Agreement Of Purchase And Sale Of Assets

EXHIBIT 10.46


Agreement of Purchase and Sale of Assets


By and among The 3DO Company,
NTN Communications, Inc.,
and New World Computing, Inc.


Dated as of June 28, 1996


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Agreement of Purchase and Sale of Assets


TABLE OF CONTENTS


Page ARTICLE I PURCHASE AND SALE OF ASSETS ................................. 1


1.1 Sale and Transfer of Assets............................. 1
1.2 Consideration From 3DO at Closing....................... 1
1.3 Share Adjustment........................................ 2
1.4 Assumption of Liabilities............................... 2
1.5 Excise and Property Taxes............................... 2


ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLING
PARTIES .......................................................... 3


2.1 Organization, Standing, and Qualification of NWC........ 3
2.2 Capital Structure of NWC................................ 3
2.3 Title to NWC Shares..................................... 3
2.4 Subsidiaries............................................ 3
2.5 Financial Statements.................................... 3
2.6 Absence of Specified Changes............................ 3
2.7 Claims and Liabilities.................................. 5
2.8 Tax Returns and Audits.................................. 5
2.9 Assets.................................................. 5
2.10 Validity of Agreement .................................. 10


ARTICLE III 3DO's REPRESENTATIONS AND WARRANTIES ...................... 11


3.1 Organization, Standing and Due Authorization............ 11
3.2 No Required Consents.................................... 11
3.3 Validity of the Shares.................................. 11
3.4 Validity of Agreement................................... 11
3.5 3DO Financial Statements................................ 11


ARTICLE IV SELLING PARTIES' OBLIGATIONS BEFORE CLOSING................. 11


4.1 3DO's Access to Premises and Information................ 11
4.2 Conduct of Business in Normal Course.................... 11
4.3 Preservation of Business and Relationships.............. 12
4.4 Corporate Matters....................................... 12
4.5 Maintenance of Insurance................................ 12
4.6 Employees and Compensation.............................. 12
4.7 New Transactions........................................ 12
4.8 Dividends, Distributions, and Acquisitions of Stock..... 12
4.9 Payment of Liabilities and Waiver of Claims............. 13
4.10 Existing Agreements .................................... 13
4.11 Consents of Others ..................................... 13
4.12 Documentation of Procedures and Trade Secrets .......... 13
4.13 Representations and Warranties True at Closing ......... 13
4.14 Corporate and NTN Approvals ............................ 13
4.15 Bulk Sales Law ......................................... 13


2 3 ARTICLE V 3DO'S OBLIGATIONS BEFORE CLOSING................................. 13


5.1 Cooperation in Securing Consents of Third Parties........... 13
5.2 Resale Certificate.......................................... 13


ARTICLE VI CONDITIONS PRECEDENT TO 3DO'S PERFORMANCE....................... 14


6.1 Accuracy of Selling Parties' Representations and
Warranties ................................................. 14
6.2 Performance by Selling Parties.............................. 14
6.3 No Material Adverse Change.................................. 14
6.4 Certification by Selling Parties............................ 14
6.5 Opinion of Selling Parties' Counsel......................... 14
6.6 Absence of Litigation....................................... 14
6.7 Letter Regarding Changes.................................... 14
6.8 Corporate Approval.......................................... 14
6.9 Consents.................................................... 15
6.10 Noncompetition Agreement ................................... 15
6.11 Approval of Documentation .................................. 15


ARTICLE VII CONDITIONS PRECEDENT TO NWC'S PERFORMANCE ..................... 15


7.1 Accuracy of 3DO's Representations and Warranties............ 15
7.2 3DO's Performance........................................... 15
7.3 Opinion of 3DO's Counsel.................................... 15
7.4 Certification by 3DO........................................ 15
7.5 3DO's Corporate Approval.................................... 15
7.6 Absence of Litigation....................................... 15
7.7 No Material Adverse Change.................................. 16
7.8 Termination of Employment Agreement......................... 16
7.9 Assumption of Liabilities................................... 16


ARTICLE VIII THE CLOSING .................................................. 16


8.1 Time and Place.............................................. 16
8.2 Selling Parties' Obligations................................ 16
8.3 3DO's Obligations........................................... 17
8.4 Bulk Sales Compliance....................................... 17


ARTICLE IX SELLING PARTIES' OBLIGATIONS AFTER CLOSING ..................... 17


9.1 Selling Parties' Indemnity.................................. 17
9.2 Selling Parties' Noncompetition Agreement................... 18
9.3 Change of NWC's Name........................................ 18
9.4 NWC Financial Statements.................................... 18


ARTICLE X 3DO's OBLIGATIONS AFTER CLOSING.................................. 18


10.1 3DO's Indemnity ............................................ 18
10.2 Registration Statement ..................................... 19
10.3 Purchase Price Guarantee ................................... 19
10.4 Release of Selling Parties' Guarantees ..................... 19


3 4 ARTICLE XI RESTRICTIONS ON TRANSFER; LEGENDS AND
REGISTRATION OF STOCK ...................................... 20


11.1 Restrictions on Transferability ............................ 20
11.2 Restrictive Legend ......................................... 20
11.3 Registration of Shares ..................................... 20
11.4 Transfer of Shares After Registration ...................... 23
11.5 Limitations ................................................ 23
11.6 Assignment of Registration Rights .......................... 23
11.7 Share Assignment ........................................... 24


ARTICLE XII MISCELLANEOUS ................................................. 24


12.1 Publicity .................................................. 24
12.2 Finder's or Broker's Fees .................................. 24
12.3 Expenses ................................................... 24
12.4 Effects of Headings ........................................ 24
12.5 Entire Agreement; Modification; Waiver ..................... 24
12.6 Counterparts ............................................... 24
12.7 Parties in Interest ........................................ 25
12.8 Assignment ................................................. 25
12.9 Arbitration ................................................ 25
12.10 Specific Performance and Waiver of Rescission Rights ....... 25
12.11 Recovery of Litigation Costs ............................... 25
12.12 Termination ................................................ 25
12.13 Notices .................................................... 26
12.14 Governing Law .............................................. 26
12.15 Severability ............................................... 26
12.16 Nature and Survival of Representations and Obligations ..... 26
12.17 Interpretation ............................................. 27


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AGREEMENT


OF


PURCHASE AND SALE OF ASSETS


This Agreement of Purchase and Sale of Assets (the "Agreement") is made as of June 28, 1996, by and among The 3DO Company, a Delaware corporation ("3DO"), having its principal office at 600 Galveston Street, Redwood City, California; NTN Communications, Inc. ("NTN"), a Delaware corporation, having its principal office at 5966 La Place Court, Carlsbad, California 92008; and New World Computing, Inc. ("NWC"), a California corporation, having its principal office at 29800 Agoura Road, Suite 200, Agoura Hills, California 91301, a wholly-owned subsidiary of NTN. NTN and NWC are collectively referred to in this Agreement as the "Selling Parties."


WHEREAS, 3DO desires to purchase from NWC, and NWC desires to sell to 3DO, on the terms and subject to the conditions of this Agreement, substantially all of the business and properties of NWC as described in Section 1.1, below, in exchange for the 3DO common stock as described in Section 1.2, below, all on the terms and subject to the conditions contained herein (the "Transaction"); and


WHEREAS, NTN desires that the Transaction be consummated;


NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained in this Agreement, the parties agree as follows:


ARTICLE ONE


PURCHASE AND SALE OF ASSETS


1.1 Sale and Transfer of Assets. Subject to the terms and conditions set forth in this Agreement, NWC agrees to sell, convey, transfer, assign, and deliver to 3DO, and 3DO agrees to purchase from NWC, substantially all of the assets, properties, and business of NWC of every kind, character, and description, whether tangible, intangible, real, personal, or mixed, and wherever located (all of which are sometimes collectively referred to as the "Assets"), including, but not limited to, the following:


(a) All property and other rights listed in the Exhibits attached to this Agreement, other than property and rights specifically excluded as listed on Schedule 1.1 hereto (the "Excluded Assets"); and


(b) All other supplies, materials, work in progress, finished goods, equipment, machinery, furniture, fixtures, motor vehicles, claims, and rights, under leases, contracts, notes, evidences of indebtedness, purchase and sales orders, copyrights, service marks, trademarks, trade names, trade secrets, patents, patent applications, licenses, royalty rights, deposits, and rights, and claims to refunds and adjustments of any kind.


1.2 Consideration From 3DO. As full payment for the transfer of the Assets to 3DO and the assumption of the Liabilities (as defined in Section 1.4, below) by 3DO, 3DO shall issue to NWC in accordance with the provisions of Section 8.3, an aggregate of one


5 6 million two hundred thousand (1,200,000) shares of 3DO common stock (the "Shares"), subject to adjustment as provided in Section 1.3, below.


1.3 Share Adjustment. Within twenty (20) days following the Closing, Selling Parties shall deliver to 3DO a closing balance sheet which shall contain a comprehensive schedule of all accounts receivable and royalties receivable and their amounts, together with a correct and complete aging of these accounts, and a schedule of all inventories of raw materials, work in process and finished goods, of NWC, and the cost of each of these items, as of June 30, 1996 (the "Closing Balance Sheet"). The number of Shares to be delivered to NWC will be adjusted within five (5) business days after the delivery of the Closing Balance Sheet to 3DO and shall be delivered to NWC on the date which the parties mutually agree to be the Settlement Date (the "Settlement Date") based upon the Closing Balance Sheet, in the event that:


(a) the specific Current Assets, as referenced in Exhibit A (the "Specified Current Assets"), total less than three million six hundred fifty-two thousand dollars ($3,652,000) on the Closing Balance Sheet (with the difference being equal to and being defined as the "Current Asset Deficiency"); or


(b) the current liabilities exceed one million three hundred thousand dollars ($1,300,000) on the Closing Balance Sheet and 3DO agrees to assume such additional liabilities (with the difference being equal to and being defined as the "Additional Current Liabilities").


The number of Shares shall be reduced by an amount which is equal to the dollar value of the Additional Current Liabilities plus an amount which is equal to the dollar value of the Current Asset Deficiency; divided by the average closing price for 3DO common stock reported on NASDAQ for the five (5) trading days prior to the Closing Date. Notwithstanding the foregoing, in the event that the Specified Current Assets and the Current Liabilities, as reflected on the Closing Balance Sheet, each decrease from the amounts set forth above, then, provided that the Specified Current Assets exceed the Current Liabilities by at least two million three hundred fifty-two thousand dollars ($2,352,000) on the Closing Balance Sheet, there shall be no adjustment in the number of Shares; however, in the event that the Specified Current Assets minus the Current Liabilities, as reflected on the Closing Date Balance Sheet (the "Net Current Assets"), is less than two million three hundred fifty-two thousand dollars ($2,352,000), then the number of Shares shall be reduced by an amount which is equal to the dollar value of the difference between two million three hundred fifty-two thousand dollars ($2,352,000) and the Net Current Assets; divided by the average closing price for 3DO common stock reported on NASDAQ for the five (5) trading days prior to the Closing Date.


1.4 Assumption of Liabilities. 3DO agrees to assume only those liabilities and obligations listed on Exhibit B (the "Liabilities"). It is expressly understood and agreed that 3DO shall not be liable for any of the obligations or liabilities of NWC or NTN of any kind or nature other than those specifically assumed by 3DO under this Section.


1.5 Excise and Property Taxes. NWC shall pay all sales and use taxes arising out of the transfer of the Assets and shall pay its portion, prorated as of the Closing Date, of state and local, real and personal property taxes of the business. 3DO shall not be responsible for any business, occupation, withholding, or similar tax, or any taxes of any kind or nature related to any period before the Closing Date, except as specifically assumed by 3DO as provided in Section 1.4. 3DO agrees that it will reimburse NTN for fifty percent (50%) of the sales tax incurred by NWC in connection with the sale of the Assets, up to a maximum amount of ten thousand dollars ($10,000).


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ARTICLE TWO


REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES


Selling Parties, jointly and severally, represent and warrant that, except as disclosed on the Disclosure Schedule:


2.1 Organization, Standing, and Qualification of NWC. NWC is a corporation duly organized, validly existing, and in good standing under the laws of the State of California, has all necessary corporate powers to own its properties and to carry on its business as now owned and operated by it, and is duly qualified to do intrastate business and is in good standing in all jurisdictions in which the nature of NWC's business or of its properties makes such qualification necessary, or except where the failure to be so qualified would not have a material adverse effect on the business or properties of NWC.


2.2 Capital Structure of NWC. The authorized capital stock of NWC consists of one million (1,000,000) shares of common stock, with no par value, of which one million (1,000,000) shares (the "NWC Shares") are issued and outstanding. All of the NWC Shares are validly issued, fully paid, and nonassessable, and such shares have been so issued in full compliance with all federal and state securities laws. There are no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating NWC to issue or to transfer from treasury any additional shares of its capital stock of any class.


2.3 Title to NWC Shares. NTN is the owner, beneficially and of record, of the NWC Shares free and clear of all security agreements, and restrictions, other than any restrictions imposed by applicable securities laws and NTN has the sole and exclusive right to vote such shares.


2.4 Subsidiaries. NWC does not own, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, business, trust, or other entity.


2.5 Financial Statements. Exhibit C to the Disclosure Schedule, sets forth the balance sheets of NWC as of December 31, 1994, December 31, 1995 and June 30, 1996, and the related statements of operations for the years ended December 31, 1994 and 1995 and the six months ended June 30, 1996. The balance sheet and statement of operations for the year ended December 31, 1995 has been audited by KPMG Peat Marwick, NWC's independent public accountants, on a consolidated basis and included in the consolidated financial statements of NTN. KPMG's opinion on those statements will be provided upon issuance. The balance sheets and statements of operations as of end for the year ended December 31, 1994 and as of and for the six months ended June 30, 1996 are unaudited by independent public accountants but will be certified by the chief financial officer of NWC as accurately reflecting the financial condition of NWC for those periods and accurately reflecting all information normally reported to NWC's independent public accountants for the preparation of the NWC's financial statements. The financial statements in Exhibit C are referred to as the "Financial Statements." The Financial Statements have been prepared in accordance with generally accepted accounting principles, in all material respects, excluding footnote disclosure, consistently followed by NWC throughout the period indicated and fairly present the financial position of NWC as of the respective dates of the balance sheets included in the Financial Statements, and the results of its operations for the respective periods indicated.


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2.6. Absence of Specified Changes. Except as disclosed in Item 2.6 of the Disclosure Schedule since March 31, 1996 there has not been any:


(a) Transaction by NWC except in the ordinary course of business as conducted on that date, except as contemplated by this Agreement;


(b) Capital expenditure by NWC exceeding twenty-five thousand dollars ($25,000);


(c) Material adverse change in the financial condition, liabilities, assets, or business of NWC;


(d) Destruction, damage to, or loss of any asset of NWC (whether or not covered by insurance) that materially and adversely affects the financial condition or business of NWC;


(e) Change in accounting methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) by NWC;


(f) Revaluation by NWC of any of its assets;


(g) Declaration, setting aside, or payment of a dividend or other distribution in respect to the capital stock of NWC or any direct or indirect redemption, purchase, or other acquisition by NWC of any of its shares of capital stock;


(h) Increase in the salary or other compensation payable or to become payable by NWC or Subsidiary to any of its officers, directors, or employees, or the declaration, payment, or commitment or obligation of any kind for the payment, by NWC, of a bonus or other additional salary or compensation to any such person;


(i) Sale or transfer of any material asset of NWC, except in the ordinary course of business;


(j) Amendment or termination of any contract, agreement, or license to which NWC is a party, except in the ordinary course of business;


(k) Loan by NWC to any person or entity, or guaranty by NWC of any loan;


(l) Mortgage, pledge, or other encumbrance of any asset of NWC;


(m) Waiver or release of any material right or claim of NWC, except in the ordinary course of business;


(n) Commencement or notice or, to the best of the Selling Parties' knowledge, threat of commencement of, any civil litigation or any governmental proceeding against or investigation of NWC or affairs;


(o) Labor trouble or claim of wrongful discharge or other unlawful labor practice or action;


(p) Issuance or sale by NWC of any shares of its capital stock of any class, or of any other of its securities;


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(q) Agreement by NWC to do any of the things described in the preceding clauses (a) through (p); or


(r) Other material event or condition of any character of which the Selling Parties are aware that has or might reasonably have a material and adverse effect on the financial condition, business, assets, or liabilities of NWC.


2.7 Claims and Liabilities. Item 2.7 of the Disclosure Schedule contains a true and complete schedule of all material liabilities and obligations of NWC. NWC has no material debts, liabilities, or obligations of any nature, whether accrued, absolute, contingent, or otherwise, and whether due or to become due, that are not set forth in such Item.


2.8 Tax Returns and Audits. Within the times and in the manner prescribed by law, NWC has filed all federal, state, and local tax returns required by law and has paid all taxes, assessments, and penalties due and payable. The provisions for taxes reflected in the Closing Balance Sheet, will be adequate for any and all federal, state, county, and local taxes for the period ending on the date of that balance sheet and for all prior periods, whether or not disputed. There are no present disputes as to taxes of any nature payable by NWC. NWC has never filed, and will not file on or before the Closing Date, any consent under Section 341(f) of the Internal Revenue Code.


2.9 Assets.


(a) Real Property. Item 2.9(a) of the Disclosure Schedule is a complete and accurate legal description of each parcel of real property owned by or leased to NWC. All the leases listed in such Exhibit are valid and in full force, and there does not exist any default or event that with notice or lapse of time, or both, would constitute a default by NWC under any of these leases and, to the best of the Selling Parties' knowledge, no other party is in default, in any material respect, under any of these leases . To the best of the Selling Parties' knowledge and belief, there has been no spills, disposals, discharges, or releases of any Hazardous Material into, upon, from, or over that real property or into or upon ground or surface water on that real property. As used in this Section, "Hazardous Material" means any hazardous or toxic substance, material, or waste that is regulated as such by any federal authority or by any state or local governmental authority where the substance, material, or waste is located.


(b) Inventory. The inventories of raw materials, work in process, and finished goods (collectively, the "Inventories") shown on the Closing Balance Sheet, consist of items of a quality and quantity usable and salable in the ordinary course of business by NWC, except for obsolete and slow-moving items and items below standard quality, all of which have been written down on the books of NWC to net realizable market value or have been provided for by adequate reserves. All items included in the Inventories are the property of NWC, except for sales made in the ordinary course of business since the date of the Closing Balance Sheet; for each of these sales, either the purchaser has made full payment or the purchaser's liability to make payment is reflected in the books of NWC. No items included in the inventories have been pledged as collateral or are held by NWC on consignment from others, except as disclosed in Item 2.9(b) of the Disclosure Schedules. The Inventories shown on all the balance sheets included in the financial statements are based on quantities determined by physical count or measurement, taken within the preceding three (3) months, and are valued at the lower of cost (determined on a first-in, first-out basis) or market value and on a basis consistent with that of prior years.


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(c) Tangible Personal Property. Item 2.9(c) of the Disclosure Schedule is a complete and accurate schedule describing and specifying the location of automobiles, machinery, equipment, furniture, supplies and all other tangible personal property owned by, in the possession of, or used by NWC in connection with its business, except for Inventories. The property listed in such Item constitutes all such tangible personal property reasonably necessary for the conduct by NWC of its business as now conducted and all of such property is in good working condition. Except as stated in the Disclosure Schedule, no personal property used by either NWC in connection with its business is held under any lease, security agreement, conditional sales contract, or other title retention or security arrangement, or is located other than in the possession of NWC.


(d) Accounts Receivable. Item 2.9(d) of the Disclosure Schedule is a complete and accurate schedule of the accounts receivable of NWC as of June 28, 1996, as reflected in the Closing Balance Sheet, together with an accurate aging of these accounts. These accounts receivable, and all accounts receivable of NWC created after that date, arose from valid sales in the ordinary course of business. These accounts, to the best of the Selling Parties' knowledge, are collectible at their full amount less any reserve for doubtful accounts and trade discounts shown on the Closing Balance Sheet.


(e) Trade Names, Trademarks, and Copyrights. Item 2.9(e) of the Disclosure Schedule is a schedule of all trade names, trademarks, service marks, and copyrights and their registrations, owned by NWC or in which NWC has any rights or licenses, together with a brief description of each. The Selling Parties have no knowl ...