Security Agreement - The 3DO Co. and William M. Hawkins III
AMENDED AND RESTATED
SECURITY AGREEMENT
This Amended and Restated Security Agreement (this "Security
Agreement"), dated as of December 27, 2002, is between THE 3DO COMPANY, a
California corporation ("Company"), and William M. Hawkins, III, an individual
("Investor").
RECITALS
A. Company has issued to Investor a secured bridge note in the
aggregate principal amount of $3,000,000 on October 1, 2002.
B. Company entered into a Security Agreement (the "Previous Agreement")
dated as of October 1, 2002 in favor of Investor.
C. Company wishes to issue additional notes up to an aggregate
principal amount of $8,000,000, including the previously issued notes.
D. Investor is willing to purchase additional notes pursuant to a Note
and Warrant Purchase Agreement of even date herewith (the "Note and Warrant
Purchase Agreement") only if he is granted a security interest in the Collateral
described below and the Previous Agreement is amended and restated on the terms
specified in this Security Agreement.
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 and Investor hereby agree to amend and restate the
Previous Agreement 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
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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.
"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
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infringements, all rights corresponding thereto throughout the world and all
renewals and extensions thereof.
"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
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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.
"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.
"Notes" means the First Note, Second Note, the amended and
restated Previous Note and the Subsequent Notes issued pursuant to the Note and
Warrant Purchase Agreement.
"Obligations" means all loans, advances, debts, liabilities
and obligations, howsoever arising, owed by Company to Investor of every kind
and description (whether or not evidenced by any note or instrument and whether
or not for the payment of money), now existing or hereafter arising under or
pursuant to the terms of the Notes and the other Transaction Documents,
including, all interest, fees, charges, expenses, attorneys' fees and costs and
accountants' fees and costs chargeable to and payable by Company hereunder and
thereunder. The term Obligations includes all such amounts, in each case,
whether direct or indirect, absolute or contingent, due or to become due, and
whether or not arising after the commencement of a proceeding under Title 11 of
the United States Code (11 USC Section 101 et seq.), as amended from time to
time (including post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding.
"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.
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"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 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 where they are
undischarged for not more than 30 days; (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) Senior Liens.
"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.
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"PTO" means the United States Patent and Trademark Office,
and any successor office or agency thereto.
"Senior Liens" means, the Liens securing indebtedness of
Company, to banks, commercial finance lenders, insurance companies, leasing or
equipment financing institutions or other lending institutions regularly engaged
in the business of lending money (excluding venture capital, investment banking
or similar institutions which sometimes engage in lending activities but which
are primarily engaged in investments in equity securities), under an accounts
receivable line of credit or a purchase order financing line of credit; provided
that the aggregate principal amount of the indebtedness secured by Senior Liens
shall not exceed $20,000,000."
"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 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.
"Transaction Documents" means the Note and Warrant Purchase
Agreement, the Notes, this Security Agreement (and each UCC financing statement
or notice of security interest filed in connection with this Security
Agreement), the Warrant, and the Registration Rights Agreement.
All capitalized terms not otherwise defined herein shall have the
respective meanings given in the Notes or the Note and Warrant Purchase
Agreement. 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").
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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.
(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,
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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 holders of Senior Liens), 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.
(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,
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,
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(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. Lien Subordination. Investor agrees that the Lien granted to it on
the assets Company shall be subordinate to any Liens granted to a holder of
Senior Liens by Company or by law, notwithstanding the date or order of
attachment or perfection of any such Lien or the provisions of any applicable
law. Investor agrees to execute and deliver customary forms of security interest
subordination agreements as requested from time to time by holder(s) of Senior
Liens; provided that such forms shall not impose on Investor terms less
favorable than those provided herein.
8. 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; (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 10.
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9. 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.
10. 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 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
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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 10, Investor may, at
any time, pursuant to the authority granted in the Power of Attorney
executed pursuant to Section 8(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;
(ii) Second, to the payment to Investor of the amount then owing
or unpaid on the Notes;
(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.
11. 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
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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
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.
(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
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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 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
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"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 and Investor have caused this Security
Agreement to be executed as of the day and year first above written.
THE 3DO COMPANY, a California corporation
By: /s/ James A. Cook
-------------------------------------
Name: James A. Cook
-----------------------------------
Title: Executive Vice President
----------------------------------
WILLIAM M. HAWKINS, III
/s/ William M. Hawkins, III
-----------------------------------------
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