Security Agreement - The 3DO Co. and William M. Hawkins III
SECURITY AGREEMENT
This Security Agreement (this "Security Agreement"), dated as of
October 1, 2002, is executed by THE 3DO COMPANY, a California corporation
("Company"), in favor of William M. Hawkins, III, an individual ("Investor").
RECITALS
A. Company has issued to Investor a secured bridge note (the "Bridge
Note") in the aggregate principal amount of $3,000,000.
B. Investor is willing to purchase the Bridge Note only if he is
granted a security interest in the Collateral described below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Company hereby agrees for the benefit of Investor as follows:
1. Definitions and Interpretation. When used in this Security
Agreement, the following terms have the following respective meanings:
"Accounts" means all "accounts," as such term is defined in
the Code, now owned or hereafter acquired by Company, including: (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper or
Instruments) (including any such obligations that may be characterized as an
account or contract right under the Code); (b) all of Company's rights in, to,
and under, all purchase orders or receipts for goods or services; (c) all of
Company's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods); (d) all rights
to payment due to Company for Goods or other property sold, leased, licensed,
assigned or otherwise disposed of, for a policy of insurance issued or to be
issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by Company or in connection with any other
transaction (whether or not yet earned by performance on the part of Company);
(e) all health care insurance receivables; and (f) all collateral security of
any kind given by any Account Debtor or any other Person with respect to any of
the foregoing.
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"Account Debtor" means any Person who is or may become
obligated with respect to, or on account of, an Account, Chattel Paper or
General Intangibles (including a Payment Intangible).
"Books and Records" means all books, records, board minutes,
contracts, licenses, insurance policies, environmental audits, business plans,
files, computer files, computer discs and other data and software storage and
media devices, accounting books and records, financial statements (actual and
pro forma), filings with Governmental Authorities, and any and all records and
instruments relating to the Collateral or Company's business.
"Chattel Paper" means all "chattel paper," as such term is
defined in the Code, including electronic chattel paper, now owned or hereafter
acquired by any Person.
"Code" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of California; provided, that if, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of, or remedies with respect to, Investor's Lien on any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "Code" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Security Agreement relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions; provided,
further, that to the extent that the Code is used to define any term herein or
in any Transaction Document and such term is defined differently in different
Articles or Divisions of the Code, the definition of such term contained in
Article or Division 9 shall govern.
"Collateral" is defined in Section 2.
"Contracts" means all the contracts, undertakings, or
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which any Person may now or hereafter have any right,
title or interest, including any agreement relating to the terms of payment or
the terms of performance of any Account.
"Copyright License" means rights under any written agreement
now owned or hereafter acquired by any Person granting the right to use any
Copyright or Copyright registration.
"Copyright Office" means the United States Copyright Office,
and any successor office or agency thereto.
"Copyrights" means all of the following now owned or hereafter
acquired by any Person: (a) all copyrights in any original work of authorship
fixed in any tangible medium of expression, now known or later developed, all
registrations and applications for registration of any such copyrights in the
Copyright Office or any other country, including registrations, recordings and
applications, and supplemental registrations, recordings, and applications in
the Copyright Office and including all Copyrights listed in Schedule A; and (b)
all Proceeds of the foregoing, including license royalties and proceeds of
infringement suits, the right to sue for past, present and future infringements,
all rights corresponding thereto throughout the world and all renewals and
extensions thereof.
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"Deposit Accounts" means all "deposit accounts" as such term
is defined in the Code, now or hereafter held in the name of any Person.
"Documents" means all "documents," as such term is defined in
the Code, now owned or hereafter acquired by any Person, wherever located,
including all bills of lading, dock warrants, dock receipts, warehouse receipts,
and other documents of title, whether negotiable or non-negotiable.
"General Intangibles" means all "general intangibles," as such
term is defined in the Code, now owned or hereafter owned by any Person,
including all right, title and interest that such Person may now or hereafter
have in or under any Contract, all Payment Intangibles, customer lists,
Licenses, Intellectual Property, interests in partnerships, joint ventures and
other business associations, permits, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, experience, processes, models, drawings, materials, Books and
Records, Goodwill (including the Goodwill associated with any Intellectual
Property), all rights and claims in or under insurance policies (including
insurance for fire, damage, loss, and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key-person, and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit accounts, rights
to receive tax refunds and other payments, rights to received dividends,
distributions, cash, Instruments and other property, and rights of
indemnification.
"Goods" means all "goods," as such term is defined in the
Code, now owned or hereafter owned by any Person, wherever located, including
equipment, embedded software to the extent included in "goods" as defined in the
Code, manufactured homes, standing timber that is cut and removed for sale and
unborn young of animals.
"Goodwill" means all goodwill, trade secrets, proprietary or
confidential information, technical information, procedures, formulae, quality
control standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter owned by any Person.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Waste" shall have the meaning ascribed to such term
in the Resource Conservation and Recovery Act (42 U.S.C.ss.ss. 6901 et. seq.).
"Instruments" means all "instruments," as such term is defined
in the Code, now owned or hereafter owned by any Person, wherever located,
including all certificated securities and all notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
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"Intellectual Property" means any and all Licenses,
Copyrights, Patents, Trademarks, Trade Secrets and customer lists.
"Inventory" means all "inventory," as such term is defined in
the Code, now owned or hereafter owned by any Person, wherever located,
including all inventory, merchandise, goods and other personal property that are
held by or on behalf of such Person for sale or lease or are furnished or are to
be furnished under a contract of service or that constitute raw materials, work
in process, finished goods, returned goods, or materials or supplies of any
kind, nature or description used or consumed or to be used or consumed in such
Person's business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including all supplies and embedded software.
"Investment Property" means all "investment property," as such
term is defined in the Code, now or hereafter acquired by any Person, wherever
located.
"Letter-of-Credit Rights" means "letter-of-credit rights" as
such term is defined in the Code, now owned or hereafter acquired by any Person,
including rights to payment or performance under a letter of credit, whether or
not such Person, as beneficiary, has demanded or is entitled to demand payment
or performance.
"License" means any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
held by any Person.
"Patent Applications" means all applications previously or
hereafter made by, or on behalf of, a Person to the PTO or to any similar office
or agency of any foreign country or political subdivision thereof for the
registration of Patents.
"Patent License" means rights under any written agreement now
held or hereafter held by any Person granting any right with respect to any
invention on which a Patent is in existence.
"Patents" means all of the following in which any Person now
holds or hereafter holds any interest: (a) all Patent Applications; (b) all
letters patent of any country and all registrations and recordings thereof; and
(c) all reissues, continuations, continuations-in-part or extensions thereof.
"Payment Intangibles" means all "payment intangibles" as such
term is defined in the Code, now owned or hereafter owned by any Person.
"Permitted Liens" means (a) Liens for taxes not yet delinquent
or Liens for taxes being contested in good faith and by appropriate proceedings
for which adequate reserves have been established; (b) Liens in respect of
property or assets imposed by law which were incurred in the ordinary course of
business, such as carriers', warehousemen's, materialmen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings for which adequate reserves have been
established; (c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, and mechanic's Liens, carrier's Liens and other
Liens to secure the
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performance of tenders, statutory obligations, contract bids, government
contracts, performance and return of money bonds and other similar obligations,
in each case incurred in the ordinary course of business, whether pursuant to
statutory requirements, common law or consensual arrangements; (d) Liens in
favor of Investor; (e) Liens securing obligations under a capital lease if such
Liens do not extend to property other than the property leased under such
capital lease; (f) Liens upon any equipment acquired or held by Company or any
of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, so long as such Lien extends only to the equipment financed, and
any accessions, replacements, substitutions and proceeds (including insurance
proceeds) thereof or thereto; (g) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
6(g) of the Bridge Note; (h) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods, (i) Liens which constitute rights of setoff of a
customary nature or banker's liens, whether arising by law or by contract; (j)
Liens on insurance proceeds in favor of insurance companies granted solely as
security for financed premiums; (k) Leases or subleases and licenses or
sublicenses granted in the ordinary course of Company's business; and (l) Liens
securing obligations under the GE Facility.
"Proceeds" means "proceeds," as such term is defined in the
Code and, in any event, shall include: (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to Company from time to time
with respect to any Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to Company from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of any
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority); (c) any recoveries by the Company
against third parties with respect to any litigation or dispute concerning any
Collateral, including claims arising out of the loss or nonconformity of,
interference with the use of, defects in, or infringement of rights in, or
damage to, Collateral; (d) all amounts collected on, or distributed on account
of, other Collateral; and (e) any and all other amounts, rights to payment or
other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
"PTO" means the United States Patent and Trademark Office, and
any successor office or agency thereto.
"Supporting Obligations" means all "supporting obligations" as
such term is defined in the Code, including letters of credit and guaranties
issued in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
"Trademark License" means rights under any written agreement
now held or hereafter held by any Person granting any right to use any Trademark
or Trademark registration.
"Trademarks" means all of the following now owned or hereafter
owned by any Person: (a) all trademarks, trade names, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the PTO or in any similar office
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or agency of the United States, any State or Territory thereof, or any other
country or any political subdivision thereof, and (b) all reissues, extensions
or renewals thereof.
"Trade Secrets" all proprietary information, including
formulas, patterns, compilations, programs, devices, methods, techniques or
processes that derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other Persons who can obtain economic value from its disclosure or use, all
whether now owned or hereafter owned by any Person.
All capitalized terms not otherwise defined herein shall have the
respective meanings given in the Bridge Note. Unless otherwise defined herein,
all terms defined in the Code have the respective meanings given to those terms
in the Code.
2. Grant of Security Interest. As security for the Obligations, Company
hereby pledges to Investor and grants to Investor a security interest in all
right, title and interests of Company in and to the property described in
Attachment 1, whether now existing or hereafter from time to time acquired
(collectively, the "Collateral").
3. General Representations and Warranties. Company represents and
warrants to Investor that, as of the date hereof: (a) Company is the owner of
the Collateral (or, in the case of after-acquired Collateral, at the time
Company acquires rights in the Collateral, will be the owner thereof) and that
no other Person has (or, in the case of after-acquired Collateral, at the time
Company acquires rights therein, will have) any right, title, claim or interest
(by way of Lien or otherwise) in, against or to the Collateral, other than
Permitted Liens; (b) upon the filing of UCC-1 financing statements in the
appropriate filing offices, Investor has (or in the case of after-acquired
Collateral, at the time Company acquires rights therein, will have) a first
priority perfected security interest in the Collateral to the extent that a
security interest in the Collateral can be perfected by such filing, except for
Permitted Liens; (c) information set forth in Schedule A is true and correct in
all material respects.
4. Representations and Warranties Regarding Intellectual Property.
Company represents and warrants to Investor that, as of the date hereof:
(a) (i) Company does not own any Patents, Trademarks or
Copyrights registered in the PTO or the Copyright Office or any similar offices
or agencies in any other country or any political subdivision thereof, other
than those described on Schedule A; (ii) Company has, except for Permitted
Liens, the sole, full and unencumbered right, title and interest in and to each
of the Patents, Trademarks and Copyrights shown on Schedule A and the
registrations thereof are valid and enforceable and in full force and effect;
and (iii) Company has, except for Permitted Liens, the sole, full and
unencumbered right, title and interest in and to each of its Trademarks and
Copyrights not listed on Schedule A.
(b) To Company's knowledge, there is no claim by any third
party that any Patents, Trademarks or Copyrights are invalid and unenforceable
or do or may violate the rights of any Person.
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(c) Company has obtained from each employee who may be
considered the inventor of patentable inventions (invented within the scope of
such employee's employment) an assignment to Company of all rights to such
inventions, including Patents.
(d) Company has taken all steps reasonably necessary to
protect the secrecy and the validity under applicable law of all material Trade
Secrets.
5. Covenants Relating to Collateral Generally. Company hereby agrees
(a) to perform all acts that may be reasonably necessary to maintain, preserve,
protect and perfect the Collateral, the Lien granted to Investor therein and the
perfection and first priority of such Lien, except for Permitted Liens; (b) not
to use or permit any Collateral to be used (i) in violation in any material
respect of any applicable law, rule or regulation, or (ii) in violation of any
policy of insurance covering the Collateral; (c) to pay when due all material
taxes and other governmental charges except taxes being contested in good faith
and by appropriate proceedings for which adequate reserves have been
established; (d) without 10 days' written notice to Investor, (i) not to change
Company's name or place of business (or, if Company has more than one place of
business, its chief executive office), or the office in which Company's records
relating to accounts receivable and payment intangibles are kept, and (ii) not
to change Company's state of incorporation; (e) to procure, execute and deliver
from time to time any endorsements, assignments, financing statements and other
writings reasonably deemed necessary by Investor to perfect, maintain and
protect its Lien hereunder and the priority thereof; (f) to appear in and defend
any action or proceeding which may affect its title to or Investor `s interest
in a material portion of the Collateral; (g) if Investor gives value to enable
Company to acquire rights in or the use of any Collateral, to use such value for
such purpose; (h) not to surrender or lose possession of (other than to Investor
or GE pursuant to the GE Facility), sell, encumber, lease, rent, license, or
otherwise dispose of or transfer any Collateral or right or interest therein,
and to keep the Collateral free of all Liens except Permitted Liens; provided
that Company may sell, lease, transfer, license or otherwise dispose of any of
the Collateral in the ordinary course of business as presently conducted; and
(i) to permit Investor and his representatives the right, during normal business
hours, upon reasonable prior notice, to visit and inspect the properties of
Company and its corporate, financial and operating records, and to discuss
Company's affairs, finances and accounts with its directors, officers and
independent public accountants; provided that Investor and his representatives
shall maintain the confidentiality of any non-public information regarding
Company acquired during such visit.
6. Covenants Regarding Intellectual Property Collateral. Company hereby
agrees:
(a) Perfection. Company will perform all acts and execute all
documents, including notices of security interest for:
(i) each registered Patent and Trademark in forms
suitable for filing with the PTO; and
(ii) each registered Copyright in the form of
Attachment 3 hereto,
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in each case that may be reasonably necessary to record, maintain, preserve,
protect and perfect Investor's interest in the Collateral, the Lien granted to
Investor in the Collateral and the priority of such Lien, subject to Permitted
Liens;
(b) Notice Regarding Intellectual Property. Company will
within 20 Business Days notify Investor upon the filing, either by Company or
through any agent, employee, licensee or designee, of (i) an application for the
registration of any Patent or Trademark, with the PTO or any similar office or
agency in any other country or any political subdivision thereof, and (ii) any
assignment of any Patent or Trademark, which Company may acquire from a third
party, with the PTO or any similar office or agency in any country or any
political subdivision thereof. In addition, Company will provide Investor with
at least 30 Business Days prior notice of the filing, either by Company or
through any agent, employee, licensee or designee, of any Copyright registration
not listed on Schedule A with the Copyright Office or any similar office or
agency in any other country or any political subdivision thereof. Upon the
request of Investor, Company shall execute and deliver any and all assignments,
agreements, instruments, documents and papers as Investor may reasonably request
to evidence Investor's security interest in such Patents, Trademarks (and the
goodwill and general intangibles of Company relating thereto or represented
thereby).
(c) Actions Regarding Intellectual Property. Except to the
extent that Investor shall give its prior written consent,
(i) Company (either itself or through licensees) will
continue to use the Trademarks in connection with each and every trademark class
of goods or services applicable to its current line as reflected in its current
catalogs, brochures, price lists or similar materials in order to maintain the
Trademarks in full force and effect free from any claim of abandonment for
nonuse, and Company will not (and will not permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Trademark may become
invalidated; and
(ii) Company will not do any act, or omit to do any
act whereby any Patent or Copyright may become abandoned or dedicated or the
remedies available against potential infringers materially weakened and shall
notify Investor immediately if Company knows of any reason or has reason to know
that any Patent or Copyright may become abandoned or dedicated.
7. Authorized Action by Investor.
(a) General Power of Attorney. Company hereby irrevocably
appoints Investor as its attorney-in-fact (which appointment is coupled with an
interest) and agrees that Investor may perform (but Investor shall not be
obligated to and shall incur no liability to Company for the failure so to do)
any act which Company is obligated by this Security Agreement to perform, and to
exercise such rights and powers as Company might exercise with respect to the
Collateral, including the right to (a) collect by legal proceedings or otherwise
and endorse, receive and receipt for all dividends, interest, payments, proceeds
and other sums and property now or hereafter payable on or on account of the
Collateral; (b) enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral; (c) make any
compromise or settlement, and take any action it deems advisable, with respect
to the Collateral; (d) insure, process and preserve the Collateral;
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(e) pay any indebtedness of Company relating to the Collateral; and (f) execute
financing statements pursuant to the Code and other documents, instruments and
agreements required hereunder; provided, however, that Investor shall not
exercise any such powers granted pursuant to subsections (a) through (c) prior
to the occurrence of an Event of Default and shall only exercise such powers
during the continuance of an Event of Default after prior notice to Company of
its intent to exercise the same. It is further agreed and understood between the
parties hereto that such care as Investor gives to the safekeeping of its own
property of like kind shall constitute reasonable care of the Collateral when in
Investor's possession.
(b) Special Power of Attorney. Company agrees to execute and
deliver to Investor three originals of a Special Power of Attorney in
substantially the form of Attachment 2 to this Security Agreement for the
implementation of the recording, giving of notice of security interest,
assignment, sale or other disposal of the certain Collateral pursuant to Section
6 or 9.
8. Litigation and Other Proceedings.
(a) Rights of Company. Company shall have the right and
obligation to commence and diligently prosecute such suits, proceedings or other
actions for infringement or other damage, or reexamination or reissue
proceedings, or opposition or cancellation proceedings as are reasonable to
protect any material portion of the Patents, Trademarks, Copyrights, and Trade
Secrets.
(b) Rights of Investor. Upon the occurrence and during the
continuation of an Event of Default, Investor shall have the right but not the
obligation to bring suit or institute proceedings in the name of Company or
Investor to enforce any rights in the Collateral, including any license
thereunder, in which event Company shall at the request of Investor do any and
all lawful acts and execute any and all documents reasonably required by
Investor in aid of such enforcement. If Investor elects not to bring suit to
enforce any right under the Collateral, including any license thereunder,
Company agrees to use all reasonable measures, whether by suit, proceeding or
other action, to prevent the material infringement of any right under the
Collateral by any Person and for that purpose agrees to diligently maintain any
action, suit or proceeding against any Person so infringing reasonably necessary
to prevent such infringement.
9. Default and Remedies.
(a) Default. Company shall be deemed in default under this
Security Agreement upon the occurrence and during the continuance of an Event of
Default.
(b) Remedies. Upon the occurrence and during the continuance
of any Event of Default, Investor shall have the rights of a secured creditor
under the Code and all rights granted by this Security Agreement and by law,
including the right to:
(i) Require Company to assemble the Collateral and
make it available to Investor at a place to be designated by Investor;
(ii) Prior to the disposition of the Collateral,
store, process, repair or recondition it or otherwise prepare it for disposition
in any manner and to the extent Investor deems
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appropriate and in connection with such preparation and disposition, without
charge, use any trademark, trade name, copyright, patent or technical process
used by Company;
(iii) Upon thirty (30) days, prior notice to Company,
direct Company not to make any further use of the Patents, the Trademarks (or
any mark similar thereto), the Copyrights (or any work deriving therefrom) or
Trade Secrets (or any work deriving therefrom) for any purpose;
(iv) At any time and from time to time, upon thirty
(30) days' prior notice to Company, license, whether general, special or
otherwise, and whether on an exclusive or nonexclusive basis, any of the
Patents, Trademarks, Copyrights or Trade Secrets, throughout the world for such
term or terms, on such conditions, and in such manner, as Investor shall
reasonably determine;
(v) At any time and from time to time, enforce (and
upon notice to Company have the exclusive right to enforce) against any licensee
or sublicensee all rights and remedies of Company in, to and under any one or
more license agreements with respect to the Collateral (without assuming any
obligations or liability thereunder), and take or refrain from taking any action
under any thereof; and
(vi) In addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
consisting of Intellectual Property pursuant to this Section 9, Investor may, at
any time, pursuant to the authority granted in the Power of Attorney executed
pursuant to Section 7(b), execute and deliver on behalf of Company, one or more
instruments of assignment of the Patents, Trademarks, or Copyrights or (or any
application or registration thereof), in form suitable for filing, recording or
registration in any country.
(c) Company Cooperation. In the event of any license,
assignment, sale or other disposition of the Collateral, or any of it, after the
occurrence or during the continuance of an Event of Default, Company shall
supply its know-how and expertise relating to the manufacture and sale of the
products bearing or in connection with which the Trademarks, Patents, Copyrights
or Trade Secrets are used, and its customer lists and other records relating to
the Trademarks, Patents, Copyrights and Trade Secrets to the distribution of
products or the provisions of services, to Investor or its designee. Company
hereby agrees that ten (10) days' notice of any intended sale or disposition of
any Collateral is reasonable.
(d) Application of Collateral Proceeds. The proceeds and/or
avails of the Collateral, or any part thereof, and the proceeds and the avails
of any remedy hereunder (as well as any other amounts of any kind held by
Investor at the time of, or received by Investor after, the occurrence of an
Event of Default) shall be paid to and applied as follows:
(i) First, to the payment of reasonable costs and
expenses, including all amounts expended to preserve the value of the
Collateral, of foreclosure or suit, if any, and of such sale and the exercise of
any other rights or remedies, and of all proper fees, expenses, liability and
advances incurred or made hereunder by Investor;
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(ii) Second, to the payment to Investor of the amount
then owing or unpaid on the Bridge Note;
(iii) Third, to the payment of other amounts then
payable to Investor under any of the Transaction Documents; and
(iv) Fourth, to the payment of the surplus, if any,
to Company, its successors and assigns, or to whomsoever may be lawfully
entitled to receive the same.
10. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Company or Investor under this Security Agreement 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:
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William M. Hawkins, III
c/o THE 3DO COMPANY
200 Cardinal Way
Redwood City, California 94063
Telephone: (650) 385-3000
Facsimile: (650) 385-3183
Company:
-------
THE 3DO COMPANY
200 Cardinal Way
Redwood City, California 94063
Attn: James Alan Cook
Telephone: (650) 385-3000
Facsimile: (650) 385-3183
(b) Nonwaiver. No failure or delay on Investor's part in
exercising any right hereunder shall operate as a waiver thereof or of any other
right nor shall any single or partial exercise of any such right preclude any
other further exercise thereof or of any other right.
(c) Amendments and Waivers. This Security Agreement 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.
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(d) No Third Party Rights. Nothing expressed in or to be
implied from this Security Agreement is intended to give, or shall be construed
to give, any Person, other than Company and Investor, any benefit or legal or
equitable right, remedy or claim under or by virtue of this Security Agreement
or under or by virtue of any provision herein.
(e) Assignments. The rights and obligations of Company and
Investor under this Security Agreement 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 this Security Agreement or any other 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 Security Agreement. All
references in this Security Agreement to any Person shall be deemed to include
all permitted successors and assigns of such Person.
(f) Cumulative Rights, etc. The rights, powers and remedies of
Investor under this Security Agreement 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.
(g) 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 Security
Agreement.
(h) 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 Security Agreement 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 connection with
custody, preservation, or sale of, or other realization on, any of the
Collateral, or the enforcement or attempt to enforce any of the Obligations
which is not performed as and when required by this Security Agreement or the
other Transaction Documents.
(i) Partial Invalidity. If at any time any provision of this
Security Agreement 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 Security Agreement 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.
(j) Construction. Each of this Security Agreement and the
other Transaction Documents is the result of negotiations among, and has been
reviewed by, Company, Investor and their respective counsel. Accordingly, this
Security Agreement and the other Transaction
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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.
(k) Entire Agreement. This Security Agreement taken together
with the other Transaction Documents constitute and contain the entire agreement
of Company and Investor and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, respecting the subject matter hereof.
(l) Other Interpretive Provisions. References in this Security
Agreement 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 Security Agreement or any other Transaction Document refer to this
Security Agreement or such other Transaction Document, as the case may be, as a
whole and not to any particular provision of this Security Agreement or such
other Transaction Document, as the case may be. References in this Security
Agreement to "Sections," "Attachments" or "Schedules" are to sections,
attachments or schedules herein or hereto unless otherwise indicated. The words
"include" and "including" and words of similar import when used in this Security
Agreement or any other Transaction Document shall not be construed to be
limiting or exclusive. The word "or" when used in this Security Agreement shall
mean either as well as both. Headings in this Security Agreement are for
convenience of reference only and are not part of the substance hereof. All
terms defined in this Security Agreement in the singular form shall have
comparable meanings when used in the plural form and vice versa.
(m) Governing Law; Jurisdiction. This Security Agreement and
all actions arising out of or in connection with this Security Agreement shall
be governed by and construed in accordance with the laws of the State of
California without reference to conflict of laws rules (except to the extent
governed by the Code). Any action or proceeding relating in any way to this
Security 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. 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.
IN WITNESS WHEREOF, Company has caused this Security Agreement to be
executed as of the day and year first above written.
THE 3DO COMPANY, a California corporation
By: /s/ Richard A. Gelhaus
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Richard A. Gelhaus
Title: Chief Financial Officer
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