3DFX INTERACTIVE INC
EMPLOYMENT AGREEMENT - RICHARD A. HEDDLESON
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>d90630ex10-1.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT - RICHARD A. HEDDLESON
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                                                                    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)



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                                    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



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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.



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                  (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
                                             -----------------------------------



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