<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 30, 1996
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-11460 31-1103425
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
5966 La Place Court, Carlsbad, California 92008
(Address of principal executive offices) (Zip code)
619-438-7400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
The index to exhibits appears at page __ of the ______ pages constituting the
manually signed original of this report.
1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Sale of Assets of New World Computing, Inc.
-------------------------------------------
On June 30, 1996, NTN Communications, Inc. ("NTN") and its wholly owned
subsidiary, New World Computing, Inc. ("New World"), entered into a definitive
Agreement of Purchase and Sale of Assets (the "Sale Agreement") by which
substantially all of the assets and business of New World have been sold to The
3DO Company ("3DO"). The transaction was previously announced by NTN. New World,
which was acquired by NTN in 1993, is engaged in the development, distribution,
marketing and sale of computer games and other personal computer entertainment
software.
In consideration of the sale of assets, 3DO will issue to New World an
aggregate of 1,200,000 shares of the common stock of 3DO (the "3DO Shares") and
assume approximately $1,300,000 of liabilities of New World. 3DO also has agreed
to guarantee that the cash value realized by New World from the 3DO Shares will
not be less than $10 per share as described below. On July 12, 1996, the closing
sale price of the 3DO common stock as reported on the Nasdaq National Market was
$8.75 per share.
The actual number of 3DO Shares to be received by New World is subject to
downward adjustment under certain circumstances in the event the assets or
liabilities of New World acquired or assumed by 3DO differ from such assets and
liabilities as of March 31, 1996. Such adjustment is expected to be determined
on or before July 31, 1996 based upon a closing date balance sheet to be
furnished by New World and NTN. NTN currently expects that the actual number of
3DO Shares it will receive will be approximately 1,000,000. NTN and New World
have agreed to assign certain of the 3DO Shares to Jon Van Caneghem, the former
president of New World, as described below.
The Sale Agreement includes provisions entitling New World to have the 3DO
Shares it receives included in a registration statement to be filed by 3DO with
the Securities and Exchange Commission as soon as is practicable. 3DO has
agreed to use its best efforts to cause such registration statement to remain
effective for a period of at least 90 days. The registration period may be
extended by 3DO under certain circumstances as set forth in the Sale Agreement.
Under the provisions of the Sale Agreement, unless the parties agree
otherwise not more than 50,000 of the 3DO Shares (including the shares assigned
to Mr. Van Caneghem) may be resold during a single trading day. For its part,
3DO has agreed to guaranty the value of the 3DO Shares to New World as of the
end of such registration period. Accordingly, in the event that all of the 3DO
Shares are sold during such registration period, 3DO will pay to New World, in
cash, an amount equal to the difference, if any, between (i) the sum of $10 per
share plus sales discounts or commissions incurred by New World (not to exceed
3%) and (ii) the gross proceeds received by New World from sales of the 3DO
Shares. If less than all of the 3DO Shares have been sold as of the end of the
registration period, the guarantee payment will be calculated based on the
difference between the amount referred to in clause (i) above and the sum of the
gross proceeds received by New World from any sales of the 3DO Shares and the
then-current market value of the unsold 3DO Shares. New World will retain any
value in excess of $10 per share plus (applicable discounts or commissions not
to exceed 3%) realized by it from the sale of the 3DO Shares. In the event the
registration statement has not become effective by December 31, 1996, NTN and
New World will have certain rights to trigger payment of the guaranty. The terms
of 3DO's guaranty are set forth in detail in the Sale Agreement, a copy of which
is included as Exhibit 2.1 to this Report and incorporated herein by this
reference.
As part of the sale of New World's assets, NTN has agreed not to compete
with the former business of New World acquired by 3DO during the three-year
period ending June 30, 1999. NTN will not be restricted, however, from
developing, marketing or distributing its products and services on CD-ROM or
other media which also may be utilized by 3DO. A copy of the Noncompetition
Agreement is included as Exhibit E to the Sale Agreement and incorporated herein
by this reference.
2
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In connection with the transaction with 3DO, NTN and New World agreed to
assign to Mr. Van Caneghem 135,000 of 3DO Shares (or such greater number as
equals 12 1/2% of the total 3DO Shares) received by New World in the transaction
in settlement of his existing employment agreement with New World and certain
other matters described therein. Mr. Van Caneghem will be employed by 3DO
following the sale of assets.
The terms of the foregoing transaction were determined by arm's-length
negotiations between NTN and 3DO, which prior to the transaction had no
affiliation or business with NTN or New World or any of their respective
officers, directors or associates. The sale will be taxable to New World and
NTN, and NTN estimates that the gain from the sale will be approximately
$3,300,000, net of applicable taxes. The actual gain and the taxes payable in
connection therewith cannot be determined until after the number of 3DO Shares
received, all costs have been calculated, and the final results of the
transactions have been reviewed against applicable tax regulations.
During the fiscal year ended December 31, 1995 and the quarter ended March
31, 1996, New World contributed approximately $5,400,000 and $1,250,000,
respectively, to NTN's consolidated revenues, and the sale of New World's assets
will result in lower total revenues for NTN for the current fiscal year. The
sale of New World's assets will enhance NTN's consolidated balance sheet and is
expected to improve its liquidity once the 3DO Shares are covered by an
effective registration statement and can be sold. There can be no assurance as
to when or at what price the 3DO Shares can be sold.
The matters discussed in this Report include forward-looking statements
that are subject to certain risks and uncertainties, including the final
determination of the number of 3DO Shares to be received in the transaction, the
final tax treatment of the transaction to NTN, the future market price and
realizable value of the 3DO Shares received in the transaction, the timing of
any future sales of such shares, and factors affecting 3DO's business which may
affect such market value and timing. As a result, no assurance can be made as
to the actual impact of the transaction on NTN's consolidated financial position
or results of operations for the year ending December 31, 1996.
Attached as Exhibit 2.1 to this Report is a copy of the Sale Agreement,
including exhibits thereto, which contain additional terms and provisions
relating to the subject matter of this Report, and which are incorporated by
reference in this Item 2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
Not applicable.
(b) Pro forma financial information:
The following unaudited pro forma balance sheet as of March 31, 1996,
assumes the sale of New World occurred on March 31, 1996. The
unaudited pro forma statements of operations for the three months
ended March 31, 1996, and for the year ended December 31, 1995,
assumes the sale of New World occurred on January 1, 1995.
The following unaudited pro forma financial statements do not purport
to be indicative of results of operations or financial position that
would have occurred had the disposition of New World been consummated
on January 1, 1995 or March 31, 1996, as the case may be, nor do they
purport to be indicative of actual or future results of operations or
financial condition. In addition, the following pro forma financial
statements are subject to a number of assumptions, limitations and
qualifications.
3
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Balance Sheet
March 31, 1996
<TABLE>
<CAPTION>
March 31, March 31,
1996 Proforma 1996
Assets Historical Adjustments Pro Forma
------------------ ------------ ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,510,000 (86,000) 2,424,000
Investment in available-for-sale marketable securities 0 10,400,000 10,400,000
Interest-bearing security deposits 1,450,000 1,450,000
Accounts receivable - trade, net 5,427,000 (2,556,000) 2,871,000
Accounts receivable - other 875,000 875,000
Notes receivable - related parties 680,000 680,000
Software development costs, net 1,690,000 (1,690,000) 0
Inventories 6,933,000 (754,000) 6,179,000
Prepaid expenses and other current assets 2,772,000 (256,000) 2,516,000
------------ ---------- -----------
Total current assets 22,337,000 5,058,000 27,395,000
Fixed assets, net 2,240,000 (166,000) 2,074,000
Notes receivable - related parties 4,200,000 4,200,000
Interest-bearing security deposits 1,950,000 1,950,000
Software development costs, net 4,510,000 (1,083,000) 3,427,000
Other assets 3,862,000 3,862,000
------------ ---------- -----------
Total assets $ 39,099,000 3,809,000 42,908,000
============ ========== ===========
Liabilities and Shareholders' Equity
------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 2,398,000 2,289,000 4,687,000
Current portion of long-term debt 2,092,000 (732,000) 1,360,000
Deferred revenue 1,148,000 1,148,000
Customer deposits 1,236,000 1,236,000
------------ ---------- -----------
Total current liabilities 6,874,000 1,557,000 8,431,000
Deferred revenue 1,052,000 (18,000) 1,034,000
Long-term debt, excluding current portion 2,000 2,000
------------ ---------- -----------
Total liabilities 7,928,000 1,539,000 9,467,000
------------ ---------- -----------
Minority interest (208,000) (208,000)
Shareholders' equity
10% Cumulative convertible preferred stock 1,000 1,000
Common stock 113,000 113,000
Treasury stock (2,551,000) (2,551,000)
Additional paid-in capital 56,730,000 56,730,000
Accumulated deficit (22,914,000) 2,270,000 (20,644,000)
------------ ---------- -----------
Total shareholders' equity 31,379,000 2,270,000 33,649,000
------------ ---------- -----------
Total liabilities and shareholders' equity $ 39,099,000 3,809,000 42,908,000
============ ========== ===========
</TABLE>
4
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Assumptions to Proforma Consolidated Balance Sheet
March 31, 1996
1 Sale of New World assumed to have occurred on March 31, 1996; accordingly all
operations, assets and liabilities of New World have been removed.
2 Gross Proceeds (in the form of stock) is subject to adjustment based on a
closing balance sheet which cannot be determined at this point. The
transaction is expected to be finalized by July 31, 1996.
3 Proceeds from the sale before payment of resulting liabilities is estimated
to be $10,400,000.
4 Taxes on the sale are estimated to be $1,000,000 however the exact amount has
not been finalized and is subject to adjustment after determination of
proceeds, costs and applicable tax regulations.
5 Proceeds in the form of stock are included in Investment in available-for-
sale marketable securities and was assumed not to have been liquidated at the
balance sheet date.
5
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1995 Proforma 1995
Historical Adjustments Pro Forma
------------ ------------ -----------
<S> <C> <C> <C>
Broadcast and production services $17,307,000 17,307,000
Product sales 3,884,000 (3,884,000) 0
Equipment sales 6,784,000 6,784,000
License fees and royalties 2,167,000 (1,495,000) 672,000
Other revenue 1,629,000 1,629,000
----------- ----------- -----------
Total revenues 31,771,000 (5,379,000) 26,392,000
Cost of services - broadcast and
production services 8,756,000 8,756,000
Cost of sales - product sales 1,844,000 (1,864,000) (20,000)
Cost of sales - equipment 4,981,000 4,981,000
----------- ----------- -----------
Total cost of sales 15,581,000 (1,864,000) 13,717,000
----------- ----------- -----------
Gross profit 16,190,000 (3,515,000) 12,675,000
----------- ----------- -----------
Operating expenses:
Selling, general and administrative 16,838,000 (3,257,000) 13,581,000
Legal and professional services 1,851,000 (131,000) 1,720,000
Research and development 1,471,000 1,471,000
----------- ----------- -----------
Total operating expenses 20,160,000 (3.388,000) 16,772,000
Operating income (loss) (3,970,000) (127,000) (4,097,000)
Interest income (expense), net 22,000 58,000 80,000
----------- ----------- -----------
Earnings (loss) from continuing
operations before income taxes (3,948,000) (69,000) (4,017,000)
Income taxes 0 0 0
----------- ----------- -----------
Earnings (loss) from continuing
operations (3,948,000) (69,000) (4,017,000)
----------- ----------- -----------
Gain on disposal of New World, net of
applicable taxes of $1,000,000 3,300,000 3,300,000
----------- ----------- -----------
Net earnings (loss) (3,948,000) 3,231,000 (717,000)
=========== =========== ===========
Net earnings (loss) per share $ (0.19) 0.15 (0.04)
=========== =========== ===========
Weighted average equivalent number of shares 20,301,000 20,301,000 20,301,000
=========== =========== ===========
</TABLE>
6
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1996 Proforma 1996
Historical Adjustments Pro Forma
--------------- -------------- ---------------
<S> <C> <C> <C>
Broadcast and production services $ 5,339,000 5,339,000
Product sales 1,212,000 (1,212,000) 0
Equipment sales 1,310,000 1,310,000
License fees and royalties 29,000 (29,000) 0
Other revenue 385,000 (3,000) 382,000
----------- ---------- ----------
Total revenues 8,275,000 (1,244,000) 7,031,000
Cost of services - broadcast and
production services 2,508,000 2,508,000
Cost of sales - product sales 410,000 (410,000) 0
Cost of sales - equipment 822,000 822,000
----------- ---------- ----------
Total cost of sales 3,740,000 (410,000) 3,330,000
----------- ---------- ----------
Gross profit 4,535,000 (834,000) 3,701,000
----------- ---------- ----------
Operating expenses:
Selling, general and administrative 3,852,000 (644,000) 3,208,000
Legal and professional services 190,000 (26,000) 164,000
Research and development 498,000 (124,000) 374,000
----------- ---------- ----------
Total operating expenses 4,540,000 (794,000) 3,746,000
Operating income (loss) (5,000) (40,000) (45,000)
Interest income (expense), net 70,000 11,000 81,000
----------- ---------- ----------
Earnings (loss) before minority
interest and income taxes 65,000 (29,000) 36,000
Minority interest 208,000 0 208,000
----------- ---------- ----------
Earnings before income taxes 273,000 (29,000) 244,000
Income taxes 0 0 0
----------- ---------- ----------
Net earnings (loss) $ 273,000 (29,000) 244,000
=========== ========== ==========
Net earnings (loss) per share $ 0.01 0.00 0.01
=========== ========== ==========
Weighted average equivalent number of shares 23,678,000 23,678,000 23,678,000
=========== ========== ==========
</TABLE>
7
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NTN COMMUNICATIONS, INC. AND SUBSIDIARIES
Assumptions to Pro Forma Consolidated Statements of Operations
Assumptions to Pro Forma Statement of Operations for the Year Ended December 31,
- --------------------------------------------------------------------------------
1995
- ----
1. Sale of New World assumed to have occurred on January 1, 1995; therefore all
1995 operations of New World have been removed.
2. Gross proceeds (in the form of stock) is subject to adjustment based on a
closing balance sheet which cannot be determined at this point.
3. Proceeds from the sale before payment of resulting liabilities is estimated
to be $10,400,000.
4. Taxes on the sale are estimated to be $1,000,000 however the exact amount has
not been finalized and is subject to adjustment after determination of
proceeds, costs and applicable tax regulations.
5. Proceeds in the form of stock are included in the balance sheet and was
assumed not to have been liquidated for purposes of this statement.
Assumption to Pro Forma Statement of Operations for the Three Months Ended March
- --------------------------------------------------------------------------------
31, 1996
- --------
1. Sale of New World assumed to have occurred on January 1, 1995; therefore all
1995 operations of New World have been removed.
2. Proceeds in the form of stock are included in the balance sheet and was
assumed not to have been liquidated for purposes of this statement.
(c) Exhibits:
The following exhibit included with this Report is made part hereof:
Sequential Page No.
-------------------
2.1 Agreement of Purchase and Sale of Assets, dated as of June 30, 1996,
with schedules and exhibits, among NTN Communications, Inc., New World
Computing, Inc., and The 3DO Company.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NTN COMMUNICATIONS, INC.
Date: July 15, 1996 By: /s/ Ronald E. Hogan
----------------------------------------
Ronald E. Hogan, Chief Financial Officer
9
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EXHIBIT 2.1
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
1
<PAGE>
Agreement of Purchase and Sale of Assets
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
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
</TABLE>
2
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<TABLE>
<S> <C>
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
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
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
</TABLE>
4
<PAGE>
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
<PAGE>
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 knowledge of any infringement or alleged infringement by others
of any such trade name, trademark, service mark, or copyright. NWC has not
infringed, and is not now infringing, on any trade name, trademark, service
mark, or copyright belonging to any other person, firm, or entity. Except as set
forth in Item 2.9(e), NWC is not a party to any license, agreement, or
arrangement, whether as licensor, licensee, franchisor, franchisee, or
otherwise, with respect to any trademarks, service marks, trade names, or
applications for any such items, or any copyrights. NWC owns, or holds adequate
licenses or other rights to use, all trademarks, service marks, trade names, and
copyrights reasonably necessary for its business as now conducted by it, and
that use does not, and will not, conflict with, infringe on, or otherwise
violate any rights of others. NWC has the right to sell or assign to 3DO all
such owned trademarks, trade names, service marks, and applications for any of
such items, and copyrights, and all such licenses or other rights, except as set
forth in item 2.9(e).
(f) Patents and Patent Rights. Item 2.9(f) of the Disclosure
Schedule is a true and complete schedule of all patents, inventions, processes,
designs, and applications for patents owned by NWC or in which NWC has any
rights, licenses, or immunities. The patents and applications for patents listed
in such Item are valid and in full force and effect and are not subject to any
taxes, maintenance fees, or actions falling due within ninety (90) days after
the Closing Date. Except as set forth in such Item, there have been no
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the patents or applications for patents listed in such
Item. Each patent application is awaiting action by its respective patent office
except as otherwise indicated in such Item. The manufacture, use, or sale of the
inventions, designs, and systems covered by the patents and applications for
patents listed in Item 2.9(f) do not violate or infringe on any patent or any
proprietary or personal right of any person, firm, or entity; and NWC has not
infringed and is not now infringing on any patent or other right belonging to
any person, firm, or entity. Except as set forth in Item 2.9(f), NWC is not a
party to any license, agreement, or arrangement, whether as licensee, licensor,
or otherwise, with respect to any patent, application for patent, invention,
design, process, trade secret, or formula. NWC has the right and authority to
use and to transfer to 3DO such inventions,
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trade secrets, processes, designs, and formulas as are necessary to enable 3DO
to conduct and to continue to conduct all phases of NWC's business in the manner
presently conducted by NWC, and such use does not, and will not, conflict with,
infringe on, or violate any patent or other rights of others.
(g) Trade Secrets. Item 2.9(g) of the Disclosure Schedule is a
true and complete list, without extensive or revealing descriptions, of NWC's
trade secrets, including all customer lists, processes, know-how, computer
programs and routines, and other technical data reasonably required or necessary
for the operation of NWC's business. The specific location of each trade
secret's documentation, including its complete description, specifications,
charts, procedures, and other material relating to it, is also set forth with it
in such Item. Each trade secret's documentation is current, accurate, and
sufficient in detail and content to identify and explain it and to allow its
full and proper use by 3DO without reliance on the special knowledge or memory
of others. NWC is the sole owner of each of these trade secrets, free and clear
of any liens, encumbrances, restrictions, or legal or equitable claims of
others, except as specifically stated in Item 2.9(g). NWC has taken all
reasonable security measures to protect the secrecy, confidentiality, and value
of these trade secrets; and all of NWC's employees and any other persons,
including all contractors and all consultants, who, either alone or in concert
with others, developed, invented, discovered, derived, programmed, or designed
these secrets, or who have knowledge of or access to information relating to
them, have entered into agreements assigning these trade secrets to NWC and
acknowledging that these secrets are proprietary to NWC and not to be divulged
or misused. All of these trade secrets referred to in the Disclosure Schedule
are presently valid and protectible and are not part of the public knowledge or
literature; nor to Selling Parties' knowledge have they been used, divulged, or
appropriated for the benefit of any past or present employees or other persons,
or to the detriment of NWC.
(h) Other Intangible Property. Item 2.9(h) of the Disclosure
Schedule contains a true and complete list of all intangible assets of NWC,
other than those specifically referred to elsewhere in this Agreement.
(i) Title to Assets. NWC has good and marketable title to all
of the assets and interests in assets, whether real, personal, mixed, tangible,
or intangible, which constitute all the assets and interests in assets that are
reasonably necessary to operate the business of NWC, excluding its legal,
billing, collection and accounting operations. All these assets are free and
clear of restrictions on or conditions to transfer or assignment, and free and
clear of mortgages, liens, pledges, charges, encumbrances, equities, claims,
easements, rights of way, covenants, conditions, or restrictions, except for (1)
those disclosed in the Closing Balance Sheet, or in the Disclosure Schedule; (2)
the lien of current taxes not yet due and payable; and (3) possible minor
matters that, in the aggregate, are not substantial in amount and do not
materially detract from or interfere with the present or intended use of any of
these assets or materially impair business operations. NWC is not in default or
in arrears in any material respect under any material lease. All real property
and tangible personal property of NWC is in good and safe operating condition
and repair, ordinary wear and tear excepted. NWC is in possession of all
premises leased to it from others. Neither NTN; nor any officer, director, or
employee of NTN or NWC; nor any spouse, child, or other relative of any of these
persons, owns, or has any interest, directly or indirectly, in any of the real
or personal property owned by or leased to NWC or in any copyrights, patents,
trademarks, trade names, or trade secrets licensed by NWC. To the best of the
Selling Parties' knowledge, NWC does not occupy any real property in violation
of any law, regulation, or decree.
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(j) Customers and Sales. Item 2.9(j) of the Disclosure
Schedule is a correct and current list of all customers of NWC together with
summaries of the sales made to each customer during the most recent fiscal year
ended December 31, 1995. Except as indicated in such Exhibit, neither NWC nor
NTN has any information, and has not been advised of any facts, indicating that
any of these customers intend to cease doing business with NWC or materially
alter the amount of the business they are presently doing with NWC.
(k) Employment Contracts and Benefits. Item 2.9(k) of the
Disclosure Schedule is a list of all employment contracts and collective
bargaining agreements, and all pension, bonus, profit-sharing, stock option, or
other agreements or arrangements providing for employee remuneration or benefits
to which NWC is a party or by which NWC is bound. All these contracts and
arrangements are in full force and effect, and NWC is not in default under them.
There has been no claim of default and, to the best knowledge and belief of
Selling Parties, there are no facts or conditions that if continued, or on
notice, will result in a material default under these contracts or arrangements.
There is no pending or, to the best of Selling Parties' knowledge and belief,
threatened labor dispute, strike, or work stoppage affecting NWC's business. NWC
and Subsidiary have complied with all applicable laws, in all material respects,
for each of their respective employee benefit plans, including the provisions of
the Employee Retirement Income Security Act ("ERISA") if and to the extent
applicable. There is no pending claim or, to the best of Selling Parties'
knowledge, any threatened claim by or on behalf of any such benefit plan, by or
on behalf of any employee covered under any such plan, or otherwise involving
any such benefit plan, that alleges a breach of fiduciary duties or violation of
other applicable state or federal law, nor is there, to the best of Selling
Parties' knowledge and belief, any basis for such a claim. Except as set forth
in Item 2.9(k), NWC has not entered into any severance or similar arrangement in
respect of any present or former employee that will result in any obligation,
absolute or contingent, of 3DO or NWC, to make any payment to any present or
former employee following termination of employment.
(l) Insurance Policies. Item 2.9(l) of the Disclosure Schedule
is a description of all insurance policies held by NWC concerning its businesses
and properties. All these policies are in the respective principal amounts set
forth in such Exhibit. NWC has maintained and now maintains (1) insurance on all
its assets and businesses of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (2) adequate insurance
protection against all liabilities, claims, and risks against which it is
reasonably customary to insure. NWC is not in default with respect to payment of
premiums on any such policy. Except as set forth in item 2.9(l), no claim is
pending under any such policy.
(m) Other Contracts. NWC is not a party to, nor is any of its
property bound by, any distributor's or manufacturer's representative or agency
agreement; any output or requirements agreement; any agreement not entered into
in the ordinary course of business; any indenture, mortgage, deed of trust, or
lease; or any material agreement that is unusual in nature, duration, or amount
(including, without limitation, any agreement requiring the performance by NWC
of any obligation for a period of time extending beyond three (3) months from
the Closing Date or calling for consideration of more than ten thousand dollars
($10,000); except for the agreements listed in Item 2.9(m) of the Disclosure
Schedule, copies of which have been furnished or made available to 3DO. There is
no default or event that, with notice or lapse of time or both, would constitute
a material default by NWC, nor, to the best of Selling Parties' knowledge, any
other party to any of these agreements. NWC has not received notice that any
party to any of these agreements intends to cancel or terminate any of these
agreements or to exercise or not
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exercise any options under any of these agreements. NWC is not a party to, nor
is any of its property bound by, any agreement that is materially adverse to the
businesses, properties, or financial condition of NWC.
(n) Compliance With Laws. NWC has complied in all material
respects with all federal, state, and local laws and regulations which
materially affects its business, including, but not limited to, laws pertaining
to environmental protection and the Occupational Safety and Health Act and its
California equivalent, and has not been cited for or received notice of any
material violation of any law or regulation. To the best of the Selling Parties'
knowledge, no material capital expenditures will be required for compliance with
any applicable federal, state, or local laws or regulations now in force.
(o) Litigation. Except as set forth in Item 2.9(o) of the
Disclosure Schedule, there is not pending, nor, to the best of the Selling
Parties' knowledge and belief, threatened, any suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation
against or affecting NWC, or any of its businesses, assets, or financial
condition. The matters set forth in such Item, if decided adversely to NWC, will
not result in a material adverse change in any of the businesses, assets, or
financial condition of NWC. Selling Parties have furnished or made available to
3DO copies of all relevant court papers and other documents relating to the
matters set forth in such Item. NWC is not in default with respect to any order,
writ, injunction, or decree of any federal, state, local, or foreign court,
department, agency, or instrumentality. Except as set forth in Item 2.9(o), NWC
is not presently engaged in any legal action to recover moneys due to it or
damages sustained by it.
(p) Agreement Will Not Cause Breach or Violation. Except as
set forth in Item 2.9(p) of the Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not result in or constitute any
of the following: (1) a breach of any term or provision of any material
agreement to which NWC is a party which is included in the Assets; (2) a default
or an event that, with notice or lapse of time or both, would be a default,
breach, or violation of the articles of incorporation or bylaws of NWC or any
lease, license, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust, or other agreement, instrument, or
arrangement to which NTN or NWC is a party or by which either of them or the
property of either of them is bound; (3) an event that would permit any party to
terminate any agreement or to accelerate the maturity of any indebtedness or
other obligation of NWC; or (4) the creation or imposition of any lien, charge,
or encumbrance on any of the businesses, agreements, assets, or properties of
NWC.
(q) Authority and Consents. Selling Parties have the right,
power, legal capacity, and authority to enter into, and perform their respective
obligations under, this Agreement, and no approval or consent of any person or
entity other than Selling Parties is necessary in connection with it. The
execution and delivery of this Agreement by NTN and NWC have been duly
authorized by all necessary corporate action on the part of NTN and NWC,
respectively.
(r) Interest in Customers, Suppliers, and Competitors. Except
as set forth in Item 2.9(r) of the Disclosure Schedule, neither NTN, nor any
officer, or director, of NTN or NWC, nor any spouse or child of any of them, has
any direct or indirect material interest in any competitor, supplier, or
customer of NWC or in any person from whom or to whom NWC leases any real or
personal property.
(s) Corporate Documents. Selling Parties have furnished to 3DO
for its examination (1) copies of the articles of incorporation and bylaws of
NWC; (2) the minute
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books of NWC containing all records required to be set forth of all proceedings,
consents, actions, and meetings of the shareholders and boards of directors of
NWC; (3) all permits, orders, and consents issued by the California Commissioner
of Corporations with respect to NWC, or any security of, and all applications
for such permits, orders, and consents; and (4) the stock transfer books of NWC
setting forth all transfers of any capital stock.
(t) Personnel. Item 2.9(t) of the Disclosure Schedule is a
list of the names and addresses of all officers, directors, employees, agents,
and manufacturer's representatives of NWC, stating the rates of compensation,
including all bonus arrangements, payable to each.
(u) Authority. Item 2.9(u) of the Disclosure Schedule lists
(1) the names and addresses of all persons holding a power of attorney on behalf
of NWC, and (2) the names and addresses of all banks or other financial
institutions in which NWC has an account, deposit, or safe deposit box, with the
names of all persons authorized to draw on these accounts or deposits or to have
access to these boxes.
(v) Full Disclosure. None of the representations and
warranties made by NTN or NWC, or made in any certificate or memorandum
furnished or to be furnished by any of them as listed in Item 2.9(v) of the
Disclosure Schedule or on their behalf, contains or will contain any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements made, in the light of the circumstances under which they
were made, not misleading.
(w) Investor Representation. With respect to the issuance of
the Shares, the Selling Parties hereby represent and warrant:
(i) Investment Intent. The Shares to be acquired
hereunder are being acquired for investment for the Selling Parties' own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Selling Parties have no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Selling Parties further represent except as contemplated pursuant
to NTN's settlement agreement with Mr. Van Caneghem, that they do not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third party, with
respect to any of the Shares.
(ii) Reliance Upon Selling Parties' Representations.
The Selling Parties understand that, as of the Closing Date, the Shares will not
be registered under the Securities Act on the ground that the issuance of the
Shares hereunder is exempt from registration under the Securities Act pursuant
to section 4(2) thereof, and that 3DO's reliance on such exemption is based on
the Selling Parties' respective representations set forth herein.
(iii) Receipt of Information. The Selling Parties
have received all the information which they consider necessary or appropriate
for deciding whether to acquire the Shares to be issued hereunder. The Selling
Parties further represent that they have had an opportunity to ask questions and
receive answers from 3DO regarding the terms and conditions of the Shares and
the business, properties, prospects and financial condition of 3DO and to obtain
additional information necessary to verify the accuracy of any information
furnished to them or to which they have each had access. In addition, the
Selling Parties have received copies of the following 3DO reports: Form 10-K for
the fiscal years ended March 31, 1995, and March 31, 1996, Form 10-Q for the
quarters ended June 30, 1995, September 30, and December 31, 1995 and Proxy
Statement for its 1995 Annual Meeting of Stockholders (collectively, the "SEC
Documents"), which 3DO
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filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with the Securities and Exchange Commission.
(iv) Investment Experience. The Selling Parties are
experienced in evaluating and investing in restricted securities and acknowledge
that they are able to fend for themselves, can bear the economic risk of such
investment, and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the
investment in the Shares.
(v) Restricted Securities. The Selling Parties
understand that the Shares may not be sold, transferred or otherwise disposed of
without registration under the Securities Act or an exemption therefrom, and
that in the absence of an effective registration statement covering the Shares
or an available exemption from registration under the Securities Act and any
applicable state law, the Shares must be held indefinitely.
(vi) Legends. Each certificate or other document
evidencing any of the Shares shall be endorsed with the legend set forth in
Section 11.2, below, and the Selling Parties covenant that, except to the extent
such restrictions are waived by 3DO, the Selling Parties shall not transfer the
Shares represented by any such certificate without complying with the
restrictions on transfer described in the legends endorsed thereon.
(x) Repayment of Loans and Liabilities and Release. There are
no outstanding loans or liabilities to NWC from NTN, or from any person
affiliated with NWC or NTN, except for those which are reflected on the Closing
Balance Sheet.
2.10 Validity of Agreement. This Agreement has been duly and validly
authorized and, when executed and delivered by all Selling Parties, will be
valid and binding on each of them and enforceable in accordance with its terms,
except as limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally.
ARTICLE THREE
3DO'S REPRESENTATIONS AND WARRANTIES
3DO represents and warrants that:
3.1 Organization, Standing and Due Authorization. 3DO is a corporation
duly organized, existing, and in good standing under the laws of Delaware. The
execution and delivery of this Agreement and the consummation of this
transaction by 3DO have been duly authorized, and no further corporate
authorization is necessary on the part of 3DO.
3.2 No Required Consents. No consent, approval, or authorization of, or
declaration, filing, or registration with, any United States federal or state
governmental or regulatory authority is required to be made or obtained by 3DO
in connection with the execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement.
3.3 Validity of the Shares. The Shares of 3DO's common stock to be
issued and delivered under this Agreement will be, when delivered in accordance
with the terms and conditions of this Agreement, be validly issued, fully paid,
nonassessable.
3.4 Validity of Agreement. This Agreement has been duly and validly
authorized and, when executed and delivered by 3DO, will be valid and binding on
3DO
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and enforceable in accordance with its terms, except as limited by bankruptcy
and insolvency laws and by other laws affecting the rights of creditors
generally.
3.5 3DO Financial Statements. 3DO has furnished the Selling Parties a
true and complete copy of its financial statements for the fiscal year ended
March 31, 1996, including the notes thereto, (the "3DO Financial Statements").
The 3DO Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently followed by 3DO and present fairly
the financial position of 3DO as of March 31, 1996. Since March 31, 1996, there
have not been any changes in the assets, liabilities, financial condition,
business or operations of 3DO from those reflected in the 3DO Financial
Statements, except for changes which have not had a materially adverse effect.
ARTICLE FOUR
SELLING PARTIES' OBLIGATIONS BEFORE CLOSING
Selling Parties covenant that from the date of this Agreement until the Closing:
4.1 3DO's Access to Premises and Information. 3DO and its counsel,
accountants, and other representatives shall have reasonable access during
normal business hours to all properties, books, accounts, records, contracts,
and documents of or relating to NWC. Selling Parties shall furnish or cause to
be furnished to 3DO and its representatives all data and information concerning
the business, finances, and properties of NWC that may reasonably be requested.
4.2 Conduct of Business in Normal Course. NWC will carry on its
business and activities diligently and in substantially the same manner as it
previously has been carried out and shall not make or institute any unusual or
novel methods of purchase, sale, lease, management, accounting, or operation
that vary materially from those methods used by NWC as of the date of this
Agreement.
4.3 Preservation of Business and Relationships. NWC will use its best
efforts, without making any commitments on behalf of 3DO, to preserve its
business organization intact, to keep available to NWC its present employees,
and to preserve its present relationships with developers, suppliers, customers,
and all others having business relationships with NWC.
4.4 Corporate Matters. NWC will not (a) amend its articles of
incorporation or bylaws; (b) issue any shares of its capital stock; (c) issue or
create any warrants, obligations, subscriptions, options, convertible
securities, or other commitments under which any additional shares of its
capital stock of any class might be directly or indirectly authorized, issued,
or transferred from treasury; or (d) agree to do any of the acts listed above.
4.5 Maintenance of Insurance. NWC will continue to carry its existing
insurance, subject to variations in amounts required by the ordinary operations
of its businesses. At the request of 3DO and at 3DO's sole expense, the amount
of insurance against fire and other casualties that, at the date of this
Agreement, NWC and Subsidiary carry on any of their properties or in respect of
their operations shall be increased by the amount or amounts 3DO shall specify.
If requested by 3DO, Selling Parties shall cause 3DO to be named as an
additional insured on each existing insurance policy carried by NWC.
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4.6. Employees and Compensation. NWC will not do, and will not agree to
do, any of the following acts: (a) make any change in compensation payable or to
become payable by it, to any officer, director, employee, sales agent, or
representative; (b) make any change in benefits payable to any officer,
director, employee, sales agent, or representative under any bonus or pension
plan or other contract or commitment; or (c) modify any collective bargaining
agreement to which it is a party or by which it may be bound.
4.7. New Transactions. NWC will not, without 3DO's written consent, do
or agree to do any of the following acts:
(a) Enter into any contract, commitment, or transaction not in
the usual and ordinary course of its business;
(b) Enter into any contract, commitment, or transaction in the
usual and ordinary course of business involving an amount exceeding ten thousand
dollars ($10,000), individually, or twenty-five thousand dollars ($25,000), in
the aggregate;
(c) Make any material capital expenditures in excess of ten
thousand dollars ($10,000) for any single item or twenty-five thousand dollars
($25,000) in the aggregate, or enter into any leases of capital equipment or
property under which the annual lease charge is in excess of ten thousand
dollars ($10,000); or
(d) Sell or dispose of any capital assets.
4.8. Dividends, Distributions, and Acquisitions of Stock. NWC will not:
(a) Declare, set aside, or pay any dividend or make any
distribution in respect of its capital stock;
(b) Directly or indirectly purchase, redeem, or otherwise
acquire any shares of its capital stock; or
(c) Enter into any agreement obligating it to do any of the
foregoing prohibited acts.
4.9 Payment of Liabilities and Waiver of Claims. NWC will not do, or
agree to do, any of the following acts: (a) pay any obligation or liability,
fixed or contingent, other than current liabilities; (b) waive or compromise any
right or claim; or (c) cancel, without full payment, any note, loan, or other
obligation owing to NWC.
4.10 Existing Agreements. NWC will not modify, amend, cancel, or
terminate any of its existing contracts or agreements, or agree to do any of
such prohibited acts.
4.11. Consents of Others. As soon as reasonably practical after the
execution and delivery of this Agreement, and in any event on or before the
Closing Date, Selling Parties will obtain the written consent of the persons
described in Exhibit D to this Agreement and will furnish to 3DO executed copies
of those consents. In the event any of such consents are not obtained by the
Settlement Date, the parties agree to negotiate in good faith to determine an
appropriate resolution of such matter, which may include NWC holding any related
agreements in trust on behalf of 3DO. 3DO will exercise its best efforts, and
promptly execute and deliver any documents and instruments that may be
reasonably required, to assist Selling Parties in obtaining such consents;
provided, however, that 3DO shall not be obligated under this Section to execute
any guaranty, assumption of liability, or
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other document or instrument requiring it to assume obligations not contemplated
by this Agreement.
4.12 Documentation of Procedures and Trade Secrets. At the written
request of 3DO, NWC will, prior to the Closing Date, document and describe any
of its trade secrets, processes, or business procedures specified by 3DO, in
form and content satisfactory to 3DO.
4.13 Representations and Warranties True at Closing. All
representations and warranties of Selling Parties set forth in this Agreement
and in any written statements delivered to 3DO by Selling Parties under this
Agreement will also be true and correct as of the Closing Date as if made on
that date.
4.14 Corporate and NTN Approvals. NWC will deliver to 3DO, on or before
the Closing Date, a written consent of its sole shareholder, NTN, (1)
authorizing and approving the sale of substantially all NWC's property and
assets to 3DO on the terms and conditions provided in this Agreement, and (2)
approving the change of name of "New World Computing" to a name that does not
include the words "New World Computing".
4.15 Bulk Sales Law. 3DO agrees to waive compliance with the provisions
of the California Commercial Code relating to bulk transfers in connection with
this sale of assets, subject to the indemnities of Selling Parties contained in
this Agreement. Nothing in this Section shall stop or prevent either 3DO or the
Selling Parties from asserting as a bar or defense to any action or proceeding
brought under that law that it does not apply to the sale contemplated under
this Agreement.
ARTICLE FIVE
3DO'S OBLIGATIONS BEFORE CLOSING
5.1 Cooperation in Securing Consents of Third Parties. 3DO will use its
best efforts to assist NWC in obtaining the consent of all necessary persons and
agencies to the assignment and transfer to 3DO of any and all properties,
assets, and agreements, to be assigned and transferred under the terms of this
Agreement.
5.2 Resale Certificate. 3DO agrees to furnish any resale certificate or
other documents reasonably requested by NWC to comply with the provisions of the
sales and use tax laws of the State of California.
ARTICLE SIX
CONDITIONS PRECEDENT TO 3DO'S PERFORMANCE
The obligations of 3DO to purchase the Assets under this Agreement are
subject to the satisfaction, at or before the Closing, of all the conditions set
out below in this Article Six. 3DO may waive any or all of these conditions in
whole or in part without prior notice; provided, however, that no such waiver of
a condition shall constitute a waiver by 3DO of any of its other rights or
remedies, at law or in equity, if NTN or NWC shall be in default of any of their
respective representations, warranties, or covenants under this Agreement,
excluding those pertaining specifically to any matter waived by 3DO.
Notwithstanding the foregoing 3DO may allow the Selling Parties' to defer their
performance of specific items under this Article until the Settlement Date;
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6.1 Accuracy of Selling Parties' Representations and Warranties. Except
as otherwise permitted by this Agreement, all representations and warranties by
each of the Selling Parties set forth in this Agreement, or in any written
statement that shall be delivered to 3DO by any of them under this Agreement,
shall be true on and as of the Closing Date as though made at that time.
6.2 Performance by Selling Parties. Selling Parties shall have
performed, satisfied, and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by them,
or any of them, on or before the Closing Date.
6.3 No Material Adverse Change. During the period from the date of the
Closing Balance Sheet to the Closing Date, there shall not have been any
material adverse change in the financial condition or the results of operations
of NWC, and NWC shall not have sustained any material loss or damage to its
assets, whether or not insured, that materially affects its ability to conduct
any material part of its business.
6.4 Certification by Selling Parties. 3DO shall have received a
certificate, dated the Closing Date, signed and verified by NTN's and by NWC's
respective presidents and their respective treasurers or assistant treasurers,
certifying that the conditions specified in Sections 6.1, 6.2, 6.3, 6.6, 6.8 and
6.11 have been fulfilled.
6.5 Opinion of Selling Parties' Counsel. 3DO shall have received from
Troy & Gould, Professional Corporation, counsel for Selling Parties, or from the
Selling Parties in-house counsel, an opinion dated as of the Closing Date, in
form and substance satisfactory to 3DO and its counsel.
6.6 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
6.7 Letter Regarding Changes. 3DO shall have received from NTN's and
NWC's respective chief financial officers a letter, dated the Closing Date,
stating that on the basis of a limited review (not an audit) of the latest
available accounting records of NWC, consultations with other responsible
officers of NWC and with NTN, and other pertinent inquiries that they may deem
necessary, they have no knowledge or reason to suspect that during the period
from the date of the latest audited financial statement(s) up through and
including the Closing Date, there was any change in the financial condition or
results of operations of NWC, except changes incurred in the ordinary and usual
course of their respective businesses during that period that in the aggregate
are not materially adverse, and any other changes or transactions contemplated
by this Agreement.
6.8 Corporate Approval. The execution and delivery of this Agreement by
NWC, and the performance of its covenants and obligations under it, shall have
been duly authorized by all necessary corporate action, and 3DO shall have
received copies of all resolutions pertaining to that authorization, certified
by the secretary of NWC.
6.9 Consents. All necessary agreements and consents of any parties to
the consummation of the transactions contemplated by this Agreement, or
otherwise pertaining to the matters covered by it, shall have been obtained by
Selling Parties and delivered to 3DO, unless the delivery of any such documents
has been deferred until the Settlement Date, as provided in Article 8 below.
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6.10 Noncompetition Agreement. A noncompetition agreement in the form
set forth in Exhibit E, dated the Closing Date, shall have been executed and
delivered by NTN and NWC to 3DO.
6.11 Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered to 3DO under
this Agreement shall be satisfactory in all reasonable respects to 3DO and its
counsel.
ARTICLE SEVEN
CONDITIONS PRECEDENT TO NWC'S PERFORMANCE
The obligations of NWC to sell and transfer the Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set forth in this
Article Seven. NWC may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by NWC of any of its other rights or remedies, at law
or in equity, if 3DO should be in default of any of its representations,
warranties, or covenants under this Agreement.
7.1 Accuracy of 3DO's Representations and Warranties. All
representations and warranties by 3DO contained in this Agreement or in any
written statement delivered by 3DO under this Agreement shall be true on and as
of the Closing Date as though such representations and warranties were made on
and as of that date.
7.2 3DO's Performance. 3DO shall have performed and complied with all
covenants and agreements and satisfied all conditions that it is required by
this Agreement to perform, comply with, or satisfy, before or at the Closing.
7.3 Opinion of 3DO's Counsel. 3DO shall have furnished Selling Parties
with an opinion, dated the Closing Date, of counsel for 3DO, in form and
substance satisfactory to Selling Parties and their counsel.
7.4 Certification by 3DO. The Selling Parties shall have received a
certificate, dated the Closing Date, signed and verified by 3DO's president and
chief financial officer, certifying that the conditions specified in Sections
7.1, 7.2, 7.5, 7.6 and 7.7 have been fulfilled.
7.5 3DO's Corporate Approval. The board of directors of 3DO shall have
duly authorized and approved the execution and delivery of this Agreement and
all corporate action necessary or proper to fulfill 3DO's obligations to be
performed under this Agreement on or before the Closing Date.
7.6 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
7.7 No Material Adverse Change. During the period from the date of the
3DO Financial Statements to the Closing Date, there shall not have been any
material adverse change in the financial condition of 3DO.
7.8 Termination of Employment Agreement. Selling Parties and Jon Van
Ceneghem shall have entered into a settlement agreement, in form and substance
satisfactory to Selling Parties and their counsel, which provides for, among
other things,
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the termination of the Employment Agreement, dated as of January 4, 1994, among
Selling Parties and Mr. Van Caneghem.
7.9 Assumption of Liabilities. The Selling Parties shall have received
an instrument executed by in form and substance satisfactory to Selling Parties
and their counsel, by which 3DO assumes the Liabilities.
ARTICLE EIGHT
THE CLOSING
8.1 Time and Place. The transfer of the Assets by NWC to Buyer (the
"Closing") shall take place at the offices of Troy & Gould, 1801 Century Park
East, 16th Floor, Los Angeles, CA 90067, at 10:00 a.m., on June 30, 1996, or at
such other time and place as the parties may agree to in writing (the "Closing
Date"). If on the scheduled Closing Date the Selling Parties shall have been
unable to obtain all other waivers and consents of private parties and/or
governmental agencies required by this Agreement, then either 3DO or Selling
Parties, on written notice, may postpone the Closing to a time as soon as
practicable thereafter but in no event later than the Settlement Date, which
shall occur no later than July 31, 1996.
8.2 Selling Parties' Obligations. NWC shall deliver or cause to be
delivered to 3DO:
(a) Lease Assignments. Assignments of all leaseholds, properly
executed and acknowledged by NWC, and accompanied by all consents of lessors
required by this Agreement and the leases being assigned;
(b) Property Assignments. Instruments of assignment and transfer of
all other property of NWC of every kind and description and wherever situated,
including, but not limited to, all its interests in accounts receivable,
royalties receivable, bank accounts, cash, choses in action, rights under
agreements, trademarks, trade names, patents, patent applications, patent
licenses, copyrights, shop rights, and other property, tangible or intangible,
except as expressly excluded in an Exhibit to this Agreement;
(c) Contract Assignments. Instruments of assignment of all of NWC's
rights to receive any payments and royalties. It is expressly understood that
3DO shall not assume any of NWC's obligations under any such contracts unless
such obligations are expressly assumed by 3DO under the terms of this Agreement;
(d) Opinion of Counsel. An opinion of the Selling Parties' counsel,
dated the Closing Date, as provided for in Section 6.5;
(e) Officers' Certificate. The officers' certificate, dated the
Closing Date, as provided for in Section 6.4; and
(f) Certified Resolutions. Certified resolutions of the Selling
Parties' respective boards of directors, in form satisfactory to counsel for
3DO, authorizing the execution and performance of this Agreement and all actions
to be taken by the Selling Parties under this Agreement.
Simultaneously with the consummation of the transfer, NWC, through its officers,
agents, and employees, will put 3DO into full possession and enjoyment of all
properties and assets to be conveyed and transferred by this Agreement. Selling
Parties, at any time
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before or after the Closing Date, will execute, acknowledge, and deliver any
further deeds, assignments, conveyances, and other assurances, documents, and
instruments of transfer, reasonably requested by 3DO, and will take any other
action consistent with the terms of this Agreement that may reasonably be
requested by 3DO for the purpose of assigning, transferring, granting,
conveying, and confirming to 3DO, or reducing to possession, any or all property
to be conveyed and transferred under this Agreement. If requested by 3DO, NWC
further agrees to prosecute or otherwise enforce in its own name for the benefit
of 3DO any claims, rights, or benefits that are transferred to 3DO under this
Agreement and that require prosecution or enforcement in NWC's name. Any
prosecution or enforcement of claims, rights, or benefits under this Section
shall be solely at 3DO's expense, unless the prosecution or enforcement is made
necessary by a breach of this Agreement by any of the Selling Parties.
8.3 3DO's Obligations. 3DO shall deliver to NWC the following
instruments and documents against delivery of the items specified in Section
8.2, above:
(a) Shares. Certificate(s) representing the total number of shares
of 3DO's common stock to be issued to NWC and delivered to NWC pursuant to
Section 1.1, subject to any adjustments as provided for under Section 1.3.
Within five (5) business days from the Closing Date, 3DO shall deliver to NWC a
certificate representing one hundred and thirty five thousand (135,000) of the
Shares (the "First Certificate") and shall retain an additional certificate for
one million sixty-five thousand shares, which shall be canceled and reissued for
an appropriate number of shares in the event of any adjustment pursuant to
Section 1.3 (the "Second Certificate"). The Second Certificate shall be
delivered to NWC within five (5) business days of the Settlement Date;
(b) Opinion of Counsel. An opinion of 3DO's counsel, dated the
Closing Date, as provided for in Section 7.3;
(c) Officers' Certificate. The officers' certificate, dated the
Closing Date, as provided for in Section 7.4;
(d) Certified Resolutions. Certified resolutions of 3DO's board of
directors, in form satisfactory to counsel for Selling Parties, authorizing the
execution and performance of this Agreement and all actions to be taken by 3DO
under this Agreement; and
(e) Agreement of Assumption. Instruments of assumption of the
liabilities of NWC listed on Exhibit B, executed by 3DO.
8.4 Bulk Sales Compliance. 3DO hereby waives Selling Parties'
compliance with the provisions of the California Commercial Code relating to
bulk transfers in connection with the sale of the Assets hereunder. Nothing in
this Section 8.4 shall, however, estop or preclude 3DO or Selling Parties from
asserting as a bar or defense of any action or proceeding brought under that law
that it does not apply to the sale contemplated under this Agreement.
ARTICLE NINE
SELLING PARTIES' OBLIGATIONS AFTER CLOSING
9.1. Selling Parties' Indemnity. Subject to Section 12.16, NWC and NTN
shall, jointly and severally, indemnify, defend, and hold harmless 3DO against,
and in respect of, any and all claims, demands, losses, costs, expenses,
obligations, liabilities,
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damages, recoveries, and deficiencies, including interest, penalties, and
reasonable attorneys' fees, that 3DO shall incur or suffer, that arise, result
from, or relate to any breach of, or failure by Selling Parties to perform, any
of their representations, warranties, covenants, or agreements in this Agreement
or in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by Selling Parties under this Agreement. Notwithstanding any other
provision of this Agreement, NWC and NTN shall not be liable to 3DO on any
warranty, representation, or covenant made by Selling Parties in this Agreement,
or under any of their indemnities in this Agreement, regarding any claims,
losses, expenses, obligations, or other liabilities that do not exceed fifty
thousand dollars ($50,000) until the aggregate of all such claim exceed fifty
thousand dollars ($50,000); provided, however, that when the aggregate amount of
all such claims, losses, expenses, obligations, and liabilities reaches fifty
thousand dollars ($50,000), NWC and NTN jointly and severally shall thereafter
be liable in full for all those breaches and indemnities and regarding all those
claims, losses, expenses, obligations, and liabilities.
9.2 Selling Parties' Noncompetition Agreement. In connection with the
sale of the business of NWC as contemplated herein, the Selling Parties agree
that for a period of three (3) years immediately following the Closing Date,
they shall not either directly or indirectly, engage in any activity which is
the same as, similar to, or competitive with any activity now engaged in by NWC
or have any interest in any person, firm, corporation, or business (whether as
an employee, officer, director, agent, security holder, creditor, consultant, or
otherwise) that engages in any such activity and the Selling Parties agree to
enter into the Noncompetition Agreement in the form attached hereto as Exhibit
E. The Selling Parties further agree not to divulge, communicate, use to the
detriment of 3DO or for the benefit of any other person or persons, or misuse in
any way, any confidential information or trade secrets of NWC, including
personnel information, know-how, customer lists, or any other technical or
proprietary data.
9.3 Change of NWC's Name. NWC agrees that after the Closing Date it
shall not use or employ in any manner directly or indirectly the name or the
words comprising "New World Computing", and that it will take and cause to be
taken all necessary action by its board of directors, stockholders, and any
other persons in order to make this change in NWC's name on or before the
Settlement Date.
9.4 NWC Financial Statements. The Selling Parties shall use their best
efforts to deliver to 3DO within fifteen (15) business days from the Closing
Date, but in no event later than July 31, 1996: (i) audited financial statements
of NWC for the year ended December 31, 1995; and (ii) an unaudited income
statement and balance sheet for the six month period ended June 30, 1996, which
shall meet the requirements of Regulation S-X under the Securities Act and of
Form 8-K under the Exchange Act (the "NWC Financial Statements").
ARTICLE TEN
3DO'S OBLIGATIONS AFTER CLOSING
10.1 3DO's Indemnity. Subject to Section 12.16, 3DO agrees to indemnify
and hold harmless NTN against, and in respect of, any and all claims, demands,
losses, expenses, costs, obligations, liabilities, damages, and recoveries,
including interest, penalties, and reasonable attorneys' fees, that NTN may
incur by reason of 3DO's breach of or failure to perform any of its warranties,
guaranties, commitments, or covenants in this Agreement, or by reason of any act
or omission of 3DO, or any of its successors or assigns, after the Closing Date,
that constitutes a breach or default under, or a failure to perform, any
obligation, duty, or liability of any of the Selling Parties under any loan
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agreement, lease, contract, order, or other agreement to which it is a party or
by which it is bound at the Closing Date, but only to the extent to which 3DO
expressly assumes these obligations, duties, and liabilities under this
Agreement. Notwithstanding any other provision of this Agreement, 3DO shall not
be liable to the Selling Parties on any warranty, representation, or covenant
made by 3DO in this Agreement, or under any of their indemnities in this
Agreement, regarding any claims, losses, expenses, obligations, or other
liabilities that does not exceed fifty thousand dollars ($50,000) until the
aggregate of all such claims exceed fifty thousand dollars ($50,000); provided,
however, that when the aggregate amount of all such claims, losses, expenses,
obligations, and liabilities reaches fifty thousand dollars ($50,000), 3DO shall
thereafter be liable in full for all those breaches and indemnities and
regarding all those claims, losses, expenses, obligations, and liabilities.
10.2 Registration Statement. 3DO agrees to file a registration
statement, which includes the Shares, with the Securities and Exchange
Commission, subject to the terms and conditions contained in Article Eleven,
below.
10.3 Purchase Price Guarantee. 3DO shall guarantee that the total value
to NWC of the Shares shall be not less than twelve million dollars
($12,000,000), plus the actual amount of any commissions and/or sales charges
actually incurred by the Selling Parties in connection with its sale of the
Shares, not to exceed three percent (3%) of the sales price of the Shares sold
(the "Sales Fees"), minus the dollar amount of any adjustment in the number of
Shares made pursuant to Section 1.3, above (the "Guaranteed Value"), ninety (90)
days following the effective date of the registration statement with respect to
such Shares (the "90th Day" and the "Selling Period", respectively). In the
event that the Selling Parties elect to dispose of all of the Shares during the
Selling Period and receive less than the Guaranteed Value in gross sales
proceeds from their bona fide stock sale transactions with third parties, 3DO
will provide the Selling Parties with a cash sum equal to the difference between
the Guaranteed Value and the gross sales proceeds actually received by the
Selling Parties as a result of the sale of the Shares (the "Actual Value")
within ten (10) business days after 3DO's confirmation of the Actual Value and
the Sales Fees. In the event the Selling Parties elect to sell less than all of
the Shares during the Selling Period, 3DO guarantees that the calculated value
(the "Calculated Value") of the Shares at the end of the Selling Period will be
no less than the Guaranteed Value, where the Calculated Value equals (a) the
gross sales proceeds obtained by the Selling Parties from such bona fide stock
sale transactions with third parties, and (b) the aggregate number of Shares
held by the Selling Parties at the end of the Selling Period multiplied by the
average closing price for 3DO common shares reported on NASDAQ for the ten (10)
trading days prior to the final 90th Day of the Selling Period (the "Final
Day"). Following the Final Day, if the Calculated Value is less than the
Guaranteed Value, then 3DO will pay the Selling Parties the difference between
the Calculated Value and the Guaranteed Value, in cash, within ten (10) business
days after 3DO's confirmation of the aggregate amount of gross sales proceeds to
the Selling Parties from their sales of the Shares and the Sales Fees, and, the
aggregate number of Shares held by the Selling Parties at the expiration of the
Final Day. If the Actual Value or the Calculated Value is greater than the
Guaranteed Value, then the Selling Parties shall retain any difference. In the
event that the Shares have not been registered by December 31, 1996, then, at
the option of NWC, the calculation pursuant to this section will be made as
though December 31, 1996 was the Final Day and payment of the difference between
the Guaranteed Value and the Calculated Value will be made as provided herein.
However, in the event that NWC does not elect to have the guarantee calculated
based on December 31, 1996 as the Final Day, then subject to Section 11.1, NWC
may sell the shares in a private transaction with a bona fide third party or
parties, provided that NWC provides 3DO with an assignable right of first
refusal to acquire the Shares at the same price, which shall remain open for a
period of five (5) business days
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following written notice to 3DO of the intended transaction(s). In the event
that all of the Shares are sold in such private transactions, 3DO shall pay to
the Selling Parties the difference between the Guaranteed Value and the Actual
Value, and if less than all of the Shares are sold and if the Calculated Value
is less than the Guaranteed Value, then 3DO will pay the Selling Parties the
difference between the Guaranteed Value and the Calculated Value, in cash,
within ten (10) business days after 3DO's confirmation of the aggregate amount
of gross sales proceeds to the Selling Parties from their sales of the Shares
and the Sales Fees, and, the aggregate number of Shares held by the Selling
Parties at the expiration of the guarantee period, if applicable, which shall
end on the earlier of (i) the date that the Selling Parties have sold all of
their Shares or (ii) June 30, 1997. In the event that there are any extensions
in the effective period of the registration statement pursuant to Section
11.4(c), then the "Final Day" shall mean the final date of the extended Selling
Period, as extended pursuant to Section 11.4.
10.4 Release of Selling Parties' Guarantees. 3DO shall use its
commercially reasonable efforts following the Closing to cause Selling Parties
to be released as an obligor or guarantor on the obligations and indebtedness of
NWC set forth in Exhibit F.
ARTICLE ELEVEN
RESTRICTIONS ON TRANSFER; LEGENDS AND REGISTRATION OF STOCK
11.1 Restrictions on Transferability. The Shares issued to the Selling
Parties in the Transaction shall not be transferable in the absence of (i)
registration under the Securities Act or an exemption therefrom, (ii)
registration or qualification under the provisions of any applicable blue sky
laws or an exemption therefrom, and (iii) compliance with any term of this
Agreement. 3DO shall be entitled to give stop transfer instructions to its
transfer agent with respect to the Registrable Securities (as defined in Section
11.3, below) in order to enforce the foregoing restrictions.
11.2 Restrictive Legend. Each certificate representing the Shares
acquired in the Transaction shall bear the following legends (in addition to any
legends required under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, AND COMPLIANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS
NOT REQUIRED.
The legends contained in this Section 11.2 shall be removed from a certificate
in connection with any sale in compliance with the terms of this Agreement or
following the expiration of the applicable restrictions, but shall not be
removed in any other circumstance without 3DO's prior written consent and in
3DO's sole discretion.
25
<PAGE>
11.3 Registration of the Shares.
(a) Undertaking. 3DO shall use its best efforts to file a
registration statement on Form S-3, which includes the Shares issued to the
Selling Parties in the Transaction (the "Registrable Securities"), with the
Securities and Exchange Commission by the later of (i) ten (10) business days
after the Selling Parties deliver to 3DO the NWC Financial Statements as
provided for in Section 9.4, above, or (ii) July 31, 1996; and 3DO shall use its
best efforts to cause such registration statement to become effective as soon as
reasonably possible thereafter; and shall use its best efforts to keep such
registration statement in effect for a period of at least ninety (90) days. Such
registration statement may also include shares of 3DO's Common Stock to be sold
by 3DO and/or other stockholders of 3DO. Notwithstanding the foregoing, 3DO
shall not be obligated to effect any registration pursuant to this Section 11.3
if 3DO shall furnish to the Selling Parties a certificate signed by the
President or Chief Executive Officer of 3DO stating that, in the good faith
judgment of the Board of Directors of 3DO, it would be seriously detrimental to
3DO and its stockholders for such Form S-3 Registration to be effected at such
time, in which event 3DO shall have the right to defer the filing of the Form S-
3 registration statement for a period of time which is no longer than is
necessary to avoid such detriment and in no event shall that period of time
exceed ninety (90) days.
(b) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 11.3 (excluding underwriters' and brokers'
discounts and commissions, if any), including, without limitation, all federal
and "blue sky" registration and qualification fees, printers' and accounting
fees, fees and disbursements of counsel for 3DO shall be borne by 3DO.
(c) Shareholder Information. It shall be a condition precedent to
the obligations of 3DO to include any Registrable Securities in any registration
statement, that the Selling Parties shall furnish to 3DO such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
(d) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 11.3:
(i) By 3DO. To the extent permitted by law, 3DO shall indemnify
and hold harmless each Selling Party against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations: any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto;
the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
any violation or alleged violation by 3DO of the Securities Act, the Exchange
Act, any federal or state securities law, or any rule or regulation promulgated
under the Securities Act, the Exchange Act, or any federal or state securities
law, in connection with the offering covered by such registration statement
(collectively, a "Violation"). The indemnity agreement contained in this Section
11.3(d) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of 3DO (which consent shall not be unreasonably withheld), nor shall 3DO be
liable in any such case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information
26
<PAGE>
furnished expressly for use in connection with such registration by such Selling
Party, or any person acting on behalf of such Selling Party.
(ii) By Selling Parties. To the extent permitted by law, each
Selling Party will indemnify and hold harmless 3DO, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls 3DO within the meaning of the Securities Act, any underwriter and
any other stockholders selling securities under such registration statement or
any of such other stockholder's partners, directors or officers or any person
who controls such stockholder within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which 3DO or any such director, officer, controlling person,
underwriter or other such stockholder, partner, director, officer, or
controlling person of such other stockholder, may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Selling Party expressly for use in
connection with such registration; and each such Selling Party will reimburse
any legal or other expenses reasonably incurred by 3DO or any such director,
officer, controlling person, underwriter or other stockholder, partner, officer,
director or controlling person of such other stockholder in connection with
investigating or defending any such loss, claim, damage liability or action;
provided, however, that the indemnity agreement contained in this Section
11.3(d) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Selling Party, which consent shall not be unreasonably withheld; and
provided further, that the total amounts payable in indemnity by a Shareholder
under this Section 11.3(d) in respect of any Violation shall not exceed the net
proceeds received by such Selling Party in the registered offering out of which
such Violation arises.
(iii) Notice. Promptly after receipt by an indemnified party
under this Section 11.3(d) of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
11.3(d), deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party or parties shall have the right to retain one separate counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party or parties by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential conflict of interests
between such indemnified party or parties and any indemnifying party represented
by such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
11.3(d), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 11.3(d).
(iv) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of 3DO and the Selling Parties are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC
27
<PAGE>
pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity agreement
shall not inure to the benefit of any person if a copy of the Final Prospectus
was furnished to the indemnified party and was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act.
(v) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) any Selling Party exercising rights under this Agreement, or
any controlling person of any such Selling Party, makes a claim for
indemnification pursuant to this Section 11.3(d) but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 11.3(d) provided for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of any
such selling Shareholder or any such controlling person in circumstances for
which indemnification is provided under this Section 11.3(d); then, and in each
such case, 3DO and such Selling Party will contribute to the aggregate losses,
claims, damages, or liabilities to which they may be subject (after contribution
from others) in such proportion so that such Selling Party is responsible for
the portion represented by the percentage that the public offering price of its
Registrable Securities offered by and sold under the registration statement
bears to the public offering price of all securities offered by and sold under
such registration statement, and 3DO and other selling stockholders are
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such Selling Party will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered
and sold by such Selling Party pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(vi) Survival. The obligations of 3DO and Selling
Parties under this Section 11.3(d) shall survive the completion of any offering
of Registrable Securities in a registration statement, and otherwise.
11.4 Transfer of Shares After Registration.
(a) No Selling Party may make any transfer of any Registrable
Securities which are registered pursuant to an effective registration statement
(the "Registered Securities") except either (i) in accordance with the
Registration Statement, in which case Holder must comply with the requirement of
delivering a current prospectus, or (ii) in accordance with an applicable
exemption from the registration requirements under the Securities Act. Such
Registered Securities shall not be transferable on the books of 3DO unless the
certificate submitted to 3DO's transfer agent evidencing such Registered
Securities is accompanied by a separate certificate executed by the Holder for
purposes of establishing compliance with this Agreement.
(b) If any Selling Party shall propose to sell any Registered
Securities pursuant to the Registration Statement, it shall notify 3DO in
writing of its intent to do so at least three (3) full business days prior to
such sale. For purposes of this Agreement, "business day" shall be any day of
the year, other than a Saturday or Sunday, on which banks in San Francisco,
California, generally are open. Such notice shall be deemed to constitute a
representation that any information previously supplied by such Selling Party
(including, without limitation, the information referred to in Section 11.4
hereof) is accurate as of the date of such notice. At any time within such three
(3) business-day period, 3DO may refuse to permit the Selling Party to resell
any Registered Securities
28
<PAGE>
pursuant to the Registration Statement; provided, however, that in order to
exercise this right, 3DO must deliver a certificate in writing to the Selling
Party to the effect that a delay in such sale is necessary because a sale
pursuant to such Registration Statement in its then-current form would not be in
the best interests of 3DO and its stockholders. In no event shall such delay
exceed twenty (20) trading days; provided, however, that if, prior to the
expiration of such twenty (20) trading day period, 3DO delivers a certificate in
writing to the Selling Party to the effect that a further delay in such sale
beyond such twenty (20) trading day period is necessary because a sale pursuant
to such Registration Statement in its then-current form would not be in the best
interests of 3DO and its stockholders, 3DO may refuse to permit such Selling
Party to resell any Registered Securities pursuant to the Registration Statement
for an additional period not to exceed twenty (20) trading days.
(c) In the event that 3DO exercises its rights pursuant to
Section 11.4(b) with respect to NWC or NTN, then 3DO shall use its best efforts
to keep the registration statement effective for an additional period of time
equal to the aggregate number of days that NWC has been unable to sell its
Registered Securities.
11.5 Limitations. The Selling Parties agree that they shall not,
without the prior written consent of 3DO, sell more than an aggregate of fifty
thousand (50,000) shares during any single trading day during the first ninety
(90) days following the effective date of the registration statement.
11.6 Assignment of Registration Rights. The rights of any Selling Party
under Section 11.3 may be assigned in connection with an assignment or transfer
of the shares to a permitted assignee provided that any such assignee agrees in
writing with the Company to be bound by all of the provisions of Article 11
herein. 3DO shall have no obligation pursuant to Section 11.4(c) to extend the
effective period of the registration statement in the event that a permitted
assignee is unable to sell the assigned Shares because of the limitations
provided for in Section 11.4(b). Notwithstanding the foregoing, in the event
that the period of effectiveness has been extended pursuant to Section 11.4(c)
with respect to the Selling Parties, a permitted assignee may continue to sell
the assigned Shares, subject to the limitations contained in this Article 11,
during the period for which the effectiveness of the registration statement has
been extended.
11.7 Share Assignment. 3DO acknowledges that it may be necessary or
desirable for Selling Parties to assign to Jon Van Caneghem, as part of NTN's
settlement agreement with Mr. Van Caneghem , certain of the Shares to be issued
to the Selling Parties hereunder. 3DO hereby consents to such assignment
provided that the Selling Party's can demonstrate compliance with all applicable
securities laws and agrees to indemnify 3DO for any loss, damage, fee or expense
which 3DO may incur as a result of any such assignment.
ARTICLE TWELVE
MISCELLANEOUS
12.1 Publicity. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between 3DO and NTN. Neither 3DO nor NTN shall
act unilaterally in this regard without the prior written approval of the other
party; however, this approval shall not be unreasonably withheld.
12.2 Finder's or Broker's Fees. Each party represents that it has dealt
with no broker or finder in connection with any transaction contemplated by this
Agreement, except
29
<PAGE>
for the Selling Parties' dealings with Frost Capital Partners; and, as far as it
knows, no broker or other person is entitled to any commission or finder's fee
in connection with any of these transactions, except the fee to be paid to Frost
Capital Partners by NTN. Selling Parties and 3DO each agree to indemnify and
hold harmless one another against any loss, liability, damage, cost, claim, or
expense incurred by reason of any brokerage, commission, or finder's fee alleged
to be payable because of any act, omission, or statement of the indemnifying
party; provided, further that NTN agrees to indemnify 3DO against any loss,
liability, damage, cost, claim, or expense arising out of any claim by Frost
Capital Partners.
12.3 Expenses. Each party shall pay all costs and expenses incurred or
to be incurred by it in negotiating and preparing this Agreement and in closing
and carrying out the transactions contemplated by this Agreement.
12.4 Effects of Headings. The subject headings of the sections and
subsections of this Agreement are included for convenience only and shall not
affect the construction or interpretation of any of its provisions.
12.5 Entire Agreement; Modification; Waiver. Except for the
Confidentiality Agreements dated May 9, 1996 and May 23, 1996 between the
parties, this Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties,
including, but not limited to, the prior Letter Agreement between the parties.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by all the parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
12.6 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.7 Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons or entities other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third parties to any
party to this Agreement, nor shall any provision give any third parties any
right of subrogation or action over against any party to this Agreement.
12.8 Assignment. This Agreement shall be binding on, and shall inure to
the benefit of, the parties to it and their respective heirs, legal
representatives, successors, and assigns.
12.9 Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement, or the making, performance, or interpretation of it, shall
be settled by arbitration in San Mateo, California, under the commercial
arbitration rules of the American Arbitration Association then existing, and
judgment on the arbitration award may be entered in any court having
jurisdiction over the subject matter of the controversy. Arbitrators shall be
persons experienced in negotiating, making, and consummating acquisition
agreements pertaining to intellectual property assets in the software industry.
12.10 Specific Performance and Waiver of Rescission Rights. Each
party's obligations under this Agreement are unique. If any party should default
in any of its
30
<PAGE>
obligations under this Agreement, the parties each acknowledge that it would be
extremely impracticable to measure the resulting damages; accordingly, the
nondefaulting party or parties, in addition to any other available rights or
remedies, may sue in equity for specific performance, and the parties each
expressly waive the defense that a remedy in damages will be adequate.
Notwithstanding any breach or default by any of the parties of any of their
respective representations, warranties, covenants, or agreements under this
Agreement, if the purchase and sale contemplated by it shall be consummated at
the Closing, each of the parties waives any rights that it or they may have to
rescind this Agreement or the transaction consummated by it; provided, however,
that this waiver shall not affect any other rights or remedies available to the
parties under this Agreement or under the law.
12.11 Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
12.12 Termination.
(a) Conditions Permitting Termination. NTN and 3DO may, on the
Closing Date, terminate this Agreement, without liability to the other if any
bona fide action or proceeding shall be pending against such party on the
Closing Date that could result in an unfavorable judgment, decree, or order that
would prevent or make unlawful the performance of this Agreement.
(b) Defaults Permitting Termination. If either Buyer or
Selling Parties materially defaults in the due and timely performance of any of
its or their warranties, covenants, or agreements under this Agreement, the
nondefaulting party or parties may on the Closing Date give notice of
termination of this Agreement. The notice shall specify with particularity the
default or defaults on which the notice is based. The termination shall be
effective on the Closing Date, unless the specified default or defaults have
been cured on or before such effective date for termination.
12.13 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
To NTN at: NTN Communications, Inc.
5966 La Place Court
Carlsbad, California 92008
Attn.: Laura Kass, Esq.
with a copy to: Troy & Gould
1801 Century Park East, 16th Floor
Los Angeles, CA 90067
Attn.: Bill Gould, Esq.
31
<PAGE>
To 3DO at: The 3DO Company
600 Galveston Drive
Redwood City, California 94063
Attn.: President
with a copy to: The 3DO Company
600 Galveston Drive
Redwood City, California 94063
Attn.: General Counsel
Any party may change its address for purposes of this Section by giving the
other parties written notice of the new address in the manner set forth above.
12.14 Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California as applied to
contracts that are executed and performed entirely in California.
12.15 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of final jurisdiction, it is the intent of the
parties that all other provisions of this Agreement be construed to remain fully
valid, enforceable, and binding on the parties.
12.16 Nature and Survival of Representations and Obligations. All
representations, warranties, covenants, and agreements of the parties contained
in this Agreement, or in any instrument, certificate, opinion, or other writing
provided for in it, shall survive until January 1, 1998.
32
<PAGE>
12.17 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. As used in this Agreement, the
phrase "to the best of [one or more party's(ies')] knowledge and belief," "to
[one or more party's(ies')] knowledge and belief," "[one or more party(ies)] is
not aware," and similar phrases shall mean the knowledge and belief of such
party(ies) and of the officers and directors of such party(ies) after careful
consideration of the matters set forth in the representation that is so
qualified and a diligent review of all files, documents, agreements and other
materials in such person's possession or subject to his or her control and after
such consultation with its financial or legal advisors or any other advisor, as
appropriate. Any such statement shall be deemed to be a representation that each
party making such statement has made all due and careful inquiries to ascertain
if the relevant information is true, accurate, correct and not misleading. The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the day and year first above written.
THE 3DO COMPANY
By: /s/ HUGH C. MARTIN, JR.
------------------------------
Hugh Martin, Jr.
President
NTN COMMUNICATIONS, INC.
By: /s/ PATRICK J. DOWNS
------------------------------
Patrick J. Downs
Chief Executive Officer and
Chairman of the Board
NEW WORLD COMPUTING, INC.
By: /s/ JON VAN CANEGHEM
------------------------------
Jon Van Caneghem
President
33
<PAGE>
EXHIBIT A
Specified Current Assets
THE FOLLOWING INFORMATION IS BASED ON PROJECTIONS AND ESTIMATES THROUGH JUNE 30,
1996 AND IS SUBJECT TO REVISION FOLLOWING COMPLETION OF USUAL AND CUSTOMARY
CLOSING PROCEDURES SUBSEQUENT TO JUNE 30, 1996.
<TABLE>
<CAPTION>
Category Approximate Amount Detail Reference
------------------ ---------------------------
<S> <C> <C>
Cash $ 6,000 See Supporting Schedule A-1
Accounts Receivable 1,208,000 See Supporting Schedule A-1
Royalties Receivable 287,000 See Supporting Schedule A-1
Inventory 543,000 See Supporting Schedule A-1
Prepaid Expenses 198,000 See Supporting Schedule A-1
----------
Total $2,242,000
==========
</TABLE>
34
<PAGE>
EXHIBIT A
Supporting Schedule A-1
<TABLE>
<CAPTION>
Projected
Balance
------------------
<S> <C> <C>
Cash NOTE: THE INFORMATION HEREON IS
BASED ON PROJECTIONS AND ESTIMATES
THROUGH JUNE 30, 1996 AND IS SUBJECT
First Citizens Bank 6,028 TO REVISION FOLLOWING COMPLETION
First Interstate - General 0 OF USUAL AND CUSTOMARY CLOSING
First Interstate - Money Market 0 PROCEDURES SUBSEQUENT TO JUNE 30,
Petty Cash 304 1996.
-----------------
6,332
-----------------
Accounts Receivable
- ------------------------------
A/R, Trade 1,647,919
Allowance for Doubtful Accounts (225,664)
A/R Returned Items 200
Reserve for Stock Returns (484,273)
Reserve for Defective Returns 269,513
------------------
1,207,695
------------------
Royalties Receivable
- ------------------------------
License Fee (Royalty) Rec'd 622,467
Allowance for Doubtful Accounts (335,683)
------------------
286,784
------------------
Inventory
- ------------------------------
Inventory - Finished Goods 169,889
Component Inventory 290,844
Reserve - Component Inventory (41,000)
Reserve for Pricing Adjustments 37,365
Deferred Costs - Returns 86,282
------------------
543,380
------------------
Prepaid Expenses
- ------------------------------
Prepaid Expenses 170,748
Prepaid Taxes 14,466
Prepaid Postage (UPS) 7,472
Prepaid Payroll Expense 0
Advances and Loans - employees 4,887
------------------
197,573
------------------
------------------
Grand Total 2,241,764
==================
</TABLE>
35
<PAGE>
EXHIBIT B
Assumption of Liabilities
THE FOLLOWING INFORMATION IS BASED ON PROJECTIONS AND ESTIMATES THROUGH JUNE 30,
1996 AND IS SUBJECT TO REVISION FOLLOWING COMPLETION OF USUAL AND CUSTOMARY
CLOSING PROCEDURES SUBSEQUENT TO JUNE 30, 1996.
<TABLE>
<CAPTION>
Category Approximate Amount Detail Reference
<S> <C> <C>
Accounts Payable $642,000 See Supporting Schedule B-1
Short Term Debt - Merrill Lynch 750,000 See Supporting Schedule B-1
----------
Total $1,392,000
==========
</TABLE>
Liabilities assumed includes all liabilities incurred in the ordinary course of
business since the date of the last balance sheet dated December 31, 1995.
Liabilities assumed also includes liabilities for goods and services rendered or
received prior to June 30, 1996 but for which an invoice has not been received.
Liabilities assumed also includes existing lease obligation as denominated on
the attached List of NWC Agreements, which include but are not limited to the
following:
- - Dana Commercial
- - Pitney Bowes Credit Corp
- - Select Leasing
- - AT & T Capital Leasing Services
- - Copelco Capital Inc.
- - Trammel Crow Company
Liabilities assumed also includes obligations under license agreement, developer
agreements, distributor agreements, customer agreement, trademark agreements,
and other contracts acquired by 3DO, as denominated on the attached List of NWC
Agreements.
Liabilities assumed include all liabilities arising on or after the close of
business on June 30, 1996 incurred in the normal course of business and those
related to lease obligations, license agreements, developer agreements,
distributor agreements, customer agreements, trademark agreements and other
contracts assumed by 3DO arising on or after the close of business on June 30,
1996.
36
<PAGE>
EXHIBIT B
Supporting Schedule B-1
<TABLE>
<CAPTION>
Projected Balance
-----------------
<S> <C> <C>
NOTE: THE INFORMATION HEREON
Accounts Payable IS BASED ON PROJECTIONS AND
ESTIMATES THROUGH JUNE 30, 1996
A/P, Trade 513,613 AND IS SUBJECT TO REVISION
Accrued Payables 50,000 FOLLOWING COMPLETION OF USUAL
Sales Tax Liability - California 349 AND CUSTOMARY CLOSING
Sales Tax Liability - Florida 82 PROCEDURES SUBSEQUENT TO
Commission Payable 78,279 JUNE 30, 1996
Garnishments (254)
Customer Refund Payable (50)
Accrued Vacation 0
Deferred Income (249)
---------
641,770
---------
LOC
- ---
---------
Line of Credit - Merrill Lynch 750,000
---------
---------
Total 1,391,770
=========
</TABLE>
37
<PAGE>
EXHIBIT C
Financial Statements
[To be added at a later date.]
38
<PAGE>
EXHIBIT D
Necessary Consents
<TABLE>
<CAPTION>
Type of Agreement Third Party Name of Property (if applicable)
- ----------------- ----------- --------------------------------
<S> <C> <C>
Developer/License Agreement Chip Johnson & Ray Tayek Vegas Ent. Pack
Developer/License Agreement Delta Tao Software Spaceward Ho! 4.x
Developer/License Agreement Dreamers Guild Empire Deluxe for Mac
Developer/License Agreement Dreamers Guild Vegas Games II
Developer/License Agreement Hypnotix Wetlands
Developer/License Agreement
(Amendment Letter for change
of royalties) Hypnotix Wetlands
Developer/License Agreement Magicode, Inc. Family Card Games
Developer/License Agreement Phil Steinmeyer Heroes of M&M for Win95
Developer/License Agreement Random Games Wages of War
Developer/License Agreement StickMan Games Chaos Overloads
Developer/License Agreement DreamForge D3
Developer/License Agreement Phil Steinmeyer Heroes of M&M II
Developer/License Agreement StickMan Games Tank Game
Developer/License Agreement Magicode, Inc. Steller Vanguard
Developer/License Agreement CATWare, Inc. Vegas Games Entertainment
Pack for Win95
Lease Agreement Dana Commercial Credit
Lease Agreement Copelco Capital Inc.
Lease Agreement for 29800
Agoura Road, Suite 200, Agoura
Hills, California 91301 Trammel Crow Company
Lease Agreement for expansion
into 29800 Agoura Road, Suite
220, Agoura Hills, California
91301 Trammel Crow Company
Lease Agreement for expansion
into 29800 Agoura Road, Suite
205, Agoura Hills, California
91301 Trammel Crow Company
Playstation License Agreement Sony
Tool Agreement Sony
Misc. Agreement Bill Fawcett & Assoc. Xeen Saga
Misc. Agreement Delta Tao Software Spaceward Ho!
Misc. Agreement Dreamers Guild Inherit the Earth
Misc. Agreement Holistic Design Hammer of the Gods
Misc. Agreement Hurricane Graphics, Inc. Subterrane
Misc. Agreement Phil Steinmeyer Blitzkreig
Misc. Agreement White Wolf Prod. Empire Deluxe
Misc. Agreement (Agreement on
foreign sublicense) White Wolf Prod. Empire Deluxe
Misc. Agreement (Agreement on
license of on-line version) White Wolf Prod. Empire Deluxe
Misc. Agreement (Amendment
Letter on Section VII) White Wolf Prod. Empire Deluxe
Empire Deluxe, the Scenario
Misc. Agreement White Wolf Disk
Misc. Agreement White Wolf War!
Misc. Agreement (Amendment
Letter) White Wolf War!
</TABLE>
39
<PAGE>
EXHIBIT E
Noncompetition Agreement
This Noncompetition Agreement (the "Noncompetition Agreement") is made
and rendered effective as of the 30th day of June 1996, by and among The 3DO
Company, a Delaware corporation ("3DO"), having its principal office at 600
Galveston Drive, Redwood City, California; and NTN Communications, Inc., a
Delaware corporation, having its principal office at 5966 La Place Court,
Carlsbad, California 92008 ("NTN"); and New World Computing, Inc., a California
corporation, having its principal office at 29800 Agoura Road, Suite 200, Agoura
Hills, California 91301 ("NWC"), a wholly-owned subsidiary of NTN. NTN and NWC
are collectively referred to in this Agreement as the "Selling Parties."
WITNESSETH:
WHEREAS, the Selling Parties have agreed to sell all of the assets and
the business of NWC to 3DO pursuant to the terms and conditions of the Agreement
of Purchase and Sale of Assets by and among 3DO and the Selling Parties dated
June 28th, 1996; and
WHEREAS, 3DO intends to continue the business of NWC in the form of a
division of 3DO (the "3DO-NWC Division");
NOW, THEREFORE, in conjunction with 3DO's purchase of the assets and
the business of NWC and for good and valuable consideration, the sufficiency of
which is hereby acknowledged, Selling Parties hereby agree as follows:
1. Each Selling Party shall refrain from carrying on, directly or
indirectly (either as a proprietor, partner, shareholder, agent, consultant,
trustee, affiliate, or otherwise), any business competitive in any material
respect with the business of the 3DO-NWC Division within the State of California
and each of the counties within California and the states and countries listed
on Exhibit A, attached hereto. It is hereby acknowledged and agreed that the
3DO-NWC Division will do substantial business in each of such territories. As
used herein, the phrase "the business of the 3DO-NWC Division within" includes
the carrying on of a business which may be located elsewhere but which involves
sales or other activity within such county, state or country. For the purposes
of this Agreement, the business of the 3DO-NWC Division shall include, the
business of designing, developing, marketing, publishing, distributing, and
otherwise exploiting interactive consumer entertainment software products which
are graphically based that are distributed through CDROM and/or electronic
networks and are hosted on personal computers and/or video game consoles.
2. This Agreement shall continue in full force and effect until June
30, 1999.
3. A business shall be deemed to be competitive with the 3DO-NWC
Division if such business designs, develops, markets, publishes, distributes, or
otherwise makes available consumer entertainment software products which are
graphically based and which are delivered through CDROM and which are hosted on
personal computers and/or video game consoles. Notwithstanding the above, a
CDROM product which is designed, developed, marketed, published, distributed or
otherwise made available by the Selling Parties shall not be deemed competitive
with the 3DO-NWC Division if such product is
40
<PAGE>
related to a product which is developed and/or distributed by Selling Parties on
a delivery platform other than CDROM which is also designed, developed,
marketed, published, distributed or otherwise made available by Selling Parties
(an "Affiliated Product"). It is hereby acknowledged and agreed that the 3DO-NWC
Division's business plans at the time of this Agreement shall be construed so as
to afford 3DO the widest possible protection permitted by applicable law,
however, this Agreement shall not be construed in such a manner so as to
preclude the Selling Parties from designing developing, marketing, publishing,
distributing or otherwise making products available to multiple delivery
platforms, which may include through CDROM, provided that such products are not
competitive with the types of products developed and published by New World
Computing, Inc. on CDROM prior to the Closing Date or that such products are
Affiliated Products.
4. Notwithstanding the foregoing, it shall not be a breach of the
provisions of this Agreement for any Selling Party to own, as a passive
investment, not more than five percent (5%) of the outstanding stock of a
publicly held company engaged in any of the above activities.
5. Each Selling Party understands and intends that the covenants and
agreements set forth in this Agreement shall be construed as a series of
separate covenants, one for each geographic area covered and, except for
geographical coverage, each separate covenant shall be deemed identical in terms
and conditions.
6. Each Selling Party acknowledges and agrees that the creative
concepts, methods, trade secrets, source code, user lists, marketing plans,
pricing and cost information, and technical information of or concerning NWC
(collectively, the "Confidential Information") are valuable and unique assets,
and each Selling Party agrees that it shall not, without the prior written
consent of 3DO, directly or indirectly, disclose to any third party or use for
any purpose whatsoever, any Confidential Information or any other matter so
designated as confidential.
7. Each Selling Party acknowledges and agrees that the trade secrets
and goodwill of NWC are NWC's most valuable assets established at substantial
cost and effort. The diversion of or harm to the goodwill of NWC by reason of
the breach of this Agreement would leave 3DO without an adequate remedy at law
and would cause 3DO to suffer irreparable damage. Each Selling Party hereby
covenants and agrees that, in addition to any other remedies available to 3DO at
law or in equity, 3DO shall be entitled to the issuance of equitable relief,
including, without limitation, temporary and permanent injunctive relief, to
prevent the occurrence of any such damage from the breach or threatened breach
of this Agreement, without the necessity of proving actual damages.
Notwithstanding the foregoing, nothing herein shall be construed as prohibiting
3DO from pursuing any other remedies available to it for any breach or
threatened breach, including recovery of damages from the Selling Parties.
8. Each Selling Party knowingly and expressly waives any rights it
might otherwise have to object to the enforcement of this Agreement under the
law or public policy of any state, and covenants and agrees that this Agreement
shall be governed by and construed under the laws of the State of California
(excluding that body of law related to choice of laws), the principal place of
business of both 3DO and NWC.
9. Each Selling Party acknowledges and agrees that the scope of this
Noncompetition Agreement, both as to duration and geography, is reasonable and
necessary to protect the legitimate interest of 3DO arising from the trust,
knowledge,
41
<PAGE>
relationships and Confidential Information developed by NWC which shall form the
3DO-NWC Division.
10. If any legal action or proceeding at law or in equity arises
between the parties regarding this Agreement, or regarding the rights and/or
obligations of any of the parties hereto, then the prevailing party in any such
action or proceeding shall be entitled to an award of its reasonable fees for
attorneys and otherwise professionals and related expenses, in addition to any
other remedy to which such party is otherwise entitled.
11. This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties
with respect thereto. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by all the parties. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver. This Agreement shall be
binding on and shall inure to the benefit of each of the parties hereto and
their respective successors and assigns.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the
day and year first above written.
THE 3DO COMPANY
By: ______________________________
Hugh Martin, Jr.
President
SELLING PARTIES:
NTN COMMUNICATIONS, INC.
By:_______________________________
Patrick J. Downs
Chief Executive Officer and
Chairman of the Board
NEW WORLD COMPUTING, INC.
By:_______________________________
Jon Van Caneghem
President
42
<PAGE>
EXHIBIT F
Requested Guarantor Releases
43
