printer-friendly

Sample Business Contracts

Secured Second Note - The 3DO Co. and William M. Hawkins III

Sponsored Links

                                 THE 3DO COMPANY

                               SECURED SECOND NOTE


$1,400,000                                                     December 18, 2002
                                                        Redwood City, California

         FOR  VALUE   RECEIVED  The  3DO  Company,   a  California   corporation
("Company")  promises to pay to William M.  Hawkins,  III  ("Investor"),  or his
registered  assigns,  the  principal  sum of One Million Four  Hundred  Thousand
Dollars  ($1,400,000),  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

<PAGE>


     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 December 31, 2002. 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 applied  first to the payment of expenses due
     under this Note,  second to interest accrued on this Note


                                       2
<PAGE>


     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 EDGAR and
     are  available to the public  through  EDGAR,  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, 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


                                       3
<PAGE>

               (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  and an  order  for  relief  entered  or  such
     proceeding shall not be dismissed or discharged  within thirty (30) days of
     commencement.


                                       4
<PAGE>


         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.

         Investor:
                                    William M. Hawkins, III
                                    c/o THE 3DO COMPANY
                                    200 Cardinal Way
                                    Redwood City, California 94063
                                    Telephone: (650) 385-3000
                                    Facsimile: (650) 385-3183

                                       5
<PAGE>


         Company:
                                    THE 3DO COMPANY
                                    200 Cardinal Way
                                    Redwood City, California 94063
                                    Attn: James Alan Cook
                                    Telephone:  (650) 385-3000
                                    Facsimile: (650) 385-3183


         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
     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.


                                       6
<PAGE>

          (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.

         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.


                                       7
<PAGE>

         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.

         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:  /s/  James A. Cook
                                            -----------------------------------
                                        Name:     James A. Cook
                                             ----------------------------------
                                        Title:    Executive Vice President
                                               --------------------------------


                                       8