THE 3DO COMPANY
SECURED SUBSEQUENT NOTE
$_____________________ [insert date]
Redwood City, California
FOR VALUE RECEIVED The 3DO Company, a California corporation
("Company") promises to pay to Xxxxxxx X. Xxxxxxx, III ("Investor"), or his
registered assigns, the principal sum of _____________________________________
($_______________), or such lesser amount as shall equal the outstanding
principal amount hereof, together with interest from the date of this Note on
the unpaid principal balance at a rate equal to nine and one-half percent (9
1/2%) per annum, computed on the basis of the actual number of days elapsed and
a year of 365 days. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and payable
(i) upon five (5) days prior written notice by Investor to Company, or (ii)
when, upon or after the occurrence of an Event of Default (as defined below),
such amounts are declared due and payable by Investor or made automatically due
and payable in accordance with the terms hereof. In addition, this Note shall be
subject to prepayment as set forth below. Company will make all payments due
under this Note in immediately available United States dollars, by 11:00 A.M.
(California time) on the date such payment is due in the manner and at the
address for such purpose specified by Investor from time to time in writing.
The following is a statement of the rights of Investor and the
conditions to which this Note is subject, and to which Investor, by the
acceptance of this Note, and Company agree:
1. Definitions. As used in this Note, the following capitalized terms
have the following meanings:
(a) "Business Day" means any day other than a Saturday, Sunday
or public holiday under the laws of California.
(b) "Change of Control" means a merger, stock transfer or
issuance of voting securities, in one or more related transactions, which
results in Company's or Parent's, as applicable, stockholders before the
transaction(s) owning voting securities after the transactions(s) representing
the right to elect less than half of the directors of Company or Parent, as
applicable, (in a reverse merger, stock transfer or issuance of voting
securities) or successor entity (in a forward merger or the sale of all or
substantially all of Company's or Parent's assets, in one or more transactions).
(c) "Event of Default" is defined in Section 6.
(d) "Lien" means, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including the interest of a vendor or
lessor under a conditional sale agreement, capital lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
(e) "Note and Warrant Purchase Agreement" means the Note and
Warrant Purchase Agreement by and among Parent, Company and Investor dated as of
December 27, 2002.
(f) "Material Adverse Effect" means a material adverse effect
on (a) the business, prospects, assets, operations or financial condition of
Company or Parent; (b) the ability of Company to pay or perform the Obligations
in accordance with the terms of this Note; or (c) the rights and remedies of
Investor under this Note, the other Transaction Documents or any related
document, instrument or agreement.
(g) "Parent" means The 3DO Company, a Delaware corporation.
(h) "Person" means an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability
company, an unincorporated association, a joint venture or other entity or
governmental authority.
(i) "Preferred Stock" means Parent's Series A Convertible
Preferred Stock, par value $0.01, as described in the Parent's Certificate of
Designations filed with the Secretary of State of Delaware as of December 10,
2001 ("Parent's Certificate of Designations").
(j) "Security Agreement" means the Amended and Restated
Security Agreement dated as of December 27, 2002 between Company and Investor.
(k) "Transaction Documents" means this Note, the Note and
Warrant Purchase Agreement, other notes issued pursuant to the Note and Warrant
Purchase Agreement, the Warrant, the Registration Rights Agreement dated
December 27, 2002 between Parent and Investor, the Security Agreement, and each
UCC financing statement or notice of security interest filed in connection with
the Security Agreement.
(l) "Warrant" means the warrant dated as of December 27, 2002
issued by Parent to Investor.
All capitalized terms not otherwise defined herein shall have the
respective meanings given in the Security Agreement or the Note and Warrant
Purchase Agreement.
2. Interest. Accrued interest on this Note shall be payable ten days
after the last day of each calendar quarter until the outstanding principal
amount hereof shall be paid in full, with the first such payment due ten days
after [insert date of first quarter end after issuance]. Interest shall be
payable in cash.
3. Prepayment.
(a) Optional Prepayment. Upon five (5) days prior written
notice to Investor, Company may prepay this Note in whole or in part; provided
that any such prepayment will be
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applied first to the payment of expenses due under this Note, second to interest
accrued on this Note and third, if the amount of prepayment exceeds the amount
of all such expenses and accrued interest, to the payment of principal of this
Note.
(b) Mandatory Prepayment on Change of Control. Without
limiting Investor's right to demand prepayment at any time, Company must prepay
this Note in whole, including all expenses and accrued interest, concurrently
with the closing of any transaction that constitutes a Change of Control.
4. [Intentionally Omitted]
5. Certain Covenants.
(a) Use of Proceeds. Company will use the proceeds from the
sale of the Note for general corporate purposes and working capital.
(b) Financial Information. Company agrees to send the
following to Investor: (i) unless the following are filed with the SEC through
XXXXX and are available to the public through XXXXX, within two (2) Business
Days after the filing thereof with the SEC, a copy of Parent's Annual Reports on
Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K
and any registration statements (other than on Form S-8) or amendments filed
pursuant to the Securities Act of 1933, as amended; (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by Company or
Parent; and (iii) copies of any notices and other information made available or
given to the stockholders of Parent generally, contemporaneously with the making
available or giving thereof to the stockholders.
(c) Notice of Certain Events. Company shall provide Investor
with prompt written notice of the occurrence of any of the following events:
(i) Breaches of Covenants. Company or Parent shall
fail to observe or perform any covenant, obligation, condition or agreement
contained in this Note or the other Transaction Documents; or
(ii) Representations and Warranties. Any
representation, warranty, certificate, or other statement (financial or
otherwise) made or furnished by or on behalf of Company or Parent to Investor in
writing in connection with this Note or any of the other Transaction Documents,
or as an inducement to Investor to enter into this Note and the other
Transaction Documents, shall be false, incorrect, incomplete or misleading in
any material respect when made or furnished; or
(iii) Other Payment Obligations. Either (A) a
"Triggering Event" (as defined in the Parent's Certificate of Designations)
shall have occurred with respect to the Preferred Stock; (B) Parent shall have
failed to pay a dividend in a proper and timely manner to the holders of the
Preferred Stock; or (C) Company shall (1) fail to make any payment when due
under the terms of any other indebtedness, or (2) default in the observance or
performance of any other agreement, term or condition contained in any other
indebtedness, and the effect of such failure or default is to cause,
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or permit the creditor thereof to cause, the obligations of Company with respect
thereto to become due prior to their stated date of maturity thereto; or
(iv) Judgments. A final judgment or order for the
payment of money in excess of Two Hundred Fifty Thousand Dollars ($250,000)
(exclusive of amounts covered by insurance) shall be rendered against Company or
Parent, or any judgment, writ, assessment, warrant of attachment, or execution
or similar process shall be issued or levied against a substantial part of the
property of Company or Parent; or
(v) Transaction Documents. Any Transaction Document
or any material term thereof shall cease to be, or be asserted by Company not to
be, a legal, valid and binding obligation of Company enforceable in accordance
with its terms or if the Liens of Investor on the Collateral pursuant to the
Security Agreement shall cease to be or shall not be valid, perfected, first
priority (subject to Permitted Liens) Liens or Company shall assert that such
Liens are not valid and perfected, first priority (subject to Permitted Liens)
Liens on the Collateral; or
(vi) Nasdaq Listing. Parent's common stock is
suspended from trading or no longer listed on the Nasdaq National Market.
6. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note and the other Transaction
Documents:
(a) Failure to Pay. Company shall fail to pay (i) when due any
principal or interest payment on the due date under any Note; or (ii) any other
payment required under the terms of this Note or any other Transaction Document
on the date due and such payment shall not have been made within five (5) days
of Company's receipt of Investor's written notice to Company of such failure to
pay; or
(b) Voluntary Bankruptcy or Insolvency Proceedings. Company or
Parent shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent
(as such term may be defined or interpreted under any applicable statute), (vi)
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
consent to any such relief or to the appointment of or taking possession of its
property by any official in an involuntary case or other proceeding commenced
against it, or (vii) take any action for the purpose of effecting any of the
foregoing; or
(c) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Company or Parent or of all or a substantial part of the property thereof, or
an involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to Company or Parent or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced
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and an order for relief entered or such proceeding shall not be dismissed or
discharged within thirty (30) days of commencement.
7. Rights of Investor upon Default. Without limiting Investor's right
to demand payment at any time, upon the occurrence or existence of an Event of
Default described in Section 6(a), Investor may by written notice to Company,
declare all outstanding Obligations payable by Company hereunder to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the other Transaction Documents to the contrary notwithstanding.
Upon the occurrence or existence of any Event of Default described in Section
6(b) or 6(c), immediately and without notice, all outstanding Obligations
payable by Company hereunder shall automatically become immediately due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the
other Transaction Documents to the contrary notwithstanding. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
Investor may exercise any other right power or remedy granted to it by the
Transaction Documents or otherwise permitted to him by law, either by suit in
equity or by action at law, or both.
8. [Intentionally Omitted]
9. Successors and Assigns. The rights and obligations of Company and
Investor under this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties; provided that
Company may not assign or transfer any of its rights or obligations under any
Transaction Document without the prior written consent of Investor. Investor may
at any time sell, assign, grant participations in, or otherwise transfer to any
other Person all or part of the obligations of Company under this Note and the
other Transaction Documents. All references in this Note to any Person shall be
deemed to include all permitted successors and assigns of such Person. Transfers
of this Note shall be registered upon registration books maintained for such
purpose by or on behalf of Company.
10. Waiver and Amendment. This Note may not be amended or modified, nor
may any of its terms be waived, except by written instruments signed by Company
and Investor. Each waiver or consent under any provision hereof shall be
effective only in the specific instance and purpose for which given.
11. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Company or Investor under this Note shall be in writing and faxed, mailed or
delivered to each party to the facsimile number or its address set forth below
(or to such other facsimile number or address as the recipient of any notice
shall have notified the other in writing). All such notices and communications
shall be effective (a) when sent by Federal Express or other overnight service
of recognized standing, on the business day following the deposit with such
service; (b) when mailed, by registered or certified mail, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (c) when delivered by hand, upon delivery; and (d) when faxed,
upon confirmation of receipt.
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Investor:
Xxxxxxx X. Xxxxxxx, III
c/o THE 3DO COMPANY
000 Xxxxxxxx Xxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Company:
THE 3DO COMPANY
000 Xxxxxxxx Xxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
12. Default Rate; Usury. During any period in which an Event of Default
has occurred and is continuing, Company shall pay interest on the unpaid
principal balance hereof at a rate per annum equal to the rate otherwise
applicable hereunder plus two percent (2%). If any interest is paid on this Note
is deemed to be in excess of the then legal maximum rate, then that portion of
the interest payment representing an amount in excess of the then legal maximum
rate shall be deemed a payment of principal and applied against the principal of
this Note.
13. Governing Law; Jurisdiction. This Note and all actions arising out
of or in connection with this Note shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflict of laws provisions of the State of California, or of any other state.
Any action or proceeding relating in any way to this Note or the other
Transaction Documents may be brought and enforced in the courts of the State of
California or of the United States for the Northern District of California. Any
such process or summons in connection with any such action or proceeding may be
served by mailing a copy thereof by certified or registered mail, or any
substantially similar form of mail, addressed to Company or Investor as provided
for notices hereunder.
14. Indemnity.
(a) Indemnity. In consideration of Investor's purchase of this
Note and in addition to all of Company's other obligations under the Transaction
Documents, Company shall defend, protect, indemnify and hold harmless Investor
and all of its stockholders, officers, directors, employees and direct or
indirect investors and any of Investors' agents or other representatives
(including those retained in connection with the transactions contemplated by
the Transaction Documents) (collectively, the "Indemnitees") from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (collectively, the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to any matter or thing
or action or failure to act by Indemnitees, or any of them, arising out of or
relating to the Transaction Documents, including any use by Company of any
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proceeds from the sale of this Note, except to the extent such liability arises
from the gross negligence or willful misconduct of the Indemnitees. To the
extent that the foregoing undertaking by Company may be unenforceable for any
reason, Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
(b) Process. Upon receiving knowledge of any suit, claim or
demand asserted by a third party that Investor believes is covered by this
indemnity (a "Claim"), Investor shall give Company notice of the matter and an
opportunity to defend it, at Company's sole cost and expense, with legal counsel
satisfactory to Investor. However, the Indemnitees may retain their own counsel
with the fees and expenses of not more than one counsel for the Indemnitees to
be paid by Company, if, in the reasonable opinion of counsel retained by
Company, the representation by such counsel of the Indemnitees and Company would
be inappropriate due to actual or potential differing interests between such
Indemnitees and any other party represented by such counsel. The Indemnitees
shall, at Company's expense, cooperate fully with Company in connection with any
negotiation or defense of any Claim by Company. Company shall keep the
Indemnitees fully apprized as to the status of the defense or any settlement
negotiations with respect thereto. Company shall not be liable for any
settlement of any Claim effected without its prior written consent, provided,
however, that Company shall not unreasonably withhold, delay or condition its
consent. Company shall not, without the prior written consent of the
Indemnitees, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the Indemnitees of a release from all
liability in respect to such Claim. Any failure or delay of Investor to notify
Company of any Claim shall not relieve Company of its obligations under this
Section, but shall reduce such obligations to the extent of any increase in
those obligations caused solely by an unreasonable failure or delay. The
indemnification required by this Section shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Liabilities are incurred. The indemnity
agreements contained herein shall be in addition to (i) any cause of action or
similar right of an Indemnitee has against Company or others, and (ii) any
liabilities Company may be subject to pursuant to the law. The obligations of
the parties under this Section shall survive the payment and performance of the
Obligations.
15. No Third Party Rights. Nothing expressed in or to be implied from
this Note is intended to give, or shall be construed to give, any Person, other
than the parties hereto and their permitted successors and assigns hereunder,
any benefit or legal or equitable right, remedy or claim under or by virtue of
this Note or under or by virtue of any provision herein.
16. Expenses. Company shall pay on demand, (a) all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by
Investor in connection with the preparation, execution and delivery of, and the
exercise of its rights and duties under, this Note and the other Transaction
Documents, and the preparation of amendments and waivers hereunder and
thereunder; and (b) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Investor in the enforcement or attempt
to enforce any of the Obligations which is not performed as and when required by
this Note or the other Transaction Documents.
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17. Cumulative Rights, etc. The rights, powers and remedies of Investor
under this Note shall be in addition to all rights, powers and remedies given to
Investor by virtue of any applicable law, rule or regulation of any governmental
authority, any Transaction Document or any other agreement, all of which rights,
powers, and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Investor's rights hereunder.
18. Payments Free of Taxes, Etc. All payments made by Company under the
Transaction Documents shall be made by Company free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, Company shall pay upon demand any stamp or other
taxes, levies or charges of any jurisdiction with respect to the execution,
delivery, registration, performance and enforcement of this Note.
19. Partial Invalidity. If at any time any provision of this Note is or
becomes illegal, invalid or unenforceable in any respect under the law or any
jurisdiction, neither the legality, validity or enforceability of the remaining
provisions of this Note nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be affected
or impaired thereby.
20. Interpretive Provisions. References in this Note and each of the
other Transaction Documents to any document, instrument or agreement (a)
includes all exhibits, schedules and other attachments thereto, (b) includes all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) means such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Note or any other Transaction Document
refer to this Note or such other Transaction Document, as the case may be, as a
whole and not to any particular provision of this Note or such other Transaction
Document, as the case may be. References in this Note to "Sections" or
"Schedules" are to sections or schedules herein or hereto unless otherwise
indicated. The words "include" and "including" and words of similar import when
used in this Agreement shall not be construed to be limiting or exclusive. The
word "or" when used in this Note shall mean either as well as both. Headings in
this Note are for convenience of reference only and are not part of the
substance hereof. All terms defined in this Note in the singular form shall have
comparable meanings when used in the plural form and vice versa.
21. Construction. Each of this Note and the other Transaction Documents
is the result of negotiations among, and has been reviewed by, Company, Investor
and their respective counsel. Accordingly, this Note and the other Transaction
Documents shall be deemed to be the product of Company and Investor, and no
ambiguity shall be construed in favor of or against Company or Investor.
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IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
THE 3DO COMPANY
a California corporation
By:
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Name:
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Title:
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