3DFX INTERACTIVE INC
EXHIBIT 10.7
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>8
<FILENAME>f68798ex10-7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.7


                              EMPLOYMENT AGREEMENT


                          (AS AMENDED FEBRUARY 1, 2001)


        This AGREEMENT amends, replaces and supercedes that certain Employment
Agreement entered into as of November 10, 2000 (the "Effective Date"), by and
between Scott D. Sellers ("Executive") and 3dfx Interactive, Inc., a California
corporation (the "Company"), and is effective as of February 1, 2001 (the
"Amendment Date"). 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 Technical Officer and Founder,
                        reporting directly to the Chief Executive Officer
                        ("CEO"), or person designated by the CEO. 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. Executive agrees
                        that, until the closing of the Asset Sale, he will
                        devote substantially all of his business efforts toward
                        enhancing shareholder return through performing those
                        duties set forth on Schedule 1 to this Agreement.

                (b)     Obligations to the Company. During the Employment Term,
                        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 CEO. 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



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                        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." Any
                        contrary representations, which may have been made to
                        Executive shall be superseded by this Agreement. This
                        Agreement shall constitute the full and complete
                        agreement between Executive and the Company regarding
                        the "at will" nature of Executive's employment, which
                        may only be changed in an express written agreement
                        signed by Executive and the Chief Executive Officer.

                (b)     Termination. The Employment Period shall end on the
                        earlier of (i) the closing of the Asset Sale; (ii) upon
                        Executive's death or Disability; (iii) the date on which
                        Executive resigns his employment for any reason in
                        accordance with this subsection 2(b); or (iv) the date
                        on which the Company terminates Executive's employment
                        in accordance with this subsection 2(b). Subject to the
                        provisions contained within this Agreement, either
                        Executive or the Company may terminate Executive's
                        employment at any time for any reason (or no reason),
                        and with or without Cause upon giving fourteen (14)
                        days' notice in writing.

        3.      Cash and Incentive Compensation.

                (a)     Base Salary. The Company shall pay Executive as
                        compensation for his services an annualized base salary
                        of Two Hundred Sixty Thousand Dollars ($260,000), less
                        applicable deductions and withholdings, payable in
                        accordance with the Company's standard payroll schedule.
                        The compensation specified in this Subsection (a),
                        together with any increases in such compensation that
                        the Company may grant from time to time, are referred to
                        in this Agreement as "Base Salary."

                (b)     Bonus. Executive will be eligible to earn an annualized
                        bonus (the "Target Bonus") for the 2001 fiscal year
                        equal to forty percent (40%) of his Base Salary, less
                        applicable deductions and withholdings.

                (c)     Stock Options. As of the Effective Date of this
                        Agreement, Executive has been granted stock options
                        pursuant to the Company's Stock Option Plan (the
                        "Plan"), which are summarized in Exhibit A to this
                        Agreement (the "Options"). Executive's Options shall
                        continue to vest in accordance with



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                        the Plan and the stock option agreements between the
                        Company and Executive evidencing such Options.

                (d)     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 term 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.

                (e)     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 and Benefits Following Termination.

                (a)     Termination without Cause. If the Executive remains
                        employed through the closing of the Asset Sale (or if
                        the Company terminates his employment without Cause
                        prior to such date), the Executive shall receive:

                        (i)     continued severance pay (the "Severance Pay") in
                                an amount equal to his Base Salary in accordance
                                with the Company's standard payroll practices
                                until the earlier of (A) the Lump Sum Payment
                                Date, (B) the date that is twelve (12) months
                                following the termination of Executive's
                                employment, or (C) the date on which Executive
                                commences full-time employment for any person,
                                venture, partnership or corporate entity; and

                        (ii)    payment (or reimbursement) of COBRA premiums
                                (or, if COBRA coverage is not available,
                                reimbursement of premiums paid for other medical
                                insurance in an amount not to exceed the COBRA
                                premium) for twelve (12) months following the
                                termination date of Executive's employment.

                (b)     Lump Sum Payment. If the Executive remains employed
                        through the closing of the Asset Sale (or if the Company
                        terminates his employment without Cause prior to such
                        date), and if the closing of the Asset Sale occurs
                        within twelve (12) months following the Amendment Date,
                        then



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                        the Executive shall be entitled to receive a Lump Sum
                        payment (the "Lump Sum Payment") equal to the sum of (i)
                        Executive's Base Salary and (ii) 50% of Executive's
                        Target Bonus, less applicable deductions and
                        withholdings; reduced by the Base Salary and Severance
                        Pay paid to the Executive during the period from the
                        Amendment Date through the Lump Sum Payment Date. The
                        Lump Sum Payment Date shall be the date that the Company
                        shall have fully paid or caused to be paid or otherwise
                        provided for (in a manner satisfactory to NVIDIA) all
                        Liquidated Claims. Upon the Lump Sum Payment Date,
                        Executive's Severance Pay under Section 4(a)(i) shall
                        cease, and he shall receive the Lump Sum Payment.

                (c)     Resignation or Termination for "Cause." If Executive
                        terminates his employment for any reason or no reason,
                        or if the Company terminates Executive's employment for
                        "Cause," Executive will be paid his Base Salary and for
                        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.

                (d)     Release Required. As a prior condition to Executive
                        receiving any payment or benefit under Sections 4(a)
                        and/or 4(b) of this Agreement, Executive shall execute a
                        full release of known and unknown claims against the
                        Company, its successors, affiliates, employees, agents,
                        advisors and representatives, in a form designated by
                        the Company.

                (e)     Condition of Non-competition.

                        (i)     Termination Following a Change of Control. If
                                required by a successor company, Executive will
                                not engage in any Competitive Activity for a
                                period of one (1) year following a Change in
                                Control.

                        (ii)    Termination Outside a Change of Control. During
                                the one (1) year following termination of his
                                employment (the "Continuation Period"),
                                Executive shall not engage in any "Competitive
                                Activity" without first notifying the Company of
                                the contemplated activity. Executive agrees that
                                if there is any reasonable question regarding
                                whether or not a contemplated activity would be
                                a Competitive Activity, Executive will consult
                                with the Board before engaging in the
                                contemplated activity. The Compensation
                                Committee of the Board will determine in its
                                sole discretion whether the activity
                                contemplated by Executive is a Competitive
                                Activity and, if it so determines, Executive
                                will forfeit his right to any and all continued
                                payments and benefits under Section 4(a) of this
                                Agreement if he proceeds to engage in the
                                Competitive Activity during the Continuation
                                Period.



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<PAGE>   5

                (f)     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: (i)
                        payment for all Base Salary and accrued but unused
                        vacation earned through the date of termination; and
                        (ii) a lump-sum payment equal to the pro-rata portion of
                        Executive's full Target Bonus, based on Executive's
                        length of service during the year in which Executive's
                        employment is terminated due to death or Disability.

                (g)     Definitions.

                        (i)     "Asset Sale." The sale of certain assets of the
                                Company pursuant to the Asset Purchase Agreement
                                dated as of December 15, 2000 with NVIDIA
                                Corporation.

                        (ii)    "Change of Control." The parties agree that the
                                closing of the sale of certain assets of the
                                Company pursuant to the Asset Purchase Agreement
                                dated as of December 15, 2000 with NVIDIA
                                Corporation will constitute a Change of Control.
                                For all purposes under this Agreement, "Change
                                of Control" shall mean (1) a merger or
                                consolidation in which securities possessing at
                                least fifty percent (50%) of the total combined
                                voting power of the Company's outstanding
                                securities are transferred to a person or
                                persons different from the persons holding those
                                securities immediately prior to such
                                transaction, or (2) the sale, transfer or other
                                disposition of all or substantially all of the
                                Company's assets in complete liquidation or
                                dissolution of the Company.

                        (iii)   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."

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



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<PAGE>   6

                        (v)     "Competitive Activity." For the purposes of this
                                Agreement, a "Competitive Activity" means any
                                activity in which Executive directly or
                                indirectly provides services of any kind or
                                nature (whether or not Executive is compensated
                                for such services), including, but not limited
                                to, Executive working in an employment, advisory
                                or consulting capacity, for any Competitor of
                                the Company.

                        (vi)    "Competitor." For purposes of this Agreement,
                                "Competitor" is defined as any company involved
                                in the design and creation of 3D graphics,
                                animation and/or effects for use in
                                entertainment, or educational. Currently, the
                                Competitor's list includes, but is not limited
                                to, 3d Labs, ATI, S3, Maxtrox and any of their
                                successors or affiliates. During the
                                Continuation Period, the Company may reasonably
                                add other companies to the Competitors list.

                        (vii)   "Liquidated Claims." For purposes of this
                                Agreement, "Liquidated Claims" mean debts,
                                obligations or liabilities of any nature that
                                are fixed and ascertainable in amount, of the
                                type that would be required to be disclosed on a
                                balance sheet prepared in accordance with GAAP,
                                but regardless of whether such debt, obligation
                                or liability is immediately due and payable. Any
                                unknown, undisclosed, unasserted, contingent,
                                conditional, vicarious or derivative claims
                                shall not be considered "Liquidated Claims."

        5.      Non-Solicitation and Non-Disclosure.

                (a)     Non-Solicitation. During the period commencing on the
                        Effective Date of this Agreement and continuing until
                        the second anniversary of the date when Executive's
                        employment terminates for any reason, Executive shall
                        not directly or indirectly, personally or through
                        others, solicit or encourage, or attempt to solicit or
                        encourage (on Executive's own behalf or on behalf of any
                        other person or entity) for hire any employee or
                        consultant of the Company or any of the Company's
                        affiliates.

                (b)     Non-Disclosure. As a condition of employment, Executive
                        will execute the Company's standard Proprietary
                        Information Agreement, a copy of which is attached.

        6.      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



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                        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.

        7.      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.



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                (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
                                in which injunctive relief is sought; 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 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



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                        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.

                (f)     WAIVER OF RIGHT TO JURY. EXECUTIVE AND THE COMPANY
                        UNDERSTAND AND AGREE THAT THE ARBITRATION OF DISPUTES
                        AND CLAIMS UNDER THIS AGREEMENT SHALL BE INSTEAD OF A
                        TRIAL BEFORE A COURT OR JURY OR A HEARING BEFORE A
                        GOVERNMENT AGENCY.

        8.      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, the
                        Proprietary Information Agreement, 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).



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                (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)     280G. Executive understands and acknowledges that
                        certain benefits provided for under this Agreement may
                        constitute "parachute payments" within the meaning of
                        Section 280G of the Internal Revenue Code of 1986, as
                        amended, (the "Code"). Such parachute payments may be
                        subject to the excise tax imposed by Section 4999 of the
                        Code. Executive acknowledges and agrees that he has and
                        will review any tax consequences which may arise as the
                        result of any such parachute payments with his own tax
                        advisors and that he is relying and will rely solely on
                        such advisors and not on any representations of the
                        Company or any of its agent with regard to the possible
                        tax implications of receiving such parachute payments.
                        Executive further acknowledges and agrees that he is
                        responsible for his own tax liability which may arise as
                        the result of any such payments.

                (i)     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.

                (j)     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.



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        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/ Scott D. Sellers
                                       -----------------------------------------
                                       SCOTT D. SELLERS


                                       3DFX INTERACTIVE, INC.



                                       By:     /s/ Alex M. Leupp
                                          --------------------------------------
                                       Name:   ALEX M. LEUPP
                                            ------------------------------------
                                       Title:  PRESIDENT AND CHIEF EXECUTIVE
                                               OFFICER
                                             -----------------------------------



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