<SUBMISSION>
<ACCESSION-NUMBER>0000950134-01-506407
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20010731
<FILING-DATE>20010917
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>3DFX INTERACTIVE INC
<CIK>0001010026
<ASSIGNED-SIC>7372
<IRS-NUMBER>770390421
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>0201
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-22651
<FILM-NUMBER>1739142
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>4435 FORTRAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
<PHONE>4085913508
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>4435 FORTRAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d90630e10-q.txt
<DESCRIPTION>FORM 10-Q FOR QUARTER ENDED JULY 31, 2001
<TEXT>
<PAGE>   1
                                 United States
                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                   FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended July 31, 2001.

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

                         Commission file number 0-22651

                                   ----------

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

                                   ----------

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


                               4435 FORTRAN DRIVE
                           SAN JOSE, CALIFORNIA 95134

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

              (Address of Principal Executive Office)  (Zip Code)

                        TELEPHONE NUMBER (408) 935-4400

                                   ----------

              (Registrant's telephone number, including area code)

                                   ----------

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

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

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

Common Stock, No Par Value --- 39,799,364 shares as of September 13, 2001

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


<PAGE>   2

                             3DFX INTERACTIVE, INC.

                                     INDEX


<Table>
<Caption>
                                                                                            PAGE
<S>       <C>                                                                               <C>
PART 1    FINANCIAL INFORMATION

          Item 1.   Financial Statements

                    Consolidated Statement of Net Liabilities in Liquidation at
                    July 31, 2001.........................................................     1

                    Condensed Consolidated Balance Sheet of Discontinued Operations at
                    January 31, 2001......................................................     2

                    Consolidated Statement of Changes in Net Liabilities in Liquidation
                    for the period from March 27, 2001 to July 31, 2001 ..................     3

                    Condensed Consolidated Statements of Discontinued Operations for the
                    period from February 1, 2001 to March 26, 2001 and for the three and
                    six months ended July 31, 2000........................................     4

                    Condensed Consolidated Statements of Cash Flows of Discontinued
                    Operations for the period from February 1, 2001 to March 26, 2001
                    and for the six months ended July 31, 2000............................     5

                    Notes to Condensed Consolidated Financial Statements..................     6

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

          Item 3.   Quantitative and Qualitative Disclosure about Market Risk.............    15

PART II.  OTHER INFORMATION

          Item 1.   Legal Proceedings.....................................................    15

          Item 2.   Changes in Securities and Use of Proceeds.............................    16

          Item 3.   Defaults Upon Senior Securities.......................................    16

          Item 4.   Submission of Matters to a Vote of Security Holders...................    16

          Item 5.   Other Information.....................................................    16

          Item 6.   Exhibits and Reports on Form 8-K......................................    16

SIGNATURES................................................................................    16
</Table>



<PAGE>   3
                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                    3dfx INTERACTIVE, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
                                 (In thousands)
                                  (Unaudited)



<Table>
<Caption>
                                                                      July 31,
                                                                        2001
                                                                      ---------
<S>                                                                   <C>
ASSETS
  Cash and cash equivalents                                           $   9,291
  Accounts receivable                                                       504
  Other current assets                                                      852
  Other assets held for sale                                                327
  Contingent receivable (Note 1)
                                                                      ---------
    Total assets                                                      $  10,974
                                                                      =========

LIABILITIES
  Accounts payable                                                    $  25,204
  Other liabilities                                                         487
  Estimated costs during period of liquidation (Note 1)                   7,377
  Contingent Liabilities (Note 1)
                                                                      ---------
    Total liabilities                                                    33,068
                                                                      ---------
    Net liabilities in liquidation                                    $  22,094
                                                                      =========
</Table>


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



                                     Page 1
<PAGE>   4

                    3dfx INTERACTIVE, INC. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED BALANCE SHEET OF DISCONTINUED OPERATIONS
                                 (In thousands)
                                  (Unaudited)



<Table>
<Caption>
                                                                     January 31,
                                                                        2001
                                                                     -----------
<S>                                                                  <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                           $   9,391
  Accounts receivable, net of allowance for doubtful accounts of          6,398
    $9,992 at January 31, 2001
  Inventories, net                                                       22,358
  Deferred tax assets                                                    35,000
  Other current assets                                                    1,214
  Other assets held for sale                                             45,245
                                                                      ---------
    Total current assets                                              $ 119,606
                                                                      =========

LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
  Accounts payable                                                    $  64,245
  Accrued liabilities                                                    11,642
  nVidia term loan                                                       15,000
  Other current liabilities                                               6,366
                                                                      ---------
    Total current liabilities                                            97,253
                                                                      ---------

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 shares issued and outstanding at January 31, 2001        430,922
  Warrants                                                                  242
  Accumulated other comprehensive loss                                   (1,722)
  Accumulated deficit                                                  (407,089)
                                                                      ---------
    Total shareholders' equity                                           22,353
                                                                      ---------
    Total liabilities and shareholder's equity                        $ 119,606
                                                                      =========
</Table>


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



                                     Page 2
<PAGE>   5

                    3dfx INTERACTIVE, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF CHANGES IN
                         NET LIABILITIES IN LIQUIDATION
                                 (In thousands)
                                  (Unaudited)



<Table>
<Caption>
                                                             For the period from
                                                              March 27, 2001 to
                                                                July 31, 2001
                                                             -------------------
<S>                                                          <C>
Net assets in liquidation at March 27, 2001                       $ 20,457
    Selling, general and administrative expenses                    (3,901)
    Net gain on sale of assets held for sale                         3,227
    Decrease in deferred tax asset                                 (35,000)
                                                                  --------
Net liabilities in liquidation at April 30, 2001                    15,217


    Selling, general and administrative expenses                    (5,929)
    Net loss on sale of assets held for sale                          (948)
                                                                  --------
Net liabilities in liquidation at July 31, 2001                   $ 22,094
                                                                  ========
</Table>

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



                                     Page 3
<PAGE>   6

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




<Table>
<Caption>
                                                                  For the Period from     Three Months         Six Months
                                                                  February 1, 2001 to    Ending July 31,    Ending July 31,
                                                                    March 26, 2001            2000               2000
                                                                  -------------------    ---------------    ---------------
<S>                                                               <C>                    <C>                <C>
Revenues                                                          $                --    $        66,989    $       175,567
Cost of revenues                                                                   --             56,800            138,967
                                                                  -------------------    ---------------    ---------------
Gross profit                                                                       --             10,189             36,600
                                                                  -------------------    ---------------    ---------------
Operating expenses:
    Research and development                                                       --             19,195             35,752
    Selling, general and administrative                                         7,801             16,532             35,657
    In-process research and development                                            --             66,250             66,250
    Amortization of goodwill and intangibles                                       --              4,495              8,325
                                                                  -------------------    ---------------    ---------------
Total operating expenses                                                        7,801            106,472            145,984
                                                                  -------------------    ---------------    ---------------
Loss from discontinued operations                                              (7,801)           (96,283)          (109,384)
Other income (expense), net                                                       182               (436)              (481)
                                                                  -------------------    ---------------    ---------------
Loss from discontinued operations before income taxes                          (7,619)           (96,719)          (109,865)
Provision (benefit) for income taxes                                           (4,992)             3,777              3,062
                                                                  -------------------    ---------------    ---------------
Net loss from discontinued operations                             $            (2,627)   $      (100,496)   $      (112,927)
                                                                  ===================    ===============    ===============

Net loss per share from discontinued operations:
    Basic                                                         $             (0.07)   $         (3.81)   $         (4.44)
                                                                  ===================    ===============    ===============
    Diluted                                                       $             (0.07)   $         (3.81)   $         (4.44)
                                                                  ===================    ===============    ===============
Shares used in net loss per share from discontinued operations:
    Basic                                                                      39,788             26,350             25,430
                                                                  ===================    ===============    ===============
    Diluted                                                                    39,788             26,350             25,430
                                                                  ===================    ===============    ===============
</Table>


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



                                     Page 4
<PAGE>   7

                    3DFX INTERACTIVE, INC. AND SUBSIDIARIES
   CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS OF DISCONTINUED OPERATIONS
                                 (In thousands)
                                  (Unaudited)



<Table>
<Caption>
                                                                             For The Period From       Six Months
                                                                             February 1, 2001 To    Ending July 31,
                                                                                March 26, 2001           2000
                                                                             -------------------    ---------------
<S>                                                                          <C>                    <C>
Cash flows from operating activities:
   Net loss from discontinued operations                                     $            (2,627)   $      (112,927)

Adjustments to reconcile net income to net cash from operating activities:
   Depreciation                                                                               --             12,791
   Amortization                                                                                               8,325
   Stock compensation                                                                         --                363
   Write-off of acquired in-process research and development                                  --             66,250
   Decrease in allowance for doubtful accounts                                            (5,573)            (1,728)
   Changes in assets and liabilities:
      Accounts receivable                                                                 10,725             17,561
      Inventory                                                                              183            (25,605)
      Deferred tax asset                                                                      --                 --
      Other assets                                                                           544              7,020
      Accounts payable                                                                        --              5,574
      Accrued and other liabilities                                                      (11,394)            (4,343)
      Deferred revenue                                                                        --               (355)
                                                                             -------------------    ---------------
         Net cash used in discontinued operating activities                               (8,142)           (27,074)
                                                                             -------------------    ---------------
Cash flows from investing activities:
   Sales of short-term investments                                                           188             10,859
   Purchases of property and equipment                                                        --             (9,200)
   Merger with GigaPixel Corporation                                                          --              5,319
                                                                             -------------------    ---------------
         Net cash provided by investment activities                                          188              6,978
                                                                             -------------------    ---------------

Cash flows from financing activities:
   Proceeds from issuance of common stock, net                                                --              2,226
   Principal payments of capitalized lease obligations, net                                   --               (423)
                                                                             -------------------    ---------------
         Net cash provided by financing activities                                            --              1,803
                                                                             -------------------    ---------------
Net decrease in cash and cash equivalents                                                 (7,954)           (18,293)
Cash and cash equivalents at beginning of period                                           9,391             41,818
                                                                             -------------------    ---------------
Cash and cash equivalents at end of period                                   $             1,437    $        23,525
                                                                             ===================    ===============
</Table>



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



                                     Page 5
<PAGE>   8

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

Note 1 - The Company and its Significant Accounting Policies:

     3dfx Interactive, Inc. ("3dfx"), a company in liquidation, 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 condensed consolidated financial statements include
the financial statements of 3dfx and its wholly owned subsidiaries. All
significant intercompany transactions and accounts have been eliminated.

     The unaudited condensed consolidated financial statements included herein
have been prepared by 3dfx pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of 3dfx, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
information included therein. While 3dfx believes that the disclosures are
adequate to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the audited financial
statements and accompanying notes included in 3dfx's Annual Report on Form 10-K
for the fiscal year ended January 31, 2001 as filed with the Securities and
Exchange Commission.

     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 as of March 27, 2001 are presented under the
liquidation basis of accounting. Under the liquidation basis of accounting,
assets are stated at their estimated net realizable values and liabilities are
stated at their anticipated settlement amount, if reasonably estimatable. See
"Activities while in Liquidation" below. Additionally, 3dfx's common stock has
been delisted from the Nasdaq National Market effective May 16, 2001.

Asset Sale and Plan of Dissolution

     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 Sub 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 Sub 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 payment
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 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 payment and applied it to the payment of such liabilities, and
if nVidia Sub 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 payment 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 payment by
$50. Irrespective of whether 3dfx receives a post-closing payment, 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



                                     Page 6
<PAGE>   9


been paid in full or otherwise provided for and (ii) 3dfx has or will be validly
dissolved. In the event the contingencies are not met and the remaining
consideration from nVidia is not paid, 3dfx will have to explore other options,
including filing for bankruptcy. As a result of the contingencies described
above, the contingent receivable and related tax expense on the gain have not
been recorded in the accompanying consolidated statement of net liabilities in
liquidation as of July 31, 2001. The ultimate total of the value of nVidia stock
received by 3dfx, if any, is dependent on the number and market value of shares
received given the conditions described above.

     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 on a liquidation basis of accounting.

     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.
The sales and costs of sales related to these operations are recorded as other
income and expense on the condensed consolidated statement of discontinued
operations for the period from February 1, 2001 to March 26, 2001 and as
selling, general, and administrative expense from March 27, 2001 to July 31,
2001.

Activities While in Liquidation

     During the six months ended July 31, 2001, 3dfx disposed of most of its
inventory and other assets held for sale through the asset purchase agreement
with nVidia Sub as well as through sales to other parties. Any remaining
inventory and other assets held for sale have been written down to their net
realizable value, most of which equals zero. As 3dfx is in liquidation, these
remaining assets may be sold. 3dfx believes that any gains/losses on such sales
that may be realized will be immaterial.

     During the six months ended July 31, 2001, 3dfx terminated substantially
all of its remaining employees and continued to liquidate its remaining assets,
negotiate with third parties for resolutions of various litigation matters that
would be agreeable to all parties involved, and to reach settlements with its
vendors in reduction of its accounts payable, as well as to reach mutually
satisfactory settlements with the lessors to its facilities and various
equipment leases. At July 31, 2001, 3dfx had total future lease obligations of
$16.7 million, of which $14.8 million has been accrued. At July 31, 2001, 3dfx
was still in negotiations to settle certain remaining leases under which it has
contingent contractual obligations, which range from $0 to $11.9 million and
therefore no amounts have been recorded for this contingent liability. After
establishing a reserve for the winding up of its affairs, 3dfx used the
remaining proceeds received from the asset sale to nVidia Sub to pay a
significant portion of its and its subsidiaries' known and determinable debts
and liabilities.

     Changes in net liabilities for the period from March 27, 2001 to July 31,
2001 were a result of selling, general and administrative expenses of $9.8
million, which is comprised of operating expenses, accrued expenses and lease
termination expense, partially offset by the forgiveness of liabilities, a
decrease in the deferred tax asset of $35.0 million and the net gain on sale of
assets to nVidia Sub of $2.3 million, which was comprised of the following: (a)
a gain on the sale of inventory and other assets held for sale to nVidia Sub of
$14.3 million, which was comprised of the purchase by nVidia Sub of certain
inventory, fixed assets and intangible assets with net book values of $55.5
million offset by proceeds of $70.0 million and (b) losses of $12.0 million on
sale of and impairment of inventory and other assets held for sale.

    3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. Should 3dfx qualify for its final
payment from nVidia Sub, 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.



                                     Page 7
<PAGE>   10

Note 2 - Balance Sheet Components (in Thousands):

Inventory:


<Table>
<Caption>
                                                                January 31, 2001
<S>                                                             <C>
Raw materials                                                      $  1,972
Work in-process                                                          70
Finished goods                                                       20,316
                                                                   --------
          Total inventory                                          $ 22,358
                                                                   ========
</Table>


Other assets held for sale:



<Table>
<Caption>
                                              July 31, 2001        January 31, 2001
<S>                                           <C>                  <C>
Computer Equipment                                  $   --               $ 8,268
Purchased computer software                             --                 7,653
Furniture and equipment                                 --                 4,428
Goodwill and other intangibles                          --                20,765
Other assets                                           327                 4,131
                                                    ------               -------
     Other assets held for sale                     $  327               $45,245
                                                    ======               =======
</Table>


          At July 31, 2001, other assets held for sale is comprised of other
miscellaneous assets totaling $327,000 at 3dfx's facility in Richardson, Texas.

Estimated Costs During Period of Liquidation:

<Table>
<Caption>
                                              July 31, 2001
<S>                                           <C>
Income taxes payable                                $  215
Accrued salaries, wages and benefits                 1,703
Deferred tax liability                                  --
Accrued leases payable                               4,844
Other accrued liabilities                              615
                                                    ------
          Estimated costs during period
             of liquidation                         $7,377
                                                    ======
</Table>

Accrued Liabilities:


<Table>
<Caption>
                                                                   January 31, 2001
<S>                                                                <C>
Income taxes payable                                                    $    96
Accrued salaries, wages and benefits                                      3,524
Deferred tax liability                                                    4,735
Accrued leases payable                                                       --
Other accrued liabilities                                                 3,287
                                                                        -------
          Accrued Liabilities                                           $11,642
                                                                        =======
</Table>

Note 3 - Net Loss Per Share:

     Basic net loss per share is computed using the weighted average number of
common shares outstanding during the periods. Diluted net loss per share is
computed using the weighted average number of common and potentially dilutive
common shares during the periods presented.



                                     Page 8
<PAGE>   11

Diluted loss per share was the same as basic loss per share for the three and
six months ended July 31, 2000. During the three and six month periods ended
July 31, 2000, options to purchase approximately 5,516,000 and 2,879,000 shares
of common stock, respectively, were outstanding but not included in the
calculation because they were anti-dilutive. In June 2001, 3dfx granted to
Richard A. Heddleson, 3dfx's Chief Financial Officer, 800,000 stock options at
an exercise price of $.38 per share. During the period from February 1, 2001 to
March 26, 2001, options to purchase approximately 3,276,380 shares of common
stock were outstanding but not included in the calculation because they were
anti-dilutive.

Note 4 - Comprehensive Loss:

     Total comprehensive loss for the period February 1, 2001 to March 26, 2001
was $3.4 million, comprised of $700,000 from an unrealized loss on investment in
3Dlabs and net loss from discontinued operations of $2.7 million. Other
comprehensive income (loss) for the three months ended July 31, 2000 was an
unrealized loss of ($651,000), representing a loss from investing activities,
resulting in total comprehensive loss of ($100.1) million. Other comprehensive
income (loss) for the six months ended July 31, 2000 was an unrealized loss of
($3.3) million, representing a loss from investing activities, resulting in
total comprehensive income (loss) of ($116.2) million.

NOTE 5 - Legal Contingencies:

     On December 21, 2000, CagEnt Technologies Inc. filed suit against 3dfx in
the Northern California District Federal Court. The complaint alleged patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint sought a
declaratory judgment of infringement, injunctive relief enjoining future
infringement and money damages caused by the alleged infringement, together with
pre-judgment interest, attorneys' fees and cost of suit. On August 2, 2001, 3dfx
reached a settlement with CagEnt, under which CagEnt and 3dfx agreed to release
all claims against each other. 3dfx did not make or agree to make any payment to
CagEnt as part of the settlement. The settlement of CagEnt's claim will not
affect the contemplated liquidation and winding up of 3dfx's business pursuant
to the 3dfx plan of dissolution.

     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.

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

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

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 and to sell certain of its assets to nVidia US
Investment Company ("nVidia Sub"), a wholly owned subsidiary of nVidia
Corporation ("nVidia"). 3dfx is continuing to wind up its affairs and dissolve.
Accordingly, all activities of 3dfx are presented on a liquidation basis in the
accompanying condensed consolidated financial statements. Additionally, 3dfx's
common stock has been delisted from the Nasdaq National Market effective May 16,
2001.



                                     Page 9
<PAGE>   12

ASSET SALE AND PLAN OF DISSOLUTION

     On December 15, 2000, 3dfx entered into an asset purchase agreement with
nVidia and nVidia Sub under which in nVidia Sub would acquire certain of 3dfx's
assets, including its core graphics processor assets. Under the terms of the
asset purchase agreement, nVidia Sub 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 Sub 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 Sub 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 payment
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 payment and applied it to the payment of such liabilities, and
if nVidia Sub 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 payment, 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 payment by
$50. Irrespective of whether 3dfx receives a post-closing payment, 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. In the event the contingencies are not met and the
remaining consideration from nVidia is not paid, 3dfx will have to explore other
options, including filing for bankruptcy. As a result of the contingencies
described above, a contingent receivable and related tax expense on the gain
have not been recorded in the accompanying consolidated statement of net
liabilities in liquidation as of July 31, 2001. The ultimate total of the value
of nVidia stock received by 3dfx, if any, is dependent on the number and market
value of shares received given the conditions described above.

     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 on a liquidation basis of accounting.

     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.
The sales and costs of sales related to these operations are recorded as other
income and expense on the condensed consolidated statement of discontinued
operations for the period from February 1, 2001 to March 26, 2001 and as
selling, general, and administrative expense from March 27, 2001 to July 31,
2001.

ACTIVITIES WHILE IN LIQUIDATION

     During the six months ended July 31, 2001, 3dfx disposed of most of its
inventory and other assets held for sale through the asset purchase agreement
with nVidia Sub as well as through sales to other parties. Any remaining
inventory and other assets held for sale have been written down to their net
realizable value, most of which equals zero. As 3dfx is in liquidation, these
remaining assets may be sold. 3dfx believes that any gains/losses on such sales
that may be realized will be immaterial.



                                    Page 10
<PAGE>   13
     During the six months ended July 31, 2001, 3dfx terminated substantially
all of its remaining employees and continued to liquidate its remaining assets,
negotiate with third parties for resolutions of various litigation matters that
would be agreeable to all parties involved, and to reach settlements with its
vendors in reduction of its accounts payable, as well as to reach mutually
satisfactory settlements with the lessors to its facilities and equipment
leases. At July 31, 2001, 3dfx has total future lease obligations of $16.7
million, of which $14.8 million has been accrued. At July 31, 2001, 3dfx was
still in negotiations to settle certain remaining leases under which they have
contingent contractual obligations, which range from $0 to $11.9 million and
therefore no amounts have been recorded for this contingent liability. After
establishing a reserve for the winding up of its affairs, 3dfx used the
remaining proceeds received from the asset sale to nVidia Sub to pay a
significant portion of its and its subsidiaries' known and determinable debts
and liabilities.

     Changes in net liabilities for the period from March 27, 2001 to July 31,
2001 were a result of selling, general and administrative expenses of $9.8
million, which is comprised of operating expense, accrued expenses and lease
termination expense, partially offset by the forgiveness of liabilities, a
decrease in the deferred tax asset of $35.0 million and the net gain on sale of
assets to nVidia Sub of $2.3 million, which was comprised of the following: (a)
a gain on the sale of inventory and other assets held for sale to nVidia Sub of
$14.3 million, which was comprised of the purchase by nVidia Sub of certain
inventory, fixed assets and intangible assets with net book values of $55.5
million offset by proceeds of $70.0 million and (b) losses of $12.0 million on
sale of impairment of inventory and other assets held for sale.

     3dfx expects to continue to incur certain administrative and other costs
associated with winding up its affairs. Should 3dfx qualify for its final
payment from nVidia Sub, 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.

STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION

     During the period from March 27, 2001 to April 30, 2001, 3dfx incurred
selling, general and administrative costs of $3.9 million and recorded a
decrease in deferred tax asset of $35.0 million. During this period 3dfx also
incurred a net gain on sale of assets held for sale of $3.2 million, which was
comprised of the following: (a) a gain on the sale of inventory and other assets
held for sale to nVidia Sub of $14.3 million, which was comprised of the
purchase by nVidia Sub of certain inventory, fixed assets and intangible assets
with net book values of $55.5 million offset by proceeds of $70.0 million and
(b) losses of $11.1 million on sale of and impairment of inventory and other
assets held for sale.

     During the quarter ended July 31, 2001, 3dfx incurred selling, general and
administrative expenses of $5.9 million, which were comprised of equipment
expense, including current period lease payments and the accrual of all future
lease payments, personnel expense and the accrual of future anticipated salary,
all severance and associated benefit expenses, current period facilities
expenses and current period legal, banking and other professional service
expenses, offset by discounts received from vendors. In addition, 3dfx incurred
an additional $900,000 in losses on the sale of and impairment of assets held
for sale during the quarter ended July 31, 2001. Not included in the accrual of
future expenses were approximately $12.0 million in facilities lease payments on
properties that 3dfx is currently attempting to sublease. In addition, as a
result of the contingencies described above relating to the receipt of the
remaining consideration from Nvidia, the contingent receivable and related tax
expense on the gain resulting from the asset sale have not been recorded in the
accompanying consolidated statement of net liabilities in liquidation as of July
31, 2001.

LIQUIDITY AND CAPITAL RESOURCES

     As of July 31, 2001, 3dfx had cash, cash equivalents and short-term
investments of $9.3 million.

     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 pursuant to an asset



                                    Page 11
<PAGE>   14

purchase agreement. After establishing a reserve for the winding up of its
affairs, 3dfx used the remaining proceeds received from the asset sale to nVidia
Sub to pay a significant portion of its and its subsidiaries' known and
determinable debts and liabilities. Subject to 3dfx in the future satisfying
certain additional conditions provided for in the asset purchase agreement,
nVidia Sub is obligated to pay 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 also seeking to liquidate its remaining
assets.

     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. 3dfx may also seek to assign or sublease its leased
properties. In addition, unknown or contingent liabilities could require
substantial cash resources. Management cannot reasonably estimate the amount of
future obligations at this time. 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.

     Should 3dfx qualify for its final payment from nVidia Sub, 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.

RISK FACTORS

      This report contains certain forward-looking statements within the meaning
of the deferral 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, 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:

     o    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 distribution to shareholders at
          all.

     o    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.


     o    If the resolution of pending or future litigation results in greater
          than anticipated liabilities or expenses.



                                    Page 12
<PAGE>   15

     o    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.

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

     o    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, even if the asset sale is completed.

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.



                                    Page 13
<PAGE>   16

     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 and 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.

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'S COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ NATIONAL MARKET EFFECTIVE
MAY 16, 2001.

     As a result of the decline in the trading price of 3dfx's common stock,
3dfx's common was delisted effective as of the opening of business on May 16,
2001. 3dfx's common stock is currently traded in over-the-counter bulletin board
of the National Association of Securities Dealers, Inc. The delisting of 3dfx's
common stock means that, among other things, fewer investors have access to
trade 3dfx's common stock, which may reduce demand for the stock. These factors
may adversely affect 3dfx's common stock price.

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.



                                    Page 14
<PAGE>   17

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 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 480 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, or 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     3dfx's cash equivalents are exposed to financial market risks due to
fluctuations and interest rates, which may affect interest income. Due to the
short term nature of 3dfx's 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.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On December 21, 2000, CagEnt Technologies Inc. filed suit against 3dfx in
the Northern California District Federal Court. The complaint alleged patent
infringement relating to CagEnt's patent no. 5,856,829. The complaint sought 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. On
August 2, 2001, 3dfx reached a settlement with CagEnt, under which CagEnt and
3dfx agreed to release all claims against each other. 3dfx did not make or agree
to make any payment



                                    Page 15
<PAGE>   18

to CagEnt as part of the settlement. The settlement of CagEnt's claim will not
affect the contemplated liquidation and winding up of 3dfx's business pursuant
to the 3dfx plan of dissolution.

     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.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

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

       None

ITEM 5. OTHER INFORMATION

     On June 8, 2001, the 3dfx board of directors approved a proposal to fix the
authorized number of directors at five.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

          3.1  Amended and Restated By-Laws (amendment of Article III, Section 2
               to reflect reduction in size of the Board of Directors to five
               members) (filed herewith).

          10.1 Employment Agreement, dated as of June 8, 2001, by and between
               3dfx and Richard A. Heddleson(filed herewith).

     (b) Reports on Form 8-K

          (i) Current Report on Form 8-K filed on May 3, 2001 disclosing the
          completion of the sale of certain assets of 3dfx to nVidia US
          Investment Company pursuant to the Asset Purchase Agreement dated as
          of December 15, 2000, by and among 3dfx, nVidia Corporation and nVidia
          US Investment Company f/k/a Titan Acquisition Corp. No. 2
          (incorporated by reference to nVidia Corporation's Registration
          Statement on Form S-4 filed with the Securities and Exchange
          Commission on January 26, 2001).

          (ii) Amended Current Report on Form 8-K/A filed on June 29, 2001
          disclosing that pro forma information relating to the asset sale
          between 3dfx and nVidia US Investment Company f/k/a Titan Acquisition
          Corp. No. 2 pursuant to the Asset Purchase Agreement dated as of
          December 15, 2000 would not be presented because the transaction was
          reflected in 3dfx's condensed consolidated financial statements filed
          in 3dfx's Quarterly Report for the period ended April 30, 2001.

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

Dated: September 17, 2001
                                       3DFX INTERACTIVE, INC.
                                       (Registrant)

                                       By: /s/ RICHARD A. HEDDLESON
                                       ----------------------------
                                       Richard A. Heddleson
                                       Chief Financial Officer
                                       (Principal Financial Officer
                                       and Duly Authorized Officer)



                                    Page 16
<PAGE>   19

                                INDEX TO EXHIBITS



<Table>
       EXHIBIT
       NUMBER     DESCRIPTION
       -------    -----------
<S>               <C>
         3.1      Amended and Restated By-Laws (amendment of Article III,
                  Section 2 to reflect reduction in size of the Board of
                  Directors to five members)(filed herewith).

         10.1     Employment Agreement, dated as of June 8, 2001, by and between
                  3dfx and Richard A. Heddleson(filed herewith).
</Table>



                                    Page 17

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>3
<FILENAME>d90630ex3-1.txt
<DESCRIPTION>AMENDED AND RESTATED BY-LAWS
<TEXT>
<PAGE>   1

                                                                     EXHIBIT 3.1







                              AMENDED AND RESTATED

                                    BYLAWS OF

                             3DFX INTERACTIVE, INC.






<PAGE>   2

                                TABLE OF CONTENTS





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



                                        i
<PAGE>   3

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
  Section 4. Representation of Shares of Other
             Corporations...................................   11
  Section 5. Inspection of Bylaws...........................   11
  Section 6. Construction and Definitions...................   11
ARTICLE VII. -- Amendments..................................   12
  Section 1. Amendment by Shareholders......................   12
  Section 2. Amendment by Board of Directors................   12
ARTICLE VIII. -- Annual and Other Reports...................   12
  Section 1. Annual Report to Shareholders..................   12
  Section 2. Request for Financial Statements...............   12
</Table>



                                       ii
<PAGE>   4

                           AMENDED AND RESTATED BYLAWS
                                       OF
                             3DFX INTERACTIVE, INC.

                                   ARTICLE I.

                                PRINCIPAL OFFICE

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

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

                                  ARTICLE II.

                            MEETINGS OF SHAREHOLDERS

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

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

     All such notices shall be given to each shareholder entitled thereto not
less than ten (10) days nor more than sixty (60) days before each annual
meeting. Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the United States mail or delivered to a
common carrier for transmission to the recipient or actually transmitted by the
person giving the notice by electronic means to the recipient or sent by other
means of written communication. An affidavit of mailing of any such notice in
accordance with the foregoing provisions, executed by the secretary, assistant
secretary or transfer agent of the corporation shall be prima facie evidence of
the giving of the notice.

     Such notices shall state:

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

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



                                       1
<PAGE>   5

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

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

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

     SECTION 3. Special Meetings. Special meetings of the shareholders, for the
purpose of taking any action permitted by the shareholders under the California
General Corporation Law, may be called at any time by the Board or, subject to
the provisions of this Section 3, by the Chair of the Board, the President, or
one or more shareholders holding not less than ten percent (10%) of the votes
entitled to be cast at the meeting. For a special meeting of the shareholders to
be properly brought by any person or persons other than the Board pursuant to
the preceding sentence, the person or persons calling the meeting must have
given timely notice thereof in writing to the Secretary of the Corporation and
the business proposed to be conducted at such meeting must otherwise be a proper
matter for shareholder action. To be timely, such notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the date of the meeting proposed by the person
or persons calling the meeting. Such notice shall set forth (a) the proposed
date and time of the meeting, (b) as to each person whom the person or persons
calling the meeting propose to nominate for election or reelection as a director
all information relating to such nominee that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (or any successor thereto) and Rule 14a-11
thereunder (or any successor thereto) (including such nominee's written consent
to being named in the proxy statement as a nominee and to serving as a director
if elected); (c) as to any other business that the person or persons calling the
meeting proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
person or persons and any other person or entity, if any, on whose behalf the
proposal is made; and (d) as to any shareholders giving the notice (i) the name
and address of such shareholders, as they appear on the Corporation's books and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholders. Upon notice meeting the
requirements of this Section 3 by any person or persons entitled to call a
special meeting of shareholders, the Corporation shall cause notice to be given
to shareholders entitled to vote that a meeting will be held. Except in special
cases where other express provision is made by statute, notice of special
meetings shall be given in the same manner as for annual meetings of
shareholders. In addition, to the matters required by items (i), and, if
applicable, (ii) and (iii) of the preceding Section, notice of any special
meeting shall specify the general nature of the business to be transacted, and
no other business may be transacted at such meeting.

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

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

     When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken, except that notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at an adjourned meeting in



                                       2
<PAGE>   6

accordance with Section 2 of this Article II if a new record date for the
adjourned meeting is fixed by the board of directors, or if the adjournment is
for more than forty-five (45) days from the date set for the original meeting.
At any adjourned meeting the corporation may transact any business which might
have been transacted at the original meeting.

     SECTION 6. Record Date; Cumulative Voting. Unless a record date for voting
purposes be fixed as provided in Section 1 of Article VI of these bylaws, then,
subject to the provisions of sections 702 to 704, inclusive, of the General
Corporation Law, only persons in whose names shares entitled to vote stand on
the stock records of the corporation at the close of business on the business
day next preceding the day on which notice of the meeting is given or if such
notice is waived, at the close of business on the business day next preceding
the day on which the meeting of shareholders is held (except that the record
date for shareholders entitled to give consent to corporate action without a
meeting shall be determined in accordance with Section 8 of this Article II)
shall be entitled to receive notice of and to vote at such meeting, and such day
shall be the record date for such meeting. Any shareholder entitled to vote on
any matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or vote them against the proposal (other than
elections of directors), but if the shareholder fails to specify the number of
shares such shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
such shareholder is entitled to vote. Such vote may be via voice or by ballot;
provided, however, that all elections for directors must be by ballot upon
demand made by a shareholder at any election and before the voting begins. The
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
shall constitute at least a majority of the required quorum) shall be the act of
the shareholders except as may otherwise be provided by (i) Section 4 of this
Article II, (ii) the cumulative voting provisions for the election of directors
as stated in this section below, and (iii) the General Corporation Law or the
articles of incorporation of this corporation (including without limitation the
provision that, upon the vote of the holder or holders of shares representing
fifty percent or more of the voting power of this corporation, this corporation
may elect voluntarily to wind up and dissolve). Subject to the requirements of
the next sentence, every shareholder entitled to vote at any election for
directors may cumulate his votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which his shares are normally entitled, or distribute his votes on the same
principle among as many candidates as he shall think fit. No shareholder shall
be entitled to cumulate votes unless such candidate or candidates' names have
been placed in nomination prior to the voting and the shareholder has given
notice at the meeting prior to the voting of the shareholder's intention to
cumulate his votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. The
candidates receiving the highest number of votes of shares entitled to be voted
for them, up to the number of directors to be elected, shall be elected.

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

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

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



                                       3
<PAGE>   7

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

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

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

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

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

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

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



                                       4
<PAGE>   8

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

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

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

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

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

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

     For nominations or other business to be properly brought before a
shareholders meeting by a shareholder pursuant to clause (c) of the preceding
sentence, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for shareholder action. To be timely, a shareholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the meeting; provided,
however, that in the event that less than 65 days



                                       5
<PAGE>   9

notice of the meeting is given to shareholders, notice by the shareholder to be
timely must be so delivered not earlier than the close of business on the
seventh (7th) day following the day on which the notice of meeting was mailed.
In no event shall the public announcement of an adjournment of a shareholders
meeting commence a new time period for the giving of a shareholder's notice as
described above. Such shareholder's notice shall set forth (a) as to each person
whom the shareholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (or any successor thereto) and
Rule 14a-11 thereunder (or any successor thereto) (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the shareholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such shareholder, as they appear on the Corporation's books, and of
such beneficial owner, and (ii) the class and number of shares of the
Corporation which are owned beneficially and of record by such shareholder and
such beneficial owner. Notwithstanding any provision herein to the contrary, no
business shall be conducted at a shareholders meeting except in accordance with
the procedures set forth in this Section 11.

                                  ARTICLE III.

                               BOARD OF DIRECTORS

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

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

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

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

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

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

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



                                       6
<PAGE>   10

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

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

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

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

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

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

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

     SECTION 2. Number of Directors. The number of directors of the corporation
shall be not less than five (5) nor more than nine (9). The exact number of
directors shall be five (5) until changed, within the limits specified above, by
a bylaw amending this Section 3.2, duly adopted by the board of directors or by
the shareholders. The indefinite number of directors may be changed, or a
definite number may be fixed without provision for an indefinite number, by a
duly adopted amendment to the articles of incorporation or by an amendment to
this bylaw duly adopted by the vote or written consent of holders of a majority
of the outstanding shares entitled to vote; provided, however, that an amendment
reducing the fixed number of or the minimum number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by written
consent, are equal to more than sixteen and two-thirds percent (16 2/3%) of the
outstanding shares entitled to vote thereon. No amendment may change the stated
maximum number of authorized directors to a number greater than two (2) times
the stated minimum number of directors minus one (1). No reduction of the
authorized number of directors shall have the effect of removing any director
before the director's term of office expires.

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

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

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

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

     Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors of
the corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the board of directors accepts the resignation of a
director tendered to take effect at a future time, the board or the



                                       7
<PAGE>   11

shareholders shall have power to elect a successor to take office when the
resignation is to become effective.

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


                                   ARTICLE IV.

                              MEETINGS OF DIRECTORS

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

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

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

     SECTION 4. Quorum. Presence of a majority of the authorized number of
directors at a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
sections 310, 311 and 317 of the General Corporation Law. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, provided that any action taken is approved by at
least a majority of the required quorum for such meeting. A majority of the
directors present, whether or not a quorum is present, may adjourn any meeting
to another time and place. If the meeting is adjourned for more than twenty-four
(24) hours, notice of any adjournment to another time or place (other than
adjournments until the time fixed for the next regular meeting of the board of
directors, as to which no notice is required) shall be given



                                       8
<PAGE>   12

prior to the time of the adjourned meeting to the directors who were not present
at the time of the adjournment.

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

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

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

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

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

                                   ARTICLE V.

                                    OFFICERS

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

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

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


                                       9
<PAGE>   13

further powers and shall perform such further duties as may be prescribed for
him by the board of directors.

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

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

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

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

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

                                   ARTICLE VI.

                                  MISCELLANEOUS

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

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


                                       10
<PAGE>   14

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

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

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

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

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

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

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

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

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

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

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



                                       11
<PAGE>   15

                                  ARTICLE VII.

                                   AMENDMENTS

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


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

                                  ARTICLE VIII.

                            ANNUAL AND OTHER REPORTS

     SECTION 1. Annual Report to Shareholders.

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

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

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


                                       12

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>d90630ex10-1.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT - RICHARD A. HEDDLESON
<TEXT>
<PAGE>   1
                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         This AGREEMENT is entered into as of June 8, 2001, but shall have
effect from April 19, 2001 (the "Effective Date"), by and between Richard A.
Heddleson ("Executive") and 3dfx Interactive, Inc., a California corporation
(the "Company"). In consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:

         1. DUTIES AND SCOPE OF EMPLOYMENT.

                  (a) Position and Duties. For the term of his employment under
this Agreement, the Company agrees to employ Executive as its Chief Financial
Officer, reporting directly to the Chief Executive Officer ("CEO") and the Board
of Directors of the Company. Executive shall have such duties and authority as
are commensurate with one employed in his position, as may be customarily
incident to such position, and as may be assigned to Executive from time to
time. Executive shall diligently, to the best of his ability, and with the
highest degree of good faith and loyalty, perform all such duties incident to
his position and use his best efforts to promote the interests of the Company.
If the Company's assets are transferred to a liquidating trust (the "Trust"),
Executive agrees to provide services to the Trust and/or serve as trustee of the
Trust, with such duties and authority as are set forth in the Trust documents,
and on such terms as are mutually acceptable to the Executive and the Company
(including the trustee's compensation for serving as such).

                  (b) Obligations to the Company. During the Employment Period,
Executive shall devote his full time and energy to the business of the Company
and shall not be engaged in any competitive business activity without the
express written consent of the Board. Executive shall comply with the Company's
policies and rules, as they may be in effect from time to time during the term
of his employment.

                  (c) No Conflicting Obligations. Executive represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. Executive represents and warrants that he will not use or disclose,
in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person or entity. Executive represents and warrants to the Company that he
has returned all property and confidential information belonging to any prior
employers.

         2. TERM OF EMPLOYMENT.

                  (a) Basic Rule. The Company agrees to continue Executive's
employment, and Executive agrees to remain in employment with the Company, from
the Effective Date until the date when Executive's employment terminates
pursuant to Subsection 2(b) below (the "Employment Period"). Executive's
employment with the Company shall be "at will," which means that either
Executive or the Company may terminate Executive's employment at any time, for
any reason, with "Cause" or "Without Cause."

                  (b) Termination. The Company or Executive may terminate
Executive's employment at any time for any reason (or no reason), and with
"Cause" or "Without Cause," by giving the other party fourteen (14) days' notice
in writing. Executive's employment shall terminate automatically in the event of
his death. If not earlier terminated pursuant to the preceding sentences, the
Employment Period shall terminate upon the complete liquidation and dissolution
of the Company.

         3. CASH AND INCENTIVE COMPENSATION.

                  (a) Salary. The Company shall pay Executive as compensation
for his services the sum of Two Hundred and Seventy Five Thousand Dollars
($275,000) ("Base Salary Amount"), less applicable deductions and withholdings.
The Executive acknowledges and agrees that the Employment Period may extend
beyond a twelve-month period, and that the compensation figure set forth above
is intended to compensate him both for such twelve-month period and any portion
of the Employment Period beyond such twelve-month period. Executive's
compensation shall be payable in accordance with the Company's standard payroll
schedule over the twelve-month period commencing on the Effective Date, subject
to Section 4 pertaining to termination of Executive's employment.

                  (b) Stock Options. As of June 8, 2001, Executive was granted
options to acquire a total of 800,000 shares of the Company's common stock at a
per share exercise price of $0.38 pursuant to the Company's Employee Stock Plan
(the "Plan"). The terms of Executive's stock options are set forth in a separate
Notice of Option Grant.



<PAGE>   2

                  (c) Vacation and Executive Benefits. During the term of his
employment, Executive shall be eligible for vacation each year, in accordance
with the Company's standard policy for senior executives, as it may be amended
from time to time. Executive shall be eligible during his Employment Period to
participate in any employee benefit plans generally available to the other
senior executives of the Company, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan. The Company
reserves the right to amend, modify or terminate any employee benefits at any
time for any reason.

                  (d) Business Expenses. During the term of his employment,
Executive shall be authorized to incur necessary and reasonable travel and other
business expenses in connection with his duties hereunder, pursuant to and
consistent with policies and procedures as established by the Company and as may
be modified from time-to-time. The Company shall reimburse Executive for such
expenses upon presentation of an itemized account and appropriate supporting
documentation, in accordance with Company policy and procedures.

         4. PAYMENTS, BENEFITS AND ACCELERATION FOLLOWING TERMINATION.

                  (a) Termination without Cause. Subject to Section 4(e) of this
Agreement, if the Company terminates Executive's employment "Without Cause",
then Executive shall receive:

                           (i)      If the Employment Period terminates prior to
                                    April 19, 2002 (the "Anniversary Date"),
                                    then a single lump-sum payment equal to the
                                    Base Salary Amount, less all base salary
                                    compensation payments already made to
                                    Executive;

                           (ii)     Immediate vesting of his stock option; and

                           (iii)    Payment of Executive's premiums for health
                                    insurance (not to exceed $350 per month)
                                    through the Anniversary Date.

                  (b) Resignation or Termination for "Cause." In the event that:
(i) Executive's employment is terminated by the Company at any time for "Cause,"
or (ii) Executive resigns his employment for any reason, then upon the
termination of Executive's employment, Executive will be paid his base salary
and all unused vacation earned through the date of termination, but nothing
else, and all stock vesting and benefits will cease on Executive's date of
termination.

                  (c) Release Required. As a prior condition to Executive
receiving any payment, benefit or stock acceleration under Section 4(a) of this
Agreement, Executive and the Company shall execute a full mutual release of
known and unknown claims against each other, their successors, affiliates,
employees, agents, advisors and representatives, in mutually agreeable form.

                  (d) Termination Due to Death or Disability. If Executive's
employment is terminated due to death or Disability, then Executive, or
Executive's estate, will receive payment for all Base Salary and accrued but
unused vacation earned through the date of termination and immediate vesting of
50% of his unvested stock options.

                  (e) Definitions.

                           (i)      Termination for "Cause." For all purposes
                                    under this Agreement, a termination for
                                    "Cause" shall mean a termination of
                                    Executive's employment for any of the
                                    following reasons: (1) misconduct; (2)
                                    misappropriation of the assets of the
                                    Company; (3) conviction of, or a plea of
                                    "guilty" or "no contest" to a felony under
                                    the laws of the United States or any state
                                    thereof; (4) committing an act of fraud
                                    against, or the misappropriation of property
                                    belonging to, the Company; (5) a material
                                    breach of any confidentiality or proprietary
                                    information agreement between Executive and
                                    the Company; or (6) continued unsatisfactory
                                    performance after being given a written
                                    warning and at least thirty (30) days to
                                    improve performance. A termination of
                                    Executive's employment in any other
                                    circumstance or for any other reason will be
                                    a termination "Without Cause."

                           (ii)     "Disability." For all purposes under this
                                    Agreement, "Disability" means Executive's
                                    inability to carry out his material duties
                                    under this Agreement for more than six (6)



                                      -2-
<PAGE>   3

                                    months in any twelve (12) consecutive month
                                    period as a result of incapacity due to
                                    mental or physical illness or injury.

         5. SUCCESSORS.

                  (a) Company's Successors. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.

                  (b) Executive's Successors. This Agreement and all rights of
Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

         6. ARBITRATION. Executive and the Company agree to arbitrate before a
neutral arbitrator any and all disputes or claims arising from or relating to
Executive's employment with the Company, or the termination of that employment,
including disputes or claims against any current or former agent or employee of
the Company.

                  (a) Arbitrable Claims. Arbitrable disputes or claims include
those which arise in tort, contract, or pursuant to a statute, regulation, or
ordinance now in existence or which may in the future be enacted or recognized,
including, but not limited to, the following claims:

                           (i)      claims for fraud, promissory estoppel,
                                    fraudulent inducement of contract or breach
                                    of contract or contractual obligation,
                                    whether such alleged contract or obligation
                                    be oral, written, or express or implied by
                                    fact or law;

                           (ii)     claims for wrongful termination of
                                    employment, violation of public policy and
                                    constructive discharge, infliction of
                                    emotional distress, misrepresentation,
                                    interference with contract or prospective
                                    economic advantage, defamation, unfair
                                    business practices, and any other tort or
                                    tort-like causes of action relating to or
                                    arising from the employment relationship or
                                    the formation or termination thereof;

                           (iii)    claims of discrimination, harassment, or
                                    retaliation under any and all federal,
                                    state, or municipal statutes, regulations,
                                    or ordinances that prohibit discrimination,
                                    harassment, or retaliation in employment, as
                                    well as claims for violation of any other
                                    federal, state, or municipal statute,
                                    regulation, or ordinance, except as set
                                    forth herein; and

                           (iv)     claims for non-payment or incorrect payment
                                    of wages, commissions, bonuses, severance,
                                    employee fringe benefits, stock options and
                                    the like, whether such claims be pursuant to
                                    alleged express or implied contract or
                                    obligation, equity, the California Labor
                                    Code, the Fair Labor Standards Act, the
                                    Employee Retirement Income Securities Act,
                                    and any other federal, state, or municipal
                                    laws concerning wages, compensation or
                                    employee benefits.

                  (b) Non-Arbitrable Claims. Executive and the Company further
understand and agree that the following disputes and claims are not covered by
the arbitration agreement contained in this Section 7 and shall therefore be
resolved as required by the law then in effect:

                           (i)      claims for workers' compensation benefits,
                                    unemployment insurance, or state or federal
                                    disability insurance;

                           (ii)     claims concerning the validity,
                                    infringement, enforceability, or
                                    misappropriation of any trade secret, patent
                                    right, copyright, trademark, or any other
                                    intellectual or confidential property held
                                    or sought by Employee or the Company; and

                           (iii)    any other dispute or claim that has been
                                    expressly excluded from arbitration by
                                    statute.

                  (c) Relief and Review. The Arbitrator shall have the authority
to award any relief authorized by law in connection with the asserted claims or
disputes and shall issue a written Award that sets forth the essential findings
and



                                      -3-
<PAGE>   4

conclusions on which the Award is based. The Arbitrator's Award shall be final
and binding on both the Company and Employee and it shall provide the exclusive
remedy(ies) for resolving any and all disputes and claims subject to arbitration
under this Agreement. The Arbitrator's Award shall be subject to correction,
confirmation, or vacation, as provided by California Code of Civil Procedure
Section 1285.8 et seq and any applicable California case law setting forth the
standard of judicial review of arbitration Awards.

                  (d) Location and Rules. The arbitration shall be conducted in
Santa Clara County, California, or such location as is mutually agreeable to the
parties, in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association; provided, however, that the
Arbitrator shall allow the discovery authorized by California Code of Civil
Procedure Section 1283.05 or any other discovery required by California law.
Also, to the extent that any of the National Rules for the Resolution of
Employment Disputes or anything in this Agreement conflicts with any arbitration
procedures required by California law, the arbitration procedures required by
California law shall govern.

                  (e) Costs and Attorneys' Fees. The Company will bear the
arbitrator's fee and any other type of expense or cost that Executive would not
be required to bear if he were free to bring the dispute(s) or claim(s) in court
as well as any other expense or cost that is unique to arbitration. Executive
and the Company shall each bear their own attorneys' fees incurred in connection
with the arbitration, and the arbitrator will not have authority to award
attorneys' fees unless a statute or contract at issue in the dispute authorizes
the award of attorneys' fees to the prevailing party, in which case the
arbitrator shall have the authority to make an award of attorneys' fees as
required or permitted by applicable law. If there is a dispute as to whether the
Company or Executive is the prevailing party in the arbitration, the Arbitrator
will decide this issue.

         7. MISCELLANEOUS PROVISIONS.

                  (a) Notice. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by overnight courier, U.S.
registered or certified mail, return receipt requested and postage prepaid.
Mailed notices shall be addressed to Executive at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.

                  (b) Modifications and Waivers. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by Executive and by an authorized
officer of the Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.

                  (c) Whole Agreement. No other agreements, representations or
understandings (whether oral or written) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter of this Agreement. This Agreement and any proprietary
information agreement between the Company and the Executive, and applicable
stock option agreements and stock plans, contain the entire understanding of the
parties with respect to the subject matter hereof.

                  (d) Taxes. All payments made under this Agreement shall be
subject to reduction to reflect taxes or other charges required to be withheld
by law.

                  (e) Choice of Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California (except provisions governing the choice of law).

                  (f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

                  (g) No Assignment. This Agreement and all rights and
obligations of Executive hereunder are personal to Executive and may not be
transferred or assigned by Executive at any time. The Company may assign its
rights under this Agreement to any entity that assumes the Company's obligations
hereunder in connection with any sale or transfer of all or a substantial
portion of the Company's assets to such entity.

                  (h) Headings. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.



                                      -4-
<PAGE>   5

                  (i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.


                                       EXECUTIVE



                                       /s/ Richard A. Heddleson
                                       -----------------------------------------
                                       RICHARD A. HEDDLESON


                                       3DFX INTERACTIVE, INC.



                                       By: /s/ Gordan Campbell
                                          --------------------------------------
                                       Name: GORDON CAMPBELL
                                            ------------------------------------
                                       Title: CHAIRMAN OF THE BOARD
                                             -----------------------------------



                                      -5-

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