NOTE AND WARRANT PURCHASE AGREEMENT
This Note and Warrant Purchase Agreement, dated as of December 27,
2002, (this "Agreement") is entered into by and among The 3DO Company, a
Delaware corporation, (the "Company"), The 3DO Company, a California corporation
("Subsidiary") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III (the "Purchaser"). The parties,
intending to be legally bound, hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
terms have the following meanings:
(a) "Notes" means the First Note, the Second Note, the amended and
restated Previous Note, and the Subsequent Notes (as defined below).
(b) "Security Agreement" means the Amended and Restated Security
Agreement dated as of December 27, 2002 between Company and Investor.
(c) All capitalized terms not otherwise defined herein shall have the
respective meanings given in the Notes or the Security Agreement.
2. Sale of Notes.
(a) Loan Commitment Amount. During the period beginning on the date
hereof and ending on June 30, 2003 (the "Borrowing Period"), the Subsidiary
will sell to Purchaser certain Notes for an aggregate principal amount of
up to $8,000,000 (the "Loan Commitment Amount"), including the principal
amount of the Previous Note, the First Note and the Second Note described
below.
(b) First Note. Upon execution of this Agreement, the Subsidiary shall
issue a secured subordinated promissory note substantially in the form
attached hereto as Exhibit A in the principal amount of $1,800,000 (the
"First Note"). The parties acknowledge that the Purchaser delivered to the
Subsidiary the purchase price of the First Note on December 9, 2002.
(c) Second Note. Upon execution of this Agreement, the Subsidiary
shall issue a secured subordinated promissory note substantially in the
form attached hereto as Exhibit B in the principal amount of $1,400,000
(the "Second Note"). The parties acknowledge that the Purchaser delivered
to the Subsidiary the purchase price of the Second Note on December 18,
2002.
(d) Previous Note. The parties acknowledge that the Subsidiary issued
a Secured Bridge Note (the "Previous Note") in the principal amount of
$3,000,000 on October 1, 2002. The Company, Subsidiary and Purchaser agree
to amend and restate the Previous Note in the form attached as Exhibit C
and the Subsidiary shall issue the amended and restated Previous Note upon
execution of this Agreement. The Subsidiary and Purchaser shall amend and
restate the Security Agreement dated October 1, 2002 by the Subsidiary in
favor of the Purchaser in the form attached hereto as Exhibit D. The
Subsidiary acknowledges that the Subordination
Agreement between GE Capital Commercial Services, Inc. and the Purchaser
dated October 1, 2002 is no longer effective.
(e) Initial Closing. The execution of this Agreement and the closing
of the purchase and sale of the First Note and Second Note and the issuance
of the amended and restated Previous Note to the Purchaser hereunder shall
be held at the offices of the Company on the date and time upon which the
Company, Subsidiary and Purchaser sign this Agreement (the "Initial
Closing"). At the Initial Closing, the Subsidiary shall deliver to the
Purchaser the executed First Note, Second Note and the amended and restated
Previous Note, and the Purchaser shall deliver to the Subsidiary the
Previous Note for cancellation.
(f) Subsequent Closing(s). During the Borrowing Period, the Subsidiary
may further issue and sell notes to Purchaser (the "Subsequent Closings")
for additional draw amounts (each respectively, a "Subsequent Draw Down
Amount") not to exceed the Loan Commitment Amount in the aggregate
(including the principal amount of the First Note, Second Note, the
Previous Note and any Subsequent Notes (as defined below)) by giving notice
thereof to Purchaser (each, a "Notice"). Within five (5) business days
after a Notice is received by Purchaser, the Purchaser will lend to the
Subsidiary, and the Subsidiary will borrow from Purchaser, an amount equal
to such Purchaser's Subsequent Draw Down Amount as set forth in the Notice.
In consideration therefor, the Company will issue to Purchaser a secured
promissory note for a principal amount equal to such Subsequent Draw Down
Amount (each, a "Subsequent Note") in the form attached as Exhibit E.
(g) Delivery. At each closing of the sale of a Note to the Purchaser,
the Subsidiary will deliver to the Purchaser a Subsequent Note in the
principal amount of the Subsequent Draw Down Amount dated as of the date of
each closing, in exchange for cash, check or forgiveness of indebtedness in
an amount equal to the principal amount of the Subsequent Note.
3. Registration Rights Agreement. Simultaneous with the execution of
this Agreement, the Company and the Purchaser shall enter into the Amended and
Restated Registration Rights Agreement in substantially the form attached hereto
as Exhibit F.
4. Warrant. In consideration of Purchaser's commitment to purchase up
to the Loan Commitment Amount of Notes from Subsidiary, Company shall issue a
warrant to Purchaser in the form attached hereto as Exhibit G (the "Warrant").
5. Representations and Warranties of Company and Subsidiary. Company
and Subsidiary represent and warrant to Purchaser as of the date hereof and each
Subsequent Closing that:
(a) Due Incorporation, Qualification, etc. Each of Company and
Subsidiary (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation; (ii) has the
power and authority to own, lease and operate its properties and carry on
its business as now conducted; and (iii) is duly qualified, licensed to do
business and in good standing as a foreign corporation in each jurisdiction
where the failure to be so qualified or licensed could reasonably be
expected to have a Material Adverse Effect.
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(b) Authority.
(1) Corporate Authorization. The execution, delivery and
performance by Company and Subsidiary of each Transaction Document to be
executed by Company or Subsidiary and the consummation of the transactions
contemplated thereby (i) are within the power of Company and Subsidiary; and
(ii) have been duly authorized by all necessary actions on the part of Company
and Subsidiary, except that the approval by the Company's stockholder of the
exercise of the Warrant, if applicable, has not been obtained.
(2) Valid Issuance. The Warrant, and the shares of Common Stock
issued upon exercise of the Warrant (collectively, the "Securities"), when
issued in compliance with the provisions of this Agreement and the Warrant will
be validly issued and will be free of any liens or encumbrances; provided,
however, that the Securities may be subject to restrictions on transfer under
state and/or federal securities laws as set forth herein, and as may be required
by future changes in such laws.
(c) Enforceability. Each Transaction Document executed, or to be
executed, by Company or Subsidiary has been, or will be, duly executed and
delivered by Company and Subsidiary and constitutes, or will constitute, a
legal, valid and binding obligation of Company and Subsidiary, enforceable
against Company and Subsidiary in accordance with its terms, except as
limited by (i) bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and
general principles of equity and (ii) limitations on the enforceability of
the indemnification provisions of the Registration Rights Agreement as
limited by applicable securities laws.
(d) Non-Contravention. The execution and delivery by Company and
Subsidiary of the Transaction Documents executed by Company and Subsidiary
and the performance and consummation of the transactions contemplated
thereby do not and will not (i) violate the Articles of Incorporation or
Certificate of Incorporation, as applicable, or Bylaws of Company or
Subsidiary or any material judgment, order, writ, decree, statute, rule or
regulation applicable to Company or Subsidiary; (ii) violate any provision
of, or result in the breach or the acceleration of, or entitle any other
Person to accelerate (whether after the giving of notice or lapse of time
or both), any material mortgage, indenture, agreement, instrument or
contract to which Company or Subsidiary is a party or by which it is bound;
or (iii) result in the creation or imposition of any Lien upon any
property, asset or revenue of Company or Subsidiary (other than any Lien
arising under the Transaction Documents) or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization or approval applicable to Company or Subsidiary, its business
or operations, or any of its assets or properties.
(e) Approvals. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or
other Person (including the shareholders of any Person) is required in
connection with the execution and delivery of the Transaction Documents
executed by Company and Subsidiary and the performance and consummation of
the transactions contemplated thereby, except such consents, approvals,
orders, authorizations, registrations, declarations or filings that are so
required and which have been
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obtained and are in full force and effect, except that the approval by the
Company's stockholder of the exercise of the Warrant, if applicable, has
not been obtained.
(f) No Violation or Default. Neither Company nor Subsidiary is in
violation of or in default with respect to (i) its Articles of
Incorporation or Certificate of Incorporation, as applicable or Bylaws or
any material judgment, order, writ, decree, statute, rule or regulation
applicable to such Company or Subsidiary; or (ii) any material mortgage,
indenture, agreement, instrument or contract to which Company or Subsidiary
is a party or by which it is bound (nor is there any waiver in effect
which, if not in effect, would result in such a violation or default),
where, in each case, such violation or default, individually, or together
with all such violations or defaults, could reasonably be expected to have
a Material Adverse Effect.
(g) Litigation. Except as set forth in Item 4(g) of Schedule I, no
actions (including derivative actions), suits, proceedings or
investigations are pending or, to the knowledge of Company, threatened
against Company or Subsidiary at law or in equity in any court or before
any other governmental authority which (i) if adversely determined could
reasonably be expected to (alone or in the aggregate) have a Material
Adverse Effect; or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by Company or Subsidiary of the
Transaction Documents or any of the transactions contemplated thereby.
(h) Accuracy of Information Furnished. None of the Transaction
Documents and none of the other certificates, statements or information
furnished to Purchaser by or on behalf of Company or Subsidiary in
connection with the Transaction Documents or the transactions contemplated
thereby contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(i) Government Consent, Etc. No consent, approval, order or
authorization of, or designation, registration, declaration or filing with,
any federal, state, local or other governmental authority on the part of
Company or Subsidiary is required in connection with the valid execution
and delivery of this Agreement, the Notes, the Warrant or the offer, sale
or issuance of the Securities, other than, if required, filings or
qualifications under the California Corporate Securities Law of 1968, as
amended (the "California Law"), or other applicable blue sky laws, which
filings or qualifications, if required, will be timely filed or obtained by
Company.
6. Representations and Warranties by Purchaser. Purchaser represents
and warrants to Company and Subsidiary as of the Closing Date as follows:
(a) Investment Intent: Authority. This Agreement is made with
Purchaser in reliance upon Purchaser's representation to Company and
Subsidiary, evidenced by Purchaser's execution of this Agreement, that
Purchaser is acquiring the Securities for investment for Purchaser's own
account, not as nominee or agent, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended, (the
"Securities Act") or the California Law. Purchaser has the full right,
power, authority and capacity to enter into and perform this
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Agreement and the Agreement will constitute a valid and binding obligation
upon Purchaser, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application affecting the
enforcement of creditors' rights.
(b) Securities Not Registered. Purchaser understands and acknowledges
that the offering of the Securities pursuant to this Agreement will not be
registered under the Securities Act or qualified under the California Law
on the grounds that the offering and sale of securities contemplated by
this Agreement are exempt from registration under the Securities Act and
exempt from qualification pursuant to section 25102(f) of the California
Law, and that Company's reliance upon such exemptions is predicated upon
Purchaser's representations set forth in this Agreement. Purchaser
acknowledges and understands that resale of the Securities may be
restricted indefinitely unless the Securities are subsequently registered
under the Securities Act and qualified under the California Law or an
exemption from such registration and such qualification is available.
Purchaser acknowledges that Company is under no obligation to effect any
registration with respect to the Securities or to file for or comply with
any exemption from registration, except as provided in Section 3.
(c) Transfer Restrictions. Purchaser covenants that in no event will
it sell, transfer or otherwise dispose of any of the Securities other than
in conjunction with an effective registration statement for the Securities
under the Securities Act or pursuant to an exemption therefrom, or in
compliance with Rule 144 promulgated under the Securities Act or to a
person related to or an entity affiliated with said Purchaser and other
than in compliance with the applicable securities regulation laws of any
state.
(d) Knowledge and Experience. Purchaser (i) has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of Purchaser's prospective investment in the
Securities; (ii) has the ability to bear the economic risks of Purchaser's
prospective investment; (iii) has had all questions which have been asked
by Purchaser satisfactorily answered by Company; and (iv) has not been
offered the Securities by any form of advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any such media. Purchaser represents and
warrants that he is an "accredited investor" within the meaning of Rule 501
of Regulation D of the Securities Act.
7. Legends. Company will place the following legends on each
certificate representing Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED UNLESS SUCH SALE
OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH RESPECT
THERETO.
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8. Miscellaneous.
(a) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified upon the written consent of Company, Subsidiary
and Purchaser.
(b) Governing Law. This Agreement, the Notes, the Warrant, the other
Transaction Documents, and all actions arising out of or in connection
herewith or therewith shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California or of any other state. Any action or
proceeding relating in any way to this Agreement 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.
(c) Entire Agreement. This Agreement together with the exhibits
attached hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
(d) Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution and delivery of this
Agreement.
(e) Expenses. Company shall pay on demand all reasonable fees and
expenses incurred by Purchaser, including reasonable legal fees and
expenses in connection with the preparation, execution and delivery of this
Agreement and the other Transaction Documents.
(f) Notices, etc. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given (i) upon receipt if personally delivered, (ii) three (3) days
after being mailed by registered or certified mail, postage prepaid, or
(iii) one day after being sent by recognized overnight courier or by
facsimile, if to Purchaser, at c/o Company at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address or number as Purchaser
shall have furnished to Company in writing, or if to Company or Subsidiary,
at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other
address or number as Company shall have furnished to Purchaser in writing.
(g) Validity. If any provision of this Agreement, the Notes or the
Warrant shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
(i) Assignment. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and assigns
of the parties. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
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9. Additional Assurances. Investor agrees to negotiate in good faith
with Company and Subsidiary with respect to additional financial assistance to
Company and Subsidiary on terms to be discussed among the parties that the
parties currently contemplate may provide up to an additional $2,000,000 of
financial assistance to Company and Subsidiary.
10. Future Financing.
(a) Participation in Qualified Financing. In the event Company
consummates or proposes to consummate, prior to March 31, 2003, an equity
or debt financing (a "Qualified Financing"), then the Subsidiary shall have
the option of causing Purchaser to purchase (solely through cancellation of
principal and accrued interest under the Notes) up to an aggregate of
$3,000,000 of securities issued in the Qualified Financing (the "Financing
Securities") at the same price and on the same terms as the other investors
in the Qualified Financing, or, if there are no other investors, at such
price and on such terms as are acceptable to Purchaser and Subsidiary. In
conjunction with such purchase, the Purchaser shall become a party and
shall execute all related Qualified Financing documentation. Purchaser
agrees that any subsequent holder of the Notes shall be bound by the
provisions of this Section 10 .
(b) Procedures. If Notes are to be cancelled pursuant to this Section
10, written notice shall be delivered to Purchaser at the address last
shown on the records of Subsidiary for Purchaser or given by Purchaser to
Subsidiary for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of Subsidiary is
located, notifying Purchaser of the Qualified Financing, the terms of the
Qualified Financing, the principal amount and interest of the Notes to be
cancelled, the date on which such cancellation is expected to occur and
calling upon Purchaser to surrender to Subsidiary, in the manner and at the
place designated, the Notes. Upon such cancellation of the Notes, Purchaser
shall surrender the Notes, duly endorsed, at the office of Subsidiary.
Subsidiary shall, or shall cause Company to, as soon as practicable
thereafter, issue and deliver at such office to Purchaser a certificate or
certificates for the Financing Securities to which Purchaser shall be
entitled (bearing such legends as are required by the Qualified Financing
documentation and applicable state and federal securities laws in the
opinion of counsel to Subsidiary), together with replacement Notes (if any
principal amount and accrued interest is not cancelled) and any other
securities and property to which Purchaser is entitled under the terms of
the Notes, including a check payable to Purchaser for any cash amounts
payable as described in Section 10(c), if applicable. The cancellation
shall be deemed to have been made immediately prior to the close of
business on the date of the surrender of the Notes, and the Person or
Persons entitled to receive the Financing Securities upon such conversion
shall be treated for all purposes as the record investor or investors of
such Financing Securities as of such date.
(c) Fractional Shares; Interest; Effect. No fractional shares shall be
issued upon cancellation of the Notes pursuant to Section 10. In lieu of
Company issuing any fractional shares of Financing Securities to Purchaser
upon cancellation of the Notes, Subsidiary shall pay to Purchaser the cash
value of the fraction of a share not issued pursuant to the previous
sentence, if a replacement Note is not issued pursuant to Section 10(b). In
addition, Subsidiary shall pay to Purchaser any interest accrued on the
amount cancelled and on the amount to be paid to Subsidiary pursuant to the
previous sentence, if accrued interest is not cancelled.
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Upon cancellation of the Notes in full and the payment of the amounts
specified in this Section 10(c), Subsidiary shall be forever released from
all its obligations and liabilities under the Notes.
(d) Limitation on Qualified Financing. Company shall not issue any
Financing Securities pursuant to this Section 10 if the issuance of such
Financing Securities would cause the Company to exceed that number of
shares of Common Stock or securities convertible into Common Stock which
Company may issue upon cancellation of the Notes (the "Exchange Cap")
without breaching Company's obligations, if applicable, under the rules or
regulations of the Nasdaq National Market, except that such limitation
shall not apply in the event that Company (a) obtains the approval of its
stockholders as required by the Nasdaq National Market (or any successor
rule or regulation) for issuances of Common Stock in excess of such amount,
(b) obtains a written opinion from outside counsel to the Subsidiary that
such approval is not required, which opinion shall be reasonably
satisfactory to the holder of the Note, or (c) adequate provisions similar
to those contained in this section are contained in the Qualified Financing
documentation.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
THE 3DO COMPANY
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
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Title: Secretary
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SUBSIDIARY:
THE 3DO COMPANY
a California corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
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Title: Executive Vice President
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The 3DO Company
Signature Page to the
Note and Warrant Purchase Agreement
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PURCHASER:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
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▇▇▇▇ ▇▇▇▇▇▇▇
Signature Page to the
Note and Warrant Purchase Agreement
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EXHIBIT A
FIRST NOTE
EXHIBIT B
SECOND NOTE
EXHIBIT C
AMENDED AND RESTATED
PREVIOUS NOTE
EXHIBIT D
AMENDED AND RESTATED
SECURITY AGREEMENT
EXHIBIT E
FORM OF SUBSEQUENT NOTE
EXHIBIT F
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
EXHIBIT G
WARRANT