
                           involving a realisation of assets) or has a winding
                           up order made

<PAGE>   12
                                      -11-




                           against it by the Court or has a receiver appointed
                           over all or any part of its assets or an
                           administration order is made pursuant to the
                           Insolvency Act 1986 or the Insolvent Partnerships
                           Order 1994; or

                           9.1.3.2 (being one or more individuals whether or not
                           in partnership together) any one of them petitions
                           the Court for his own bankruptcy or has a bankruptcy
                           order made against him; or

                           9.1.3.3 becomes insolvent or enters into any
                           composition with its or his creditors or enters into
                           a voluntary arrangement (within the meaning of
                           Section 1 or 253 Insolvency Act 1986 or the Insolvent
                           Partnerships Order 1994), or

                  9.1.4 if the Tenant (whether an individual or a body
                  corporate) shall permit or suffer any distress or execution to
                  be levied on the Demised Premises

         then and in any such case (and notwithstanding the waiver of any
         previous right of re-entry) it shall be lawful for the Landlord or any
         person or persons duly authorised by it in that behalf to re-enter into
         and upon the Demised Premises or any part thereof in the name of the
         whole and to repossess and enjoy the same henceforth as if this Lease
         had not been granted and thereupon the Lease Term shall cease and
         absolutely determine but without prejudice to any right of action or
         remedy of the Landlord in respect of any breach of the covenants on the
         Tenant's part herein contained.

         9.2 In the event of the Demised Premises or any part thereof being
         damaged or destroyed by an Insured Risk so as to be unfit for
         occupation or use then subject as hereinafter provided the rent or a
         fair proportion thereof according to the nature and extent of the
         damage sustained shall cease to be payable by the Tenant from the date
         of damage or destruction until the expiration of a period of three
         years (or such other longer period as the Landlord has insured against
         for loss of rent) from such date or until the date on which the Demised
         Premises are restored fit for use and occupation by the Tenant
         whichever date shall be the earlier PROVIDED.

                  9.2.1 that there shall be no cesser of rent if the insurance
                  policy effected by the Landlord shall have been vitiated in
                  whole or in part by the act, neglect or omission or default of
                  the Tenant or by anyone at the Demised Premises expressly or
                  by implication with the Tenant's authority or if the monies
                  payable under the said policy in respect of loss of rent shall
                  not be paid to the Landlord as hereinafter provided by reason
                  of any such act or default as aforesaid;

                  9.2.2 that where the Tenant has paid rent in advance which
                  relates to a period after the date of the damage or
                  destruction aforesaid the Tenant will not be repaid the same
                  or as appropriate the fair proportion thereof until after the
                  Landlord has received reimbursement thereof from the relevant
                  insurance company;

                  9.2.3 that any dispute which may arise under this sub-clause
                  shall be referred to the decision of some competent person to
                  be agreed upon by the Landlord and by the Tenant or (in the
                  event of failure so to agree) to be nominated by the President

<PAGE>   13
                                      -12-



                  for the time being of The Royal Institution of Chartered
                  Surveyors such person acting as an expert and not as an
                  arbitrator and the decision of such person (including any
                  decision as to the costs of such determination) shall
                  accordingly be final and binding on both the Landlord and the
                  Tenant.

         9.3 All policy monies received in respect of loss of rent shall be paid
         to the Landlord for its own use and benefit and if for any cause
         whatsoever rebuilding or reinstatement of the Demised Premises shall be
         prevented or frustrated then all policy monies shall belong to and be
         retained by the Landlord absolutely.

         9.4 Any notice hereby required or authorised to be given to the
         Landlord or the Tenant respectively shall be in writing and may be
         given in any of the modes provided in Section 196 of the Law of
         Property Act 1925 as amended by the Recorded Delivery Service Act 1962
         and shall also be sufficiently served if sent by telex or by
         telegraphic facsimile transmission to the party to be served and that
         service shall be deemed to be made on the day of transmission before
         4.00 p.m. on any day from Monday to Friday (inclusive) other than
         Christmas Day, Good Friday and any statutory Bank Holiday but otherwise
         on the next such day following the day of transmission.

         9.5 Nothing herein contained or implied shall give the Tenant the
         benefit of or the right to enforce or to prevent the release or
         modification of any covenant agreement or condition entered into by any
         tenant of the Landlord in respect of any property not comprised in this
         Lease.

         9.6 Any dispute arising as between the Tenant and the lessees tenants
         or occupiers of any Adjoining Property or any neighbouring property as
         to any easement, right or privilege in connection with the use of the
         Demised Premises and any Adjoining Property or any neighbouring
         property or as to the party or other walls separating the Demised
         Premises from any Adjoining Property or any neighbouring property or as
         to the amount of any contribution towards the repair of services or
         other things used in common with any Adjoining Property or any
         neighbouring property or relating in any way to the Demised Premises
         shall be decided by the Landlord or in such manner as the Landlord
         shall reasonably direct and such decision shall be binding on all the
         parties to the dispute.

         9.7 The Landlord shall not be responsible to the Tenant or (save as is
         otherwise provided by statute) to the Tenant's licensees, servants,
         agents or other persons in the Demised Premises or calling upon the
         Tenant for any accident, happening or injury suffered or damage to or
         loss of any chattel or property sustained in the Demised Premises or
         any Adjoining Property.

         9.8 Each of the Tenant's covenants shall remain in full force both at
         law and in equity notwithstanding that the Landlord shall have waived
         or released temporarily any such covenant or waived or released
         temporarily or permanently revocably or irrevocably a similar covenant
         or similar covenants affecting other adjoining or neighbouring Premises
         belonging to the Landlord.


<PAGE>   14
                                      -13-




         9.9 Such of the internal division walls as divide the Demised Premises
         from any Adjoining Property shall be deemed to be party walls within
         the meaning of Section 38 of the Law of Property Act 1925 and shall be
         maintained accordingly.

         9.10     9.10.1 If after the Tenant has vacated the Demised Premises on
                  the expiry or sooner determination of the Lease Term any
                  property of the Tenant shall remain in or on the Demised
                  Premises and the Tenant shall fail to remove the same within
                  fourteen days after being requested in writing by the Landlord
                  so to do or if after using reasonable endeavours the Landlord
                  is unable to make such a request to the Tenant within fourteen
                  days from the first attempt so made by the Landlord then the
                  Landlord may as the Agent of the Tenant sell such property and
                  hold the proceeds of sale after deducting the costs and
                  expenses of removal, storage and sale reasonably and properly
                  incurred by the Landlord to the order of the Tenant provided
                  that the Tenant will indemnify the Landlord against any
                  liability incurred by it to any Third Party whose property
                  shall have been sold by the Landlord in the bona fide mistaken
                  belief (which shall be presumed unless the contrary be proved)
                  that such property belonged to the Tenant.

                  9.10.2 If the Landlord having made reasonable efforts is
                  unable to locate the Tenant the Landlord shall be entitled to
                  retain the said proceeds of sale absolutely unless the Tenant
                  shall claim the same within six months of the date upon which
                  the Tenant vacated the Demised Premises.

                  9.10.3 The Tenant shall indemnify the Landlord against any
                  damage occasioned to the Demised Premises or any Adjoining
                  Property or Other Buildings and any actions, claims,
                  proceedings, costs, expenses and demands made against the
                  Landlord caused by or related to the presence of such property
                  in or on the Demised Promises.

         9.11 Except where any statutory provision prohibits the Tenant's right
         to compensation being reduced or excluded by agreement the Tenant shall
         not be entitled to claim from the Landlord on quitting the Demised
         Premises any compensation under the Landlord and Tenant Act 1954.

         9.12 This Lease embodies the entire understanding of the Landlord and
         the Tenant relating to the Demised Premises and to all the matters
         dealt with by any of the provisions of this Lease.

         9.13 The Tenant acknowledges that this Lease has not been entered into
         in reliance wholly or partly on any statement or representation made by
         or on behalf of the Landlord except any such statement or
         representation that is expressly set out in this Lease.

         9.14 The Tenant shall not be entitled to any right of light or air or
         other easement which will interfere with the free use of any Adjoining
         Property or any land adjoining opposite or near to the Demised Premises
         for building or other purposes and shall not during the Lease Term
         acquire or become entitled by any means whatsoever to any easement from
         or over or affecting any Adjoining Property.


<PAGE>   15
                                      -14-




         9.15 The Tenant warrants that prior to the execution of this Lease the
         Tenant has disclosed to the Landlord in writing any conviction,
         judgment or finding of any Court or Tribunal relating to the Tenant (or
         if a company any director other officer or majority shareholder of the
         Tenant) of such a nature as to be likely to affect the decision of any
         insurer or underwriter to grant or to continue insurance of any of the
         Insured Risks.

         9.16 Wherever this Lease provides that the consent of the Landlord is
         required the Landlord may withhold its consent if the giving of such
         consent would:

                  9.16.1 materially diminish the value of the Landlord's
                  reversion expectant upon the determination of this Lease.

                  9.16.2 materially prejudice any business carried on by the
                  Landlord or any Group Company or any other Tenant of the
                  Landlord or a Group Company on any Adjoining Property

                  9.16.3 cause nuisance to the Landlord or any other tenant of
                  the Landlord

                  9.16.4 conflict with the generally accepted principles of good
                  estate management from time to time current.

         9.17 For the purposes of the Data Protection Act 1984 or otherwise the
         Tenant and the Guarantor agree to any information relating to this
         tenancy held by the Landlord being disclosed to third parties so far
         only as is necessary in connection with the management or disposal of
         the Demised Premises.

DEMISE SUBJECT TO EASEMENTS ETC.

10 THE Demised Premises are demised to the Tenant subject to all easements and
rights affecting the same.

NON WAIVER OF BREACH OF COVENANT

11 THE demand for or receipt of rent on the part of the Landlord or its agent
with knowledge of a breach of any of the covenants, provisions or conditions
herein contained and on the part of the Tenant to be observed and performed
shall not operate is a waiver in whole or in part of any such breach or of the
Landlord's right to re-enter.

12 ENGLISH LAW

THIS Lease shall be construed and governed in accordance with the laws of
England and Wales and the parties hereto submit to the non-exclusive
jurisdiction of the English Courts.

OPERATION OF THIS DEED

13 THIS document shall be treated as having been executed and delivered as a
deed only upon being dated.


<PAGE>   16
                                      -15-




NO PRECEDING AGREEMENT FOR LEASE

14 IT IS HEREBY CERTIFIED that there is no agreement for lease to which this
Lease gives effect.

         IN WITNESS whereof this Lease has been executed as a deed by the
parties hereto the day and year first before Written.

                               THE FIRST SCHEDULE

                       DESCRIPTION OF THE DEMISED PREMISES

ALL THAT land and premises TOGETHER WITH the structures and building or
buildings erected thereon or on some part thereof edged red for identification
on the Plan and known as Meridian House, 2/4 The Grove, Slough in the County of
Berkshire the freehold of which is registered at H M Land Registry under title
numbers BK 309299 and BK 228376.



<PAGE>   17
                                      -16-



                               THE SECOND SCHEDULE

                           EXCEPTIONS AND RESERVATIONS

                                   (CLAUSE 2)

The following rights and easements are excepted and reserved out of the Demised
Premises unto the Landlord and its tenants and the owners and occupiers of any
Adjoining Property and all other persons authorised by the Landlord or for the
time being entitled thereto:

1 The right to the free and uninterrupted passage and running of water, sewage,
gas, electricity, telephone and other services or supplies from and to any
Adjoining Property in and through the Pipes which now are or may at any time
during the Perpetuity Period be in, on, under or over the Demised Premises.

2 The right to construct and at any time during the Perpetuity Period in on
under or over the Demised Premises any Pipes, easements or services for the,
benefit of or to serve any Adjoining Property.

3 The right at any time during the Perpetuity Period but (except in case of
emergency) after giving reasonable notice to enter the Demised Premises and:

         3.1      to inspect, cleanse, connect to, repair, remove, replace with
                  others, alter or execute any works whatever to or in
                  connection with the Pipes, easements or services referred to
                  in paragraphs 1 and 2 of this Part of this Schedule;

         3.2      to view the state and condition of the Demised Premises and to
                  repair and maintain any Other Buildings where such viewing or
                  work would not otherwise be reasonably practicable;

         3.3      to carry out work or to do anything whatever comprised within
                  the Landlord's obligations in this Lease;

         3.4      to take schedules or inventories of fixtures and other items
                  to be yielded up on the expiry of the Lease Term, or

         3.5      to exercise any of the rights granted or reserved by this
                  Lease.

4 The right with or without any Surveyor acting for the Landlord and any person
acting as the third party determining the Rack Rental Value in default of
agreement between the parties under the provisions for rent review contained in
this Lease at convenient hours on reasonable prior notice to cater and to
inspect measure and survey the Demised Premises for all purposes connected with
any pending or intended step under the Landlord and Tenant Act 1954 or the
implementation of the provisions for rent review contained in this Lease.

5 The right during the Perpetuity Period to carry out work of any kind including
alteration of or additions or extensions to Other Buildings or the construction
of new buildings on any Adjoining Property of any height and to use any boundary
or external wall of the Demised

<PAGE>   18
                                      -17-



Premises as a party wall for any new building on Adjoining Property and to carry
out all necessary construction works accordingly and the right to erect and use
scaffolding and hoardings on the Demised Premises for the Purpose of inspecting
repairing maintaining or cleansing any Other Buildings or carrying out any works
(including alterations or extensions of Other Buildings or the construction of
new buildings) on any Adjoining Property notwithstanding that the exercise of
such rights may temporarily restrict the access to or use and enjoyment of the
Demised Premises or any temporary derogation from the terms of the Lease (but in
the event of such derogation to carry out all works as expeditiously as
practicable) and notwithstanding that any new buildings or structures may
obstruct, affect or interfere with [he amenity of or access to the Demised
Premises or that the free access of light and air to the Demised Premises may
thereby be impaired or injuriously affected or that nuisance, inconvenience,
disturbance or annoyance arising therefrom may be caused to the Tenant PROVIDED
THAT the persons exercising such rights shall make, good as soon as is
practicable any physical damage caused to the Demised Premises.

6 The rights of light, air, support, protection, shelter and all other easements
and rights now or after the date of this Lease enjoyed by or belonging to any
Other Buildings and any Adjoining Property and any part or parts thereof or any
neighbouring or adjoining property or any part or parts thereof.

                               THE THIRD SCHEDULE

                                   (CLAUSE 8)

                               TENANT'S COVENANTS

TO PAY RENTS

1        1.1 To pay the said rents at the times and in manner aforesaid free
         from all deductions and not to exercise or seek to exercise any right
         or claim to withhold rent or any right or claim to legal or equitable
         set off.

         1.2 If so required by the Landlord to make such payments by banker's
         order or credit transfer to any bank and account chat the Landlord may
         from time to time nominate.

TO PAY RATES ETC.

2    TO pay and to indemnify the Landlord against:

         2.1      All existing and future rates, taxes, assessments,
                  impositions, duties, charges and outgoings whatsoever (whether
                  parliamentary, local or otherwise and whether or not of a
                  capital or non-recurring nature and even though of a wholly
                  novel character) which now are or may hereafter at any time
                  during the Lease Term become payable, charged or assessed in
                  respect of the Demised Premises or any part thereof or on the
                  owner or occupier in respect thereof and

         2.2      A sum equal to any uniform business races (or similar
                  imposition substituted therefor or payable in replacement
                  thereof) payable after the expiry or sooner

<PAGE>   19
                                      -18-



                  determination of the Lease Term which would not have been so
                  payable had the Demised Premises been in rateable occupation
                  (or fully occupied) during the preceding twelve months.

TO PAY V.A.T.

3 TO pay to the Landlord V.A.T. which is or may become payable in respect of
ally payment made or to be made by the Tenant under any of the provisions of or
it) connection with this Lease or paid by the Landlord on any payment made by
the Landlord where the Tenant agrees in this Lease to reimburse the Landlord for
such payment and in every case where in this Lease the Tenant covenants with the
Landlord to pay an amount of money such amount shall be regarded as being
exclusive of all V.A.T. which may from time to time be payable thereon.

TO PAY FOR ELECTRICITY, GAS, ETC.

4 TO pay to the suppliers and indemnify the Landlord against all charges for
electricity, gas and other services consumed or used in relation to the Demised
Premises (including meter rents) where a separate supply is provided for the
Demised Premises.

TO REPAIR AND YIELD UP IN REPAIR

5        5.1 AT all times to the reasonable satisfaction in all respects of the
         Landlord's Surveyor during the Lease Term well and substantially to
         repair and keep in good and substantial repair and condition the
         Demised Premises (damage by fire or any other insured risks excepted
         provided that the insurance effected by the Landlord shall not have
         been vitiated or payment of tile insurance monies refused in whole or
         in part in consequence of some act or default on the part of the Tenant
         or anyone at the Demised Premises expressly or by implication with the
         Tenant's authority) and quietly to surrender and yield up the Demised
         Premises in such good and substantial repair as aforesaid at the end or
         sooner determination of the Lease Term together with any such additions
         and improvements as aforesaid and the Landlord's fixtures and fittings
         whole undefaced and fit for use and without prejudice to the generality
         of the foregoing with the carpets or floor coverings, wall coverings,
         light fittings, sanitary ware and ironmongery replaced with new items
         of like nature, quality and colouring, the Tenant making good any
         damage caused by the removal of the Tenant's fixtures, fittings,
         furniture and effects.

         5.2 If it shall become necessary at any time under the provisions of
         this Lease for the Tenant to rebuild the whole or any part of the
         Demised Premises (damage or destruction by any insured Risk excepted
         provided that the policy of insurance shall not have been vitiated by
         any act or default of the Tenant or anyone at the Demised Premises
         expressly or by implication with the Tenant's authority) then the
         Tenant will at its own expense and with all reasonable despatch carry
         out such rebuilding under the direction and to the reasonable
         satisfaction of the Landlord's Surveyor and in accordance with such
         plans and specifications as may be approved by them in writing, such
         approval not to be unreasonably withheld.


<PAGE>   20
                                      -19-




         5.3 To maintain at all times during the Lease Term the Landlord's
         fixtures and fittings and to replace and renew such of them as may
         become worn out lost or unfit for use by substituting replacements of
         the like nature and quality provided that before carrying out any
         renewal or replacement the Tenant shall first obtain the approval in
         writing of the Landlord as to the nature of the work to be carried out
         or the replacement items, such approval not to be unreasonably
         withheld.

TO DECORATE AND MAINTAIN OPEN AREAS ETC.

6        6.1      6.1.1 TO paint with three coats of good quality paint in a
                  proper and workmanlike manner all the internal wood iron and
                  other parts of the interior of the Demised Premises heretofore
                  or usually painted in every fourth year and in the last year
                  or on sooner determination (howsoever determined) of the Lease
                  Term and after every painting to grain, polish, wash, stop,
                  whiten and colour all such parts as are usually so treated and
                  to repaper the parts usually papered with suitable paper of
                  good quality and to carry out all the aforesaid work with the
                  best quality materials of their several kinds available and in
                  accordance with the best standards of workmanship PROVIDED
                  THAT any such painting or treatment at the end or sooner
                  determination of the Lease Term shall be carried out in such
                  colours as the Landlord in its absolute discretion shall
                  determine.

                  6.1.2 TO paint with three coats of good quality paint in a
                  proper and workmanlike manner all the external wood iron and
                  other parts of the exterior of the Demised Premises previously
                  or usually painted in every third year and in the last year or
                  on sooner determination (howsoever determined) of the Lease
                  Term and after every painting to grain, varnish, polish, wash,
                  stop, whiten and colour all such parts as are usually so
                  treated and to clean the brickwork stonework arid other
                  finishes to the exterior of the Demised Premises and to carry
                  out all the aforesaid work with the best quality materials of
                  their sever-at kinds available and in accordance with The best
                  standards of workmanship PROVIDED THAT any such painting or
                  treatment at the end or sooner determination of the Lease Term
                  shall be carried out in such colours as the Landlord in its
                  absolute discretion shall determine,

         6.2 At all times during the Lease Term to keep the windows and window
         frames of the Demised Premises, clean and to keep any part of the
         Demised Premises not occupied by buildings adequately surfaced in good
         condition free from weeds and all landscaped areas (if any) properly
         cultivated.

         6.3 To enter into contracts with persons of good repute for the regular
         maintenance, inspection, care and servicing of any lifts, boilers,
         ventilation, air-conditioning, central heating plant and apparatus from
         time to time in the Demised Premises and to supply to the Landlord
         details of all such contracts upon written request.


<PAGE>   21
                                      -20-




NOT TO MAKE ALTERATIONS ETC.

7        7.1 NOT at any time during the Lease Term to alter cut maim or remove
         any of the main walls, beams, columns, timbers, floors or other
         structural parts of the Demised Premises or commit or permit any waste
         or damage to the Demised Premises or to the floors or timbers thereof
         or to endanger the structure Or any floor or to make or permit to be
         made any alteration in or addition to the elevation, main structure or
         in the external decoration thereof or to erect any additional buildings
         or structures PROVIDED That the Tenant may with the prior written
         consent of the Landlord (such consent not to be unreasonably withheld
         or delayed) carry out works of alteration or addition of a
         non-structural nature but if the Tenant shall make any such alteration
         or additions to the Demised Premises the Tenant shall (if the Landlord
         shall so require but not otherwise) at the end or sooner determination
         of the Lease Term at the Tenant's own expense remove such alterations
         and additions if required by the Landlord and shall also at its own
         expense restore the Demised Premises to the same condition ill which
         they were prior to the making or erecting of such alterations or
         improvements and in any event shall remove any moulding, sign, writing
         or painting of the name or business of the Tenant and other persons
         from the Demised Premises and make good any damage caused to the
         Demised Premises by such removal.

         7.2 Not to cut, injure or remove nor make any connection with the Pipes
         serving the Demised Premises either exclusively or in connection with
         other premises PROVIDED THAT the Tenant may make connection with those
         Pipes that exclusively serve the Demised Premises only in accordance
         with plans and specifications first approved in writing by the
         Landlord.

         7.3 Not without the previous consent it, Writing of the Landlord to
         alter the electrical heating or lighting installations or other
         services serving the Demised Premises and to replace the same when
         necessary with the same materials or if not then available with
         materials of no lesser quality to be first approved b y the Landlord's
         Surveyor.

NOT TO OVERLOAD FLOORS

8 NOT to impose or permit to be imposed (whether by using machinery or
otherwise) on any part of the floors, roof, roof trusses, joists or the '
structure of any building comprised in the Demised Premises a load or weight
greater than that which the said floors, roof, roof trusses, joists or structure
are designed or constructed to bear with due margin for safety,

NOT TO ENDANGER DRAINAGE OR ELECTRICAL INSTALLATION

9        9.1 NOT to discharge into any of the Pipes and any other conducting
         media serving the Demised Premises or any other property any oil,
         grease or other deleterious matter or any substance which might be or
         become a source of danger or injury to the drainage system of the
         Demised Premises, the buildings thereon or any adjoining or
         neighbouring property.


<PAGE>   22
                                      -21-




         9.2 Not in the use of electrical wiring and electrical installations in
         the Demised Premises to Use The same or any part thereof in such a way
         as to overload the wiring system or any other part of the electrical
         installation and within three months of any request by the Landlord in
         that behalf (such request not to be made except in the case of an
         overloading or other failure more than once in every three years) to
         produce a certificate of test of the electrical wiring and the
         electrical installations in the Demised Premises given by a competent
         electrical engineer who is a member of and in accordance with the
         regulations of the Institute of Electrical Engineers and the local
         electricity supply authority or company or either of them.

NOT TO INSTALL NOISY MACHINERY ETC.

10 NOT to install or use in or upon the Demised Premises any machinery or
apparatus which causes excessive noise or vibration which can be heard or felt
in nearby premises or outside the Demised Premises or which may cause structural
damage to the Demised Premises.

TO PERMIT LANDLORD TO ENTER AND VIEW STATE OF REPAIR

11 TO permit the Landlord and the Landlord's Surveyor and agent with or without
workmen and others at all reasonable times and upon reasonable notice to enter
upon and examine (and to open up floors and ceilings where the same is required
in order to examine) the condition of the Demised Premises and thereupon the
Landlord may serve on the Tenant a notice in writing specifying any repairs
maintenance or rebuilding necessary to be done so far as they are the liability
of the Tenant under the covenants herein contained and require the Tenant to
commence to execute the same within one calendar month (but forthwith in case of
emergency) including the making good of the said opening up (if any) and
forthwith to pay the Landlord's Surveyors' reasonable and proper fees in respect
of such examination and the preparation of such notice,

TO CARRY OUT WORKS ON NOTICE

12 WELL and substantially to commence (arid thereafter proceed diligently) to
repair and make good all defects and wants of reparation or other works of which
notice in writing shall be given to or left on the Demised Premises for the
Tenant by the Landlord and for which the Tenant is liable hereunder within one
calendar month after the giving or leaving of such notice (or forthwith in case
of emergency) and to complete such works of repair and making good or other
works within three calendar months after the giving or leaving of such notice
and if the Tenant fails to comply with any such notice it shall be lawful (but
not obligatory) for the Landlord (without prejudice to the rights of re-entry
hereinafter contained) to enter upon the Demised Premises to undertake the same
at the cost of the Tenant which cost shall be repaid by the Tenant to the
Landlord on demand together with all Solicitors' and Surveyors' charges and
other expenses reasonably incurred by the Landlord in connection therewith and
with Interest from the date of demand to the daze of payment.

TO PERMIT ENTRY FOR REPAIRS ETC.

13 TO permit the Landlord or any persons authorised by the Landlord and the
tenants and occupiers of any Adjoining Property or other neighbouring or
adjoining property at all

<PAGE>   23
                                      -22-




reasonable times and upon reasonable notice (except in case of emergency) to
enter upon the Demised Premises for the purpose of carrying out repairs,
decorations, alterations or other works to or upon such Adjoining Property or
any Other Buildings or other neighbouring or adjoining property or buildings
thereon or of cleansing or renewing the Pipes belonging to or serving the same
the person entering carrying out all such work with the minimum practicable
interference with the use and occupation of the Demised Premises by the Tenant
and making good To the Tenant all physical damage occasioned thereby to the
Demised Premises but so that no liability except in respect of entry personally
by the Landlord or the duly authorised representative of the Landlord shall
accrue against the Landlord.

TO PAY LANDLORD'S COSTS OF APPLICATION FOR LICENCES ETC.

14 TO pay on demand to the Landlord on an indemnity basis all costs, fees,
disbursements, charges and expenses (including without prejudice to the
generality of the foregoing those payable to counsel, solicitors, surveyors and
bailiffs) incurred by the Landlord in relation or incidental to:

         14.1 Every application made by the Tenant for a consent or licence
         required or made necessary by the provisions of this Lease whether the
         same be granted or refused or proffered subject to any lawful
         qualification or whether the application be withdrawn,

         14.2 The Preparation and service of a notice under Section 146 of the
         Law of Property Act 1925 or incurred in or in contemplation of
         proceedings under Section 146 and 147 of that Act notwithstanding that
         in any case forfeiture is avoided otherwise than by relief granted by
         the Court.

         14.3 Any steps taken in contemplation of or in connection with the
         preparation and service of all notices and schedules relating to wants
         of repair to the Demised Promises and whether served during or after
         the end or sooner determination of the Lease Term (but relating in all
         cases to such wants of repair that accrued no later than the expiration
         or sooner determination of the Lease Term).

         14.4 The recovery or attempted recovery of arrears of rents or other
         sums due from the Tenant.

         14.5 The preparation and endorsement of Memoranda hereon of any
         increase in the rent following a review thereof.

USER, OCCUPATION ETC.

15       15.1 NOT to use the Demised Premises or any part thereof OT permit
         or suffer the same to be used for a sale by auction public exhibition
         show spectacle or gambling or for the sale or consumption of
         intoxicating liquor or as a club or for any public or political meeting
         nor to maintain use exercise or carry on or permit or suffer to be
         maintained used exercised or carried on by an), person whomsoever upon
         any part of the Demised Premises any noisy, noisome, dangerous, or
         offensive trade or business whatsoever nor to keep or permit to be kept
         any animal, fish, reptile or bird in the Demised Premises nor to

<PAGE>   24
                                      -23-



         use the premises as a residence or as sleeping accommodation nor for
         any purpose other than as offices within Class B1(a) of the Schedule to
         the Town and Country Planning (Use Classes) Order 198? (notwithstanding
         any amendment or revocation of such Order) (to the exclusion of any
         other use or uses whether or not the same is permitted by the relevant
         planning authority or is Permitted development under the Planning Acts)
         PROVIDED that nothing in this clause shall amount to a representation
         or warranty by the Landlord that any such use is or will remain a
         permitted use within the provisions of the Town and Country Planning
         Acts nor shall any consent which the Landlord may in its discretion
         give to any change of use be taken as including any such representation
         or warranty,

         15.2 Not to leave the Demised Premises continuously unoccupied for more
         than one month without

                  15.2.1 notifying the Landlord and

                  15.2.2 providing such caretaking or security arrangements as
                  the Landlord shall reasonably require and the Landlord's
                  insurers shall require in order to protect the Demised
                  Premises from vandalism, theft, damage or unlawful occupation.

NO ILLEGAL USE OR NUISANCE ETC.

16       16.1 NOT to use or permit or suffer the Demised Premises to be used for
         any illegal or immoral purpose nor to do or permit or suffer anything
         in or upon the Demised Premises or any part thereof which may be or
         become a nuisance, annoyance or cause damage or inconvenience to the
         Landlord or the tenants of the Landlord or other occupiers of any
         Adjoining Property or other property in the neighbourhood.

         16.2 Not to cause any land roads or pavements adjoining the Demised
         Premises to become untidy or in a dirty condition or deposit thereon
         any materials or refuse.

         16.3 Not to stand, place, deposit or expose outside any building
         forming part of the Demised Premises any goods, materials, articles or
         things whatsoever for display or sale or for any other purpose other
         than in waste receptacles or marked car parking bays designed for such
         purpose.

         16.4 Not to play or use any musical instrument, loudspeaker, tape
         recorder, gramophone, record or compact disc player, radio or
         television receiver or ocher equipment or apparatus that produces
         excessive sound in the Demised Premises so as to be heard in any Ocher
         Buildings or nearby premises or outside the Demised Premises if the
         Landlord shall reasonably consider such sound to be undesirable and
         shall give written notice to the Tenant to that effect.

DANGEROUS MATERIALS ETC.

17 NOT to keep or permit to be kept on the Demised Premises any materials or
liquid of a dangerous or explosive nature nor which might attack or in any way
injure by percolation, corrosion or otherwise the Demised Premises nor to do
permit or suffer anything which may

<PAGE>   25
                                      -24-



render the Landlord or the Tenant liable to any notice under any Public Health
Act for the time being in force or for any purpose or in any way which would
constitute a breach of any of the provisions of any statute for the time being
in force whether affecting the Landlord or any of its present or future property
(including the Demised Premises) to which may be in any way calculated to injure
any such property.

INSURANCE COVENANTS

18       18.1 NOT to do or suffer to be done anything which may render any
         increased or extra premium payable for the insurance of the Demised
         Premises or any Adjoining Property against loss or damage by any of the
         Insured Risks or which may vitiate any policy for such insurance or for
         any insurance of the Demised Premises and if at any time during the
         Lease Term anything shall be done upon the Demised Premises which shall
         cause the premium to be charged by any insurance office to exceed the
         average current rate for the time being in force to give notice thereof
         unto the Landlord and also to pay the extra premium so to be charged as
         aforesaid for the insurance of the Demised Premises or any Adjoining
         Property.

         18.2 In the event of the Demised Premises being destroyed or damaged to
         give notice thereof immediately to the Landlord stating (if possible)
         whether and to what extent such destruction OT damage was brought about
         directly or indirectly by all of the Insured Risks.

         18.3 If at any time during the Lease Term the Demised Premises or any
         part thereof shall be destroyed or damaged by any of the Insured Risks
         and the insurance money shall become wholly or partly irrecoverable by
         reason solely or in part of an art or default of the Tenant or any
         person at the Demised Premises expressly or by implication with the
         Tenant's authority then and in every such case the Tenant will
         forthwith on demand pay to the Landlord the whole of the, cost to the
         Landlord of completely rebuilding and/or reinstating the same together
         with Interest thereon and in the event of any dispute arising out of
         this clause the same shall be referred to arbitration in accordance
         with the Arbitration Act 1996.

         18.4 To maintain in force throughout the Lease Term insurance only
         against damage to all plate glass to its full re-instatement value from
         time to time in the Demised Premises and to produce to the Landlord on
         demand the Policy relating to such insurance and evidence of payment of
         the current premium.

         18.5 To comply with the requirements and recommendations of the
         Landlord's insurers and to keep the Demised Premises supplied with such
         fire fighting equipment as the Landlord's insurers may require and the
         fire authority may require and to maintain the same in proper and safe
         working order.

         18.6 To give notice to the Landlord forthwith upon the happening of any
         event which might affect any insurance policy relating to the Demised
         Premises.


<PAGE>   26
                                      -25-




         18.7 Forthwith to notify the Landlord in writing of any conviction
         judgment or finding of any Court or Tribunal relating to the Tenant (or
         ally director, other officer or major shareholder of the Tenant) of
         such a nature as to be likely to affect the decision of any insurer or
         underwriter to grant or continue insurance of any of the Insured Risks.

         18.8 If at any time the, Tenant shall be entitled to the benefit of any
         insurance on the Demised Premises (which is not effected or maintained
         in pursuance of any obligation herein mentioned) to apply all monies
         received by virtue of such insurance in making good the loss or damage
         in respect of which the same shall have been received.

RESTRICTIONS ON ASSIGNMENT AND UNDERLETTING

19       19.1 IN this clause 19 "Permitted Part" means any one complete floors
         of the Demised Premises (excluding common parts).

         19.2 Not to hold on trust for another or share or part with possession
         or occupation of the whole or any part of the Demised Premises save
         that the Tenant may part with or share possession or occupation of the
         Demised Premises to or with a Group Company for so long as both
         companies remain members of the same Group and otherwise than in a
         manner that transfers or creates a legal estate or the relationship of
         landlord and tenant.

         19.3 Not to assign or charge any part of the Demised Premises as
         distinct from the whole.

         19.4 Not to underlet any part of the demised Premises other than a
         Permitted Part PROVIDED THAT there may not be more than one sub-letting
         of part of the Demised Premises subsisting at any one time.

         19.5 Subject to and without prejudice to the obligations on the part of
         the Tenant and the restrictions imposed by the following sub-paragraph
         of this paragraph 19 not to assign or underlet or charge the whole of
         the Demised Premises and not to underlet a Permitted Part without in
         each and every case first obtaining the appropriate consent (such
         consent not to be unreasonably withheld or delayed subject however in
         the case of an underletting of a Permitted Part to the provisions of
         clause 19.4 above).

         19.6 Without prejudice to the right of the Landlord to withhold its
         consent an any ground where such withholding of consent would be
         reasonable the Landlord may withhold its consent to an assignment of
         this Lease in the circumstances set out in paragraph 19.7 below or such
         consent may be granted subject to the conditions set out in paragraph
         19.8 below.

         19.7 The circumstances referred to in paragraph 19.6 are:

                  19.7.1 Where any rents or other monies whatsoever due and
                  payable hereunder by the Tenant remain unpaid

                  19.7.2 Where neither the Landlord nor its surveyor nor its
                  solicitors has received an undertaking from the Tenant's
                  solicitors to pay all the Landlord's proper costs

<PAGE>   27
                                      -26-



                  arising in connection with the application for the licence to
                  assign (including without limiting the foregoing those of
                  solicitors and surveyors) and disbursements and VAT whether or
                  not the licence proceeds to completion (save where it is not
                  completed because the Landlord unlawfully withholds its
                  consent)

                  19.7.3 Where any works which the Tenant is or was required to
                  carry out as a condition of the grant of this Lease have not
                  been duly carried out in compliance with that requirement or
                  any time limit thereby imposed.

                  19.7.4 Where there subsists a material breach of any of the
                  covenants by the Tenant herein contained which the Tenant has
                  failed to remedy or the remedy of which has not been
                  adequately secured in a manner or on terms reasonably
                  acceptable to the Landlord.

                  19.7.5 Where in the Landlord's reasonable opinion an
                  assignment to the proposed assignee would reduce the open
                  market value of the Landlord's interest in the Demised
                  Premises or would adversely affect the ability of the Landlord
                  to dispose of such interest in the open market an the
                  assumption (whether or not a fact) that the Landlord wished to
                  sell such interest on the date of the Tenant's application for
                  consent for the assignment to the proposed assignee.

         19.8     The conditions referred to in paragraph 19.6 are:

                  19.8.1 That the Tenant requesting consent to assign enters
                  into an authorised guarantee agreement (as defined in Section
                  16 of the Landlord and Tenant (Covenants) Act 1995) in the
                  terms contained in the Sixth Schedule hereto (with such
                  farther provisions as may be appropriate pursuant to paragraph
                  19.6).

                  19.8.2 That on an assignment to a limited company and if the
                  Landlord shall so require to procure that at least two
                  directors of the company or some other guarantor or guarantors
                  reasonably acceptable to the Landlord enter into direct
                  covenants with the Landlord in the form set out in the Fourth
                  Schedule hereto as if references therein to the Tenant were
                  references in the Assignee or otherwise in such form as the
                  Landlord shall require.

                  19.8.3 That on an assignment if the Landlord shall so require
                  to procure that at least two guarantors reasonably acceptable
                  to the Landlord enter into direct covenants with the Landlord
                  in the form set out in the Fourth Schedule hereto as if
                  references therein to the Tenant were references to the
                  Assignee or otherwise in such form as the Landlord shall
                  require.

                  19.8.4 That if the assignee is a company incorporated
                  elsewhere than in Great Britain or is an individual not
                  resident in Great Britain (whether or not with other
                  individuals who may be so resident) the assignee enters into a
                  separate deed with the Landlord which contains the following
                  provisions:


<PAGE>   28
                                      -27-




                           19.8.4.1 (if by a company) an agreement by the
                           assignee to register and remain registered pursuant
                           to Schedule 21A of the Companies Act 1995

                           19.8.4.2 an agreement by the parties that the rights
                           and obligations of the parties under this Lease and
                           all documents supplemental thereto shall be governed
                           by the laws of England.

                           19.8.4.3 an agreement on the part of the assignee
                           that any legal action or proceedings against the
                           assignee with respect to any matter arising under
                           this Lease and any document supplemental thereto may
                           be brought in the English Courts.

                           19.8.4.4 the irrevocable and unconditional acceptance
                           by the assignee of the non-exclusive jurisdiction of
                           the English Courts in relation to anything arising
                           under this Lease or any document supplemental
                           thereto.

                           19.8.4.5 an irrevocable appointment of and
                           authorisation to an agent in England or Wales to
                           accept service on behalf of the assignee in England
                           or Wales of any notice under this Lease or any
                           document supplemental thereto or under any statute
                           and/or process in die jurisdiction in the English
                           Courts in any legal action or proceedings arising
                           under this Lease or any document supplemental
                           thereto.

                           19.8.4.6 an agreement by the assignee that should the
                           Landlord bring any judicial proceedings in relation
                           to any matter arising under this Lease or any
                           document supplemental thereto no immunity from such
                           judicial proceedings from attachment to its property
                           or from execution of judgment shall be claimed by the
                           assignee or on the assignee's behalf with respect to
                           the property of the assignee and any such immunity is
                           and shall be waived by the assignee.

                           19.8.4.7 an agreement by the assignee that nothing in
                           the foregoing provisions should affect the right to
                           serve proceedings in any other manner permitted by
                           law or to commence any legal action or proceedings in
                           any other jurisdiction.

                           19.8.4.8 an agreement by the assignee that any order
                           declaration or other decision of the English Courts
                           may be enforced in the duly constituted Court of the
                           country in which the assignee (being a company) is
                           incorporated or (being an individual) is resident or
                           in the Courts of any other country in which the
                           assignee has assets and an undertaking by the
                           assignee to submit to the jurisdiction of such
                           Courts.

         19.9 Not to underlet the whole of the Demised Premises or a Permitted
         Part at less than the full Rack Rental Value for the time being or the
         rent then payable under this Lease (whichever is the greater) (or a
         proportionate part of whichever is the greater in the case


<PAGE>   29
                                      -28-




         of an underletting of a Permitted Part) and without: taking a fine or
         premium or any consideration or money or moneys worth and not at any
         time during the Lease Term to be a party, or privy to any agreement or
         arrangement for commutation in whole or in part of an annual rent
         reserved and made payable on any underletting of the Demised Premises.

         19.10 Prior to any permitted underletting to procure that the
         underlessee enters into direct covenants with the Landlord as follows:

                  19.10.1 While the underlessee is bound by the underlessee's
                  covenants in the underlease together with and additional
                  period during which the underlessee is bound by an authorised
                  guarantee agreement to observe and perform all the tenant
                  covenants and other provisions of this Lease (other than the
                  payment of rents).

                  19.10.2 An unqualified covenant by the underlessee that the
                  underlessee will not assign, underlet, charge, hold on trust
                  for another, part with nor share the possession or occupation
                  of part only of the sub-demised premises or underlet, hold on
                  trust for another, part with nor share possession or
                  occupation of the whole of the sub-demised premises and

                  19.10.3 That the underlessee will not assign or charge the
                  whole of the sub-demised premises without the appropriate
                  consent.

         19.11 To ensure that any underlease of the Demised Premises or a
         Permitted Part shall contain:

                  19.11.1 A covenant by the underlessee to assign, underlet or
                  share or part with possession or occupation of any part of the
                  sub-demised premises (as distinct from the whole) and not to
                  underlet share or part with possession or occupation of the
                  whole of the sub-demised premises by way of an assignment
                  thereof.

                  19.11.2 A covenant by the underlessee not to assign or charge
                  the whole of the sub-demised premises without the appropriate
                  consent.

                  19.11.3 Such covenants by the underlessee as will prohibit the
                  underlessee from doing or suffering any act or thing which
                  will contravene any of the Tenant's obligations in this Lease.

                  19.11.4 A covenant requiring the assignee on any assignment of
                  the underlease to enter into direct covenants with the
                  Landlord to the same effect as those contained in paragraph
                  19.10.1.

                  19.11.5 A covenant requiring on each assignment of the
                  underlease that the assignor enters into an authorised
                  guarantee agreement in favour of the Landlord in the terms set
                  out in the Sixth Schedule but adapted TO M= the circumstances
                  in which the guarantee is given.


<PAGE>   30
                                      -29-




                  19.11.6 Provisions for review of the rent reserved by the
                  underlease (which the Tenant hereby undertakes to operate and
                  enforce) corresponding both as to terms and periodicity with
                  the provisions set out in this Lease for revision of the rent
                  hereby reserved PROVIDED THAT the review of the rent reserved
                  by any underlease shall not be concluded prior to the final
                  determination of the review of the rent reserved by this Lease
                  on a corresponding Review Date.

                  19.11.7 A condition for re-entry on breach of any covenant on
                  the part of the underlessee.

                  19.11.8 An agreement to exclude the provisions of Sections 24
                  to 28 of the Landlord and Tenant Act 1954 in relation to such
                  underlease and that agreement shall have been duly authorised
                  beforehand by the Court.

         19.12 In the event of any breach non-performance or non-observance of
         any of the provisions contained or referred to in this Lease by any
         underlessee of the Tenant the Tenant will forthwith on discovering the
         same take all necessary steps and proceedings at its own expense to
         remedy the same.

         19.13 Upon every application for the appropriate consent to disclose to
         the Landlord such information as to the terms proposed as the Landlord
         may reasonably require.

         19.14 In this paragraph 19 "the appropriate consent" means in relation
         to any consent required by the Tenant under the terms of this Lease the
         consent in writing of the person entitled to the reversion expectant
         thereon and their mortgagee (if any) and in relation to any consent
         required by the terms of any underlease such Consent as aforesaid and
         the consent in writing of the person entitled to the reversion
         expectant thereon and their mortgagee (if any).

TO REGISTER ASSIGNMENT ETC.

20       20.1 WITHIN fourteen days after every assignment transfer or
         underletting or the assignment of an underlease or after any devolution
         by will or otherwise or after the creation or discharge of any,
         mortgage or charge affecting the Demised Premises or any part thereof
         to produce for registration with the Landlord's solicitors the original
         or a certified copy of the assignment, underlease, instrument or other
         evidence of such devolution mortgage or charge and to pay the
         Landlord's solicitors reasonable fee being a minimum of THIRTY FIVE
         POUNDS (Pound Sterling35.00) for the registration of every such
         document or devolution plus Value Added Tax.

LIMITATIONS OF SIGNS, EXTERNAL DISPLAYS ETC.

21       21.1 NOT without the previous consent in writing of the Landlord
         such consent not to be unreasonably withheld or delayed to erect place
         affix or display or suffer to be erected placed affixed or displayed
         any aerial, sign, signboard, advertisement, hoarding, fascia, placard,
         bill, notice or other notification whatsoever, whether by a display of
         lights or otherwise, in or upon the Demised Premises other than a
         signboard setting forth the name

<PAGE>   31
                                      -30-



         of the Tenant and the trade or business carried on upon the Demised
         Premises which in the opinion of the Landlord is of reasonable size and
         appropriate to such trade or business and the Demised Premises.

         21.2 Not to display any flashing lights in the Demised Premises that
         can be seen from outside the Demised Premises nor to display any other
         lighting arrangement that can be seen from outside the Demised Premises
         if the Landlord shall consider such lighting to be undesirable and
         shall give written notice to the Tenant to that effect.

         NOT TO LOSE EASEMENTS OR PERMIT ADVERSE RIGHTS TO BE ACQUIRED

22       22.1 NOT to do or suffer or permit to be done or suffered anything
         whereby any right of light or air or other easements belonging to the
         Demised Premises may be endangered or interfered with or lost and not
         to permit any new window, light, opening, doorway, path, passage, drain
         or other encroachment or easement to be made or acquired in against out
         of or upon the Demised Premises or any part thereof and in the event of
         any other person or persons doing any act or thing whereby such right
         of light or air or other easement is or may be endangered interfered
         with or lost or if any such window, light, opening, path, passage,
         drain or other encroachment or easement shall be made or acquired or
         attempted to be made or acquired against out of or upon the Demised
         Premises or any part thereof forthwith to notify the Landlord and at
         the Landlord's cost to take such action at law or otherwise as may seem
         reasonably necessary to the Landlord in the name of the Tenant either
         alone or jointly with the Landlord for the protection of their
         respective rights and interests in the Demised Premises and for
         preventing any such encroachment or the acquisition or any such
         easement.

         22.2 Not to stop up darken or obscure (ocher than temporarily) any
         windows or lights belonging to the Demised Premises or any window or
         light of any other premises belonging to the Landlord.

INDEMNITIES

23 TO be responsible for and to indemnify and keep indemnified the Landlord from
and against all loss, damage, actions, proceedings, suits, claims, demands,
costs, losses, damages, liability and expense made against or incurred by the
Landlord

         23.1 In respect of any injury to or the death of any person or damage
         to any Property movable or immovable by reason of or arising in any way
         directly or indirectly out of the repair or state of repair of the
         condition of or the existence of any alteration to or the user of the
         Demised Premises and

         23.2 Any act, omission or negligence of the Tenant or any persons at
         the Demised Premises expressly or by implication with the Tenant's
         authority and

         23.3 Any breach or non-observance by the Tenant of the covenants
         conditions or other provisions of this Lease.


<PAGE>   32
                                      -31-



TO PERMIT NOTICES FOR RELETTING

24 TO permit the Landlord during the last six months of the Lease Term (or
sooner if the rents or any part thereof shall be in arrear and unpaid for
upwards of one calendar month) to affix and retain without any interference upon
any part, of the Demised Premises a notice for reletting the same and during
such period to permit persons with authority from the Landlord or its agent at
reasonable times of the day upon prior appointment being made for the purpose to
view the Demised Premises.

SALE ETC. OF REVERSION ETC.

25 TO permit upon reasonable notice at any time during the Lease Term
prospective purchasers of or dealers in or mortgagees of or agents or
representatives or surveyors of prospective mortgagees instructed in connection
with the sale or mortgage of the Landlord's reversion or of any interest
superior to the Lease Term to enter and view the Demised Premises without
interruption PROVIDED the same are authorised by the Landlord or its agents.

STATUTORY REQUIREMENTS ETC.

26       26.1 TO do and execute all such works as may under the Clean Air Act
         1956, the Offices Shops and Railway Premises Act 1963, the Defective
         Premises Act 1972, The Fire Precautions Act 1971, the Factories Act
         1961, the Health and Safety at Work etc. Act 1974 or any other statute
         be directed or required to be executed at any time during the Lease
         Term upon or in respect of the Demised Premises or any part thereof
         whether by the landlord or Tenant or any fixtures, machinery plant or
         chattels for the time being affixed thereto or being thereupon or used
         for the purpose thereof or in respect of the use to which the Demised
         Premises are being put by the landlord or tenant thereof and to keep
         the Landlord fully and effectually indemnified in respect of any
         expenditure which may be required to be incurred in regard thereto.

         26.2 Not to do anything by reason of which the Landlord may under any
         statute incur or have imposed upon the Landlord or become liable to pay
         any damages, compensation, costs, charges or expenses.

         26.3 At all times during the Lease Term at the expense of the Tenant to
         comply with all recommendations from time to time of the appropriate
         authority in relation to fire precautions affecting the Demised
         Premises.

         26.4 Without prejudice to the generality of the foregoing to comply in
         all respects with the provisions of any statutes and any other
         obligations imposed by law or by any bye laws applicable to the Demised
         Premises or in regard to carrying on the trade or business for the time
         being carried on by the Tenant on the Demised Premises.

TO GIVE NOTICE OF DEFECTS

27 TO give notice to the Landlord of any defect in the Demised Premises which
might give rise to an obligation on the Landlord to do or refrain from doing any
act or thing in order to


<PAGE>   33
                                      -32-



comply with the provisions of this Lease or the duty of care imposed on the
Landlord pursuant to the Defective Premises Act 1972 or otherwise and at all
times to display and maintain all notices which the Landlord may from time to
time reasonably require to be displayed at the Demised Premises.

TO COMPLY WITH OFFICIAL NOTICES

28 THAT upon the receipt of any notice, order, requisition, direction or other
things from a competent authority affecting or likely to affect the Demised
Premises or any part thereof (whether the same shall be served directly on the
Tenant or the original or a copy thereof be received from any underlessee or
other person whomsoever) the Tenant will so far as such notice, requisition,
direction or other thing or the Act, regulation, order or other instrument under
and by virtue of which it is issued or the provisions of this Lease require the
Tenant so to do comply therewith at its own expense and will as soon as possible
after the receipt of the same deliver to the Landlord two copies of any such
notice, order, requisition direction or other thing.

PLANNING ACTS

29 IN relation to the Planning Acts (an application for permission consent or
approval under such Acts being hereinafter referred to as a "planning
application" and "development" having the meaning assigned thereto in Section 55
of the Town and Country Planning ACL 1990 or that meaning as it may be (or have
been) amended or re-enacted from time to time or any meaning from time to time
substituted for that meaning):

         29.1 At all times during the subsistence of this Lease to comply with
         all requirements of or having validity under the Planning Acts and to
         keep the Landlord indemnified against all liability whatsoever
         including costs and expenses in respect of any contravention.

         29.2 Not to make any planning application for development or carry out
         or cause to be carried out any development on the Demised Premises
         without the previous written consent of the Landlord.

         29.3 Forthwith upon receipt of any notice or order or any proposal for
         the same from a planning authority or statutory authority to give full
         particulars thereof to the Landlord and if required to produce such
         notice order or proposal to the Landlord and at the request of the
         Landlord to make or join with the Landlord in making at the Landlord's
         cost such objection or representation as the Landlord shall reasonably
         deem expedient.

         29.4 Unless the Landlord otherwise directs in writing to carry out
         before the end of the Lease Term (disregarding any statutory
         continuation thereof) any development begun upon the Demised Premises
         with the Landlord's consent in respect of which the Landlord shall or
         may be or become liable for any charge or levy under the Planning Acts
         and any works required to be carried out to the Demised Premises, on or
         by a date subsequent thereto by reason of any limitation or condition
         imposed by a planning permission consent or approval or if the work
         cannot lawfully be done before the end of the Lease Term to pay to the
         Landlord the estimated cost of carrying it out provided that if

<PAGE>   34
                                      -33-



         application to the Court has been made for a new tenancy under Part II
         of the Landlord and Tenant Act 1954 this sub-clause shall apply to the
         date on which the tenancy as continued under the Act comes to an end.

         29.5 So often as occasion shall require at the expense in all respects
         of the Tenant to obtain from the appropriate authorities all such
         permissions licences and consents (if any) as may be required for the
         carrying out by the Tenant of any works to or operations on the Demised
         Premises or the institution or continuance by the Tenant thereon of any
         use thereof which may constitute development within the meaning of the
         Planning Acts.

         29.6 To pay and satisfy any charge or levy that may hereafter be
         imposed under the Planning Acts in respect of the carrying out or
         maintenance by the Tenant of any such works or operations or the
         institution or continuance by the Tenant of any such use as aforesaid.

         29.7 In any case where a planning permission is granted subject to
         conditions and if the Landlord reasonably so requires to provide
         security for the compliance with such conditions and not to implement
         the planning permission until such security has been provided.

         29.8 If reasonably required by the Landlord but at the cost of the
         Tenant to appeal against any refusal of planning permission or the
         imposition of any conditions in a planning permission relating to the
         Demised Premises following an application by the Tenant.

         29.9 Notwithstanding any consent which may be granted by the Landlord
         under this Lease not to carry out or make any alteration or addition to
         the Demised Promises or any change of use thereof (being an alteration
         or addition or change of use which is prohibited by or for which the
         Landlord's consent is required to be obtained under this Lease and for
         which a planning permission needs to be obtained) before a planning
         permission therefor has been produced to the Landlord and acknowledged
         by the Landlord in writing (such acknowledgement not to be unreasonably
         withheld) as satisfactory to the Landlord BUT so that the Landlord may
         refuse so to express such satisfaction with any planning permission on
         the ground that the period thereof or anything contained therein or
         omitted therefrom in the reasonable opinion of the Landlord's Surveyor
         would be likely to be prejudicial to the Landlord's interest in the
         Demised Premises or any Adjoining Property whether during or at the end
         or sooner determination of the Lease Term.

TO PAY LANDLORD DUE PROPORTION OF COMPENSATION

30 TO pay or procure the payment to the Landlord of the due and proper portion
of any compensation paid to the Tenant or payable consequent upon any notice
served or application refused by any governmental or local authority in respect
of the Demised Premises or the user thereof. In the event of any dispute arising
out of this Clause the same shall be referred to arbitration in accordance with
the Arbitration Act 1996.



<PAGE>   35
                                      -34-



NEW GUARANTOR

31 WITHIN fourteen days of the death during the Lease Term of any Guarantor or
of any Guarantor becoming bankrupt or having a receiving order made against him
or being a Company passing a resolution to wind up or entering into liquidation
or having a receiver appointed to give notice of this to the Landlord and if so
required by the Landlord at the expense of the Tenant within twenty tight days
of such request being made in writing to the Tenant to procure some other person
acceptable to the Landlord to execute a guarantee in respect of the Tenant's
obligations contained in this Lease such guarantee to be in the form set out in
the Fourth Schedule hereto.

LANDLORD'S RIGHTS

32 TO permit the Landlord and all persons authorised in writing by the Landlord
(including agents, professional advisers, contractors, workmen and others) at
all times during the Lease Term to exercise without interruption or interference
any of the rights granted to the Landlord by virtue of the provisions of this
Lease.

PLANS, DOCUMENTS, ETC.

33       33.1 TO retain a copy of the Demised Premises Health and Safety File
         upon the Demised Premises (receipt of which is acknowledged by the
         Tenant) and to maintain the said file and the original (in the
         Landlord's possession) in accordance with The Construction (Design and
         Management) Regulations 1994 and if called upon so to do to produce to
         the Landlord or the Landlord's Surveyor the Health and Safety File
         together with all information, plans, documents and other evidence as
         the Landlord may require in order to be satisfied that the provisions
         of the said Regulations and of this Lease have been complied all at the
         Tenant's expense.

         33.2 If called upon so to do to furnish to the Landlord the Landlord's
         Surveyor or any ocher surveyor acting for the Landlord or any surveyor
         or other person to acting to the Rack Rental Value of the Demised
         Premises under the provisions for rent review in this Lease such
         information as may be requested in writing in relation to any pending
         or intended step under the Landlord and Tenant Act 1954 or the
         implementation of the rent review provisions in this Lease.

TO YIELD UP

34       34.1 AT the expiration or sooner determination of the Lease Term to
         yield up the Demised Premises with vacant possession and in such good
         and substantial repair as is in accordance with the terms of this Lease
         TOGETHER WITH the Landlord's fixtures and fittings whole undefaced and
         fit for use and to give lip all keys of the Demised Premises to the
         Landlord and to remove all lettering and signs erected by the Tenant in
         or upon or near the Demised Premises and all Tenant's fixtures and
         fittings furniture and effects and forthwith to make good any damage
         caused by such removal.


<PAGE>   36
                                      -35-




         34.2 If at the expiration or sooner determination of the Lease Term the
         Demised Premises are not in the state of repair and redecoration in
         which they should be having regard to the Tenant's covenants and
         conditions contained in this Lease the Tenant shall (if so required by
         the Landlord) pay to die Landlord on demand by way of liquidated
         damages

                  34.2.1 such sum as shall be certified by the Landlord's
                  Surveyor to represent the cost of putting the Demised Premises
                  into the state of repair and redecoration in which they should
                  have been had the Tenant complied with the terms of this Lease
                  TOGETHER WITH rent at the rate prevailing at the expiration or
                  sooner determination of the Lease Term that would have been
                  payable under this Lease If the Lease Term had been extended
                  for such period as is reasonably necessary to put the Demised
                  Premises in to the state of repair and decoration in which
                  they should have been and

                  34.2.2 the fees of the Landlord's Surveyor for the preparation
                  and service of a Schedule of Dilapidations and the preparation
                  and issue of the said certificate.

INDEMNITY IN RESPECT OF DOCUMENTS CONTAINED IN FIFTH SCHEDULE

35 TO observe and perform the agreements, covenants and other matters contained
or referred to in the documents (if any) specified in the Fifth Schedule and to
indemnify the Landlord against all costs, charges, expenses, damages, breaches
and future liabilities arising from them.

                               THE FOURTH SCHEDULE

                       (THIRD SCHEDULE CLAUSES 19 AND 31)

                           COVENANTS BY THE GUARANTOR

1        IN this Schedule "Liability Period" means:

         1.1 In the case of any guarantor required pursuant to clause 19.8.2 and
         19.8.3 of the Third Schedule the period during which the relevant
         assignee is bound by the tenant covenants of this Lease together with
         any additional period during which that assignee is liable under an
         authorised guarantee agreement and

         1.2 In the case of any guarantor under an authorised guarantee
         agreement the



<PAGE>   37




                               DATED May 24, 1999






                            BALSTONE ESTATES LIMITED


                                    -- to --


                         3 dfx INTERACTIVE INC. OF TEXAS
                               (STB SYSTEMS, INC.)








                                   COUNTERPART
                                     LICENSE

                                   RELATING TO
                                 MERIDIAN HOUSE
                              2/4 THE GROVE, SLOUGH
                                    BERKSHIRE

THIS LICENSE is made the 24th day of May, _______, One thousand nine hundred and
ninety nine BETWEEN BALSTONE ESTATES LIMITED (company registration number
1098614) whose registered office is at "Sorbon", Aylesbury End, Beaconsfield,
Buckinghamshire, HP9 1LW (hereinafter called "the Landlord") of the one part and
3dfx INTERACTIVE of Texas (STB Systems, Inc.) incorporated in Texas USA (company
registration number 75-1855896) whose registered office is at 3400 Waterview
Parkway, Richardson, Texas 75080 USA, and whose address for service in the
United Kingdom is Meridian House 2-4 The Grove Slough Berkshire

(hereinafter called "the Tenant") of the other part.

WHEREAS

(1) This Licence is supplemental to a Lease (hereinafter called "the Lease")
short particulars of which appear in the First Schedule hereto whereby ALL THAT
the premises specified in the
<PAGE>   38




Second Schedule hereto (hereinafter called "the Premises") were demised for the
term of Ten years from the     day of       One thousand nine hundred and ninety
nine subject to the payment of the rents reserved by and the performance and
observance of the covenants on the Lessee's part and the conditions contained in
the Lease.

(2) The reversion immediately expectant on the determination of the term of
years granted by the Lease remains vested in the Landlord and the unexpired
residue of the said term of years remains vested in the Tenant.

(3) The Lease contains provisions (inter alia) prohibiting the Tenant from
carrying out alterations or additions to the Premises PROVIDED THAT the Tenant
may with the prior written consent of the Landlord carry out works of alteration
of a non-structural nature.

(4) The Tenant has applied to the Landlord for consent to carry out the works
described in the Third Schedule hereto and the Landlord has agreed to the Tenant
carrying out such works subject to the terms and conditions (including the
obligation to re-instate the Premises) hereinafter appearing.

NOW THIS DEED WITNESSETH as follows:

1 SUBJECT to the conditions herein contained and to all rights of any person not
a party to this Licence the Landlord HEREBY GRANTS to the Tenant its Licence and
Consent pursuant to clause 7.1 of the Third Schedule to the Lease to carry out
and complete the works described in the Third Schedule hereto ("the Permitted
Works").

2 IN consideration of the Licence hereinbefore contained and granted the Tenant
HEREBY COVENANTS with the Landlord as follows:

         2.1 To carry out the Permitted Works as soon as is practicable in
         accordance with the plans and specification (if any) referred to in the
         Third Schedule and in a good and workmanlike manner with due diligence
         and speed to the satisfaction of the Landlord and the Landlord's
         Surveyor.

         2.2 During the execution of any of the Permitted Works:

                  2.2.1    To keep all materials and equipment stored inside the
                  Premises

                  2.2.2    Not to cause or permit:

                           2.2.2.1 Any damage disturbance annoyance nuisance or
                           inconvenience whether by noise dust vibration the
                           emission of smoke fairies or effluvia or otherwise to
                           the Landlord or to the owners or occupiers of any
                           adjoining or neighbouring property.

                           2.2.2.2 Any damage or disturbance to or weaken or
                           render unsafe the structure of the Premises or any
                           adjoining or neighbouring property or any plant or
                           machinery at the Premises.


<PAGE>   39





                           2.2.2.3 The infringement interruption or destruction
                           of any right easement or privilege

                           2.2.2.4  The interruption of any service to or from
                           adjoining or neighbouring property.

         2.3 To insure and keep insured with the insurers with whom the Premises
         are for the time being insured ("the Insurers"):

                  2.3.1 All parts of the Permitted Works from time to time
                  executed and all unfixed materials and goods at the Premises
                  intended for the Permitted Works from the date of their
                  commencement to the date of their completion in the joint
                  names of the Landlord and the Tenant against loss or damage by
                  fire lightning explosion storm tempest flood bursting or
                  overflowing of water tanks apparatus or pipes earthquake
                  aircraft and other aerial devices or articles dropped from
                  aircraft or other aerial devices riot and civil commotion and
                  such other risks as the Landlord may from time to time require
                  in the full reinstatement or replacement value it being agreed
                  that all money received under any policy relating to such
                  insurance shall be applied in restoring replacing and
                  reinstating such works materials and goods the Tenant making
                  up any deficiency out of the Tenant's own money.

                  2.3.2 Without prejudice to clause 2.5.2 the Landlord and the
                  Tenant in a sufficient sum against all liability actions
                  proceedings costs claims demands and expenses whatever in
                  respect of personal injury to or the death of any person or
                  damage to any property real or personal however arising out of
                  or in the course of or as a result of the execution of the
                  Permitted Works or any part of them and to supply the Landlord
                  on demand a copy or copies of the policy or policies relating
                  to such insurance and the receipts or other evidence of
                  payment of the current premium.

         2.4      2.4.1 To pay to the Landlord on demand and to indemnify the
                  Landlord against any increased or extra premium payable in
                  respect of the insurance of the Premises or any adjoining or
                  neighbouring property as a result of the execution or
                  retention of the Permitted Works or any part of them.

                  2.4.2 To indemnify the Landlord against all liability actions
                  proceedings claims demands costs and expenses whatsoever
                  (including without limitation those in respect of personal
                  injury to or the death of any person or any injury or damage
                  to any property real or personal) however arising whether
                  directly or indirectly as a result of the grant of or any
                  failure by the Tenant to comply with the covenants and
                  conditions contained in this Licence the commencement
                  execution or retention of the Permitted Works or any part of
                  them the state and condition of tile Premises whether during
                  or after tile execution of the Permitted Works or the
                  existence operation or use of any apparatus machinery
                  substance or thing on the Premises in connection with the
                  Permitted Works.


<PAGE>   40





         2.5 On completion of all the Permitted Works to remove all debris and
         equipment from the Premises make good any damage caused to the Premises
         or any adjoining or neighbouring property of the Landlord by the
         execution of the Permitted Works and to reinstate the same to the
         satisfaction of the Landlord's Surveyor.

         2.6 To pay on demand to the Landlord and indemnify the Landlord against
         all costs charges fees disbursements and expenses of the Landlord
         (including those of tile Landlord's Solicitors and Architects or
         Surveyors where appropriate and Agents and any other professional
         advisers (and including in each case any Value Added Tax) of and
         incidental to the preparation execution and completion of this Deed (in
         duplicate) the approval of the plans and specifications and other plans
         which may be required and the superintendence of the Permitted Works
         and otherwise howsoever (without limitation) in relation to matters
         arising under this Deed.

         2.7      2.7.1 That the Tenant has obtained or will obtain forthwith
                  all necessary permissions and consents from all competent
                  local and other authorities and will comply with all Acts of
                  Parliament and any regulations rules or orders made thereunder
                  and any bye-laws in respect of the Permitted Works and will
                  carry out and maintain the Permitted Works in accordance
                  therewith and without prejudice to the generality of the
                  foregoing in accordance with any applicable planning
                  permission the Building Regulations and the requirements of
                  the Fire Officer.

                  2.7.2 Subject to any statutory direction to the contrary to
                  pay and satisfy any charge or levy which may be imposed under
                  the Town and Country Planning Act 1990 or any other statute in
                  respect of the commencement execution or retention of the
                  Permitted Works or any part of them.

                  2.7.3 To observe and perform the obligations set out in the
                  Fourth Schedule relating to health and safety.

         2.8 That the Tenant shall give to the Landlord at least seven days'
         written notification of the Tenant's intention to commence the
         Permitted Works and will further notify the Landlord forthwith of
         completion of the Permitted Works.

         2.9 To permit the Landlord and the Landlord's Architects Surveyors
         Agents and workmen to enter the Premises at all times for any purpose
         in connection with this Licence or any of the Permitted Works.

         2.10 That the Tenant will at the expiration or sooner determination of
         the Lease (unless released in writing by the Landlord from compliance
         with this stipulation) at its own cost and expense reinstate and make
         good the Premises and restore the same to the same state and condition
         as they are now and as if the said works had not been made and such
         reinstatement shall be carried out under the supervision and to the
         satisfaction of the Landlord's Architects or Surveyors whose costs
         shall be home and paid for by the Tenant and without prejudice to any
         other right of the Landlord the Tenant shall pay to the Landlord a sum
         equivalent to the loss of rent incurred by the Landlord during such
         period as the works of reinstatement are being carried out.


<PAGE>   41





3 NOTHING herein contained shall be deemed to authorise any further alterations
or works to the Premises or any part thereof or in any way lessen the liability
of the Tenant to the Landlord under the Tenant's covenants contained in the
Lease or waive or be deemed to waive any breach thereof which may have occurred
prior to the date of this Licence.

4 AS and when the Permitted Works shall have been completed all the Tenant's
covenants provisions and agreements contained in the Lease shall be applicable
to the Premises in their then altered state in the same manner and as fully and
extensively as if the Premises had continued in the same state as the Premises
were in prior to the completion of the Permitted Works.

5 THE proviso for re-entry contained in the Lease shall be exercisable upon any
breach of any of the covenants hereof as well as upon any breach of any of the
covenants and conditions in the Lease.

6        IT IS HEREBY EXPRESSLY AGREED that:

         6.1 All sums payable by the Tenant under this Licence shall be
         recoverable as rent in arrear.

         6.2 If the Permitted Works are not commenced within eight weeks of the
         date hereof the provisions of this Licence save for Clauses 2.7 and 6.1
         shall determine and cease to have effect as of that date.

         6.3 The alterations and additions comprised in the Permitted Works are
         not improvements for the purposes of the Landlord and Tenant Act 1927
         Part I and are carried out by the Tenant to suit its own personal
         requirements and neither the Tenant or any other person shall be
         entitled to compensation in respect thereof at the expiry or sooner
         determination of the Lease or at any other time.

         6.4 For the purpose of rent revision or for the calculation of the
         rental value or for any other purposes the net useable area of the
         Premises shall be deemed to be that as at the commencement of the Lease
         and any reduction in the useable area caused by the Permitted Works
         shall be ignored.

         6.5 Without prejudice to any other remedy of the Landlord if the Tenant
         is in breach of any of its obligations under this Licence the Landlord
         may serve notice on the Tenant specifying the breach and if such breach
         is not remedied within a reasonable time the Landlord may either serve
         a notice on the Tenant requiring the Tenant to reinstate the Premises
         or itself remedying the breach at the expense of the Tenant.

7 This document shall be treated as having been executed and deliver as a deed
only upon being dated.

         IN WITNESS whereof this License has been executed as a Deed by the
parties hereto the day and year first before written.


<PAGE>   42
                                      -41-




                               THE FIRST SCHEDULE

                                    THE LEASE

<TABLE>
<CAPTION>
DATE                      PARTIES                         TERM
<S>                       <C>                             <C>
                          Balstone Estates Limited (1)    Ten years from the
                          3dfx Interactive Inc. (2)       day of 1999
</TABLE>


                               THE SECOND SCHEDULE

                                  THE PREMISES

                  Meridian House 2/4 The Grove Slough Berkshire



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>6
<FILENAME>f72487ex10-41.txt
<DESCRIPTION>EXHIBIT 10.41
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.41

LEASE SCHEDULE NO. 1000063905 dated as of December 15, 1997                LEASE
(New Equipment)

Master Lease Agreement dated October 30, 1996

Lessor:        Banc One Leasing Corporation

Lessee:        STB Systems, Inc.

1. GENERAL. This Lease Schedule is signed and delivered under the Master Lease
Agreement identified above, as amended from time to time ("Master Lease"),
between Lessee and Lessor. Capitalized terms defined in the Master Lease will
have the same meanings when used in this Schedule.

2. LEASE; EQUIPMENT DESCRIPTION. Lessor leases to Lessee, and Lessee leases from
Lessor, all of the property ("Equipment") described in SCHEDULE A-1 attached
hereto (and Lessee represents that all Equipment is new unless specifically
identified as used) on Schedule A-1.

3. LESSOR'S COST OF EQUIPMENT.

<TABLE>
               <S>                          <C>
               Equipment Cost to Lessor:    $3,116,686.35
               Miscellaneous:               $0

               Lessor's Cost (total):       $3,116,686.35
</TABLE>

4. LEASE TERM. The Lease Term of this Schedule shall be SIXTY (60) MONTHS and
shall commence on DECEMBER 15,1997 ("Commencement Date").

5. RENT.

                (a) As rent for the Equipment during the Lease Term, Lessee
        shall pay to Lessor MONTHLY rent with each such periodic rent payment
        being in the amount of $53,690.72. The first rent payment in the Lease
        Term shall be paid in ARREARS and all subsequent rent payments shall be
        paid on the same day of each MONTH thereafter.

                (b) There shall be added to each rent or other payment described
        in this Schedule all applicable Taxes as in effect from time to time.

6. FEES.

                (a) Lessee shall pay Lessor a Set-Up/Filing Fee of $375.00 which
        shall be due and payable on the Acceptance Date.

                (b) Security Deposit: $__ZERO__. On the Acceptance Date, Lessee
        shall pay Lessor said Security Deposit which shall be held In accordance
        with paragraph 11 below.



                                     Page 1
<PAGE>   2

7. TITLE TO EQUIPMENT; QUIET POSSESSION. Lessee agrees that Lessor is the lawful
owner of the Equipment and that good and marketable title to the Equipment shall
remain with Lessor at all times. Lessee at its sole expense will protect and
defend Lessor's good and marketable title to the Equipment against all claims
and demands whatsoever except for Liens created directly by Lessor. Lessee shall
have no right, title or interest in any of the Equipment except the right to
peacefully and quietly hold and use the Equipment in accordance with the terms
of the Lease during the Lease Term unless and until an event of default shall
occur.

8. LESSEE'S ASSURANCES. Lessee irrevocably and unconditionally: (a) reaffirms
all of the terms and conditions of the Master Lease and agrees that the Master
Lease remains in full force and effect; (b) agrees that the Equipment is and
will be used at all times solely for commercial purposes, and not for personal,
family or household purposes; and (c) incorporates all of the terms and
conditions of the Master Lease as if fully set forth in this Schedule.

9. CONDITIONS. No lease of Equipment under this Schedule shall be binding on
Lessor, and Lessor shall have no obligation to purchase the Equipment covered
hereby, unless: (a) Lessor has received evidence of all required insurance; (b)
in Lessor's sole judgment, there has been no material adverse change in the
financial condition or business of Lessee or any guarantor, (c) Lessee has
signed and delivered to Lessor this Schedule, which must be satisfactory to
Lessor, and Lessor has signed and accepted this Schedule; (d) no change in the
Code or any regulation thereunder, which in Lessor's sole judgment would
adversely affect the economics to Lessor of the lease transaction, shall have
occurred or shall appear to be imminent; (e) Lessor has received, in form and
substance satisfactory to Lessor, such other documents and information as Lessor
shall reasonably request (including, without limitation, Political Risk
Insurance described below in this Schedule); (f) STB DE MEXICO, S.A. DE C. V.
shall execute and deliver to Lessor a guaranty which must be satisfactory in
form and substance to Lessor (such satisfaction to be evidenced by Lessors
signature thereon); (g) the sublease or bailment of the Equipment described
below in this Schedule by Lessee as sublessor or bailor to STB DE MEXICO, S.A.
DE C. V. shall be executed and delivered to Lessor, and (h) Lessee has satisfied
all other reasonable conditions established by Lessor. Notwithstanding anything
to the contrary above in this paragraph, if Lessor executes and delivers the
Schedule to Lessee and if Lessor pays all of the suppliers of the Equipment the
full Lessor's Cost of the Equipment (the date as of which both of said events
shall have occurred will be called the "Funding Date"), then except as otherwise
specified in writing by Lessor to Lessee before said Funding Date, all
conditions to the Schedule being binding on Lessor will be deemed satisfied.

10. OTHER DOCUMENTS; EXPENSES. Lessee agrees to sign and deliver to Lessor any
additional documents deemed desirable by Lessor to effect the terms of the
Master Lease or this Schedule including, without limitation, Uniform Commercial
Code financing statements which Lessor is authorized to file with the
appropriate filing officers. Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact with full power and authority in the place of Lessee
and in the name of Lessee to prepare, sign, amend, file or record any Uniform
Commercial Code financing statements or other documents deemed desirable by
Lessor to perfect, establish or give notice of Lessor's interests in the
Equipment or in any collateral as to which Lessee has granted Lessor a security
interest. Lessee shall pay upon Lessor's written request any actual
out-of-pocket costs and expenses paid or incurred by Lessor in connection with
the above terms of this section or the funding and closing of this Schedule.



                                     Page 2
<PAGE>   3

11. SECURITY DEPOSIT. As collateral for Lessee's obligations under the Lease,
Lessee hereby grants to Lessor a security interest in the sums specified in this
Schedule as a "Security Deposit." At its option, Lessor may apply all or any
part of said Security Deposit to cure any default of Lessee under the Lease. If
upon final termination of this Schedule, Lessee has fulfilled all of the terms
and conditions hereof, then Lessor shall pay to Lessee upon Lessee's written
request any remaining balance of the Security Deposit for this Schedule, without
interest.

12. REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants that: (a)
Lessee is a corporation duly organized, validly existing and in good standing
under the laws of the state of its organization; (b) Lessee has full power,
authority and legal right to sign, deliver and perform the Master Lease, this
Schedule and all related documents and such actions have been duly authorized by
all necessary corporate action; and (c) the Master Lease, this Schedule and each
related document has been duly signed and delivered by Lessee and each such
document constitutes a legal, valid and binding obligation of Lessee enforceable
in accordance with its terms, except to the extent enforcement is limited by
State and Federal laws regarding bankruptcy, insolvency or debt reorganization
or other similar laws of general application or the application of principles of
equity.

13. SUBLEASE. Notwithstanding anything to the contrary in the Master Lease, with
respect to this Schedule, Lessor consents to the sublease or bailment of the
Equipment described in this Schedule by Lessee as sublessor or bailor to STB DE
MEXICO, S.A. DE C. V. as sublessee or bailee pursuant to the terms and
conditions of a Gratuitous Bailment Agreement and to the location of the
Equipment covered by the Schedule in the City of Ciudad Juarez, State of
Chihuahua, Mexico; provided, that the Gratuitous Bailment Agreement must be
satisfactory in form and substance to Lessor (such satisfaction to be evidenced
by Lessors signature thereon).

14. POLITICAL RISK INSURANCE. As used herein, "Political Risk Insurance" shall
mean a policy of insurance issued by National Union Fire Insurance Company of
Pittsburgh, PA ("Insurance Company") which insures Lessee and Lessor (or Lessors
assignee) against risks of expropriation or deprivation of the Equipment by the
government of the United Mexican States ("Political Loss") as set forth in such
policy of insurance. Lessee acknowledges that it has reviewed a copy of the
Political Risk Insurance policy.

                (a) With respect to this Schedule, Lessee shall be required to
        carry Political Risk Insurance as an additional requirement under
        Section 8 of the Master Lease and Lessee shall pay the premiums for the
        Political Risk Insurance that Lessor requires hereunder.

                (b) If a Political Loss occurs, such event shall be deemed a
        Casualty Loss under Section 9 of the Master Lease; provided, that (1)
        Lessee agrees to continue to pay rent and perform its other obligations
        under this Schedule and the Master Lease until the earlier of the date
        that the Insurance Company pays the amounts due under the Political Risk
        Insurance or the date that Lessor has exhausted its rights and remedies
        under the Political Risk Insurance; (2) Lessor agrees that it will
        pursue with reasonable diligence its rights against the Insurance
        Company under the Political Risk Insurance; and (3) notwithstanding
        anything to the contrary in Section 9 of the Master Lease as it relates
        to this Schedule, within thirty (30) days of the earlier of the date
        that the Insurance



                                     Page 3
<PAGE>   4

        Company pays the amounts due under the Political Risk Insurance or the
        date that Lessor has exhausted its rights and remedies under the
        Political Risk Insurance, Lessee shall pay to Lessor the Stipulated Loss
        Value of the Equipment affected by the Political Loss less the aggregate
        of the amount that the Insurance Company has paid to Lessor under the
        Political Risk Insurance and the amount that the United Mexican States
        has paid to Lessor as a result of the Political Loss plus the reasonable
        expenses incurred by Lessor to collect such amounts from the Insurance
        Company and the United Mexican States.

15. CANCELLATION OPTION. So long as no event of default has occurred and
continues under the Master Lease or any Schedule thereto and so long as Lessee
gives Lessor written notice of its election under this paragraph at least 90
days, but no more than 180 days, prior to the Cancellation Date (as defined
below), Lessee may, subject the provisions of this paragraph, elect to cancel
this Schedule and return all of the Equipment. Lessee may not cancel the
Schedule under the terms of this paragraph unless and until all of the following
conditions have been satisfied in full on or before the Cancellation Date:

                (a) Lessee shall pay to Lessor on the applicable Cancellation
        Date a return and remarketing fee equal to the Cancellation Value (as
        defined below); AND

                (b) Lessee shall return all, but not less than all, of the
        Equipment to Lessor on the Cancellation Date in full compliance with
        subsection 23(b) of the Master Lease and with all other return and
        maintenance requirements of this Schedule.

"Cancellation Value" means the total of the following: (i) all rent, Taxes and
all other amounts then due and payable by Lessee under this Schedule and Master
Lease to the extent it relates to this Schedule; plus (ii) an amount equal to
SIXTY-ONE PERCENT (61%) of the Lessor's Cost of the Equipment stated above in
this Schedule; plus (iii) sales and other Taxes due in connection with Lessor's
receipt of the above amounts. "Cancellation Date" means the scheduled rent
payment date in the 24TH MONTH OF THE LEASE TERM.

16. AMENDMENT OF PURCHASE OPTION AND RETURN OPTION.

                (a) Solely for purposes of this Schedule and its Equipment,
        Lessor and Lessee agree that if Lessee elects to exercise its option to
        purchase the Equipment at the end of the Lease Term (which option is
        described in Section 23(c) of the Master Lease), then, notwithstanding
        anything to the contrary in this Schedule or the Master Lease, the
        provisions of Section 23(d) of the Master Lease for determining Fair
        Market Value for purposes of this purchase option shall not apply and
        the purchase price of the Equipment at the end of the Lease Term shall
        be equal to the Fixed Price stated below plus all Taxes (excluding
        income taxes on Lessor's gains on such sale), costs and expenses
        incurred or paid by Lessor in connection with such sale plus all accrued
        and unpaid amounts then due and payable with respect to the Equipment or
        this Schedule.

                Fixed Price:  twenty-five percent (25%) of the above Lessor's
                              Cost of the Equipment

                (b) Solely for purposes of this Schedule and its Equipment,
        Lessor and Lessee agree that if Lessee elects to exercise its option to
        return the Equipment at the end of the



                                     Page 4
<PAGE>   5

        Lease Term (which option is described in Section 23(b) of the Master
        Lease), then Lessee shall return the Equipment in full compliance with
        Section 23(b) of the Master Lease and with all other return and
        maintenance requirements of this Schedule and there shall be a rent
        adjustment as provided below in this subparagraph (b). The scheduled
        expiration date of the Lease Term specified in this Schedule will be
        referred to as the "Termination Date".

                (1)     If the Actual Sale Proceeds as determined pursuant to
                        subparagraph (c) of this paragraph are less than the
                        Fixed Price, then (A) Lessor shall retain the Actual
                        Sale Proceeds and (B) Lessee shall pay to Lessor the
                        difference between the Fixed Price and such Actual Sale
                        Proceeds on the Termination Date, provided, that the
                        amount of said deficiency payable by Lessee to Lessor
                        shall not exceed TWENTY-FOUR PERCENT (24%) of the above
                        Lessor's Cost of the Equipment; or

                (2)     If the Actual Sale Proceeds as determined pursuant to
                        subparagraph (c) of this paragraph equal or exceed the
                        Fixed Price, then Lessor shall retain the entire Actual
                        Sale Proceeds.

                (3)     In all events, Lessee shall pay all Taxes (excluding
                        income taxes on Lessor's gains on such sale), costs and
                        expenses incurred or paid by Lessor in connection with
                        any such sale plus all accrued and unpaid amounts due
                        and payable with respect to the Equipment or this
                        Schedule up to the date of any such sale.

                (4)     If for any reason whatsoever Lessee fails to return the
                        Equipment in full compliance with Section 23(b) of the
                        Master Lease and with all other return and maintenance
                        requirements of this Schedule on or before the
                        Termination Date, then Lessee shall be deemed to have
                        elected to purchase Equipment pursuant to subparagraph
                        (a) of this paragraph.

Unless otherwise expressly agreed by Lessor in writing, during the 90-day period
prior to the Termination Date, Lessee shall, and Lessor may, solicit offers to
purchase the Equipment from prospective purchasers. Neither Lessee nor third
parties affiliated with the Lessee may bid to purchase the Equipment. Lessor may
bid to purchase the Equipment.

                (c) if one or more such offers to purchase the Equipment are
        received under subparagraph (b) of this paragraph, then the Equipment
        shall be sold by Lessor to the highest bidder within ten (10) days after
        the Termination Date and the Actual Sale Proceeds shall equal the
        purchase price actually received by Lessor after deducting all
        reasonable selling expenses. If no such offers to purchase the Equipment
        are received or if the Equipment is not sold for any reason, then the
        Actual Sale Proceeds shall be deemed to be zero and Lessee shall pay the
        Fixed Price to Lessor pursuant to clause (1) of subparagraph (b) of this
        paragraph plus all accrued and unpaid amounts due and payable with
        respect to the Equipment or this Schedule up to the date of any such
        payment. If Lessor subsequently sells the Equipment, then the purchase
        price actually received by Lessor, after deducting all reasonable
        selling expenses, shall be distributed as



                                     Page 5
<PAGE>   6

        follows: first, to Lessor in an amount equal to the Fixed Price less the
        payment made by Lessee pursuant to clause (1) of subparagraph (b) of
        this paragraph; second, to Lessee, to the extent of its payment to
        Lessor pursuant to clause (1) of subparagraph (b) of this paragraph; and
        lastly, the remainder to Lessor.

                (d) Lessor shall, upon receipt of the purchase price of the
        Equipment under this paragraph, convey title to the Equipment to the
        purchaser by a bill of sale, which transfer shall be "AS-IS, WHERE IS,"
        with all faults, without recourse to Lessor and without any
        representation or warranty of any kind whatsoever by Lessor, express or
        implied.

17. TAX BENEFIT. Solely for purposes of this Schedule and its Equipment, it is
the intention of the parties that Lessor shall not be entitled to such
deductions, credits and other tax benefits as are provided by federal, state,
and local income tax law to an owner of the Equipment and Section 10 of the
Master Lease is deleted. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE MASTER
LEASE OR THIS SCHEDULE, LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, AS TO THE TAX OR ACCOUNTING TREATMENT OR CONSEQUENCES OF THIS
SCHEDULE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

18. GOVERNING DOCUMENT. In the event of any conflict between the terms of the
Master Lease and the terms of this Schedule as each is amended by its addenda,
the terms of this Schedule shall control.

19. SAVINGS CLAUSES. (a) If any court or other judicial authority determines
that this Schedule is a loan transaction or a conditional sale transaction, then
Lessor and Lessee agree: (1) that the original principal amount financed
pursuant to this Schedule is the Lessor's Cost set forth in paragraph 3 of this
Schedule; and (2) that Lessee shall pay said principal amount, together with
interest at the per annum rate of 8.62%, by paying all rentals and other amounts
due under the Schedule plus the Fixed Price set forth in paragraph 16 of this
Schedule.

        (b) If any court or other judicial authority determines that this
Schedule is a loan transaction or a conditional sale transaction, then as
collateral security for payment and performance of all Secured Obligations
(defined below) and to induce Lessor to extend credit from time to time to
Lessee (under the Master Lease or otherwise), Lessee hereby grants to Lessor a
first priority security Interest in all of. Lessee's right, title and Interest
In the Equipment, whether now existing or hereafter acquired, and in all
Proceeds (defined below), and Lessee, at its sole expense, will protect and
defend Lessor's first priority security interest in the Equipment against all
claims and demands whatsoever. Lessee agrees that Lessor shall have all rights
of a secured party under the applicable Uniform Commercial Code. "Secured
Obligations" means (1) all payments and other obligations of Lessee under or in
connection with this Schedule, and (2) all payments' and other obligations of
Lessee (whether now existing or hereafter incurred) under or in connection with
the Master Lease and all present and future Lease Schedules thereto, and (3) all
other leases, indebtedness, liabilities and/or obligations of any kind (whether
now existing or hereafter incurred, absolute or contingent, direct or indirect)
of Lessee to Lessor or to any affiliate of either Lessor or BANC ONE
CORPORATION. "Proceeds" means all cash and



                                     Page 6
<PAGE>   7

non-cash proceeds of the Equipment including, without limitation, proceeds of
insurance, indemnities and/or warranties.

20. PURCHASE-ORDERS AND ACCEPTANCE OF EQUIPMENT. Lessee agrees that (i) Lessor
has not selected, manufactured, sold or supplied any of the Equipment, (ii)
Lessee has selected all of the Equipment and its suppliers, and (iii) Lessee has
received a copy of, and approved, the purchase orders or purchase contracts for
the Equipment. AS BETWEEN LESSEE AND LESSOR, LESSEE AGREES THAT: (a) LESSEE HAS
RECEIVED, INSPECTED AND APPROVED ALL OF THE EQUIPMENT; (b) ALL EQUIPMENT IS IN
GOOD WORKING ORDER AND COMPLIES WITH ALL PURCHASE ORDERS OR CONTRACTS AND ALL
APPLICABLE SPECIFICATIONS; (c) LESSEE IRREVOCABLY ACCEPTS ALL EQUIPMENT FOR
PURPOSES OF THE LEASE "AS-IS, WHERE-IS" WITH ALL FAULTS; AND (d) LESSEE
UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF
THE EQUIPMENT.

LESSEE HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS SCHEDULE. LESSEE AGREES
THAT THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS WITH LESSOR REGARDING THE
EQUIPMENT OR THIS SCHEDULE.

Banc One Leasing Corporation           STS Systems, Inc.
(Lessor)                               (Lessee)


By:  /s/ Anthony Park                  By:  /s/ Jim Hopkins
   ----------------------------------     --------------------------------------

Title: Funding Authority               Title: Vice President
      --------------------------------       -----------------------------------


Lessor's Acceptance Date:  December ___, 1997



                                     Page 7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.42
<SEQUENCE>7
<FILENAME>f72487ex10-42.txt
<DESCRIPTION>EXHIBIT 10.42
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.42

LEASE SCHEDULE NO. 1000064617  dated as of April 17, 1998                  LEASE
(New Equipment)


Master Lease Agreement dated October 30, 1996

Lessor: Banc One Leasing Corporation

Lessee: STB Systems, Inc.

1. GENERAL. This Lease Schedule is signed and delivered under the Master Lease
Agreement identified above, as amended from time to time ("Master Lease")
between Lessee and Lessor. Capitalized terms defined in the Master Lease will
have the same meanings when used in this Schedule.

2. LEASE; EQUIPMENT DESCRIPTION. Lessor leases to Lessee, and Lessee leases from
Lessor, all of the property ("Equipment") described in SCHEDULE A-1 attached
hereto (and Lessee represents that all Equipment is new unless specifically
identified as used) on Schedule A-1.

3. LESSOR'S COST OF EQUIPMENT.

<TABLE>
               <S>                                        <C>
               Equipment Cost to Lessor:                  $ 2,892,271.10
               Political Risk Insurance Premiums:         $    49,935.88

               Lessor's Cost (total):                     $ 2,942,206.98
</TABLE>

4. LEASE TERM. The Lease Term of this Schedule shall be SIXTY (60) MONTHS and
shall commence on APRIL 15, 1998 ("Commencement Date").

5. RENT.

        (a) As rent for the Equipment during the Lease Term, Lessee shall pay to
Lessor MONTHLY rent with each such periodic rent payment being in the amount of
$49,659.04. The first rent payment in the Lease Term shall be paid in ARREARS
and all subsequent rent payments shall be paid on the same day of each MONTH
thereafter.

        (b) There shall be added to each rent or other payment described in this
Schedule all applicable Taxes as in effect from time to time.

6. FEES.

        (a) Lessee shall pay Lessor a Set-Up/Filing Fee of $375.00 which shall
be due and payable on the Acceptance Date.

        (b) Security Deposit: $___ZERO___. On the Acceptance Date, Lessee shall
pay Lessor said Security Deposit which shall be held in accordance with
paragraph 11 below.

7. TITLE TO EQUIPMENT; QUIET POSSESSION. Lessee agrees that Lessor is the lawful
owner of the Equipment and that good and marketable title to the Equipment shall
remain with Lessor at all times. Lessee at its sole expense will protect and
defend Lessor's good and marketable title to the Equipment against all



                                     Page 1
<PAGE>   2

claims and demands whatsoever except for Liens created directly by Lessor.
Lessee shall have no right, title or interest in any of the Equipment except the
right to peacefully and quietly hold and use the Equipment in accordance with
the terms of the Lease during the Lease Term unless and until an event of
default shall occur.

8. LESSEE'S ASSURANCES. Lessee irrevocably and unconditionally: (a) reaffirms
all of the terms and conditions of the Master Lease and agrees that the Master
Lease remains in full force and effect; (b) agrees that the Equipment is and
will be used at all times solely for commercial purposes, and not for personal,
family or household purposes; and (c) incorporates all of the terms and
conditions of the Master Lease as if fully set forth in this Schedule.

9. CONDITIONS. No lease of Equipment under this Schedule shall be binding on
Lessor, and Lessor shall have no obligation to purchase the Equipment covered
hereby, unless: (a) Lessor has received evidence of all required insurance; (b)
in Lessor's sole judgment, there has been no adverse change in the financial
condition or business of Lessee or any guarantor material adverse change in the
fi a (c) Lessee has signed and delivered to Lessor this Schedule, which must be
satisfactory to Lessor, and Lessor has signed and accepted this Schedule; (d) no
change in the Code or any regulation thereunder, which in Lessor's sole judgment
would adversely affect the economics to Lessor of the lease transaction, shall
have occurred or shall appear to be imminent; (e) Lessor has received, in form
and substance satisfactory to Lessor, such other documents and information as
Lessor shall reasonably request (including, without limitation, Political Risk
Insurance described below in this Schedule); (f) STB DE MEXICO, S.A. DE C. V.
shall execute and deliver to Lessor a guaranty which must be satisfactory in
form and substance to Lessor (such satisfaction to be evidenced by Lessor's
signature thereon); (g) the sublease or bailment of the Equipment described
below in this Schedule by Lessee as sublessor or bailor TO STB DE MEXICO, S.A.
DE C. V. shall be executed and delivered to Lessor, and (h) Lessee has satisfied
all other reasonable conditions established by Lessor. Notwithstanding anything
to the contrary above in this paragraph, if Lessor executes and delivers the
Schedule to Lessee and if Lessor pays all of the suppliers of the Equipment the
full Lessor's Cost of the Equipment (the date as of which both of said events
shall have occurred will be called the "Funding Date"), then except as otherwise
specified in writing by Lessor to Lessee before said Funding Date, all
conditions to the Schedule being binding on Lessor will be deemed satisfied.

10. OTHER DOCUMENTS: EXPENSES: Lessee agrees to sign and deliver to Lessor any
additional documents deemed desirable by Lessor to effect the terms of the
Master Lease or this Schedule including, without limitation, Uniform Commercial
Code financing statements which Lessor is authorized to file with the
appropriate filing officers. Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact with full power and authority in the place of Lessee
and in the name of Lessee to prepare, sign, amend, file or record any Uniform
Commercial Code financing statements or other documents deemed desirable by
Lessor to perfect, establish or give notice of Lessor's interests in the
Equipment or in any collateral as to which Lessee has granted Lessor a security
interest. Lessee shall pay upon Lessor's written request any actual
out-of-pocket costs and expenses paid or incurred by Lessor in connection with
the above terms of this section or the funding and closing of this Schedule.



                                     Page 2
<PAGE>   3

11. SECURITY DEPOSIT: As collateral for Lessee's obligations under the Lease,
Lessee hereby grants to Lessor a security interest in the sums specified in this
Schedule as a "Security Deposit". At its option, Lessor may apply all or any
part of said Security Deposit to cure any default of Lessee under the Lease. If
upon final termination of this Schedule, Lessee has fulfilled all of the terms
and conditions hereof, then Lessor shall pay to Lessee upon Lessee's written
request any remaining balance of the Security Deposit for this Schedule, without
interest.

12. REPRESENTATIONS AND WARRANTIES: Lessee represents and warrants that: (a)
Lessee is a corporation duly organized, validly existing and in good standing
under the laws of the state of its organization; (b) Lessee has full power,
authority and legal right to sign, deliver and perform the Master Lease, this
Schedule and all related documents and such actions have been duly authorized by
all necessary corporate action; and (c) the Master Lease, this Schedule and each
related document has been duly signed and delivered by Lessee and each such
document constitutes a legal, valid and binding obligation of Lessee enforceable
in accordance with its terms, except to the extent enforcement is limited by
State and Federal laws regarding bankruptcy, insolvency or debt reorganization
or other similar laws of general application or the application of principles of
equity.

13. SUBLEASE. Notwithstanding anything to the contrary in the Master Lease, with
respect to this Schedule, Lessor consents to the sublease or bailment of the
Equipment described in this Schedule by Lessee as sublessor or bailor to STB DE
MEXICO, S.A. DE C. V. as sublessee or bailee pursuant to the terms and
conditions of a Gratuitous Bailment Agreement and to the location of the
Equipment covered by the Schedule in the City of Ciudad Juarez, State of
Chihuahua, Mexico; provided, that the Gratuitous Bailment Agreement must be
satisfactory in form and substance to Lessor (such satisfaction to be evidenced
by Lessor's signature thereon).

14. POLITICAL RISK INSURANCE. As. used herein, "Political Risk Insurance" shall
mean a policy of insurance issued by NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURGH, PA ("Insurance Company") which insures Lessee and Lessor (or Lessors
assignee) against risks of expropriation or deprivation of the Equipment by the
government of the United Mexican States ("Political Loss") as set forth in such
policy of insurance. Lessee acknowledges that it has reviewed a copy of the
Political Risk Insurance policy.

     (a) With respect to this Schedule, Lessor agrees that Lessee shall not be
required to carry any insurance against Political Loss under Section 8 of the
Master Lease or to pay the premiums for any insurance against Political Loss
that Lessor may deem desirable. Lessor agrees to acquire the Political Loss
Insurance and to pay the premiums for such Political Loss Insurance.

     (b) If a Political Loss occurs, such event shall be deemed a Casualty Loss
under Section 9 of the Master Lease; provided, that (1) Lessee agrees to
continue to pay rent and perform its other obligations under this Schedule and
the Master Lease until the earlier of the date that the Insurance Company pays
the amounts due, under the Political Risk Insurance or the date that Lessor has
exhausted its rights and remedies under the Political Risk Insurance; (2) Lessor
agrees that it will pursue with reasonable diligence its rights against the
Insurance Company under the Political Risk Insurance; and (3) notwithstanding
anything to the contrary in Section 9



                                     Page 3
<PAGE>   4

of the Master Lease as it relates to this Schedule, within thirty (30) days of
the earlier of the date that the Insurance Company pays the amounts due under
the Political Risk Insurance or the date that Lessor has exhausted its rights
and remedies under the Political Risk Insurance, Lessee shall pay to Lessor the
Stipulated Loss Value of the Equipment affected by the Political Loss less the
aggregate of the amount that the Insurance Company has paid to Lessor under the
Political Risk Insurance and the amount that the United Mexican States has paid
to Lessor as a result of the Political Loss plus the reasonable expenses
incurred by Lessor to collect such amounts from the Insurance Company and the
United Mexican States.

15. CANCELLATION OPTION. So long as no event of default has occurred and
continues under the Master Lease or any Schedule thereto and so long as Lessee
gives Lessor written notice of its election under this paragraph at least 90
days, but no more than 180 days, prior to the Cancellation Date (as defined
below), Lessee may, subject the provisions of this paragraph, elect to cancel
this Schedule and return ALL of the Equipment. Lessee may not cancel the
Schedule under the terms of this paragraph UNLESS AND UNTIL all of the following
conditions have been satisfied in full on or before the Cancellation Date:

        (a) Lessee shall pay to Lessor on the applicable Cancellation Date a
return and remarketing fee equal to the Cancellation Value (as defined below);
AND

        (b) Lessee shall return all, but not less than all, of the Equipment to
Lessor on the Cancellation Date in full compliance with subsection 23(b) of the
Master Lease and with all other return and maintenance requirements of this
Schedule.

"Cancellation Value" means the total of the following: (i) all rent, Taxes and
all other amounts then due and payable by Lessee under this Schedule and Master
Lease to the extent it relates to this Schedule; plus (ii) an amount equal to
SIXTY ONE AND ONE HALF PERCENT (61.5%) of the Lessor's Cost of the Equipment
stated above in this Schedule; plus (iii) sales and other Taxes due in
connection with Lessor's receipt of the above amounts. "Cancellation Date" means
the scheduled rent payment date in the 24TH MONTH OF THE LEASE TERM.


16. AMENDMENT OF PURCHASE OPTION AND RETURN OPTION.

        (a) Solely for purposes of this Schedule and its Equipment, Lessor and
Lessee agree that if Lessee elects to exercise its option to purchase the
Equipment at the end of the Lease Term (which option is described in Section
23(c) of the Master Lease), then, notwithstanding anything to the contrary in
this Schedule or the Master Lease, the provisions of Section 23(d) of the Master
Lease for determining Fair Market Value for purposes of this purchase option
shall not apply and the purchase price of the Equipment at the end of the Lease
Term shall be equal to the Fixed Price stated below plus all Taxes (excluding
income taxes on Lessor's gains on such sale), costs and expenses incurred or
paid by Lessor in connection with such sale plus all accrued and unpaid amounts
then due and payable with respect to the Equipment or this Schedule.

                Fixed Price: TWENTY-FIVE PERCENT (25%) of the above Lessor's
Cost of the Equipment



                                     Page 4
<PAGE>   5

        (b) Solely for purposes of this Schedule and As Equipment, Lessor and
Lessee agree that if Lessee elects to exercise its option to return the
Equipment at the end of the Lease Term (which option is described in Section
23(b) of the Master Lease), then Lessee shall return the Equipment in full
compliance with Section 23(b) of the Master Lease and with all other return and
maintenance requirements of this Schedule and there shall be a rent adjustment
as provided below in this subparagraph (b). The scheduled expiration date of the
Lease Term specified in this Schedule will be referred to as the "Termination
Date".

        (1)     If the Actual Sale Proceeds as determined pursuant to
                subparagraph (c) of this paragraph are less than the Fixed
                Price, then (A) Lessor shall retain the Actual Sale Proceeds and
                (B) Lessee shall pay to Lessor the difference between the Fixed
                Price and such Actual Sale Proceeds on the Termination Date,
                provided, that the amount of said deficiency payable by Lessee
                to Lessor shall not exceed TWENTY-FOUR PERCENT (24%) of the
                above Lessor's Cost of the Equipment; or

        (2)     If the Actual Sale Proceeds as determined pursuant to
                subparagraph (c) of this paragraph equal or exceed the Fixed
                Price, then Lessor shall retain the entire Actual Sale Proceeds.

        (3)     In all events, Lessee shall pay all Taxes (excluding income
                taxes on Lessor's gains on such sale), costs and expenses
                incurred or paid by Lessor in connection with any such sale plus
                all accrued and unpaid amounts due and payable with respect to
                the Equipment or this Schedule up to the date of any such sale.

        (4)     If for any reason whatsoever Lessee fails to return the
                Equipment in full compliance with Section 23(b) of the Master
                Lease and with all other return and maintenance requirements of
                this Schedule on or before the Termination Date, then Lessee
                shall be deemed to have elected to purchase Equipment pursuant
                to subparagraph (a) of this paragraph.

Unless otherwise expressly agreed by Lessor in writing, during the 90-day period
prior to the Termination Date, Lessee shall, and Lessor may, solicit offers to
purchase the Equipment from prospective purchasers. Neither Lessee nor third
parties affiliated with the Lessee may bid to purchase the Equipment. Lessor may
bid to purchase the Equipment.


        (c) If one or more such offers to purchase the Equipment are received
under subparagraph (b) of this paragraph, then the equipment shall be sold by
Lessor to the highest bidder within ten (10) days after the Termination Date and
the Actual Sale Proceeds shall equal the purchase price actually received by
Lessor after deducting all reasonable selling expenses. If no such offers to
purchase the Equipment are received or if the Equipment is not sold for any
reason, then the Actual Sale Proceeds shall be deemed to be zero and Lessee
shall pay the Fixed Price to Lessor pursuant to clause (1) of subparagraph (b)
of this paragraph plus all accrued and unpaid amounts due and payable with
respect to the Equipment or this Schedule up to the date of any such payment. If
Lessor subsequently sells the Equipment, then the purchase price actually
received by Lessor, after deducting all



                                     Page 5
<PAGE>   6

reasonable selling expenses, shall be distributed as follows: first, to Lessor
in an amount equal to the Fixed Price less the- payment made by Lessee pursuant
to clause (1) of subparagraph (b) of this paragraph; second, to Lessee, to the
extent of its payment to Lessor pursuant to clause (1) of subparagraph (b) of
this paragraph; and lastly, the remainder to Lessor.

        (d) Lessor shall, upon receipt of the purchase price of the Equipment
under this paragraph, convey title to the Equipment to the purchaser by a bill
of sale, which transfer shall be "AS-IS, WHERE IS", with all faults, without
recourse to Lessor and without any representation or warranty of any kind
whatsoever by Lessor, express or implied.

17. TAX BENEFIT. Solely for purposes of this Schedule and its Equipment, it is
the intention of the parties that Lessor shall not be entitled to such
deductions, credits and other tax benefits as are provided by federal, state,
and local income tax law to an owner of the Equipment and Section 10 of the
Master Lease is deleted. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE MASTER
LEASE OR THIS SCHEDULE, LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, AS TO THE TAX OR ACCOUNTING TREATMENT OR CONSEQUENCES OF THIS
SCHEDULE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

18. GOVERNING DOCUMENT. In the event of any conflict between the terms of the
Master Lease and the terms of this Schedule as each is amended by its addenda,
the terms of this Schedule shall control.

19. SAVINGS CLAUSES. (a) If any court or other judicial authority determines
that this Schedule is a loan transaction or a conditional sale transaction, then
Lessor and Lessee agree: (1) that the original principal amount financed
pursuant to this Schedule is the Lessor's Cost set forth in paragraph 3 of this
Schedule; and (2) that Lessee shall pay said principal amount, together with
interest at the per annum rate of 8.0074%, by paying all rentals and other
amounts due under the Schedule plus the Fixed Price set forth in paragraph 16 of
this Schedule.

        (b) If any court or other judicial authority determines that this
Schedule is a loan transaction or a conditional sale transaction, then as
collateral security for payment and performance of all Secured Obligations
(defined below) and to induce Lessor to extend credit from time to time to
Lessee (under the Master Lease or otherwise), Lessee hereby grants to Lessor a
first priority security interest in all of Lessee's right, title and interest in
the Equipment, whether now existing or hereafter acquired, and in all Proceeds
(defined below), and Lessee, at its sole expense, will protect and defend
Lessor's first priority security interest in the Equipment against all claims
and demands whatsoever. Lessee agrees that Lessor shall have all rights of a
secured party under the applicable Uniform Commercial Code. "Secured
Obligations" means (1) all payments and other obligations of Lessee under or in
connection with this Schedule, and (2) all payments and other obligations of
Lessee (whether now existing or hereafter incurred) under or in connection with
the Master Lease and all present and future Lease Schedules thereto, and (3) all
other leases, indebtedness, liabilities and/or obligations of any kind (whether
now existing or hereafter incurred, absolute or contingent, direct or indirect)
of Lessee to Lessor or to any affiliate of either Lessor or BANC ONE
CORPORATION. "Proceeds" means all



                                     Page 6
<PAGE>   7

cash and non-cash proceeds of the Equipment including, without limitation,
proceeds of insurance,- indemnities and/or warranties.

20. PURCHASE ORDERS AND ACCEPTANCE OF EQUIPMENT. Lessee agrees that (i) Lessor
has not selected, manufactured, sold or supplied any of the Equipment, (ii)
Lessee has selected all of the Equipment and its suppliers, and (iii) Lessee has
received a copy of, and approved, the purchase orders or purchase contracts for
the Equipment. AS BETWEEN LESSEE AND LESSOR, LESSEE AGREES THAT: (a) LESSEE HAS
RECEIVED, INSPECTED AND APPROVED ALL OF THE EQUIPMENT; (b) ALL EQUIPMENT IS IN
GOOD WORKING ORDER AND COMPLIES WITH ALL PURCHASE ORDERS OR CONTRACTS AND ALL
APPLICABLE SPECIFICATIONS; (c) LESSEE IRREVOCABLY ACCEPTS ALL EQUIPMENT FOR
PURPOSES OF THE LEASE "AS-IS, WHERE-IS" WITH ALL FAULTS; AND (d) LESSEE
UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF
THE EQUIPMENT.

LESSEE HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS SCHEDULE. LESSEE AGREES
THAT THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS WITH LESSOR REGARDING THE
EQUIPMENT OR THIS SCHEDULE.


Banc One Leasing Corporation           STB Systems, Inc.
(Lessor)                               (Lessee)

By:  /s/ Anthony Park                  By: /s/ Bryan F. Keyes
   ----------------------------------     --------------------------------------
                                       Title:   Vice President
Title: Funding Authority
       ------------------------------

Lessor's Acceptance Date: April 1998



                                     Page 7
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.43
<SEQUENCE>8
<FILENAME>f72487ex10-43.txt
<DESCRIPTION>EXHIBIT 10.43
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.43

LEASE SCHEDULE NO. 1000063259 dated as of October 31, 1997                 LEASE
(New Equipment)

Master Lease Agreement dated 10/30/96

Lessor:  Banc One Leasing Corporation

Lessee:  STB Systems, Inc.

1. GENERAL. This Lease Schedule is signed and delivered under the master Lease
Agreement identified above, as amended from time to time ("Master Lease),
between lessee and Lessor. Capitalized terms defined in the Master Lease will
have the same meanings when used in this Schedule.

2. LEASE; EQUIPMENT DESCRIPTION. Lessor leases to Lessee, and Lessee leases from
Lessor, all of the property ("Equipment") described in Schedule A-1 attached
hereto (and Lessee represents that all Equipment is new unless specifically
identified as used) on Schedule A-1.

3. LESSORS COST OF EQUIPMENT.

<TABLE>
               <S>                                         <C>
               Equipment Cost to Lessor.                   $3,201,726.26
               Set-Up/Filing Fee:                                $375.00
               Miscellaneous:                                      $0.00
               Sales Tax:                                          $0.00
                                                                   -----

               Lessors Cost (total):                       $3,202,101.26
                                                           =============
</TABLE>

4. LEASE TERM. The Lease Term of this Schedule shall be sixty (60) months and
shall commence on November 1, 1997 ("Commencement Date").

5. RENT/FEES. There shall be added to each rent or other payment described below
all applicable Taxes as in effect from time to time.

                (a) As rent for the Equipment during the Lease Term, Lessee
        shall pay to Lessor monthly rent with each such periodic rent payment
        being in the amount of $60,775.02. The first rent payment in the Lease
        Term shall be paid in arrears and all subsequent rent payments shall be
        paid on the same day of each month thereafter.

                (b) Lessee shall pay Lessor a Set-Up/Filing Fee of $375.00 which
        has been included in the above Lessor's Cost of the Equipment.

                (c) Security Deposit: $zero on the Acceptance Date, Lessee shall
        pay Lessor said Security Deposit which shall be held in accordance with
        paragraph 11 below.

6. RENT ADJUSTMENT. Within 15 days after each scheduled Rent Payment Date in the
Lease Term, Lessor shall calculate the Payment Adjustment for such Rent Payment
Date (the "Adjustment Date"). With the next scheduled Rent Payment in the Lease
Term (or within 15



                                       1
<PAGE>   2

days after the last scheduled Rent Payment in the Lease Term) (a) If on the
Adjustment Date the Adjusted Rate is greater than the Initial Rate, then Lessee
shall pay to Lessor the Payment Adjustment, or (b) If on the Adjustment Date the
Adjusted Rate is less than the Initial Rate, then Lessor shall pay to Lessee the
Payment Adjustment (which amount may be credited by Lessee toward the Rent
Payment then due). For the purposes of this paragraph, the following terms shall
have the following meanings:

        (a) "Adjustment Date" shall mean the scheduled Rent Payment Date in the
Lease Term for which the Payment Adjustment is being calculated.

        (b) "Adjusted Rate" shall mean LIBOR plus 250 basis points as of the
Adjustment Date.

        (c) "Contract Receivable" shall mean the remaining principal outstanding
just prior to application of the Rent Payment due on the Adjustment Date, as
shown on. the books and records of the Lessor.

        (d) "Initial Rate" shall mean 8.1250%.

        (e) "LIBOR" shall mean the one month rate of Interest at which deposits
in U.S. dollars are offered to major banks in the London interbank market as
published in the Wall Street Journal on the Adjustment Date.

        (f) "Payment Adjustment" shall mean the Rate Differential multiplied by
the Contract Receivable.

        (g) "Rate Differential" shall mean the absolute value of the difference
between the Initial Rate and the Adjusted Rate.

7. TITLE TO EQUIPMENT; QUIET POSSESSION. Lessee agrees that Lessor is the lawful
owner of the Equipment and that good and marketable title to the Equipment shall
remain with Lessor at all times, Lessee at its sole expense will protect and
defend Lessor's good and marketable title to the Equipment against all claims
and demands whatsoever except for Liens created directly by Lessor. Lessee shall
have no right, title or interest in any of the Equipment except the right to
peacefully and quietly hold and use the Equipment in accordance with the terms
of the Lease during the Lease Term unless and until an event of default shall
occur.

8. LESSEES ASSURANCES. Lessee irrevocably and unconditionally: (a) reaffirms all
of the terms and conditions of the Master Lease and agrees that the Master Lease
remains in full force and effect; (b) agrees that the Equipment is and will be
used at all times solely for commercial purposes, and not for personal, family
or household purposes; and (c) incorporates all of the terms and conditions of
the Master Lease as if fully set forth in this Schedule.

9. CONDITIONS. No lease of Equipment under this Schedule shall be binding on
Lessor, and Lessor shall have no obligation to purchase the Equipment covered
hereby, unless: (a) Lessor has received evidence of all required Insurance, (b)
in Lessor's sole judgment, there has been no material adverse change in the
financial condition or business of Lessee or any guarantor, (c) Lessee has
signed and delivered to Lessor this Schedule, which must be



                                       2
<PAGE>   3

satisfactory to Lessor, and Lessor has signed and accepted this Schedule; (d) no
change in the Code or any regulation thereunder, which in Lessors sole judgment
would adversely affect the economics to Lessor of the lease transaction, shall
have occurred or shall appear to be imminent; (e) Lessor has received, in form
and substance satisfactory to Lessor, such other documents and information as
Lessor shall reasonably request (including, without limitation, Political Risk
Insurance described below in this Schedule); (f) STB de Mexico, S.A. de C. V.
shall execute and deliver to Lessor a guaranty which must be satisfactory in
form and substance to Lessor (such satisfaction to be evidenced by Lessor's
signature thereon) and (g) Lessee has satisfied all other reasonable conditions
established by Lessor. Notwithstanding anything to the contrary above in this
paragraph, if Lessor executes and delivers the Schedule to Lessee and if Lessor
pays all of the suppliers of the Equipment the full Lessor's Cost of the
Equipment (the date as of which both of said events shall have occurred may be
called the "Funding Date"), then except as otherwise specified in writing by
Lessor to Lessee before said Funding Date, all conditions to the Schedule being
binding on Lessor will be deemed satisfied.

10. OTHER DOCUMENTS: EXPENSES. Lessee agrees to sign and deliver to Lessor any
additional documents deemed desirable by Lessor to effect the terms of the
Master Lease or the Schedule including, without limitation, Uniform Commercial
Code financing statements which Lessor is authorized to file with the
appropriate filing officers. Lessee hereby irrevocably appoints Lessor as
Lessee's attorney-in-fact with full power and authority in the place of Lessee
and in the name of Lessee to prepare, sign, amend, file or record any Uniform
Commercial Code financing statement., or other documents deemed desirable by
Lessor to perfect, establish or give notice of Lessor's interests in the
Equipment or in any collateral as to which Lessee has granted Lessor a security
interest. Lessee shall pay upon Lessor's written request any actual
out-of-pocket costs and expenses paid or incurred by Lessor in connection with
the above terms of this section or the funding and closing of this Schedule.

11. SECURITY DEPOSIT. As collateral for Lessee's obligations under the Lease,
Lessee hereby grants to Lessor a security interest in the sums specified in this
Schedule as a "Security Deposit". At its option, Lessor may apply all or any
part of said Security Deposit to cure any default of Lessee under the Lease. If
upon final termination of this Schedule, Lessee has fulfilled all of the terms
and conditions hereof, then Lessor shall pay to Lessee upon Lessee's written
request any remaining balance of the Security Deposit for this Schedule, without
interest.

12. REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants that: (a)
Lessee is a corporation duly organized, validly existing and in good standing
under the laws of the state of its organization; (b) Lessee has full power,
authority and legal right to sign, deliver and perform the Master Lease, this
Schedule and all related documents and such actions have been duly authorized by
all necessary corporate action; and (c) the Master Lease, this Schedule and each
related document has been duly signed and delivered by Lessee and each such
document constitutes a legal, valid and binding obligation of Lessee enforceable
in accordance with its terms, except to the extent enforcement is limited by
State and Federal laws regarding bankruptcy, insolvency or debt reorganization
or other similar laws of general application or the application of principles of
equity.

13. SUBLEASE. Notwithstanding anything to the contrary in the Master Lease, with
respect to this Schedule, Lessor consents to the sublease or bailment of the
Equipment described in this



                                       3
<PAGE>   4

Schedule by Lessee as sublessor or bailor to STB do Mexico, S.A. de C. V. as
sublessee or bailee pursuant to the terms and conditions of a Gratuitous
Bailment Agreement and to the location of the Equipment covered by the Schedule
in the City of Ciudad Juarez, State of Chihuahua, Mexico; provided, that the
Gratuitous Bailment Agreement must be satisfactory in form and substance to
Lessor (such satisfaction to be evidenced by Lessor's signature thereon).

14. POLITICAL RISK INSURANCE. As used herein, "Political Risk Insurance" shall
mean a policy of Insurance Issued by National Union Fire Insurance Company of
Pittsburgh, PA ("Insurance Company") which Insures Lessee and Lessor (or
Lessor's assignee) against risks of expropriation or deprivation of the
Equipment by the government of the United Mexican States ("Political Loss") as
set forth in such policy of Insurance, Lessee acknowledges that it has reviewed
a copy of the Political Risk Insurance policy.

        (a) With respect to this Schedule, Lessee shall be required to carry
Political Risk Insurance as an additional requirement under Section 8 of the
Master Lease and Lessee shall pay the premiums for the Political Risk Insurance
that Lessor requires hereunder.

        (b) If a Political Loss occurs, such event shall be deemed a Casualty
Loss under Section of the Master Lease; provided, that (1) Lessee agrees to
continue to pay rent and perform its other obligations under this Schedule and
the Master Lease until the earlier of the date that the Insurance Company pays
the amounts due under the Political Risk Insurance or the date that Lessor has
exhausted its rights and remedies under the Political Risk Insurance, (2) Lessor
agrees that it will pursue with reasonable diligence its rights against the
Insurance Company under the Political Risk Insurance; and (3) notwithstanding
anything to the contrary in Section 9 of the Master Lease as it relates to this
Schedule, within thirty (30) days of the earlier of the date that the Insurance
Company pays the amounts due under the Political Risk Insurance or the date that
Lessor has exhausted its rights and remedies under the Political Risk Insurance,
Lessee shall pay to Lessor the Stipulated Loss Value of the Equipment affected
by the Political Loss less the aggregate of the amount that the Insurance
Company has paid to Lessor under the Political Risk Insurance and the amount
that the United Mexican States has paid to Lessor as a result of the Political
Loss plus the reasonable expenses incurred by Lessor to collect such amounts
from the Insurance Company and the United Mexican States.

15. CANCELLATION OPTION. So long as no event of default has occurred and
continues under the Master Lease or any Schedule thereto and so long as Lessee
gives Lessor written notice of its election under this paragraph at least 90
days, but no more than 180 days, prior to the Cancellation Date (as defined
below), Lessee may, subject the provisions of this paragraph, elect to cancel
this Schedule and return all of the Equipment. Lessee may not cancel the
Schedule under the terms of this paragraph unless and until all of the following
conditions have been satisfied in full on or before the Cancellation Date:

        (a) Lessee shall pay to Lessor on the applicable Cancellation Date a
return and remarketing fee equal to the Cancellation Value (as defined below),
AND

        (b) Lessee shall return all, but not less than all, of the Equipment to
Lessor on the Cancellation Date in full compliance with subsection 23(b) of the
Master Lease and with all other return and maintenance requirements of this
Schedule.



                                       4
<PAGE>   5

"Cancellation Value" means the total of the following: (i) all rent, Taxes and
all other amounts then due and payable by Lessee under this Schedule and Master
Lease to the extent it relates to this Schedule, (ii) an amount equal to
Fifty-six percent (56%) of the Lessor's Cost of the Equipment stated above in
this Schedule; and (iii) sales and other Taxes due in connection with Lessor's
receipt of the above amounts. "Cancellation Date" means the scheduled rent
payment date in the 24th month of the Lease Term.

16. AMENDMENT OF PURCHASE OPTION AND RETURN OPTION.

        (a) Solely for purposes of this Schedule and its Equipment, Lessor and
Lessee agree that if Lessee elects to exercise its option to purchase the
Equipment at the end of the Lease Term (which option is described in Section
23(c) of the Master Lease), then, notwithstanding anything to the contrary in
this Schedule or the Master Lease, the provisions of Section 23(d) of the Master
Lease for determining Fair Market Value for purposes of this purchase option
shall not apply and the purchase price of the Equipment at the end of the Lease
Term shall be equal to the Fixed Price stated below plus all Taxes (excluding
income taxes on Lessor's gains on such sale), costs and expenses incurred or
paid by Lessor in connection with such sale plus all accrued and unpaid amounts
then due and payable with respect to the Equipment or this Schedule.

        Fixed Price, ten percent (10%) of the above Lessor's Cost of the
Equipment

        (b) Solely for purposes of this Schedule and its Equipment, Lessor and
Lessee agree that if Lessee elects to exercise its option to return the
Equipment at the end of the Lease Term (Which option is described in Section
23(b) of the Master Lease), then Lessee shall return the Equipment in full
compliance with Section 23(b) of the Master Lease and with all other return and
maintenance requirements of this Schedule and them shall be a rent adjustment as
provided below in the subparagraph (b). The scheduled expiration date of the
Lease Term specified in this Schedule will be referred to as the "Termination
Date".

                (1)     If the Actual Sale Proceeds as determined pursuant to
                        subparagraph (c) of this paragraph are less than the
                        Fixed Price, then (A) Lessor shall retain the Actual
                        Sale Proceeds and (B) Lessee shall pay to Lessor the
                        difference between the Fixed Price and such Actual Sale
                        Proceeds on the Termination Date, provided that the
                        amount of said deficiency payable by Lessee to Lessor
                        shall not exceed nine percent (9%) of the above Lessor's
                        Cost of the Equipment; or

                (2)     If the Actual Sale Proceeds as determined pursuant to
                        subparagraph (c) of this paragraph equal or exceed the
                        Fixed Price, then Lessor shall retain the entire Actual
                        Sale Proceeds,

                (3)     In all events, Lessee shall pay all Taxes (excluding
                        income taxes on Lessors gains on such sale), costs and
                        expenses incurred or paid by Lessor in connection with
                        any such sale plus all accrued and unpaid amounts due
                        and payable with respect to the Equipment or this
                        Schedule up to the date of any such sale.



                                       5
<PAGE>   6

                (4)     If for any reason whatsoever Lessee fails to return the
                        Equipment in full compliance with Section 23(b) of the
                        Master Lease and with all other return and maintenance
                        requirements of this Schedule on or before the
                        Termination Date, then Lessee shall be deemed to have
                        elected to purchase Equipment pursuant to subparagraph
                        (a) of this paragraph.

Unless otherwise expressly agreed by Lessor in writing, during the 90-day period
prior to the Termination Date, Lessee shall, and Lessor may, solicit offers to
purchase the Equipment from prospective purchasers. Neither Lessee nor third
parties affiliated with the Lessee may bid to purchase the Equipment. Lessor may
bid to purchase the Equipment.

        (c) If one or more such offers to purchase the Equipment are received
under subparagraph (b) of this paragraph, then the Equipment shall be sold by
Lessor to the highest bidder within ten (10) days after the Termination Date and
the Actual Sale Proceeds shall equal the purchase price actually received by
Lessor after deducting all reasonable selling expenses. If no such offers to
purchase the Equipment are received or if the Equipment is not sold for any
reason, then the Actual Sale Proceeds shall be deemed to be zero and Lessee
shall pay the Fixed Price to Lessor pursuant to clause (1) of subparagraph (b)
of this paragraph plus all accrued and unpaid amounts due and payable with
respect to the Equipment or this Schedule up to the date of any such payment. If
Lessor subsequently sells the Equipment, then the purchase price actually
received by Lessor, after deducting all reasonable selling expenses, shall be
distributed as follows: first, to Lessor in an amount equal to the Fixed Price
less the payment made by Lessee pursuant to clause (1) of subparagraph (b) of
this paragraph; second, to Lessee, to the extent of its payment to Lessee
pursuant to clause (1) of subparagraph (b) of this paragraph; and lastly, the
remainder to Lessor.

        (d) Lessor shall, upon receipt of the purchase price of the Equipment
under this paragraph, convey title to the Equipment to the purchaser by a bill
of sale, which transfer shall be "AS IS, WHERE IS", with all faults, without
recourse to Lessor and without any representation or warranty of any kind
whatsoever by Lessor, express or implied.

17. TAX BENEFIT. Solely for purposes of this Schedule and its Equipment, it is
the intention of the parties that Lessor shall not be entitled to such
deductions, credits and other tax benefits as are provided by federal, state,
and local income tax law to an owner of the Equipment and Section 10 of the
Master Lease is deleted, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE MASTER
LEASE OR THIS SCHEDULE, LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, AS TO THE TAX OR ACCOUNTING TREATMENT OR CONSEQUENCES OF THIS
SCHEDULE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

18. GOVERNING DOCUMENT. In the event of any conflict between the terms of the
Master Lease and the terms of this Schedule as each is amended by its addenda,
the terms of this Schedule shall control.



                                       6
<PAGE>   7

19. SAVINGS CLAUSES.

        (a) If any court or other judicial authority determines that this
Schedule is a loan transaction or a conditional sale transaction, then Lessor
and Lessee agree: (1) that the original principal amount financed pursuant to
this Schedule is the Lessor's Cost set forth in paragraph 3 of this Schedule;
and (2) that Lessee shall pay said principal amount, together with interest at
the Initial Rate set forth in paragraph 6 of this Schedule (subject to
adjustment as set forth in paragraph 6 of this Schedule), by paying all rentals
and other amounts due under the Schedule plus the Fixed Price set forth in
paragraph 16 of this Schedule.

        (b) If any court or other judicial authority determines that this
Schedule is a loan transaction or a conditional sale transaction, then as
collateral security for payment and performance of all Secured Obligations
(defined below) and to induce Lessor to extend credit from time to time to
Lessee (under the Master Lease or otherwise), Lessee hereby grants to Lessor a
first priority security interest in all of Lessee's right, title and interest in
the Equipment, whether now existing or hereafter acquired, and in all Proceeds
(defined below), and Lessee, at its sole expense, will protect and defend
Lessor's first priority security interest in the Equipment against all claims
and demands whatsoever. Lessee agrees that Lessor shall have all rights of a
secured party under the applicable Uniform Commercial Code, "Secured
Obligations" means (1) all payments and other obligations of Lessee under or in
connection with this Schedule 6, and (2) all payments and other obligations of
Lessee (whether now existing or hereafter Incurred) under or in connection with
the Master Lease and all present and future Lease Schedules thereto, and (3) all
other leases, Indebtedness, liabilities and/or obligations of any kind (whether
now existing or hereafter Incurred, absolute or contingent, direct or indirect)
of Lessee to Lessor or to any affiliate of either Lessor or BANC ONE
CORPORATION. "Proceeds" means all cash and non-cash proceeds of the Equipment
including, without limitation, proceeds of insurance, Indemnities and/or
warranties.

20. PURCHASE ORDERS AND ACCEPTANCE OF EQUIPMENT. Lessee agrees that (i) Lessor
has not selected, manufactured, sold or supplied any of the Equipment, (ii)
Lessee has selected all of the Equipment and its suppliers, and (iii) Lessee has
received a copy of, and approved, the purchase orders or purchase contracts for
the Equipment. AS BETWEEN LESSEE AND LESSOR LESSEE AGREES THAT: (a) LESSEE HAS
RECEIVED, INSPECTED AND APPROVED ALL 01 THE EQUIPMENT; (b) ALL EQUIPMENT IS IN
GOOD WORKING ORDER AND COMPLIES WITH ALL PURCHASE ORDERS OR CONTRACTS AND ALL
APPLICABLE SPECIFICATIONS; (c) LESSEE IRREVOCABLY ACCEPTS ALL EQUIPMENT FOR
PURPOSES OF THE LEASE "AS-IS WHERE-IS" WITH ALL FAULTS; AND (d) LESSEE
UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF
THE EQUIPMENT.

LESSEE HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS SCHEDULE. LESSEE AGREES
THAT THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS WITH LESSOR REGARDING THE
EQUIPMENT OR THIS SCHEDULE.



                                       7
<PAGE>   8

Banc One Leasing Corporation               STB Systems,
(Lessor)                                   (Lessee)


By:  /s/ Anthony Park                      By: /s/Randy Eisenbach
   ----------------------------------         ----------------------------------

Title: Funding Authority                   Title:  COO
       ----------------------------------        -------------------------------

Lessor's Acceptance Date: October 31, 1997



                                       8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>f72487ex23-1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>

<PAGE>   1

                                                                    Exhibit 23.1


                       Consent of Independent Accountants


        We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-42156, 333-39109, 333-58207, 333-78905,
333-79037, 333-86661, 333-42152 and 333-95017) of 3dfx Interactive, Inc. of our
report dated March 27, 2001, except as to Note 1 and Note 10, which are as of
April 26, 2001, relating to the consolidated financial statements which appears
in this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report dated March 27, 2001, relating to the financial
statement schedule, which appears in this Form 10-K.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Jose, California
May 15, 2001


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