Secured Bridge Note

EXHIBIT 10.1


Payment of this Bridge Note is subject to the terms
of the Subordination Agreement between Investor
and GE, and is subordinate to the payment of all of
the obligations owed by Company to GE.


THE 3DO COMPANY


SECURED BRIDGE NOTE


$3,000,000 October 1, 2002
Redwood City, California


FOR VALUE RECEIVED The 3DO Company, a California corporation ("Company") promises to pay to William M. Hawkins, III ("Investor"), or its registered assigns, the principal sum of Three Million Dollars ($3,000,000), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Bridge Note on the unpaid principal balance at a rate equal to nine and one-half percent (9 1/2%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earlier of (i) March 31, 2003, or (ii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Investor or made automatically due and payable in accordance with the terms hereof. In addition, this Bridge Note shall be subject to prepayment as set forth below. Company will make all payments due under this Bridge Note in immediately available United States dollars, by 11:00 A.M. (California time) on the date such payment is due in the manner and at the address for such purpose specified by Investor from time to time in writing.


The following is a statement of the rights of Investor and the conditions to which this Bridge Note is subject, and to which Investor, by the acceptance of this Bridge Note, and Company agree:


1. Definitions. As used in this Bridge Note, the following capitalized terms have the following meanings:


(a) "Business Day" means any day other than a Saturday, Sunday or public holiday under the laws of California.


(b) "Change of Control" means a merger, stock transfer or issuance of voting securities, in one or more related transactions, which results in Company's or Parent's, as applicable, stockholders before the transaction(s) owning voting securities after the transactions(s) representing the right to elect less than half of the directors of Company or Parent, as applicable, (in a reverse merger, stock transfer or issuance of voting securities) or successor entity (in a forward merger or the sale of all or substantially all of Company's or Parent's assets, in one or more transactions).


(c) "Event of Default" is defined in Section 6.


(d) "GE" means GE Capital Commercial Services, Inc.


(e) "GE Facility" means the Loan and Security Agreement, dated as of June 27, 2002, between GE, as Lender, and Company, as Borrower, and any related agreements entered into by GE and Company.


(f) "Lien" means, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction.


(g) "Material Adverse Effect" means a material adverse effect on (a) the business, prospects, assets, operations or financial condition of Company or Parent; (b) the ability of Company to pay or perform the Obligations in accordance with the terms of this Bridge Note and the Security Agreement; or (c) the rights and remedies of Investor under this Bridge Note, the other Transaction Documents or any related document, instrument or agreement.


(h) "Obligations" means all loans, advances, debts, liabilities and obligations, howsoever arising, owed by Company to Investor of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of this Bridge Note and the other Transaction Documents, including, all interest, fees, charges, expenses, attorneys' fees and costs and accountants' fees and costs chargeable to and payable by Company hereunder and thereunder. The term Obligations includes all such amounts, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 USC Section 101 et seq.), as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding.


(i) "Parent" means The 3DO Company, a Delaware corporation.


(j) "Person" means an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or governmental authority.


(k) "Preferred Stock" means Parent's Series A Convertible Preferred Stock, par value $0.01, as described in the Parent's Certificate of Designations filed with the Secretary of State of Delaware as of December 10, 2001 ("Parent's Certificate of Designations").


(l) "Security Agreement" means the Security Agreement dated as of the date of this Bridge Note from Company in favor of Investor.


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(m) "Transaction Documents" means this Bridge Note, the Security Agreement and each UCC financing statement or notice of security interest filed in connection with the Security Agreement.


All capitalized terms not otherwise defined herein shall have the respective meanings given in the Security Agreement.


2. Interest. Accrued interest on this Bridge Note shall be payable ten days after the last day of each calendar quarter until the outstanding principal amount hereof shall be paid in full, with the first such payment due ten days after December 31, 2002. Interest shall be payable in cash.


3. Prepayment.


(a) Optional Prepayment. Upon five (5) days prior written notice to Investor, Company may prepay this Bridge Note in whole or in part; provided that any such prepayment will be applied first to the payment of expenses due under this Bridge Note, second to interest accrued on this Bridge Note and third, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of principal of this Bridge Note.


(b) Mandatory Prepayment.


(i) Equity Financing. If Parent hereafter receives at least three million dollars ($3,000,000) of total Net Proceeds (defined below) from equity or convertible or subordinated debt financings, then Company must prepay this Bridge Note in an amount equal to any Net Proceeds in excess of three million dollars ($3,000,000) received by Parent from any equity or convertible or subordinated debt financing. Such prepayment shall be made no later than the second (2nd) Business Day following the closing of any such transaction. Any such prepayment will be applied first to the payment of expenses due under this Bridge Note, second to interest accrued on this Bridge Note and third, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of any outstanding principal under this Bridge Note. "Net Proceeds" means, with respect to any Parent equity or convertible or subordinated debt financing, the total proceeds of such financing less any related underwriting discounts or commissions and any related broker, placement agent or finder's fees, in each case paid by Parent.


(ii) Change of Control. Company must prepay this Bridge Note in whole, including all expenses and accrued interest, concurrently with the closing of any transaction that constitutes a Change of Control.


4. Representations and Warranties of Company. Company represents and warrants to Investor as of the date hereof that:


(a) Due Incorporation, Qualification, etc. Each of Company and Parent (i) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good


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standing as a foreign corporation in each jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have a Material Adverse Effect.


(b) Authority. The execution, delivery and performance by Company of each Transaction Document to be executed by Company and the consummation of the transactions contemplated thereby (i) are within the power of Company; and (ii) have been duly authorized by all necessary actions on the part of Company and Parent.


(c) Enforceability. Each Transaction Document executed, or to be executed, by Company has been, or will be, duly executed and delivered by Company and constitutes, or will constitute, a legal, valid and binding obligation of Company, enforceable against Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally and general principles of equity.


(d) Non-Contravention. The execution and delivery by Company of the Transaction Documents executed by Company and the performance and consummation of the transactions contemplated thereby do not and will not (i) violate the Articles of Incorporation or Certificate of Incorporation, as applicable, or Bylaws of Company or Parent or any material judgment, order, writ, decree, statute, rule or regulation applicable to Company or Parent; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or contract to which Company or Parent is a party or by which it is bound; or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of Company or Parent (other than any Lien arising under the Transaction Documents) or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to Company or Parent, its business or operations, or any of its assets or properties.


(e) Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other Person (including the shareholders of any Person) is required in connection with the execution and delivery of the Transaction Documents executed by Company and the performance and consummation of the transactions contemplated thereby, except such consents, approvals, orders, authorizations, registrations, decla ...