Sample Business Contracts

Loan and Security Agreement - The 3DO Co. and IIG Capital LLC

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                           LOAN AND SECURITY AGREEMENT

     This LOAN AND  SECURITY  AGREEMENT  is entered into as of March 19, 2003 by
and between The 3DO Company,  a  California  corporation  ("Borrower"),  and IIG
Capital LLC, as agent for the IIG Trade Opportunities Fund, N.V. ("Lender").


     A. Borrower has requested that Lender provide  financial  accommodations to
Borrower as more fully set forth herein and in the Loan Documents.

     B. This  Agreement  is  entered  into and will be  performed  in the Chosen

     NOW,  THEREFORE,  in  consideration  of the  premises,  and intending to be
legally bound hereby, the Parties hereby agree as follows:


     1 Certain Definitions and Index to Definitions.

         1.1 Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted,  all accounting determinations hereunder
shall be made, and all financial  statements  required to be delivered hereunder
shall be prepared in accordance with GAAP consistently applied.

         1.2 Definitions.  All other terms contained in this Agreement which are
not specifically  defined herein shall have the meanings  provided in the UCC to
the extent the same are used herein.  All  references  herein to the singular or
plural shall also mean the plural or the singular, respectively. As used herein,
the following terms shall have the following meanings:

               1.2.1 "Account Management Fee" - $1,500.00 per month.

               1.2.2 "Advances" - see Section 2.1.1 hereof.

               1.2.3  "Agreement" - this Loan and Security  Agreement,  together
with all exhibits and schedules  hereto, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated, or replaced.

               1.2.4  "Allowable  Amount" - the lesser of (i) the Borrowing Base
less Availability Reserves, if any and (ii) the Maximum Amount.

               1.2.5  "Anniversary  Date" - each date which is an anniversary of
the date of this Agreement.

               1.2.6 "Audit Fee" - $15,000.00 per year or portion thereof.

                                  Page 1 of 31


               1.2.7 "Avoidance  Claim" - any claim that any payment received by
Lender  from or for the  account of an  Account  Debtor is  avoidable  under the
Bankruptcy Code or any other debtor relief statute.

               1.2.8 "Availability  Reserves" - as of any date of determination,
such amounts as Lender may from time to time  establish and revise in good faith
reducing the amount of Advances  which would  otherwise be available to Borrower

            To reflect  events,  conditions,  contingencies  or
               risks which,  as  determined  by Lender in good faith,  do or may
               reasonably be expected to affect either (i) the Collateral or any
               other  property  which is  security  for the  Obligations  or its
               value, (ii) the assets,  business or prospects of Borrower or any
               Obligor,  or (iii) the  security  interest  and  other  rights of
               Lender  in  the   Collateral   (including   the   enforceability,
               perfection and priority thereof);

            To reflect  Lender's  good  faith  belief  that any
               financial  information  furnished  by or on behalf of Borrower or
               any Obligor to Lender is or may have been incomplete,  inaccurate
               or misleading in any material respect; or

            In  respect  of any  state  of  facts  that  Lender
               determined in good faith  constitutes  an Event of Default or may
               reasonably  be  expected  to,  with  notice or passage of time or
               both, constitute an Event of Default.

               1.2.9 "Average  Unused  Portion of Maximum  Amount" - the Maximum
Amount less the average Obligations that were outstanding during the immediately
preceding month.

               1.2.10  "Balance  Subject  to  Interest"  - The sum of the unpaid
balances of:


           Other payments made by Lender arising hereunder for
               which Borrower is liable to Lender.

               1.2.11 "Borrower" - see Preamble hereof.

               1.2.12 "Borrowing Base" - the sum of:

           60% of the Net Face Amount of  Borrower's  Eligible
               Accounts, plus

           the lesser of (i)  $2,000,000.00 or (ii) 25% of the
               value  (determined  at the lower of cost or market) of Borrower's
               Eligible Inventory.

                                  Page 2 of 31


               1.2.13  "Borrowing Base  Certificate" - a request for an Advance,
in a form acceptable to Lender.

               1.2.14 "Business Day" - any day which is not a Saturday,  Sunday,
or other day on which national banks are authorized or required to be closed.

               1.2.15 "Chosen State" - New York.

               1.2.16  "Claim" - a claim by an Account  Debtor,  of any defense,
dispute, offset, counterclaim,  or rights of return or cancellation with respect
to any Account.

               1.2.17 "Clearance Days" - 3 banking days.

               1.2.18 "Collateral" - All Borrower's present and future Accounts,
Chattel  Paper,   Goods  (including   Inventory  and  Equipment),   Instruments,
Investment  Property,  Documents,  and  General  Intangibles,  and the  proceeds

               1.2.19  "Collateral  Management  Fee" -  0.4%  per  month  of the
average monthly balance of the gross face amount of the outstanding Accounts.

               1.2.20 "Contractual Termination Date" - The end of a Term.

               1.2.21 "Credit Accommodation" - any advance or other extension of
credit by Lender to or on behalf of Borrower hereunder.

               1.2.22  "Default  Rate" - 8% per annum in excess of the  Interest

               1.2.23 "Default Waiver Fee" - $2,500.00.

               1.2.24 "Delinquent Account" - see Section

               1.2.25  "Early  Termination  Fee"  - the  greater  of  (x)  total
interest for the immediately preceding three months, or (y) $300,000.00.

               1.2.26 "Eligible Account" - an Account, excluding the following:

           Any Account which remain  uncollected for more than
               90 days from invoice date (each a "Delinquent Account");

            Any  Account  due from an Account  Debtor  that is

           Any Account due from an Account  Debtor  affiliated
               with Borrower in any manner;

           Any Account  which is not  unconditionally  due and

                                  Page 3 of 31


            Any  Account  with  respect  to which the  Account
               Debtor is not a resident or citizen of, located in, or subject to
               service of  process  in,  the  United  States,  and which are not
               either (i) covered by credit insurance in form and amount, and by
               an insurer,  satisfactory to Lender,  or (ii) supported by one or
               more  letters  of  credit  issued  by  a  financial  institution,
               acceptable to Lender;

            Any Account due from an Account  Debtor who is any
               national,  federal  state  or  municipal  government,  including,
               without limitation,  any instrumentality,  division, agency, body
               or department  thereof,  except where the Account Debtor is bound
               to make payment directly to Lender;

           That portion of Accounts due from an Account Debtor
               which is in excess of 25% percent of Borrower's  aggregate dollar
               amount of all outstanding Accounts Receivable;

             Accounts   which  are  not  free  of  all  liens,
               encumbrances,  charges,  rights and interest of any kind,  except
               liens in favor of Lender,  subordinate  liens  existing as of the
               date of this Agreement,  and subordinate liens hereafter acquired
               with Lender's  consent,  which consent shall not be  unreasonably

            Accounts  which are supported or  represented by a
               promissory  note,  post-dated  check or letter  of credit  unless
               Lender holds a first perfected security interest therein;

           Accounts that represent progress payments or other
               advance  billings  that  are  due  prior  to  the  completion  of
               performance  by  Borrower of the  subject  contract  for goods or

            Accounts  for  which  Borrower  is or may  become
               indebted to the Account  Debtor,  except  Accounts  owing from an
               Account Debtor which has signed an estoppel letter  acceptable to
               Lender  whereby  it  agrees  not to  assert  its  claims  against
               Borrower as a defense to payment of Accounts; and

            Accounts which are  unsuitable as collateral,  as
               determined  by  Lender  in  the  exercise  of  its   commercially
               reasonable discretion.

               1.2.27 "Eligible Inventory" - Inventory of Borrower which is:

            Subject  to  Lender's  first,  perfected  security

           Not owned by Borrower for more than 60 days; and

                                  Page 4 of 31


            Otherwise  acceptable to Lender in its  reasonable
               sole discretion.

               1.2.28 "Event of Default" - see Section 12 hereof.

               1.2.29 "Exposed  Payments" - Payments  received by Lender from an
Account  Debtor  which has become  subject to a  bankruptcy  proceeding,  to the
extent such payments cleared said Account Debtor's deposit account within ninety
days of the commencement of said bankruptcy case.

               1.2.30 "GAAP" - means generally  accepted  accounting  principles
set forth in the opinions and pronouncements of the Accounting  Principles Board
of the American  Institute of Certified Public Accountants and pronouncements of
the Financial  Accounting  Standards Board (or any successor authority) that are
applicable as of the date of determination.

               1.2.31  "Guarantors"  -  all  individuals  and  entities  now  or
hereafter guaranteeing the Obligations.

               1.2.32  "Interest Rate" - The greater of (i) 5% percent per annum
in excess of the Prime Rate or (ii) 9.5% per annum.  Any change in the  Interest
Rate shall be effective as of the date of any change in the Prime Rate.

               1.2.33 "Key Employees" - William M. Hawkins III.

               1.2.34 "Lender" - See Preamble.

               1.2.35  "Loan  Documents"  - this  Agreement,  together  with any
documents,  instruments and agreements,  executed and/or delivered in connection
herewith,  as  the  same  now  exist  or may  hereafter  be  amended,  modified,
supplemented, extended, renewed, restated or replaced.

               1.2.36 "Loan Fee" - 1.5% of the Maximum Amount.

               1.2.37 "Maximum Amount" - $10,000,000.

               1.2.38 "Minimum Quarterly Income" - $300,000.

               1.2.39  "Misdirected  Payment Fee" - the greater of (i) $2,000 or
(ii) 3% of any payment described in Section hereof.

               1.2.40  "Missed Payoff Fee" - (a) 2% of the unpaid balance of the
Obligations  of Borrower on the  Termination  Date,  if Borrower pays Lender the
unpaid  balance of the  Obligations  in full between one and five  Business Days
after the  Termination  Date, (b) 3% of the unpaid balance of the Obligations of
Borrower on the Termination  Date, if Borrower pays Lender the unpaid balance of
the  Obligations in full between six and ten Business Days after the Termination
Date;  and (c) 5% of the unpaid  balance of the  Obligations  of Borrower on the

                                  Page 5 of 31


Termination  Date, if Borrower pays Lender the unpaid balance of the Obligations
in full more than 10 Business Days after the Termination Date.

               1.2.41 "Missing Notation Fee" - the greater of (i) $2,000 or (ii)
3% of the Net Face Amount.

               1.2.42 "Monetary  Collateral" - cash, checks or other proceeds of
Collateral in tangible form.

               1.2.43 "Net Face Amount" - with respect to an Account,  the gross
face amount of such Account less all trade  discounts  or other  deductions  and
claims to which the Account Debtor is contractually entitled.

               1.2.44  "Obligated  Party" - any entity obligated with respect to
any Collateral.

               1.2.45  "Obligations" - all present and future  obligations owing
by Borrower to Lender whether or not for the payment of money, whether direct or
indirect,  absolute or contingent,  joint or several,  whether  arising  before,
during or after the  commencement  of any Bankruptcy Case in which Borrower is a

               1.2.46 "Obligors" - Borrower and all Guarantors.

               1.2.47  "Prime  Rate" - The prime rate as  reflected  in the Wall
Street  Journal  from time to time.  If the prime rate is  reflected as a range,
than the Prime Rate as used herein shall be the highest amount in said range.

               1.2.48  "Subordinating  Creditor" - any  creditor of the Borrower
which has executed a Subordination Agreement.

               1.2.49 "Subordination  Agreement" - a subordination  agreement in
form  and  substance  acceptable  to  Lender  whereby   Subordinating   Creditor
subordinates in favor of Lender obligations owed to it by Borrower.

               1.2.50  "Term"  - one  year  from  the  date  hereof,  or if this
Agreement is extended pursuant to Section 17.2 hereof, one year from the date of
such extension.

               1.2.51  "Termination  Date" - the earlier of (i) the  Contractual
Termination  Date or (ii) the date on which  Lender  elects  to  terminate  this
Agreement pursuant to the terms herein.

               1.2.52  "UCC" - The  Uniform  Commercial  Code in  effect  in the
Chosen State at the date on which a determination thereunder is to be made.

               1.2.53  "Unused Line Fee" - 0.5% percent per annum of the Average
Unused Portion of the Maximum Amount.

                                  page 6 of 31


               1.2.54 "Value of Eligible Inventory" - As determined by Lender in
good faith,  the lower of (a) cost,  computed on a  first-in-first-out  basis in
accordance with GAAP, or (b) market value.

     2 Credit Facilities.

         2.1 Advances.  Subject to the terms and  conditions of this  Agreement,
from the date on which this Agreement  becomes  effective  until the Termination

               2.1.1  Lender,  shall,  from  time to  time,  at the  request  of
Borrower,   make  advances  ("Advances")  to  Borrower,  less  any  Availability
Reserves,  so long as, before and after such  Advance,  the  Obligations  do not
exceed the Allowable Amount.

               2.1.2 Lender may, in its discretion,  from time to time, upon not
less than five (5) days prior notice to Borrower,  reduce the Borrowing  Base to
the extent that Lender determines in good faith that:

           The  dilution  with  respect to the Accounts for any
               period  (based  on the  ratio  of (a)  the  aggregate  amount  of
               reductions in Accounts other than as a result of payments in cash
               to (b) the aggregate  amount of total sales) has increased in any
               material respect or may be reasonably  anticipated to increase in
               any material respect above historical levels;

           The general  creditworthiness of Account Debtors has
               declined, or

           The number of days of the turnover of the  Inventory
               for any period has changed in any  material  respect,  or (a) the
               liquidation  value of the  Eligible  Inventory,  or any  category
               thereof,  has  decreased,  or (b) the nature  and  quality of the
               Inventory has deteriorated.

     2.2 General Provisions.

               2.2.1 Borrowing Base Certificate.  Each request from Borrower for
a Credit  Accommodation  shall be accompanied by a Borrowing Base Certificate in
the form attached hereto as Exhibit A, completed and signed by Borrower.

               2.2.2 Crediting Borrower's Account. All Credit  Accommodations by
Lender may be made by deposits or  transfers  to any demand  deposit  account of

               2.2.3  Authorization  for Credit  Accommodations.  Subject to the
terms and  conditions  of this  Agreement,  Lender is  authorized to make Credit

           Upon  telephonic,  facsimile  or other  instructions
               received from any of Borrower's representatives listed on Exhibit
               B hereto,  as such schedule may be amended from time to time upon
               five (5) days notice to Lender; or

                                  Page 7 of 31


             At   the   sole   discretion   of   Lender,    and
               notwithstanding  any  other  provision  in  this  Agreement,   if
               necessary to meet any  Obligations,  including but not limited to
               any interest not paid when due.

         2.3 Limitations on Credit Accommodations.  Notwithstanding  anything to
the contrary  contained  herein,  Lender shall not be obligated to make a Credit
Accommodation  if, before or as a result thereof,  the Obligations  shall exceed
the Allowable Amount.

     3 Payments by Borrower.

         3.1 In General.

               3.1.1 Place of Payments.  All payments hereunder shall be made by
Borrower to Lender at Lender's  address set forth  herein or at such other place
as Lender may designate in writing.

               3.1.2 ACH  Debits.  In order to satisfy  any of the  Obligations,
Lender is hereby  authorized  by Borrower to initiate  electronic  debit entries
through the ACH or other electronic  payment system to any account maintained by
Borrower. At the Lender's request,  Borrower shall execute and deliver to Lender
an authorization agreement for ACH debits.

         3.2 Interest and Fees.

               3.2.1 Interest.

           Basic  Interest.  Subject to Section hereof,
               interest  on the  Balance  Subject to  Interest  shall be payable
               monthly, in arrears,  shall be computed at the Interest Rate, and
               shall be due on the first (1st) day of each month  following  the
               accrual  thereof.  Lender is authorized to debit  Borrower's loan
               account  on the first  business  day of each  month for  interest
               accrued hereunder during the preceding month.

           Minimum  Quarterly  Income.  Any amount by which the
               interest  and fees (other  than Loan Fees)  earned in any quarter
               (prorated for partial periods) is less than the Minimum Quarterly
               Income, to be paid on the first day of the following quarter.

           Default Interest. Immediately upon the occurrence of
               an Event of  Default,  interest  shall be charged on the  Balance
               Subject  to  Interest  computed  at the  Default  Rate.  Lender's
               failure  to  assess  interest  at the  Default  Rate as  provided
               hereunder  shall not be deemed a waiver by Lender to charge  such
               Default Rate.

            Calculation  of  Interest.   All  interest  charged
               hereunder shall be computed on the basis of a three hundred sixty
               (360) day year for the actual number of days elapsed.

                                  Page 8 of 31


            Application of Collections.  Lender shall,  for the
               purpose of the  computation  of interest due  hereunder,  add the
               Clearance  Days to any  payments,  which is  acknowledged  by the
               parties  to  constitute  an  integral  aspect of the  pricing  of
               Lender's  facility to Borrower,  and shall apply  irrespective of
               the characterization of whether receipts are owned by Borrower or
               Lender.  Should any check or item of payment not be honored  when
               presented for payment,  then Borrower shall be deemed not to have
               made  such   payment,   and   interest   shall  be   recalculated

               3.2.2 Fees.

           Audit Fee.  Borrower shall immediately pay to Lender
               an Audit Fee,  in  addition  to  Lender's  related  out-of-pocket
               expenses, in connection with each audit Lender performs or causes
               to be performed hereunder.

            Collateral  Management Fee.  Borrower shall pay the
               Collateral  Management Fee to Lender monthly,  in arrears, on the
               first (1st) day of each month following the accrual thereof.

           Loan Fee.  Borrower shall pay the Loan Fee to Lender
               on the date hereof, and on each Anniversary Date on which (a) any
               portion of the Obligation is  outstanding  and (b) this Agreement
               has not  been  terminated,  which  amounts  shall be  debited  to
               Borrower's  loan  account.  Any  portion  not paid when due shall
               accrue interest at the applicable interest rate set forth herein.

            Default Waiver Fee.  Borrower shall pay the Default
               Waiver  Fee to Lender,  immediately  upon the waiver by Lender of
               any Event of Default hereunder, so long as the waiver was done at
               the Borrower's request.

           Early  Termination Fee.  Borrower shall promptly pay
               to Lender the Early  Termination Fee if Borrower  terminates this
               Agreement,  becomes subject to a Bankruptcy proceeding, or repays
               the Obligations  (whether by acceleration or otherwise)  prior to
               the next Contractual Termination Date.

           Account  Management Fee. The Account Management Fee,
               on the  first  day of each  month  until the last to occur of (i)
               payment in full of all Obligations,  and (ii) termination of this

            Misdirected  Payment  Fee.  Borrower  shall pay the
               Misdirected  Payment Fee to Lender,  promptly on its accrual,  on
               the amount of any payment on an Account,  which has been received
               by  Borrower  and not  delivered  in kind by  Borrower  to Lender
               within three (3) Business Days of receipt thereof.

                                  Page 9 of 31


            Missed  Payoff Fee.  Borrower  shall pay the Missed
               Payoff Fee to Lender promptly upon its accrual.

           Missing Notation Fee. Borrower shall promptly pay to
               Lender the Missing  Notation  Fee on any invoice  that is sent by
               Borrower to an Account Debtor that does not contain the notice as
               required by Section 6.1 hereof.

           Unused Line Fee. Borrower shall pay the Unused Line
               Fee to Lender on the first  (1st) day of each  month  during  the
               term of this Agreement.

     4 Grant of Security Interest.

         4.1 To secure the  performance of the  Obligations,  Borrower grants to
the Lender a security interest in the Collateral,  and all proceeds and products

         4.2  Notwithstanding  anything to the contrary herein,  upon Borrower's
request and so long as Borrower is not in default  under this  Agreement  at the
time of such request,  Lender agrees to subordinate its security interest in any
trademarks,  patents,  copyrights, trade secrets and other intellectual property
to the  security  interest  granted  by  Borrower  to any other  secured  party;
provided,  that such other party executes an intercreditor agreement with Lender
in the  form  attached  hereto  as  Exhibit  C or such  other  form as  shall be
reasonably agreed upon between Lender and such other secured party.

     5 Authorization to File Financing Statements.

         5.1 The  Borrower  irrevocably  authorizes  the  Lender  to file in any
Uniform  Commercial  Code  jurisdiction  any initial  financing  statements  and
amendments thereto that:

               5.1.1  Indicate the  Collateral  as all assets of the Borrower or
words of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the UCC, or as being of an
equal or lesser scope or with greater detail;

               5.1.2 Contain any other information required by part 5 of Article
9 of the UCC for the  sufficiency  or filing office  acceptance of any financing
statement or amendment,  including (i) whether the Borrower is an  organization,
the type of organization,  and any organization  identification number issued to
the Borrower and, (ii) in the case of a financing  statement  filed as a fixture
filing or indicating Collateral as as-extracted  collateral or timber to be cut,
a sufficient description of real property to which the Collateral relates; and

               5.1.3  Contain a  notification  that the  Borrower  has granted a
negative pledge to the Lender,  and that any subsequent lienor may be tortuously
interfering with Lender's rights;

               5.1.4 Advises third parties that any  notification  of Borrower's
Account Debtors will interfere with Lender's collection rights.

                                 Page 10 of 31


               5.2  The  Borrower   agrees  to  furnish  any  of  the  foregoing
information to the Lender promptly upon request.

               5.3 The  Borrower  ratifies its  authorization  for the Lender to
have filed any like initial financing  statements or amendments thereto if filed
prior to the date hereof.

               5.4 The  Lender  may add any  supplemental  language  to any such
financing  statement  as Lender  may  determine  to be  necessary  or helpful in
acquiring or preserving rights against third parties.

               5.5 At  Borrower's  request,  Lender will provide  Borrower  with
copies of the financing statements filed by Lender against Borrower.

     6 Collection and Administration of Accounts.

               6.1 Collection.  Lender may notify Borrower's customers that that
the underlying  Account has been assigned to Lender and that payment  thereof is
to be made to the order of Lender and sent directly to Lender.

               6.2  Lender's  Powers.  Borrower  hereby  authorizes  Lender,  at
Borrower's sole expense,  to exercise at any time in Lender's  discretion all or
any of the  following  powers,  which  powers are  irrevocable  until all of the
Obligations have been paid in full:

                    6.2.1 Receive, take, endorse,  assign,  deliver,  accept and
               deposit,  in the name of  Lender or  Borrower,  any and all cash,
               checks,   commercial   paper,   drafts,   remittances  and  other
               instruments  and  documents  relating  to the  Collateral  or the
               proceeds thereof;

                    6.2.2  Pay any  sums  necessary  to  discharge  any  lien or
               encumbrance that is senior to Lender's  security  interest in the
               Collateral,   which  sums  shall  be  included   as   Obligations

         6.3 Release.  Borrower  hereby  releases  and  exculpates  Lender,  its
officers,  employees,  agents,  designees,  attorneys,  and accountants from any
liability arising from any acts under this Agreement or in furtherance  thereof,
whether of omission or commission,  and whether based upon any error of judgment
or mistake of law or fact, except for gross negligence or willful misconduct. In
no event shall  Lender have any  liability to Borrower for lost profits or other
special or consequential damages.

     7  Representations  and Warranties by Borrower.  All Accounts listed on any
report provided by Borrower to Lender will be:

         7.1 Bona fide existing  obligations created by the sale and delivery of
goods  or the  rendition  of  services  in the  ordinary  course  of  Borrower's

         7.2 To Borrower's  knowledge,  unconditionally owed and will be paid to
Lender without defenses, disputes, offsets,  counterclaims,  or rights of return
or cancellation;

                                 Page 11 of 31


               7.3 Not sales to any entity that is affiliated  with Seller or in
any way not an "arms length" transaction.

     8  Conditions  Precedent  to All  Advances.  Subject to the other terms and
conditions   contained   herein,   Lender's   obligation   to  make  any  Credit
Accommodation available to Borrower is subject to the satisfaction of, or waiver
of,  immediately  prior  to or  concurrently  with  the  making  of such  Credit
Accommodation, the following conditions precedent:

         8.1 Representations and Warranties.  The representations and warranties
contained in the Loan Documents shall be true and correct in all respects on and
as of the date of such Credit Accommodation.

         8.2 No Event of  Default.  No Event of  Default  or event that with the
giving of notice or passage of time would  constitute  an Event of Default shall
have occurred and be continuing on the date of such Credit Accommodation.

         8.3 Payment of All Fees. Borrower shall have paid to Lender all accrued
and unpaid fees and other amounts due and payable  hereunder and pursuant to the
terms hereof.

         8.4 Lender's  Priority  Interest.  Lender  shall have a first  priority
security interest in the Collateral.

     9 Authorization to Lender.  The Borrower  irrevocably  authorizes Lender to
take any and all  appropriate  action and to execute any and all  documents  and
instruments,  in the name of  Borrower,  that may be  necessary  or desirable to
accomplish  the  purposes of this  Agreement  including  the filing on behalf of
Borrower with such  governmental  authorities as are appropriate  such documents
(including, without limitation, applications,  certificates, and tax returns) as
may be required for purposes of having Borrower  qualified to transact  business
in a particular state or geographic location.

     10  Affirmative  Covenants.  Until  full  payment  of the  Obligations  and
termination of this Agreement, Borrower shall:

         10.1 Promptly advise Lender, in writing,  of the assertion of any Claim
by an Account Debtor.

         10.2  Financial  Statements,  Reports  and  Certifications.  Furnish to
Lender, in form and substance satisfactory to Lender:

               10.2.1 Annual Financial Statements. As soon as possible after the
end of each fiscal year of Borrower, and in any event within 90 days thereafter:

           A complete copy of Borrower's financial statements,
               including but not limited to (a) the management  letter,  if any,
               (b) the balance sheet as of the close of the fiscal year, and (c)
               the income statement for such year,  together with a statement of
               cash flows, audited

                                 Page 12 of 31


               by  a  firm  of  independent   certified  public  accountants  of
               recognized standing and acceptable to Lender, and

            A  statement  certified  by  the  chief  financial
               officer of Borrower that  Borrower is in compliance  with all the
               terms,  conditions,  covenants and warranties of this  Agreement.

               10.2.2 Other  Financial  Statements.  No later than 20 days after
the close of each month (an "Accounting Period"):

            Borrower's  balance  sheet as of the close of such
               Accounting  Period and its income  statement  for that portion of
               the then current  fiscal year through the end of such  Accounting
               Period certified by Borrower's  chief financial  officer as being
               complete,   correct,   and  fairly   representing  its  financial
               condition and results of operations;

           Borrower's accounts receivable and accounts payable
               agings as of the end of such  Accounting  Period,  as well as its
               month end inventory report, and an accounts receivable collection
               report in a form satisfactory to Lender,  certified by Borrower's
               chief financial officer as being complete, correct; and

           Borrower's weekly sell-through  report.

               10.2.3 Tax Returns. Copies of each of Borrower's:

            Federal  income tax  returns,  and any  amendments
               thereto,  within 10 days of the filing  thereof with the Internal
               Revenue Service; and

           Federal payroll tax returns within ten (10) days of
               filing,  together with proof,  satisfactory to Lender,  which all
               taxes have been paid.

               10.2.4 Inventory Reports. A listing of all Borrower's  Inventory,
based upon a  physical  count  taken by  Borrower  every 3 months  and  whenever
requested by Lender.

         10.3 Inspections.

               10.3.1 During usual business hours, permit Lender, without notice
to Borrower, to periodically:

            have access to all premises  where  Collateral  is
               located for the purposes of inspecting  (and  removing,  if after
               the occurrence of an Event of Default) any of the Collateral; and

            to  inspect,  audit,  make  copies  of,  and  make
               extracts  from  Borrower's   records  as  Lender  may  reasonably

                                 Page 13 of 31


               10.3.2  Without  expense  to  Lender,   Lender  may  use  any  of
Borrower's personnel, equipment, including computer equipment, programs, printed
output and computer  readable  media,  supplies  and premises as are  reasonably
necessary for the collection of accounts and realization on other Collateral.

         10.4  Indemnification.  Indemnify and hold Lender harmless from any and
all  liability  with respect to any stamp or other taxes (other than transfer or
income  taxes)  which may be  determined  to be payable in  connection  with the
execution  of the Loan  Documents  or any action of Lender  with  respect to the
Collateral,  including,  without  limitation,  the transfer of the Collateral to
Lender's  name or that of Lender's  nominee or any  purchaser  at a  foreclosure

         10.5  Enforcement  of  Judgments.  Reimburse  Lender  for all costs and
expenses, including reasonable attorneys' fees, which Lender incurs in enforcing
any judgment  rendered in  connection  with this  Agreement.  This  provision is
severable from all other provisions hereof and shall survive,  and not be deemed
merged into, such judgment.

         10.6 Taxes and Expenses Regarding Borrower's Assets.

               10.6.1 Make timely  payment or deposit of all taxes,  assessments
or  contributions  required  of  Borrower.  If  Borrower  fails to make any such
payment or deposit or furnish  proof of such payment  immediately  upon Lender's
request, Lender may, in its sole discretion and without notice to Borrower:

           make payment of the same or any part thereof; or

           Set up such  reserves  against the  Obligations  as
               Lender deems  necessary to satisfy the  liability  therefore,  or

               10.6.2 Lender may  conclusively  rely on statements of the amount
owing  or other  official  statements  issued  by the  appropriate  governmental
agency. Any payment made by Lender shall constitute neither:

           an agreement by Lender to make similar  payments in
               the future; nor

            A waiver by Lender of any  default  under the Loan
               Documents. Lender need not inquire into, nor contest the validity
               of, any expense, tax, security interest, encumbrance or lien, and
               the receipt of the usual  official  notice  requiring the payment
               thereof  shall be  conclusive  evidence that the same was validly
               due and owing.

               10.7 Change in Name. Give Lender written notice  immediately upon
forming  an  intention  to change  its name,  state of  organization  or form of
business organization.

               10.8  Maintenance  of Insurance.  The Borrower will maintain with
financially  sound  and  reputable   insurers  insurance  with  respect  to  its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses

                                 Page 14 of 31


engaged in similar  activities in similar geographic areas. Such insurance shall
be in such minimum  amounts  that the  Borrower  will not be deemed a co-insurer
under applicable insurance laws,  regulations,  and policies and otherwise shall
be in such amounts, contain such terms, be in such forms and be for such periods
as may be reasonably satisfactory to the Lender. In addition, all such insurance
shall be payable to the Lender under a Lender Loss Payable Endorsement.  Without
limiting the foregoing, the Borrower will:

               10.8.1 Keep all of its physical property insured with casualty or
physical  hazard  insurance on an "all risks"  basis,  with broad form flood and
earthquake  coverage  and  electronic  data  processing  coverage,  with  a full
replacement cost endorsement and an "agreed amount" clause in an amount equal to
100% of the full replacement cost of such property;

               10.8.2  Maintain  all  such  workers'   compensation  or  similar
insurance as may be required by law;

               10.8.3 Maintain,  in amounts and with deductibles  equal to those
generally  maintained  by  businesses  engaged in similar  activities in similar
geographic  areas,  general public liability  insurance against claims of bodily
injury,  death, or property damage occurring,  on, in or about the properties of
the Borrower; business interruption insurance; and product liability insurance.

         10.9 Before  sending any invoice to an Account  Debtor,  Borrower shall
mark same with a notice of assignment as may be required by Lender.

         10.10  Notwithstanding  that Borrower has agreed to pay the Misdirected
Payment Fee,  Borrower shall pay to Lender on the next banking day following the
date of receipt by Borrower the amount of any  proceeds of Accounts  received by

     11 Negative Covenants. Borrower will not:

         11.1 Modify Account  Obligations.  After an Event of Default, (i) grant
any extension of time for payment of any Accounts, (ii) compromise or settle any
Accounts  for less than the full amount  thereof,  (iii)  release in whole or in
part any  Account  Debtor;  or (iv) grant any  credits,  discounts,  allowances,
deductions, return authorizations, or the like with respect to any Accounts.

         11.2  Negative  Pledge.  Hereafter  grant any lien upon the  Collateral
except in favor of Lender.

     12 Events of Default.  Each of the  following  events or  conditions  shall
constitute an "Event of Default":

         12.1 Borrower fails to pay any of the Obligations when they become due,
whether at maturity, upon acceleration, or otherwise;

         12.2 Borrower fails to cure the breach of any  Obligation  other than a
payment  obligation  within five Business  Days after notice  thereof is sent by
Lender to Borrower;

                                 Page 15 of 31


         12.3  Borrower  is in default  with  respect  to any  present or future
agreement with Lender;

         12.4 The Obligations at any time exceed the Allowable Amount;

         12.5 An order for relief is entered  against  any Obligor by any United
States Bankruptcy Court; or any Obligor does not generally pay its debts as they
become due (within the meaning of 11 U.S.C.  303(h) as at any time  amended,  or
any successor  statute  thereto);  or any Obligor  makes an  assignment  for the
benefit of creditors;  or any Obligor applies for or consents to the appointment
of a custodian,  receiver,  trustee, or similar officer for it or for all or any
substantial part of its assets, or such custodian, receiver, trustee, or similar
officer is appointed  without the application or consent of any Obligor;  or any
Obligor institutes (by petition, application, answer, consent, or otherwise) any
bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment of
debt,  dissolution,  liquidation or similar proceeding  relating to it under the
laws of any  jurisdiction;  or any  such  proceeding  shall  be  instituted  (by
petition, application, or otherwise) against any Obligor; or any judgment, writ,
warrant of attachment,  execution,  or similar process shall be issued or levied
against a substantial portion of the property of any Obligor;

         12.6 An adverse  change occurs with respect to the financial  condition
or operations of Borrower which results in a material impairment of the prospect
of repayment of the Obligations;

         12.7 A sale,  hypothecation  or  other  disposition  is  made of  fifty
percent (50%) or more of the beneficial interest in any class of voting stock of

         12.8 Any Guarantor  defaults in the  performance of its  obligations to
Lender or shall notify Lender of its intention to rescind,  modify, terminate or
revoke  its  guaranty  or it shall  cease to be in full force and effect for any
reason whatever;

         12.9 Any Subordinating Creditor fails to perform or observe any of such
Subordinating  Creditor's  obligations  under any  Subordination  Agreement,  or
notifies Lender of the Subordinating  Creditor's  intention to rescind,  modify,
terminate  or  revoke  the  Subordination   Agreement  with  respect  to  future
transactions,  or the  Subordination  Agreement  ceases to be in full  force and
effect for nay reason whatsoever;

         12.10 Any of the Key  Employees  fails to  devote  one  hundred  (100%)
percent of their efforts in furtherance of the business  affairs of Borrower for
any one month,  or ceases to be employed by Borrower in the  capacity  that such
employee held as of the date of this Agreement;

         12.11 Any  provision  of this  Agreement  or any of the Loan  Documents
ceases, for any reason, to be valid and binding on Borrower.

     13 Remedies.

         13.1 Upon the  occurrence of any Event of Default,  and until such time
as all  Obligations  are repaid,  all  Obligations  shall accrue interest at the
Default Rate and Lender may:

                                 page 16 of 31


               13.1.1  Declare this  Agreement  and all of Lender's  obligations
hereunder terminated;

               13.1.2 Declare all Obligations to be immediately due and payable,
without  presentment,  demand,  protest, or notice of any kind, all of which are
hereby expressly waived by Lender.

               13.1.3  Take or bring,  in the name of Lender  or  Borrower,  all
steps, actions,  suits or proceedings deemed by Lender necessary or desirable to
effect collection of or other realization upon any Collateral;

               13.1.4  Change the address for  delivery  of  Borrower's  mail to
Lender and to receive and open mail  addressed  to Borrower;  13.1.5  Extend the
time  of  payment  of,  compromise,  or  settle  for  cash,  credit,  return  of
merchandise,  any and all  Monetary  Collateral  and  discharge  or release  any
Obligated Party without affecting any of the Obligations;

               13.1.6 Execute, file and serve, in its own name or in the name of
Borrower,  mechanics  lien or similar  notices,  or claims  under any payment or
performance bond for the benefit of Borrower.


     14 Standards for Exercising Remedies.

         14.1 To the extent that  applicable law imposes duties on the Lender to
exercise remedies in a commercially reasonable manner, the Borrower acknowledges
and agrees that it is not commercially unreasonable for the Lender:

         14.2 to not incur  expenses to prepare  Collateral  for  disposition or
otherwise to complete raw  material or work in process  into  finished  goods or
other finished products for disposition;

         14.3 to fail to obtain third party consents for access to Collateral to
be disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental  or third party  consents  for the  collection  or  disposition  of
Collateral to be collected or disposed of;

         14.4 to fail to exercise collection remedies against Account Debtors or
other persons  obligated on Collateral or to remove liens or  encumbrances on or
any adverse claims against Collateral;

                                 Page 17 of 31


         14.5 to exercise  collection remedies against Account Debtors and other
persons  obligated  on  Collateral  directly  or through  the use of  collection
agencies and other collection specialists;

         14.6 to advertise  dispositions of Collateral  through  publications or
media of general circulation,  whether or not the Collateral is of a specialized

         14.7 to hire one or more  professional  auctioneers  to  assist  in the
disposition  of  Collateral,  whether or not the  collateral is of a specialized

         14.8 to dispose of Collateral by using  Internet sites that provide for
the auction of assets of the types  included in the  Collateral or that have the
reasonable capability of doing so, or that match buyers and sellers of assets;

         14.9 to dispose of assets in wholesale rather than retail markets;

         14.10 to disclaim all disposition warranties; or

         14.11 to purchase insurance or credit enhancements to insure the Lender
against risks of loss,  collection or disposition of Collateral or to provide to
the Lender a guaranteed return from the collection or disposition of Collateral.

         14.12 Borrower  acknowledges  that the purpose of this Section 14 is to
provide  non-exhaustive  indications  of what actions or omissions by the Lender
would not be  commercially  unreasonable  in the  Lender's  exercise of remedies
against the  Collateral  and that other actions or omissions by the Lender shall
not be deemed commercially unreasonable solely on account of not being indicated
in this Section. Without limitation upon the foregoing, nothing contained herein
shall be  construed  to grant any rights to the Borrower or to impose any duties
on the Lender that would not have been  granted or imposed by this  Agreement or
by applicable law in the absence of this Section 14.

     15 Proceeds and Expenses of Dispositions.  Borrower shall pay to the Lender
on  demand  any and all  expenses,  including  reasonable  attorneys'  fees  and
disbursements,  incurred  or paid by the Lender in  protecting,  preserving,  or
enforcing the Lender's  rights under or in respect of any of the  Obligations or
any of the Collateral.  After deducting all of said expenses, the residue of any
proceeds of collection or sale of the  Obligations or Collateral  shall,  to the
extent  actually  received in cash, be applied to the payment of the Obligations
in such  order  or  preference  as the  Lender  may  determine,  notwithstanding
contrary  instructions  received by Lender from the  Borrower or any other third

     16 Attorneys  Fees and  Expenses.  Borrower  agrees to reimburse  Lender on
demand for:

         16.1 The actual amount of all costs and expenses,  including attorneys'
fees, which Lender has incurred or may incur in:

                                 Page 18 of 31


               16.1.1  Negotiating,  preparing,  or administering this Agreement
and any documents prepared in connection herewith;

               16.1.2 Any way arising out of this Agreement;

               16.1.3  Protecting,  preserving or enforcing  any lien,  security
interest  or other  right  granted  by  Borrower  to  Lender  or  arising  under
applicable law, whether or not suit is brought, including but not limited to the
defense of any Avoidance Claims;

         16.2 The actual costs,  including  photocopying (which, if performed by
Lender's employees,  shall be at the rate of $.10/page),  travel, and attorneys'
fees and expenses incurred in complying with any subpoena or other legal process
attendant to any litigation in which Borrower is a party;

         16.3 The actual amount of all costs and expenses,  including attorneys'
fees,  which  Lender may incur in enforcing  this  Agreement  and any  documents
prepared in  connection  herewith,  or in  connection  with any federal or state
insolvency  proceeding  commenced by or against  Borrower,  including  those (i)
arising out the  automatic  stay,  (ii) seeking  dismissal or  conversion of the
bankruptcy   proceeding  or  (ii)  opposing   confirmation  of  Borrower's  plan

     17 Termination.

         17.1 This  Agreement  shall become  effective  upon the  execution  and
delivery  hereof by  Borrower  and Lender and shall  continue  in full force and
effect for the Term.

         17.2 This  Agreement  shall be  automatically  extended for  successive
Terms unless either party has advised the other of their  intention to have this
Agreement  terminate on the next Contractual  Termination  Date, so long as such
notice is in writing and is received at least sixty days prior to such date.

         17.3 Upon the  Termination  Date, the unpaid balance of the Obligations
shall be due and payable without demand or notice.

         17.4 Exposed Payments.

               17.4.1 Upon termination of this Agreement,  Borrower shall pay to
Lender (or Lender may retain), to hold in a non-segregated  non-interest bearing
account the amount of all Exposed Payments (the "Preference Reserve").

               17.4.2 Lender may charge the  Preference  Reserve with the amount
of any  Exposed  Payments  which  Lender  pays to the  bankruptcy  estate of the
Account  Debtor which made the Exposed  Payment,  on account of a claim asserted
under Section 547 of the Bankruptcy Code.

               17.4.3  Lender  shall  refund to Borrower  from time to time that
balance of the  Preference  Reserve for which a claim  under  Section 547 of the
Bankruptcy Code can no

                                 Page 19 of 31


longer be asserted due to the passage of the statute of limitations,  settlement
with the bankruptcy estate of the Account Debtor or otherwise.

     18  Revocation  of  Borrower's  Right to Sell  Inventory  Free and Clear of
Lender's  Security  Interest.  Lender may,  upon the  occurrence  of an Event of
Default,  revoke  Borrower's  right to sell Inventory free and clear of Lender's
security interest therein.

     19 No Lien  Termination  without  Release.  In  recognition of the Lender's
right to have its attorneys' fees and other expenses incurred in connection with
this Agreement secured by the Collateral, notwithstanding payment in full of all
Obligations by Borrower, Lender shall not be required to record any terminations
or  satisfactions  of any of Lender's liens on the  Collateral  unless and until
Borrower  and all  Guarantors  has  executed  and  delivered to Lender a general
release  in the  form of  Exhibit  D  hereto.  Borrower  understands  that  this
provision constitutes a waiver of its rights under ss.9-513 of the UCC.

     20 Account  Stated.  Lender  shall  render to Borrower a statement  setting
forth the  transactions  arising  hereunder.  Each statement shall be considered
correct and binding upon Borrower,  absent manifest error, as an account stated,
except to the extent that  Lender  receives,  within  thirty (30) days after the
mailing  of  such  statement,  written  notice  from  Borrower  of any  specific
exceptions by Borrower to that statement.

     21 Retention of Records.  Lender  shall  retain any  documents,  schedules,
invoices or other papers  delivered by Borrower  only for such period as Lender,
at its sole  discretion,  may determine  necessary,  after which time Lender may
destroy such records without notice to or consent from Borrower.

     22 Notices  to Third  Parties.  Lender  shall have the right at any time to
give  any  Guarantor  or  Subordinating  Creditor  notice  of any  fact or event
relating  to this  Agreement,  as Lender  may deem  necessary  or  desirable  in
Lender's sole discretion,  including,  without limitation,  Borrower's financial
condition. Borrower shall provide to each Guarantor and Subordinating Creditor a
copy of each  notice,  statement  or  report  required  to be  given  to  Lender

     23 Information to  Participants.  Lender may furnish any financial or other
information  concerning  Borrower,  or any of its  subsidiaries,  heretofore  or
hereafter  provided  by  Borrower  to  Lender,  pursuant  to this  Agreement  or
otherwise,  to any prospective or actual purchaser of any participation or other
interest in any loans made by Lender to Borrower  (whether  under this Agreement
or otherwise), or to any prospective purchaser of any securities issued or to be
issued by Lender.

     24 Entire  Agreement.  No  promises of any kind have been made by Lender or
any third  party to induce  Borrower  to execute  this  Agreement.  No course of
dealing,  course of  performance or trade usage,  and no parole  evidence of any
nature, shall be used to supplement or modify any terms of this Agreement.

                                 Page 20 of 31


     25 Notice.

         25.1 All  notices  required  to be given to any  party  shall be deemed
given  upon  the  first to occur of (i)  transmittal  by  electronic  means to a
receiver  under the control of such party;  or (ii) actual receipt by such party
or an employee or agent of such party.

         25.2 The  addresses  of the  parties  are as set forth  below or as may
otherwise be  specified  from time to time in a writing sent by one party to the
other in accordance with the provisions hereof:


Address:       200 Cardinal Way
               Redwood City, CA 94063
Attention:     Mr. William M. Hawkins, III
Fax Number:    650-385-3177


Address:       1500 Broadway
               New York, NY 10036
Attention:     Mr. Martin Silver
Fax Number:    212-806-5199

         25.3  Counterparts.  This  Agreement  may be  signed  in any  number of
counterparts,  each of whom shall be an original, with the same effect as if all
signatures were upon the same instrument. Delivery of an executed counterpart of
the signature page to this Agreement by facsimile shall be effective as delivery
of a manually executed  counterpart of this Agreement,  and any party delivering
such  an  executed  counterpart  of the  signature  page to  this  Agreement  by
facsimile to any other party shall  thereafter also promptly  deliver a manually
executed  counterpart of this  Agreement to such other party,  provided that the
failure to  deliver  such  manually  executed  counterpart  shall not affect the
validity, enforceability, or binding effect of this Agreement.

     26 Amendment and Waiver.  Only a writing  signed by all parties  hereto may
amend this  Agreement.  No failure or delay in  exercising  any right  hereunder
shall impair any such right that Lender may have, nor shall any waiver by Lender
hereunder  be deemed a waiver of any default or breach  subsequently  occurring.
Lender's  rights and remedies  herein are  cumulative  and not exclusive of each
other or of any rights or remedies that Lender would otherwise have.

     27  Governing  Law.  This  Agreement  and  all  transactions   contemplated
hereunder  and/or  evidenced  hereby shall be governed by,  construed under, and
enforced in accordance with the internal laws of the Chosen State.

     28  Venue.  Any  suit,  action  or  proceeding  arising  hereunder,  or the
interpretation,  performance or breach hereof,  shall,  if Lender so elects,  be
instituted in any court sitting in the

                                 Page 21 of 31


Chosen State, in the city in which Lender's chief  executive  office is located,
or if none,  any court  sitting in the Chosen State (the  "Acceptable  Forums").
Borrower agrees that the Acceptable  Forums are convenient to it, and submits to
the  jurisdiction of the Acceptable  Forums and waives any and all objections to
jurisdiction  or venue.  Should such proceeding be initiated in any other forum,
Borrower waives any right to oppose any motion or application  made by Lender to
transfer such proceeding to an Acceptable Forum.


     30 Service Of Process.  Borrower  agrees that Lender may effect  service of
process  upon  Borrower  by  regular  mail  at the  address  set  forth  in this
Agreement, or at the option of Lender if Borrower is a Registered  Organization,
by service upon Borrower's agent for the service of process.

     31  Assignment.  Lender  may assign  its  rights  and  delegate  its duties
hereunder to any affiliate of Lender.  Upon such  assignment,  Borrower shall be
deemed to have attorned to such assignee and shall owe the same  obligations  to
such assignee and shall accept performance hereunder by such assignee as if such
assignee were Lender.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly  executed  and  delivered  by  their  respective  officers  thereunto  duly
authorized as of the date first above written.

BORROWER:                         The 3DO Company, a California corporation

                                  By:      /s/ William M. Hawkins, III
                                  Name:    William M. Hawkins, III
                                  Title:   Chief Executive Officer

                                 Page 22 of 31


LENDER:                          IIG Capital LLC, as agent for the IIG Trade
                                 Opportunities Fund, N.V.

                                 By:      /s/ Martin Silver
                                 Name:     Martin Silver
                                 Title:   Managing Partner

                                 Page 23 of 31


                                    EXHIBIT A

                           BORROWING BASE CERTIFICATE

                                 Page 24 of 31


                                    EXHIBIT B


David Wittenkamp

John Kemmerer

Jamie Cook

William M. Hawkins

                                 Page 25 of 31


                                    EXHIBIT C

                          COLLATERAL SHARING AGREEMENT

     This  AGREEMENT,  dated as of  _________________  between _, (the  "Earlier
Creditor"), and _ (the "Later Creditor").


     A. The Debtor is  indebted  to the  Earlier  Creditor  and shall  incur new
obligations  to  the  Earlier  Creditor,  direct  and  indirect,   absolute  and
contingent (the "Earlier Creditor  Obligations"),  secured by present and future
assets of the Debtor (the "Collateral").

     B. The Later Creditor has agreed to extend financial  accommodations to the
Debtor  secured  by the Later  Creditor  Collateral  on the  condition  that its
security interest therein is senior to that of the Earlier Creditor.

     C. The  Creditors  are  executing  this  Agreement  to  adjust  their  lien
priorities with respect to the Later Creditor Collateral.

     NOW,  THEREFORE,  in  consideration  of the  premises,  and intending to be
legally bound hereby, the Creditors hereby agree as follows:


1. Definitions and Index to Definitions.

     1.1. The following terms shall the meanings set forth below:

          1.1.1. "Chosen State" - _

          1.1.2. "Collateral" - see Recital A.

          1.1.3. "Creditors" - the Earlier Creditor and the Later Creditor.

          1.1.4. "Debtor" - _.

          1.1.5. "Earlier Creditor" - see Preamble.

          1.1.6. "Earlier Creditor Obligations" - see Recital A.

          1.1.7. "Later Creditor" - see Preamble.

          1.1.8.  "Later Creditor  Collateral" - the Debtor's present and future
patents, copyrights and trademarks.

          1.1.9. "Later Creditor Obligations" - obligations of the Debtor to the
Later Creditor secured directly or indirectly by the Later Creditor Collateral.

                                 Page 26 of 31


          1.1.10.  "Later Creditor Security Interest" - any security interest of
Later Creditor in the Later Creditor Collateral.

          1.1.11. "Obligations Limit" - $_.

          1.1.12.  "Retained  Collateral" - The Collateral  other than the Later
Creditor Collateral.

          1.1.13. "Termination Event" - either:

        The  Later   Creditor   Security   Interest   becomes

       Default by Later Creditor under any agreement  between
Later Creditor and Earlier  Creditor,  whether or not waived by Earlier Creditor
or cured by Later Creditor; or

       The Later Creditor Obligations exceeds the Obligations

     1.2.  All  capitalized  terms used but not  defined  herein  shall have the
meaning as set forth in the Uniform Commercial Code then in effect.

2. Priority.

     So long as no Termination Event has occurred, and notwithstanding the terms
or provisions of any agreement or arrangement  which either  Creditor may now or
hereafter have with the Debtor or any rule of law and  irrespective of the time,
order or method or  attachment  or  perfection  of any security  interest or the
recordation or other filing in any public record of any financing statement, any
perfected  Later  Creditor  Security  Interest  shall be senior to the  security
interest of the Earlier Creditor in the Later Creditor Collateral.

3. Enforcement of Security Interest.

     3.1. The Later Creditor shall have no right to take any action with respect
to  any  of  the  Retained  Collateral,  whether  by  judicial  or  non-judicial
foreclosure,  notification to the Debtor's account debtors, or otherwise, unless
and until all  Earlier  Creditor  Obligations  have been fully and  indefensibly
paid,  and the Earlier  Creditor has  terminated  the perfection of its security
interests therein.

     3.2. Any proceeds of the Retained Collateral,  or proceeds thereof (whether
or not  identifiable),  received  by the  Later  Creditor  shall  be paid to the
Earlier Creditor, for the account of the Debtor, on demand.

     3.3.  The  Earlier  Creditor  shall have no right to take any  action  with
respect to the Later  Creditor  Collateral  whether by judicial or  non-judicial
foreclosure,  notification to the Debtor's account debtors, or otherwise, unless
and until all Later Creditor Obligations have been

                                 Page 27 of 31


fully  and  indefeasibly  paid,  and  the  Later  Creditor  has  terminated  the
perfection of its security interests therein.

     3.4. Any proceeds of the Later  Creditor  Collateral,  or proceeds  thereof
(whether or not identifiable), received by the Earlier Creditor shall be paid to
the Later Creditor, for the account of the Debtor, on demand.

4. Inducement.

     This  Agreement  is  entered  into as a  specific  inducement  to the Later
Creditor to provide credit accommodations to the Debtor.

5. Waiver of Marshaling.

     The Later  Creditor  irrevocably  waives  any right to compel  the  Earlier
Creditor  to marshal  assets of the  Debtor,  whether  such  rights  arise under
California Civil Code 2899 and 3433 or otherwise.

6. Applicable Law.

     This Agreement shall be governed by the law of the Chosen State.

7. Benefits Of This Agreement.

     This  Agreement  is solely for the benefit of and shall bind the  Creditors
and their  respective  successors and assigns and no other entity shall have any
right, benefit, priority, or interest hereunder.

8. Modification.

     This Agreement shall be subject to modification only in writing,  signed by
the Creditors.

9. Term.

     This  Agreement  shall  continue so long as both Creditors have a perfected
security interest in the Collateral.

10. Enforcement.

     In the event that either  party  finds it  necessary  to retain  counsel in
connection with the  interpretation,  defense, or enforcement of this agreement,
the prevailing  party shall recover its reasonable  attorney's fees and expenses
from the unsuccessful  party. It shall be presumed  (subject to rebuttal only by
the  introduction  of  competent  evidence  to the  contrary)  that  the  amount
recoverable is the amount billed to the prevailing party by its counsel and that
such amount will be  reasonable  if based on the  billing  rates  charged to the
prevailing party by its counsel in similar matters.

                                 Page 28 of 31


11. Notice.

     11.1.  All  notices  shall be deemed  given  upon the first to occur of (i)
deposit  thereof in a receptacle  under the control of the United  States Postal
Service, (ii) transmittal by electronic means to a receiver under the control of
such party with electronic  acknowledgement that such transmission was received;
or  (iii)  delivery  to a  nationally  recognized  overnight  delivery  service,
properly addressed and prepaid.

     11.2.  For the  purposes  hereof,  notices  hereunder  shall be sent to the
following  addresses,  or to such other  address as may have been advised by the
recipient to the sender.

                                EARLIER CREDITOR

Fax Number:

                                 LATER CREDITOR

Fax Number:

12. Waiver.

     Later   Creditor   waives  any  rights  it  may  have  to  claim  that  the
enforceability of this agreement may be affected by any subsequent modification,
release,  extension,  or other  change,  material or  otherwise,  in the Earlier
Creditor Obligations or the Collateral.

13. Counterparts.

     This Agreement may be executed in any number of counterparts, each of which
when so  executed  shall be  deemed  to be an  original  and all of which  taken
together shall constitute the same agreement.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly  executed  and  delivered  by  their  respective  officers  thereunto  duly
authorized as of the date first above written.





                                 Page 29 of 31


Later Creditor:


                                 Page 30 of 31


                                    EXHIBIT D

                                 GENERAL RELEASE

     FOR GOOD AND VALUABLE CONSIDERATION,  the receipt and adequacy of which are
hereby acknowledged,  the undersigned and each of them (collectively "Releasor")
hereby  forever  releases,  discharges and acquits IIG Capital LLC, as agent for
the IIG Trade  Opportunities  Fund, N.V.  ("Releasee"),  its parent,  directors,
shareholders,  agents  and  employees,  of and from any and all  claims of every
type, kind, nature,  description or character,  and irrespective of how, why, or
by reason of what facts, whether heretofore existing,  now existing or hereafter
arising,  or which could, might, or may be claimed to exist, of whatever kind or
name,  whether  known  or  unknown,  suspected  or  unsuspected,  liquidated  or
unliquidated,  each as though  fully set forth  herein at length,  to the extent
that they arise out of or are in way connected to or are related to that certain
Loan and Security Agreement dated March 19, 2003.

     Releasor agrees that the matters released herein are not limited to matters
which are known or disclosed.

     Releasor acknowledges that factual matters now unknown to it may have given
or may hereafter give rise to Claims which are presently unknown,  unanticipated
and unsuspected,  and it acknowledges  that this Release has been negotiated and
agreed upon in light of that realization and that it nevertheless hereby intends
to release, discharge and acquit the Releasee from any such unknown Claims.

     Acceptance of this Release shall not be deemed or construed as an admission
of liability by any party released.

     Releasor  acknowledges  that either (a) it has had advice of counsel of its
own choosing in negotiations for and the preparation of this release,  or (b) it
has knowingly determined that such advise is not needed.


Individual Releasor:
                                       [Name of individual], individually

Entity Releasor:

                                 Page 31 of 31