Warrant to Purchase Shares of Common Stock - The 3DO Co. and IIG Capital LLC
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, OFFERED FOR SALE OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN
ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS
IS AVAILABLE WITH RESPECT THERETO.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK OF
THE 3DO COMPANY
Issue Date: March 19, 2003
Warrant No. CW-31 75,000 Shares of Common Stock
1. Issuance. This Warrant is issued to IIG Capital LLC, as agent for the
IIG Trade Opportunities Fund, N.V. (the "Holder"), by The 3DO Company, a
Delaware corporation (hereinafter with its successors called the "Company")
pursuant to the Securities Purchase Agreement of even date herewith (the
"Purchase Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
2. Purchase Price; Number of Shares. Subject to the exercise restriction
provided for in Section 6 hereof, this Warrant certifies that, for value
received, the Holder of this Warrant is entitled upon surrender of this Warrant
with the subscription form annexed hereto as Appendix 1 duly executed, at the
principal office of the Company, to purchase from the Company 75,000 fully paid
and nonassessable shares of Common Stock of the Company (the "Common Stock") at
a price per share (the "Purchase Price") of $2.50, subject to adjustment
pursuant to Sections 9, 10 and 11 below.
3. Payment of Purchase Price. Subject to Section 4, the Purchase Price may
be paid (i) in cash or by certified check or wire transfer, (ii) by the
cancellation, surrender or forgiveness by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. Net Issue Election. Notwithstanding any provisions herein to the
contrary, the Holder may elect to receive, without the payment by the Holder of
any additional consideration, shares of Common Stock equal to the value (as
determined below) of this Warrant by the surrender of this Warrant to the
Company, with the net issue election notice set forth in Appendix 1 annexed
hereto duly executed, at the principal office of the Company. Thereupon, the
Company shall issue to the
<PAGE>
Holder such number of fully paid and nonassessable shares of Common Stock as is
computed using the following formula:
X = Y(A-B)
-------
A
where: X = the number of shares of Common Stock to be
issued to the Holder pursuant to this Section 4.
Y = the number of shares of Common Stock covered by
this Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised at the
time the net issue election is made pursuant to this Section
4.
A = the fair market value of one share of Common
Stock, determined as follows: (i) if at such time the Common
Stock is listed on a national securities exchange or on the
over-the-counter market, then the closing price of the Common
Stock on the business day immediately prior to the date of
exercise or, if no sale of the Common Stock was made on such
day, the first business day immediately preceding such day
upon which a sale was made, or (ii) if at such time the Common
Stock is not listed on a national securities exchange or on
the over-the-counter market, then as determined in good faith
by the Board and agreed to by Holder at the time the net issue
election is made pursuant to this Section 4.
B = the Purchase Price in effect under this Warrant
at the time the net issue election is made pursuant to this
Section 4.
5. Fractional Shares. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Purchase Price.
6. Exercise.
(a) Expiration Date. Holder's rights under this Warrant expire at 5:00
p.m. Pacific Time on the third anniversary of the date of this Warrant (the
"Expiration Date") and shall be void thereafter.
(b) Delivery. Upon the exercise of the rights represented by this
Warrant, the Company shall use good faith efforts to issue and deliver to the
Holder a certificate or certificates for the shares of Common Stock issuable
upon exercise of this Warrant so purchased, in the name of the Holder within a
reasonable time after the rights represented by this Warrant shall have been so
exercised and in any event within twenty (20) days after receipt of the Notice
of Exercise and, unless the Warrant has been fully exercised or expired, a new
warrant representing the remaining portion of the Warrant and the underlying
Common Stock, if any, with respect to which this Warrant shall not have been
exercised shall also be issued to the Holder as soon as possible and in any
event within such twenty (20) day.
-2-
<PAGE>
(c) Failure to Deliver. If by the third business day after a exercise
of the warrant, the Company fails to deliver the required number of shares of
Common Stock in the manner required pursuant to Section 6(b), and if after such
third business day and prior to the receipt of such shares, the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the shares of Common Stock issuable
upon exercise of the Warrant ("Warrant Share") which the Holder anticipated
receiving upon such exercise (a "Buy In"), then the Company shall (1) pay in
cash to the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue by (B) the closing bid price of the Common
Stock at the time of the obligation giving rise to such purchase obligation and
(2) at the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery
obligations hereunder. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy In.
(d) Remedies. The Company's obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required pursuant to the
terms hereof.
7. Reserved Shares; Valid Issuance. The Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Common Stock of the Company, free from all
preemptive or similar rights therein, as will be sufficient to permit the
exercise of this Warrant in full. If at any time between the date hereof and the
Expiration Date, the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Company will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes. The Company further covenants that such shares as may be
issued pursuant to such exercise will, upon issuance, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof.
8. Registration Rights. The Company agrees that the Common Stock shall have
certain registration rights pursuant to and as set forth in that certain
Registration Rights Agreement between the Company and Holder, dated as of the
date hereof.
-3-
<PAGE>
9. Stock Splits and Dividends. If after the date hereof the Company shall
subdivide the Common Stock, by stock split or otherwise, or combine the Common
Stock, or issue additional shares of Common Stock in payment of a stock dividend
on the Common Stock, the number of shares of Common Stock issuable on the
exercise of this Warrant shall forthwith be proportionately increased in the
case of a subdivision or stock dividend, or proportionately decreased in the
case of a combination, and the Purchase Price shall forthwith be proportionately
decreased in the case of a subdivision or stock dividend, or proportionately
increased in the case of a combination.
10. Adjustments for Diluting Issuances. The Purchase Price and the Common
Stock issuable upon exercise of this Warrant, shall be subject to adjustment,
from time to time in the manner set forth in Appendix III to this Warrant.
11. Mergers and Reclassifications. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Common Stock which might have been purchased by the Holder
immediately prior to such Reorganization, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this Section 11, the term "Reorganization" shall include without
limitation any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination or stock dividend
provided for in Section 9 hereof), or any consolidation of the Company with, or
merger of the Company into, another corporation or other business organization
(other than a merger in which the Company is the surviving corporation and which
does not result in any reclassification or change of the outstanding Common
Stock), or any sale or conveyance to another corporation or other business
organization of all or substantially all of the assets of the Company.
12. No Voting or Dividend Rights. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
consent or to receive notice as a shareholder of the Company or any other
matters or any rights whatsoever as a shareholder of the Company prior to the
exercise of the Holder's rights to purchase shares of Common Stock as provided
for herein. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised.
13. Amendment. The terms of this Warrant may be amended, modified or waived
only with the written consent of the Holder.
14. Notices, Etc. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (i) upon receipt if personally delivered, (ii) three (3) days after being
mailed by registered or certified mail, postage prepaid, or (iii) one day after
being sent by recognized overnight courier or by facsimile, if to Holder, at
__________________________, or at such
-4-
<PAGE>
other address or number as Holder shall have furnished to Company in writing, or
if to Company, at 200 Cardinal Way, Redwood City, California 94063 or at such
other address or number as Company shall have furnished to Holder in writing.
15. Descriptive Headings and Governing Law. The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant and all actions
arising out of or in connection with this Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law provisions of the State of Delaware.
16. Successors and Assigns. Holder may not sell, transfer or otherwise
dispose of the Securities except in accordance with the restrictions set out in
the Purchase Agreement. The rights and obligations of Company and Holder shall
be binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.
17. Limitation on Number of Warrant Shares. Notwithstanding anything to the
contrary contained herein, the number of shares of Common Stock that may be
acquired by the Holder upon any exercise of this Warrant (or otherwise in
respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its affiliates and any
other persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Securities Exchange Act
of 1934 ("Exchange Act"), does not exceed 9.999% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of a
Form of Election to Purchase hereunder will constitute a representation by the
Holder that it has evaluated the limitation set forth in this paragraph and
determined that issuance of the full number of shares of Common Stock requested
in such Form of Election to Purchase is permitted under this paragraph. This
provision shall not restrict the number of shares of Common Stock which a Holder
may receive or beneficially own in order to determine the amount of securities
or other consideration that such Holder may receive in the event of a merger or
other business combination or reclassification involving the Company as
contemplated in Section 11 of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer.
Dated March 19, 2003 The 3DO Company
Name:
-----------------------------
Title:
----------------------------
-5-
<PAGE>
APPENDIX 1
FORM OF ELECTION TO PURCHASE
Date: _____________
The 3DO Company
200 Cardinal Way
Redwood City, CA 94063
Ladies and Gentlemen:
The undersigned hereby elects:
____ to exercise the warrant issued to it by The 3DO Company (the
"Company") and dated March __, 2003 (the "Warrant") and to purchase
____________ shares of the Common Stock of the Company (the "Shares")
purchasable thereunder at a purchase price of _______________ ($____) per
Share (the "Purchase Price") pursuant to the terms of the Warrant and the
undersigned delivers the Purchase Price herewith in full in cash or by
certified check or wire transfer or as otherwise permitted pursuant to
Section 3 of the Warrant.
____ to purchase _______ shares of the Common Stock of the Company pursuant
to the terms of the net exercise provisions set forth in Section 4 of the
Warrant.
The undersigned also makes the representations set forth on Appendix 2
attached to the Warrant.
The certificate(s) for such shares shall be issued in the name of the
undersigned or as otherwise indicated below:
Very truly yours,
[Purchaser]
___________________________
<PAGE>
APPENDIX 2
WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO THE 3DO COMPANY ALONG
WITH THE FORM OF ELECTION TO PURCHASE BEFORE THE SHARES ISSUABLE UPON EXERCISE
OF THE WARRANT CERTIFICATE WILL BE ISSUED.
Date: _____________
The 3DO Company
200 Cardinal Way
Redwood City, CA 94063
The undersigned, ("Purchaser"), intends to acquire _______ shares of the
Common Stock (the "Shares") of The 3DO Company (the "Company") from the Company
pursuant to the exercise of a certain Warrant to purchase Shares held by
Purchaser. The Shares will be issued to Purchaser in a transaction not involving
a public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
1. Purchaser is acquiring the Shares for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Shares in violation of the 1933 Act or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC") or
in violation of any applicable state securities law;
2. Purchaser has been advised that the Shares have not been registered
under the 1933 Act or state securities laws on the ground that this transaction
is exempt from registration, and that reliance by the Company on such exemptions
is predicated in part on Purchaser's representations set forth in this letter;
3. Purchaser has been informed that under the 1933 Act, the Shares must be
held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Shares;
4. The Company may refuse to permit Purchaser to sell, transfer or dispose
of the Shares (except as permitted under Rule 144) unless there is in effect a
registration statement under the 1933 Act and any applicable state securities
laws covering such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required;
5. Purchaser has invested in securities of companies in the development
stage and acknowledges that it is able to fend for itself, can bear the economic
risk of its investment, and has
<PAGE>
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares.
Purchaser represents and warrants that it is an "accredited investor" within the
meaning of Rule 501 of Regulation D of the 1933 Act.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Shares, or any substitutions therefor, legends stating in
substance:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Act"), or any applicable state securities laws, and
may not be sold, offered for sale or transferred unless such sale or
transfer is in accordance with the registration requirements of such Act
and applicable laws or an exemption from the registration requirements of
such Act and applicable laws is available with respect thereto."
Any legend required pursuant to applicable state securities laws.
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Shares with
Purchaser's counsel.
Very truly yours,
[Purchaser]
__________________________________
-2-
<PAGE>
APPENDIX III
ADJUSTMENTS FOR DILUTING ISSUANCES
1. Capitalized Terms. Capitalized terms used in this Appendix III that are not
otherwise defined herein shall have the respective meanings assigned to
them in the Warrant to which this Appendix III is attached.
2. Adjustment of Purchase Price upon Issuance of Additional Stock. The
Purchase Price shall be subject to adjustment from time to time as follows:
a. Upon each issuance by the Company of any Additional Stock without
consideration or for a consideration per share less than the Purchase
Price in effect immediately prior to the issuance of such Additional
Stock, the Purchase Price in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this Section
2) be adjusted to a price determined by multiplying the Purchase Price
by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding or deemed to be outstanding immediately prior
to such issuance plus the number of shares of Additional Stock which
could be purchased were the then Purchase Price used instead
(calculated by dividing the total consideration to be received by the
Company in such issuance by the then Purchase Price) and the
denominator of which shall be the number of shares of Common Stock
outstanding or deemed to be outstanding immediately prior to such
issuance plus the number of shares of such Additional Stock issued in
such issuance. For purposes of this Section 2, the number of shares of
Common Stock outstanding or deemed to be outstanding shall be
calculated on a fully diluted basis, as if all convertible securities
had been fully converted into shares of Common Stock immediately prior
to such issuance and any outstanding warrants, options or other rights
for the purchase of shares of common stock or convertible securities
had been fully exercised immediately prior to such issuance (and the
resulting securities fully converted into shares of Common Stock, if
so convertible) as of such date.
b. No adjustment of the Purchase Price shall be made in an amount less
than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried
forward and shall be either taken into account in any subsequent
adjustment made prior to one (1) year from the date of the event
giving rise to the adjustment being carried forward, or shall be made
at the end of one (1) year from the date of the event giving rise to
the adjustment being carried forward. Except to the limited extent
provided for in subsections 2(d)(iii) and 2(d)(iv) below, no
adjustment of the Purchase Price pursuant to subsection 2(a) of this
Appendix III shall have the effect of increasing the Purchase Price
above the Purchase Price in effect immediately prior to such
adjustment.
<PAGE>
c. In the case of issuance by the Company of Additional Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors of the Company.
d. In the case of the issuance (whether before, on or after the Issue
Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 2:
i. The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable) of
such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the
consideration (determined in a manner consistent with subsection
2(c) of this Appendix III), if any, received by the Company upon
issuance of such options or rights plus the minimum Purchase
Price provided in such options or rights (without taking into
account potential antidilution adjustments) for the Common Stock
covered thereby.
ii. The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for (to the extent
then convertible or exchangeable) convertible or exchangeable
securities or upon exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to
the consideration, if any, received by the Company for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends),
plus the minimum additional consideration, if any, to be received
by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in a manner
consistent with subsection 2(c) of this Appendix III).
iii. In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the Company
upon exercise of such options or rights or upon conversion of or
in exchange for such convertible or exchangeable securities,
excluding a change resulting from antidilution provisions
thereof, the Purchase Price, to the extent in any way affected by
or computed using such options, rights or securities, shall be
adjusted based upon the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such
securities.
-2-
<PAGE>
iv. Upon the expiration of any such options or rights, the
termination of any such options or rights to convert or exchange,
or the expiration of any options or rights related to such
convertible or exchangeable securities, the Purchase Price, to
the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the
options or rights related to such securities.
v. The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to subsections
2(d)(i) and 2(d)(ii) of this Appendix III shall be appropriately
adjusted to reflect any change, termination or expiration of the
type described in either subsection 2(d)(iii) or 2(d)(iv) hereof.
e. "Additional Stock" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to subsection 2(d) of this
Appendix III) by this Company after the Issue Date other than:
i. Shares of Common Stock issued pursuant to a transaction described
in Sections 9 and 11 of the Warrant,
ii. upon exercise or conversion of outstanding options or warrants,
or
iii. Shares of Common Stock issuable or issued to officers, employees,
consultants or directors of the Company pursuant to a
compensatory benefit plan.
f. Upon each adjustment of the Purchase Price pursuant to this Section 2,
the number of shares of Common Stock issuable upon exercise hereof
shall be equal to (x) the product of the number of shares of Common
Stock the holder was entitled to purchase immediately before such
adjustment times the Purchase Price in effect immediately before such
adjustment divided by (y) the Purchase Price in effect after giving
effect to such adjustment.
-3-