<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE 3DO COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THE 3DO COMPANY
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
TO OUR STOCKHOLDERS:
I am pleased to invite you to attend the annual meeting of stockholders of The
3DO Company as detailed below:
<TABLE>
<S> <C>
TIME 3:00 p.m. on Wednesday, September 22, 1999
PLACE Summerfield Suites Hotel
400 Concourse Drive
Belmont, California
ITEMS OF BUSINESS 1. To re-elect one director.
2. To approve an amendment to 3DO's Restated Certificate of
Incorporation to increase the authorized number of shares of
Common Stock from 50,000,000 to 125,000,000 in order to
accommodate future general corporate purposes including
potential acquisitions and financings.
3. To approve an increase in the number of shares of Common
Stock reserved for issuance under the 1993 Incentive Stock
Plan by 7,900,000 shares in order to replenish shares
previously approved by stockholders for issuance under the
plan that were reallocated and issued in conjunction with
3DO's public stock offering in July 1999.
4. To confirm the appointment of independent auditors
5. To transact any other business that may properly come before
the meeting.
These items are more fully described in the accompanying Proxy
Statement.
RECORD DATE You are entitled to vote if you were a stockholder at the close
of business on July 22, 1999.
VOTING BY PROXY To assure your representation at the meeting, you are urged to
sign and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope that has been provided.
</TABLE>
Your vote is important. Whether or not you plan to attend the meeting, please
complete, sign, date and promptly return the enclosed proxy in the envelope
provided. You may revoke your proxy at any time prior to the annual meeting. If
you decide to attend the annual meeting and wish to change your proxy vote, you
may do so automatically by voting in person at the meeting.
By order of the Board of Directors
/s/ W. M. (TRIP) HAWKINS III
W. M. (Trip) Hawkins III
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Redwood City, California
August 17, 1999
<PAGE>
THE 3DO COMPANY
----------------
PROXY STATEMENT FOR 1999
ANNUAL MEETING OF STOCKHOLDERS
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of The
3DO Company, a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held Wednesday, September
22, 1999, at 3:00 p.m., local time, or at any adjournment thereof, for the
purposes set forth in this Proxy Statement and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Summerfield Suites Hotel, 400 Concourse Drive, Belmont, California 94002. 3DO's
principal executive offices are located at 600 Galveston Drive, Redwood City, CA
94063. 3DO's telephone number is (650) 261-3000.
These proxy solicitation materials were mailed on or about August 17, 1999,
to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on July 22, 1999, are
entitled to notice of the meeting and to vote at the meeting. At the record
date, 25,710,482 shares of 3DO's Common Stock were issued and outstanding and
held of record by approximately 765 stockholders.
SOLICITATION OF PROXIES
This solicitation of proxies is made by 3DO, and all related costs will be
borne by 3DO. In addition, 3DO may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegraph, or personal
solicitations by directors, officers, or employees of 3DO. No additional
compensation will be paid for any such services.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of 3DO a
written notice of revocation, or a duly executed proxy bearing a later date, or
by attending the meeting and voting in person.
VOTING PROCEDURE
Each stockholder is entitled to one vote for each share held by such
stockholder on July 22, 1999. Shares of Common Stock may not be voted
cumulatively. All votes will be tabulated by the inspector of election appointed
for the meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes.
The director will be elected by a plurality of the affirmative votes cast by
those shares present in person or represented by proxy and entitled to vote at
the Annual Meeting. Approval of an amendment to the Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock
requires the affirmative vote of a majority of the shares outstanding on the
Record Date. Approval of an increase in the number of shares reserved for
issuance under the 1993 Incentive Stock Plan and the ratification of the
appointment of KPMG LLP as 3DO's independent auditors for the fiscal year ending
<PAGE>
March 31, 2000, require the affirmative vote of a majority of those shares
present in person or represented by proxy.
3DO's bylaws provide that the holders of a majority of 3DO's Common Stock
issued and outstanding and entitled to vote at the Annual Meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business at the Annual Meeting. Abstentions and broker non-votes will be counted
as present for the purpose of determining the presence of a quorum.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of 3DO that are intended to be presented by such
stockholders at 3DO's 2000 Annual Meeting of Stockholders must be received by
3DO no later than April 15, 2000, in order that they may be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
CERTAIN KNOWN STOCKHOLDERS
The following table sets forth certain information known to 3DO with respect
to beneficial ownership of 3DO's Common Stock as of May 31, 1999, by
- each stockholder known by 3DO to be the beneficial owner of more than 5%
of 3DO's Common Stock,
- each director,
- 3DO's Chief Executive Officer and 3DO's four other most highly compensated
executive officers serving in that capacity as of March 31, 1999, and
- all executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
----------------------------------
FIVE PERCENT STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS NUMBER PERCENT
- ---------------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
W. M. (Trip) Hawkins III.............................................. 6,352,736(2) 24.9%
600 Galveston Drive
Redwood City, California 94063
J & W Seligman & Co., Incorporated.................................... 3,232,300 12.7%
New York, New York 10017
William A. Hall....................................................... 54,183(3) *
H. William Jesse, Jr.................................................. 44,333(4) *
Hugh C. Martin........................................................ 41,667(5) *
John Adams............................................................ 36,485(6) *
James Alan Cook....................................................... 501,085(7) 2.0%
Stephen E. Fowler..................................................... 176,617(8) *
Richard J. Hicks III.................................................. 75,717(9) *
All executive officers and directors as a group (9 persons)........... 7,347,950(10) 28.8%
</TABLE>
- ------------------------
*Less than 1%.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
of Common Stock beneficially owned. As of May 31, 1999, there were
25,540,242 shares of common stock outstanding. This number does not include
shares of treasury stock.
2
<PAGE>
(2) Includes 1,215,833 shares subject to an option exercisable within 60 days
of June 30, 1999. Does not include 1,400,000 shares of common stock that
Mr. Hawkins purchased in the July 1999 public offering.
(3) Includes 43,333 shares subject to an option exercisable within 60 days of
June 30, 1999.
(4) Includes 38,333 shares subject to an option exercisable within 60 days of
June 30, 1999.
(5) Includes 41,667 shares subject to an option exercisable within 60 days of
June 30, 1999.
(6) Includes 35,667 shares subject to an option exercisable within 60 days of
June 30, 1999.
(7) Includes 491,167 shares subject to an option exercisable within 60 days of
June 30, 1999.
(8) Includes 173,166 shares subject to an option exercisable within 60 days of
June 30, 1999.
(9) Includes 70,917 shares subject to an option exercisable within 60 days of
June 30, 1999.
(10) Includes shares held beneficially by executive officers and directors as
shown in the foregoing table.
PROPOSAL ONE
REELECTION OF DIRECTOR
One director is to be elected at the Annual Meeting. 3DO's Restated
Certificate of Incorporation provides for a classified Board of Directors so
that, as nearly as possible, one-third of 3DO's Board of Directors is elected
each year to serve a three-year term. Currently, the Board of Directors consists
of four directorships with staggered terms expiring at the forthcoming Annual
Meeting and at the Annual Meetings of Stockholders in 2000 and 2001. William A.
Hall is the only director whose term as a director expires at the forthcoming
Annual Meeting. Mr. Hall has been nominated by the Board of Directors for
reelection as a director at the forthcoming Annual Meeting for a term which will
expire at the 2002 Annual Meeting of Stockholders. Mr. Hall was previously
elected by the stockholders. If Mr. Hall is elected as a director at the 1999
Annual Meeting of Stockholders, he will serve until his successor has been duly
elected and qualified.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE COMPANY POSITION SINCE
- ------------------------ --- --------------------------------------------------------- ---------
<S> <C> <C> <C>
William A. Hall(1)(2) 67 Director 1997
</TABLE>
- ------------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
WILLIAM A. HALL has been a director since June 1997. He founded Sight &
Sound Distributing Company in December 1984 and has been its President and Chief
Executive Officer since that time. Since 1988 he has also been owner of W.A.H.
Management/Consulting, and since 1993 he has been Vice Chairman and majority
stockholder of U.S. Animation, Inc. He has been a partner in Lincolnshire
Management, Inc. since June 1994. Mr. Hall is also a director of Chromium
Graphics, Inc.; Credentials (TRW Credit); Northword Press; and Lincolnshire
Management, Inc. Mr. Hall's term as a director expires at the 1999 Annual
Meeting of Stockholders.
3
<PAGE>
REQUIRED VOTE
Those nominees receiving the greatest number of votes cast (although not
necessarily a majority of the votes cast) at the Annual Meeting will be elected
to the Board of Directors. Accordingly, directions to withhold authority and
broker non-votes will have no effect on the outcome of the vote. 3DO's Restated
Certificate of Incorporation does not allow for cumulative voting in the
election of directors. A stockholder executing the enclosed proxy may vote for
the nominee or may withhold such vote from the nominee. In each case where the
stockholder has appropriately specified how the proxy is to be voted, it will be
voted in accordance with such stockholder's specifications. Although it is not
contemplated that the nominee will become unable to serve prior to the Annual
Meeting, the person named on the enclosed proxy will have the authority to vote
for the election of any nominee designated by the Board to fill the vacancy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE NOMINEE.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The members of 3DO's Board of Directors and certain information about them
(including terms of service) are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE COMPANY POSITIONS SINCE
- ----------------------------- --- ---------------------------------------------------- ---------
<S> <C> <C> <C>
W. M. (Trip) Hawkins III 45 Chairman of the Board and Chief Executive Officer 1991
William A. Hall (1) (2) 67 Director 1997
H. William Jesse, Jr. (2) 47 Director 1997
Hugh C. Martin (1) 45 Director 1996
</TABLE>
- ------------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Information concerning Mr. Hall can be found under the caption "Proposal
One: Election of Director."
TRIP HAWKINS, the founder of 3DO, has been Chairman of the Board and Chief
Executive Officer since September 1991. He also served as President of 3DO from
September 1991 until October 1995, and he served as Secretary from September
1991 through February 1993. From August 1982 to December 1990, Mr. Hawkins
served as president of Electronic Arts. He served as the chief executive officer
of Electronic Arts from August 1982 until May 1991, and was chairman of its
board of directors from August 1982 until July 1994. Prior to founding
Electronic Arts, Mr. Hawkins was a director of marketing at Apple Computer, Inc.
Mr. Hawkins' term as a director expires at the 2001 Annual Meeting of
Stockholders.
H. WILLIAM JESSE, JR. has been a director of 3DO since September 1997. He is
Chairman of Jesse.Hansen&Co, strategic and financial advisors to high-growth
consumer companies. He founded the firm in 1986 and served as its President and
CEO through March of 1998. He also serves as Chairman and CEO of Vineyard
Properties Corporation (since 1988) and as Chairman of Online Partners, Inc.
(since 1999). Mr. Jesse has previously served as Chief Executive Officer of
American Hawaii Cruises; Vice President of The Getz Corporation; Chief Executive
Officer of the Delta Queen Steamboat Co. and Vice President of its parent, The
Coca Cola Bottling Company of New York; and Vice President of Prudential Lines,
Inc. and General Manager of its Mediterranean/Mideast Division. Mr. Jesse serves
on the board of directors of The Wine Group, Inc., Stanislaus Food Products
Company, Food.com; ExTerra Credit
4
<PAGE>
Recovery; and Peet's Coffee & Tea, Inc. Mr. Jesse's term as a director expires
at the 2000 Annual Meeting of Stockholders.
HUGH C. MARTIN was appointed a director of 3DO in April 1996. Since January
1998, he has been Chief Executive Officer of Optical Networks, Incorporated, a
telecommunications network equipment company. Until his resignation from 3DO in
June 1997, he served as our President from October 1995; Chief Operating Officer
from January 1993 until October 1995; and Senior Vice President, Engineering and
Operations from May 1992 until January 1993. From March 1988 to April 1992, he
served as a director and then a senior director of Apple Computer, Inc.
Previously, Mr. Martin co-founded and served as the Vice President and Chief
Development Officer of Ridge Computers, where he co-designed one of the
industry's first commercial RISC processors. Mr. Martin's term as a director
expires at the 2001 Annual Meeting of Stockholders.
BOARD MEETINGS AND COMMITTEES
Standing committees of the Board are the Audit Committee and the
Compensation Committee. The Board of Directors has no nominating committee or
any other committee performing a similar function. Directors Hall and Martin are
currently the members of the Compensation Committee, which makes recommendations
concerning salaries and incentive compensation for employees of 3DO. Directors
Hall and Jesse are currently the members of the Audit Committee, which reviews
the results and scope of the audit and other services provided by 3DO's
independent auditors.
During 3DO's 1999 fiscal year, the Board of Directors met four (4) times and
took action by written consent three (3) times; the Compensation Committee met
two (2) times and took action by written consent eight (8) times; and the Audit
Committee met once. In fiscal year 1999, no Director attended fewer than 75% of
the aggregate of the total number of meetings of the Board of Directors (held
during the period for which he has been a Director) and of the committees of the
Board on which he served (held during the period that he served).
COMPENSATION OF DIRECTORS
Directors receive no fees for services provided in that capacity but are
reimbursed for out-of-pocket expenses in connection with attendance at Board of
Directors' meetings.
Pursuant to the terms of the 1995 Director Option Plan, each non-employee
director is automatically granted an option to purchase 100,000 shares of 3DO
Common Stock upon his or her election as a director.
EXECUTIVE OFFICERS
The executive officers of 3DO and certain information about them as of June
30, 1999, are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ----------------------- --- ---------------------------------------------------------
<S> <C> <C>
Trip Hawkins 45 Chairman of the Board and Chief Executive Officer
James Alan Cook 50 Executive Vice President, General Counsel and Secretary
Stephen E. Fowler 40 Senior Vice President, Sales & Operations
Richard J. Hicks III 38 Senior Vice President, Product Development
John W. Adams 37 Chief Financial Officer
Carrie Holder 37 Vice President & General Manager, New Business
Robert Gayman 38 Vice President, Sales
</TABLE>
5
<PAGE>
TRIP HAWKINS' background is summarized in "Directors" above.
JAMES ALAN COOK became Executive Vice President, General Counsel and
Secretary of 3DO in April 1996. He had been Senior Vice President, General
Counsel and Secretary since July 1994, and from January 1993 until July 1994, he
served as Vice President, General Counsel and Secretary of 3DO. From January
1990 until January 1993, he was a partner in the law firm of Cook and Lefevre.
From June 1985 to December 1989, he was a sole practitioner operating as the Law
Offices of James Alan Cook.
STEPHEN E. FOWLER was appointed as 3DO's Senior Vice President, Sales &
Operations in April 1998. Previously, he served as Senior Vice President,
Operations from May 1997; Vice President, Operations from October 1995; Vice
President, Developer & Customer Services from June 1994; and Senior Director,
Developer Services from January 1993. From September 1990 to January 1993 he
served as Vice President, Technical Services at Gupta Corporation (now called
Centura Software Corporation), a software tools company. From April 1984 to
August 1990, he served in various senior management positions including
Director, Worldwide Services at Application Development Systems.
RICHARD J. HICKS III joined 3DO as Vice President, Product Development in
October 1997 and was promoted to Senior Vice President, Product Development in
November 1998. He was co-founder of New Wave Entertainment, Inc., an interactive
entertainment software company, and served as its Vice President, Software
Development from July 1995 to August 1997. He was Vice President, Software of
ShaBLAMM Computer, Inc., a computer hardware company, from February 1994 to July
1995. From May 1998 to January 1994, he held several software development
positions at Electronic Arts.
JOHN W. ADAMS became the 3DO's Chief Financial Officer in March 1998. He
served as Vice President, Planning & Analysis and Director of Operations at
International Thomson Publishing from April 1996 to March 1998. Mr. Adams served
as Senior Manager, Financial Planning from February 1993 to April 1996 at The
Walt Disney Company and was Manager, Business Planning at The Gap Incorporated
from March 1992 to February 1993. Mr. Adams also held various planning positions
at the Pepsi-Cola Company from February 1986 to March 1992.
CARRIE HOLDER became Vice President, New Business in March 1999. Previously,
she served as Vice President, Sales from April 1998; Director, OEM & Licensing
from February 1997; Manager, Software Business Development from December 1995;
Strategic Software Licensing Manager from January 1995; and Account Executive
from July 1993. Prior to joining 3DO, Ms. Holder was employed by Apple Computer,
Inc.
ROBERT GAYMAN joined 3DO as Vice President, Sales in March 1999. From
October 1996 to March 1999, he was Western Regional Sales Manager for Sony
Computer Entertainment America, and from January 1993 to October 1996, he was
National Sales Manager for Sun Gro Consumer Products. He has also held sales
positions at Mediagenic, Spalding Sports Worldwide, and RJR Nabisco, Brands.
CERTAIN TRANSACTIONS AND REPORTS
3DO's Restated Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
3DO's Bylaws provide that 3DO shall indemnify its directors and officers to
the fullest extent permitted by Delaware law, including in circumstances in
which indemnification is otherwise discretionary under Delaware law. 3DO has
also entered into indemnification agreements with its officers and directors
containing provisions that may require 3DO, among other things, to indemnify
such officers and directors against certain liabilities that may arise by reason
of their status or service as directors or officers (other than liabilities
arising from willful misconduct or a culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' insurance if available on
reasonable terms.
6
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of 3DO and
persons who hold more than ten percent (10%) of 3DO's outstanding Common Stock
are subject to the reporting requirements of Section 16(a) of the Securities and
Exchange Act of 1934, as amended, which require them to file reports with
respect to their ownership of 3DO's Common Stock and their transactions in such
Common Stock. Based upon (i) the copies of Section 16(a) reports that 3DO
received from such persons for their transactions in the Common Stock and their
Common Stock holdings for the fiscal year ending March 31, 1999, and (ii) the
written representations received from one or more of such persons that no annual
Form 5 reports were required to be filed by them for the 1998 fiscal year, 3DO
believes that all reporting requirements under Section 16(a) for such fiscal
year were met in a timely manner by its executive officers, Board members and
greater than ten percent (10%) stockholders.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE. The following table sets forth the compensation
paid by 3DO to the Chief Executive Officer and the four most highly compensated
executive officers of 3DO other than the Chief Executive Officer (collectively
the "Named Officers") during the last fiscal year.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
FISCAL ------------------ OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS # COMPENSATION (1)
- ------------------------------------------------------------ ------ -------- -------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Trip Hawkins................................................ 1999 $295,792 -0- 440,000 $ 840
Chairman and Chief 1998 $295,792 -0- 1,760,000(2) $ 660
Executive Officer 1997 $295,000 $ 35,128 2,620,000(3) $ 660
James Alan Cook............................................. 1999 $289,954 -0- 40,000 $ 840
Executive Vice President, 1998 $275,504 $100,000 704,000(4) $ 660
General Counsel, and Secretary 1997 $243,552 $ 20,408 738,000(5) $ 660
Stephen E. Fowler........................................... 1999 $212,023 -0- 60,000 $ 9,085(6)
Senior Vice President, 1998 $199,473 -0- 307,000(7) $ 3,265(8)
Sales & Operations 1997 $167,722 $ 9,974 234,000(9) $ 220
Richard J. Hicks III........................................ 1999 $180,262 -0- 120,000 $10,498(10)
Senior Vice President, 1998 $ 75,810 -0- 185,000 -0-
Product Development
John Adams.................................................. 1999 $154,929 -0- 30,000 $ 538
Chief Financial Officer 1998 $ 8,654 -0- 150,000 -0-
</TABLE>
- ------------------------
(1) The amounts include premiums paid by 3DO for group term life insurance.
(2) Includes 1,560,000 options granted in previous fiscal years that in fiscal
1998 were exchanged for new options at $3.25 per share after Mr. Hawkins
agreed to certain adjustments to the option vesting schedules.
(3) Includes 500,000 options that were originally granted in fiscal 1994,
10,000 options that were originally granted in fiscal 1995 at $11.00 per
share, and 50,000 options that were originally granted in fiscal 1996 at
$11.875 per share that in fiscal 1997 were twice exchanged for new options,
first at $8.25 per share and later at $5.50 per share, after Mr. Hawkins
agreed to certain adjustments to the option vesting schedules.
7
<PAGE>
(4) Includes 594,000 options granted in previous fiscal years that in fiscal
1998 were exchanged for new options at $3.25 per share after Mr. Cook
agreed to certain adjustments to the option vesting schedules.
(5) Includes 4,000 options granted in fiscal 1995 at $9.875 per share, 12,000
options granted in fiscal 1995 at $10.75 per share, 10,000 options granted
in fiscal 1995 at $11.00 per share, 28,000 options granted in fiscal 1996
at $11.875 per share, and 40,000 options granted in fiscal 1996 at $11.50
per share that in fiscal 1997 were twice exchanged for new options, first
at $8.25 per share and later at $5.50 per share, after Mr. Cook agreed to
certain adjustments to the option vesting schedules. Also includes 150,000
options granted in fiscal 1997 at $8.25 per share that were exchanged for
new options at $5.50 per share, after Mr. Cook agreed to certain
adjustments to the option vesting schedule.
(6) Includes a gain of $8,245 realized upon the sale of shares acquired through
the Employee Stock Purchase Plan.
(7) Includes 150,000 options granted in previous fiscal years that in fiscal
1998 were exchanged for new options at $3.25 per share after Mr. Fowler
agreed to certain adjustments to the option vesting schedules.
(8) Includes a gain of $2,739 realized upon the sale of shares acquired through
the Employee Stock Purchase Plan.
(9) Includes 194,000 options granted in previous fiscal years that in fiscal
1998 were exchanged for new options at $3.25 per share after Mr. Fowler
agreed to certain adjustments to the option vesting schedules.
(10) Includes a gain of $9,893 realized upon the sale of shares acquired
through the Employee Stock Purchase Plan.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth certain
information concerning grants of stock options to each of the Named Officers
during the fiscal year ended March 31, 1999. The table also sets forth
hypothetical gains or "opinion spreads" for the options at the end of their
respective ten-year terms. These gains are based on the assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted over the full option term. Actual gains, if any, on option exercises are
dependent on the future performance of 3DO's Common Stock and overall market
conditions.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATE OF
OPTIONS STOCK PRICE
GRANTED TO APPRECIATION
EMPLOYEES EXERCISE FOR OPTIONS TERM (2)
DATE OPTIONS IN FISCAL PRICE EXPIRATION ------------------------------
NAME GRANTED GRANTED (1) YEAR PER SHARE DATE 5% 10%
- -------------------------------- --------- ----------- ----------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John Adams...................... 7/28/98 10,000 0.2030 $ 3.3750 7/28/08 $ 21,225.19 $ 53,788.81
2/18/99 20,000 0.4060 $ 3.8437 2/18/09 $ 48,345.65 $ 122,517.36
----------- ----------- ------------- ---------------
Total......................... 30,000 0.6090 $ 69,570.84 $ 176,306.17
James Alan Cook................. 7/28/98 20,000 0.4060 $ 3.3750 7/28/08 $ 42,450.39 $ 107,577.62
2/18/99 20,000 0.4060 $ 3.8437 2/18/09 $ 48,345.65 $ 122,517.36
----------- ----------- ------------- ---------------
Total......................... 40,000 0.8120 $ 90,796.04 $ 230,094.98
Stephen E. Fowler............... 7/28/98 10,000 0.2030 $ 3.3750 7/28/08 $ 21,225.19 $ 53,788.81
2/18/99 50,000 1.0150 $ 3.8437 2/18/09 $ 120,864.11 $ 306,293.39
----------- ----------- ------------- ---------------
Total......................... 60,000 1.2180 $ 142,089.30 $ 360,082.20
Trip Hawkins.................... 7/28/98 240,000 4.8719 $ 3.3750 7/28/08 $ 509,404.65 $ 1,290,931.39
2/18/99 200,000 4.0599 $ 3.8437 2/18/09 $ 483,456.45 $ 1,225,173.58
----------- ----------- ------------- ---------------
Total......................... 440,000 8.9317 $ 992,861.10 $ 2,516,104.97
Richard J. Hicks III............ 7/28/98 20,000 0.4060 $ 3.3750 7/28/08 $ 42,450.39 $ 107,577.62
11/5/98 100,000 2.0299 $ 3.0312 11/05/08 $ 190,630.54 $ 483,095.21
----------- ----------- ------------- ---------------
Total......................... 120,000 2.4359 $ 233,080.93 $ 590,672.83
</TABLE>
- ------------------------
(1) The options referenced in the foregoing table are intended to be incentive
stock options to the extent permitted by applicable law. 3DO's 1993
Incentive Stock Plan (the "Incentive Plan") also provides for the grant of
non-qualified stock options. Incentive stock options may be granted under
the Incentive Plan at an exercise price no less than market value on the
date of grant. For so long as 3DO's Common Stock is listed on the Nasdaq
National Market, the fair market value is the closing sale price for the
Common Stock. Non-qualified options may be granted at an exercise price of
no less than 85% of market value on the date of grant. Options generally
become exercisable as to 20% of the shares subject to the option one year
after commencement of employment, and as to the remainder in equal monthly
installments (accrued on a monthly basis) over the succeeding 48 months. In
addition, options accelerate in full and become immediately exercisable upon
a merger, unless such options are assumed or replaced by equivalent options
by the successor corporation. Options generally terminate on the earlier of
three months after termination of the optionee's employment by or services
to 3DO, or ten years after grant.
(2) The 5% and 10% assumed annualized rates of compound stock price appreciation
are based on the exercise prices shown in the table, are mandated by the
rules of the Securities and Exchange Commission and do not represent 3DO's
estimate or a projection by 3DO of future Common Stock prices.
9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT MARCH 31, 1999 AT MARCH 31, 1999
ACQUIRED VALUE ------------------------- --------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------------- ----------- ---------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Adams, John................. 0 $ 0.00 30,000 150,000 $ 96,561.00 $ 435,931.00
Cook, James Alan............ 0 $ 0.00 426,835 417,165 $ 1,031,789.81 $ 902,168.97
Fowler, Stephen E........... 0 $ 0.00 145,166 236,834 $ 357,183.67 $ 499,424.71
Hawkins, Trip............... 0 $ 0.00 1,062,166 1,137,834 $ 2,276,356.19 $ 2,406,043.79
Richard J. Hicks, III....... 0 $ 0.00 51,167 253,833 $ 98,109.17 $ 532,982.32
Total................... 0 $ 0.00 2,603,137 4,867,963 $ 3,859,999.84 $ 4,776,550.79
</TABLE>
10
<PAGE>
COMPENSATION COMMITTEE REPORT
THE FOLLOWING REPORT IS PROVIDED TO STOCKHOLDERS BY THE MEMBERS OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.
GENERAL
Since 3DO's initial public offering in May 1993, the Compensation Committee
of the Board of Directors has administered 3DO's management compensation
policies and plans. We are a standing committee comprised of non-employee
Directors. We recommend to the full Board an annual base salary for each
officer, including the Chief Executive Officer ("CEO"), and the criteria under
which cash incentive bonuses, if any, may be paid. We also have the authority to
grant options under 3DO's 1993 Incentive Stock Plan, and make recommendations to
the full Board for administration of this and other equity incentive plans.
We believe that the compensation of 3DO's executive officers should be
significantly influenced by 3DO's performance and that a substantial portion of
executives' incentives should come from equity. We also understand the need for
changing compensation strategies in a rapidly evolving and highly competitive
industry. In addition, in the last fiscal year 3DO's stock price has varied
significantly despite what we believe to be a positive overall performance by
3DO's executive staff. 3DO achieved significant gains in the last fiscal year,
including increasing software publishing revenues 409% over fiscal 1998;
releasing 14 new products compared to three new releases in fiscal 1998; and
having three different titles in the top ten lists of games sold, one each on
the Sony PlayStation, Nintendo 64, and personal computer platforms. Thus, at a
time when executive performance has been excellent, and 3DO has accomplished key
milestones, the incentive value of the executives' equity compensation remained
flat.
COMPENSATION VEHICLES
In fiscal 1999, 3DO's cash- and equity-based compensation program focused on
attracting and retaining key employees to work in a rapidly developing public
company. Consistent with this long-term orientation and in an effort to align
compensation incentives with stockholder goals, 3DO's compensation packages have
included salaries competitive with comparable positions in the technology
industry and significant stock option grants.
CASH COMPENSATION. Before making compensation recommendations to the Board
with respect to new officers during the past fiscal year, we reviewed base
salaries proposed by the CEO, and evaluated each new officer's experience and
proposed responsibilities and the salaries of similarly situated executives,
including a comparison to base salaries for comparable positions at other
companies. In determining its recommendations for adjustments to officers' base
salaries for fiscal 2000, we focused primarily on each officer's contributions
towards 3DO's success in moving toward its long-term goals during fiscal 1999,
the accomplishment of goals set by the officer and approved by the Board for the
year, and our assessment of the quality of services rendered by the officer. We
recognized the achievement of a number of goals by 3DO in fiscal 1999, including
a four-fold increase in software publishing revenues; a significant increase in
the release of new products; the development of several popular game brands that
can be extended across multiple platforms; the creation of an extensive
portfolio of versatile technologies for quick and cost-effective software
development; and an award-winning advertising campaign. Our recommendation for
the CEO's salary in fiscal 1999 was based primarily on compensation for CEOs of
comparable companies. In recommending the CEO's fiscal 1999 base salary, we used
the same criteria applied to other officers. Either the Board or the
Compensation Committee may award cash bonuses for exceptional contributions to
3DO's success. No cash bonuses were awarded in fiscal 1999.
STOCK OPTION PROGRAM. 3DO grants options as an incentive to employees,
including all executive officers, who are expected to contribute materially to
3DO's future success. We believe stock options
11
<PAGE>
encourage the achievement of superior results over time and align employee and
stockholder interests. The option program incorporates five-year vesting periods
to encourage 3DO's executives to continue in 3DO's employ. In fiscal 1999, 3DO
continued its policy of granting stock options to most employees, and in certain
instances granted additional stock options to employees, including 3DO's
executive officers, who had made exceptional contributions to 3DO's development.
See "Option Grants in Last Fiscal Year," above.
We recommend initial stock option grants for all officers in connection with
commencement of each officer's employment. These stock option grants are based
primarily on the scope of the officer's responsibilities at 3DO, the cash
compensation which the officer had received in his/her prior employment and the
cash compensation proposed to be paid by 3DO. With our approval, additional
options are granted in some cases in light of the individual's achievement of
specific goals set jointly by the officer and the CEO, and the individual's
level of vested and unvested options.
IRS CODE SECTION 162(m). Section 162(m) of the Internal Revenue Code of
1986, as amended, limits the deductibility by public companies of certain
executive compensation in excess of $1 million per executive per year, but
excludes from the calculation of such $1 million limit certain elements of
compensation, including performance-based compensation, provided that certain
requirements are met. None of 3DO's executive officers' cash compensation
approached the $1 million limit in fiscal year 1999. The principal non-cash
compensation of 3DO's executives is through the grant of stock options. The
provisions of Section 162(m) merit consideration, however, because, under
certain circumstances, the difference between the fair market value and the
exercise price of options granted in the present time period, measured at the
time of exercise, could be included in the calculation under Section 162(m) of
the executive officers' compensation in the time period in which the exercise
occurs. This result can be avoided if the plans under which such options are
granted comply with certain requirements at the time of grant, including
administration by a committee consisting solely of two or more non-employee
directors, and stockholder approval of the terms of the plan, including approval
of an annual limit stated in the plan on the number of shares with respect to
which options may be granted to any employee. 3DO's 1993 Incentive Stock Plan is
designed and administered to meet such requirements.
SUMMARY
We believe that 3DO's compensation policy as practiced to date by the
Compensation Committee and the Board has been successful in attracting and
retaining qualified employees and in tying compensation directly to corporate
performance relative to corporate goals. 3DO's compensation policy will evolve
over time as 3DO attempts to achieve the many short-term goals it faces while
maintaining its focus on building long-term stockholder value through growth of
its software publishing business.
Respectfully submitted,
William A. Hall
Hugh C. Martin
12
<PAGE>
CORPORATE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return on 3DO's Common Stock from June 1994 through June 1999, for 3DO, the
Nasdaq National Market Index and the Hambrecht & Quist Technology Index. The
graph is presented pursuant to SEC rules. 3DO believes that while total
stockholder return can be an important indicator of corporate performance, the
stock prices of companies like 3DO are subject to a number of market-related
factors other than company performance, such as competitive announcements,
mergers and acquisitions in the industry, the general state of the economy, and
the prices of technology stocks. 3DO's Compensation Committee considers many
factors in determining compensation, including financial and strategic results
and the other factors discussed in the Compensation Committee Report.
COMPARISON OF CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE 3DO COMPANY NASDAQ STOCK MARKET-U.S. INDEX H&Q TECHNOLOGY INDEX
<S> <C> <C> <C>
6/30/94 $100.00 $100.00 $100.00
3/31/95 $85.25 $116.69 $141.81
3/31/96 $59.84 $158.47 $193.00
3/31/97 $17.21 $176.15 $224.32
3/31/98 $17.62 $267.09 $334.08
3/31/99 $35.04 $359.46 $467.40
6/30/99 $30.33 $392.51 $553.56
</TABLE>
13
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO 3DO'S RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has unanimously adopted a resolution seeking
stockholder authorization of an amendment to 3DO's Restated Certificate of
Incorporation which would increase the number of authorized shares of Common
Stock from 50,000,000 to 125,000,000. Under the proposed amendment, Article 4.1
of 3DO's Restated Certificate of Incorporation would be amended to read as
follows:
4.1 AUTHORIZATION OF SHARES. The total number of shares of all classes of
stock which the Company has authority to issue is One Hundred Thirty
Million (130,000,000) shares, consisting of two classes: One Hundred
Twenty-Five Million (125,000,000) shares of Common Stock, par value
$0.01 per share, and Five Million (5,000,000) shares of Preferred Stock,
par value $0.01 per share.
3DO's public stock offering in July 1999, increased the outstanding Common
Stock to 34,726,000 shares, leaving 15,274,000 shares of Common Stock available
for general corporate purposes. The amendment is intended to ensure that there
will be sufficient authorized but unissued shares available for potential
acquisitions, financing requirements, employee benefit programs, stock
dividends, stock splits, and other corporate purposes without the necessity of
further stockholder action at any annual or special meeting. However,
stockholder approval is required for certain stock option plans, for certain
mergers and acquisitions, for certain related party transactions and in certain
other circumstances. Although the Board of Directors presently has no intention
of doing so, the additional shares of Common Stock could be issued to a holder
that might vote against a proposed merger or sale of assets or other
extraordinary corporate transaction. The additional shares of Common Stock, as
well as the unissued shares of Preferred Stock, might thus be available for use
to impede or discourage an attempted takeover of 3DO. The Common Stock does not
have preemptive rights. The issuance of the shares other than to existing
stockholders on a pro rata basis could have the effect of reducing an existing
stockholder's proportionate interests. Except to the extent that 3DO is
currently obligated to issue shares of Common Stock upon the exercise of
outstanding stock options and the Employee Stock Purchase Plan, 3DO has no
present plans, agreements, commitments, or understandings regarding the issuance
of any additional shares of capital stock.
If adopted, the amendment will become effective upon filing with the
Delaware Secretary of State as required by the General Corporation Law of
Delaware. We anticipate that this will occur promptly following the date of the
Annual Meeting.
VOTE REQUIRED
Approval of Proposal Two will be determined by an affirmative vote of a
majority of the shares of Common Stock outstanding on the Record Date.
Abstentions and broker non-votes will have the same effect as votes against the
Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO
THE CERTIFICATE OF INCORPORATION.
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO 1993 INCENTIVE STOCK PLAN
We are asking the stockholders to approve an increase in the number of
shares reserved for issuance under the Incentive Plan as set forth below.
Through January 1999, the Board of Directors had authorized, and the
stockholders had approved, the reservation of 20,097,519 shares of Common Stock
for issuance under the Incentive Plan, including shares added to the Incentive
Plan in January 1999, according to the Incentive Plan's "evergreen" provision,
as discussed below. In order to have sufficient shares for issuance for the July
1999 public stock offering, the Board of Directors approved the use of 7,900,000
shares that
14
<PAGE>
previously had been approved and reserved by the stockholders for issuance under
the 1993 Incentive Stock Plan. In order to replenish the shares reserved for the
Plan and in recognition of 3DO's need to attract and retain qualified employees
in a highly competitive environment, in August 1999 the Board of Directors
increased the number of shares of Common Stock reserved for the Plan by an
additional aggregate of 7,900,000 shares.
The essential features of the Incentive Plan, as amended to date, are as
follows:
GENERAL. The Incentive Plan provides for the granting to employees of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code"), and for the granting of nonstatutory stock
options to employees and consultants of 3DO. At June 30, 1999, 3,442,575 shares
had been issued upon exercise of options granted under the Incentive Plan,
1,072,000 shares had been issued as stock purchase rights, options to purchase
11,239,151 shares were outstanding under the Incentive Plan, and 5,437,970
shares remained available for future grant under the Incentive Plan. The
Incentive Plan will terminate by its own terms in 2003.
ADMINISTRATION; ELIGIBILITY. The Board may appoint a committee of the Board
to administer the Incentive Plan, and any references to the Board in this
description of the Incentive Plan shall include that committee. The Incentive
Plan is currently administered by the Compensation Committee of the Board of
Directors, which selects the participants and determines the terms of options,
including the exercise price, number of shares and exercisability of each
option. Employees of, and consultants to, 3DO and its subsidiaries are eligible
to participate in the Incentive Plan. As of June 30, 1999, approximately 388
persons were eligible to participate in the Incentive Plan.
EXERCISABILITY. The Board determines at the time of grant the
exercisability of options. The current form of option agreement under the
Incentive Plan provides that options are not exercisable except to the extent
vested. Options granted to employees typically vest in monthly increments over a
five-year period, with deferred but accumulated vesting during the first year of
employment. The maximum term of options granted under the Incentive Plan is ten
years.
EXERCISE PRICE. The Incentive Plan requires that the exercise price of
incentive stock options must be at least equal to the fair market value of the
shares on the date of grant, and the exercise price of nonqualified stock
options must be at least 85% of the fair market value of the shares on the date
of grant. With respect to any participant who owns stock possessing more than
10% of the voting rights of 3DO's outstanding capital stock, the exercise price
of any option must be at least equal to 110% of fair market value on the date of
grant. The purchase price is paid in the manner determined by the Board or its
committee, and the form of consideration may vary for each option. Fair market
value equals the closing price of 3DO's Common Stock as reported on the Nasdaq
National Market on the date of grant. At July 22, 1999, the closing price of
3DO's Common Stock as reported on the Nasdaq National Market was $5.5625.
PERFORMANCE-BASED COMPENSATION LIMITATIONS. No employee may be granted in
any fiscal year of 3DO options and stock appreciation rights to acquire in the
aggregate more than 500,000 shares of Common Stock. The foregoing limitation,
which would adjust proportionately in connection with any change in 3DO's
capitalization, is intended to satisfy the requirements applicable to options
and SARs intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code. In the event that the
Committee determines that the limitation is not required to qualify options and
SARs as performance-based compensation, the Committee may modify or eliminate
the limitation.
TERMINATION OF EMPLOYMENT. If the participant's employment or consulting
relationship terminates for any reason other than death or disability, the
participant's options may be exercised no later than three months after the
termination and only to the extent the option was exercisable on the date of
termination.
15
<PAGE>
To the extent that the optionee was not entitled to exercise the option at the
date of termination, or if the optionee does not exercise the option within the
specified time, the option terminates.
DEATH OR DISABILITY. If a participant becomes permanently and totally
disabled during continuous status as an employee or consultant, then the
participant's option may be exercised within twelve months after the date of the
disability to the extent the option was exercisable at the time of disability.
If a participant dies during continuous status as an employee or consultant
after the grant of an option, then the participant's option may be exercised at
any time within twelve months following the date of death, but only to the
extent the right to exercise had accrued at the date of death. The Board may
vary each of the foregoing time periods.
EFFECT OF CHANGE IN CONTROL. According to the terms of the Incentive Plan,
in the event of certain mergers of 3DO with other entities, transfers of voting
control of 3DO's capital stock or sales of all or substantially all of 3DO's
assets, 3DO will request that the acquiring entity assume 3DO's rights and
obligations under the Incentive Plan or provide similar options in substitution
of those rights and obligations. If the acquiring entity chooses not to assume
3DO's rights and obligations or provide substitute options, then the Board must
cause all outstanding options (together with shares purchased upon exercise
thereof) to become fully vested prior to the event causing the acceleration and
all unexercised options will terminate upon completion of the event.
NONTRANSFERABILITY. An option is non-transferable by the participant other
than by will or the laws of descent and distribution, and is exercisable during
the participant's lifetime only by the participant, or, in the event of death of
the participant, by a person who acquires the right to exercise the option by
bequest or inheritance.
AMENDMENT AND TERMINATION. The Board may amend the Incentive Plan from time
to time or may terminate it without approval of the stockholders. However, the
approval of the holders of a majority of 3DO's capital stock voted at a duly
held stockholders meeting, or the approval of the holders of a majority of the
outstanding shares of 3DO entitled to vote pursuant to a stockholders' written
consent, is required for any amendment that increases the number of shares
available under the Incentive Plan or materially changes the standards of
eligibility. No such action by the Board of Directors or stockholders may alter
or impair any options or stock previously granted under the Incentive Plan
without the consent of the optionee. In any event, the Incentive Plan will
terminate on February 28, 2003.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of the federal income tax consequences of
transactions under the Incentive Plan based on federal securities and income tax
laws in effect on July 22, 1999. This summary is not intended to be exhaustive
and does not discuss the tax consequences of a participant's death or provisions
of the income tax laws of any municipality, state or foreign country in which an
optionee may reside. Options granted under the Incentive Plan may be either
incentive stock options ("ISOs"), as defined in Section 422 of the Code, or
nonstatutory stock options ("NSOs").
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee
upon the grant or exercise of an ISO unless the optionee is subject to
alternative minimum tax. Upon the sale or exchange of the shares issued on
exercise of an ISO more than two years after grant of the option and one year
after exercising the option, any gain or loss will be treated as long-term
capital gain or loss. If these holding periods are not satisfied, then generally
the optionee will recognize ordinary income in the year of disposition in an
amount equal to the lesser of the fair market value of the shares at exercise or
the amount realized on such disposition over the exercise price of such shares.
3DO is entitled to a corresponding tax deduction. Any further gain or loss
realized will be taxed as short-term or long-term capital gain or loss depending
on the holding period of such shares. Different rules may apply in the case of
an optionee who is also an executive officer, director or more than 10%
stockholder.
16
<PAGE>
NONSTATUTORY STOCK OPTIONS. Except as noted below, with respect to NSOs,
(i) no income is recognized by the optionee at the time the option is granted;
(ii) generally, at exercise, ordinary income is recognized by the optionee in an
amount equal to the excess of the fair market value of the shares on the date of
exercise and the option exercise price paid for the shares, and 3DO is entitled
to a tax deduction in the same amount; and (iii) at disposition, any gain or
loss is treated as capital gain or loss. In the case of an optionee who is also
an employee, any income recognized upon exercise of a Nonstatutory Stock Option
will constitute wages for which withholding will be required. However, different
rules may apply if shares are purchased by an optionee who is also an executive
officer, director or more than 10% stockholder.
STOCK PURCHASE RIGHTS. The Incentive Plan permits 3DO to grant stock
purchase rights to purchase Common Stock of 3DO either alone, in addition to, or
in tandem with other awards under the Incentive Plan or cash awards made outside
the Incentive Plan. Upon the granting of a stock purchase right under the
Incentive Plan, the offeree will be advised in writing of the terms, conditions
and restrictions related to the offer, including the number of shares of Common
Stock that the offeree will be entitled to purchase, the price to be paid and
the time within which the offeree must accept such offer (which will in no event
exceed 30 days from the date upon which the administrator made the determination
to grant the stock purchase right). The offer will be accepted by execution of a
restricted stock purchase agreement between 3DO and the offeree.
Unless the administrator of the Incentive Plan determines otherwise, the
restricted stock purchase agreement will grant 3DO a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with 3DO for any reason (including death
or permanent and total disability). The purchase price for shares repurchased
pursuant to the restricted stock purchase agreement will be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to 3DO. The repurchase option will lapse at such rate as the
administrator may determine. Upon exercise of a stock purchase right, the
purchaser will have rights equivalent to those of a stockholder of 3DO.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS AND RESTRICTED STOCK
PURCHASERS. Generally, individuals subject to Section 16(b) of the Exchange Act
("Insiders") and individuals who purchase restricted stock may have their
recognition of compensation income and the beginning of their capital gains
holding period deferred for up to six (6) months after option exercise (for
Insiders), or until the restrictions lapse for restricted stock purchasers (the
"Deferral Date"). The excess of the fair market value of the stock determined as
of the Deferral Date over the purchase price will be taxed as ordinary income,
and the tax holding period for any subsequent gain or loss will begin on the
Deferral Date. However, an Insider or restricted stock purchaser who so elects
under Code Section 83(b) on a timely basis may instead be taxed on the
difference between the excess of the fair market value on the date of transfer
over the purchase price, with the tax holding period beginning on such date.
Similar rules apply for alternative minimum tax purposes with respect to the
exercise of an ISO by an Insider.
INCENTIVE PLAN BENEFITS
3DO cannot now determine the exact number of options or stock purchase
rights to be granted in the future to the executive officers named under
"Executive Compensation--Summary Compensation Table," all current executive
officers as a group or all employees (including current officers who are not
executive officers) as a group. See "Executive Officer Compensation--Option
Grants in Last Fiscal Year and Aggregate Option Exercises in Last Fiscal Year"
for the number of stock options granted to the executive officers named in the
Summary Compensation Table in the fiscal year ended March 31, 1999. In the
fiscal year ended March 31, 1999, options to purchase 960,000 shares of the
Common Stock of 3DO were granted to all current executive officers as a group,
options to purchase 30,000 shares of Common Stock of 3DO were granted to all
current non-executive officers as a group, and options to purchase 3,766,250
shares of Common Stock of 3DO were granted to all employees (including current
officers who are not executive officers). Options to purchase 440,000 shares of
the Common Stock of 3DO were granted to Trip
17
<PAGE>
Hawkins, who is a nominee for director and holds more than 5% of the options
outstanding. Options to purchase 40,000 shares of the Common Stock of 3DO were
granted to James Alan Cook, who holds more than 5% of the options outstanding.
No options in the Incentive Plan were granted to current directors who are not
executive officers of 3DO.
REQUIRED VOTE
Approval of the amendment to the Incentive Plan requires the affirmative
vote of the holders of a majority of the shares of 3DO's Common Stock
represented and voting, in person or by proxy, at the Annual Meeting. Votes cast
against the proposal are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Votes cast against the
proposal are also counted for purposes of determining the total number of votes
required to pass the proposal and whether such votes have been obtained.
While there is no definitive statutory or case law in Delaware as to the
proper treatment of abstentions in the counting of votes with respect to a
proposal such as the approval of this amendment to the Incentive Plan, 3DO
believes that abstentions should be counted for purposes of determining both the
presence or absence of a quorum for the transaction of business and the total
number of shares present or represented and entitled to vote on the proposal. In
the absence of controlling precedent to the contrary, 3DO intends to treat
abstentions on this proposal in this manner. The Delaware Supreme Court has held
that, while broker non-votes may be counted as present or represented for
purposes of determining the presence or absence of a quorum for the transaction
of business, broker non-votes may not be counted for purposes of determining the
number of shares entitled to vote with respect to the particular proposal for
which authorization to vote was withheld. Accordingly, broker non-votes with
respect to this proposal will not be considered shares entitled to vote and,
accordingly, will not be counted in determining whether this proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE INCENTIVE PLAN.
PROPOSAL FOUR
CONFIRMATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP to audit the financial
statements of 3DO for the year ending March 31, 2000, and recommends that the
stockholders confirm the selection. In the event of a negative vote, the Board
will reconsider its selection.
KPMG LLP has audited 3DO's financial statements since its inception.
Representatives of KPMG LLP are expected to be present at the meeting, will have
the opportunity to make a statement if they so desire, and are expected to be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE CONFIRMATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
OTHER MATTERS
3DO knows of no other matters to be submitted to the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed proxy card to vote the shares they represent as the Board
of Directors may recommend.
18
<PAGE>
[3DO LOGO]
4130-PS-99
<PAGE>
3DO23B DETACH HERE
PROXY
THE 3DO COMPANY
PROXY FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of The 3DO Company, a Delaware corporation (the
"Company"), hereby appoints Trip Hawkins and James Alan Cook, and each of
them, with full power of substitution to represent the undersigned and to
vote all of the shares of the stock of the Company which the undersigned is
entitled to vote, at the Annual Meeting of Stockholders of the Company to be
held on September 22, 1999, at 3:00 p.m., local time, at the Summerfield
Suites Hotel, 400 Concourse Drive, Belmont, California (the "Meeting"), and
at any adjournment thereof, and to vote all shares the undersigned would be
entitled to vote if personally present at the Meeting on the matters listed
on the reverse side.
Whether or not you plan to attend the Meeting in person, you are urged to
sign and promptly mail this proxy in the enclosed return envelope so that
your shares may be represented at the Meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR THE NOMINEE AND FOR
PROPOSALS 2 THROUGH 4. In their discretion, the proxy holders are authorized
to vote upon such other business as may properly come before the Meeting, or
any adjournment thereof, to the extent authorized by Rule 14a-4(c)
promulgated by the Securities and Exchange Commission.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
VOTE BY TELEPHONE
- -----------------
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
- --------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 1-877-PRX-VOTE (1-877-779-8683). FOR
SHAREHOLDERS RESIDING OUTSIDE THE UNITED STATES CALL COLLECT ON A
TOUCH-TONE PHONE 1-201-638-8073.
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
VOTE BY INTERNET
- ----------------
It's fast, convenient, and your vote is immediately confirmed and posted.
- --------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND PROXY CARD.
2. GO TO THE WEBSITE
http://www.eproxyvote.com/thdo
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER LOCATED ON YOUR PROXY CARD
ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Go to http://www.eproxyvote.com/thdo anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
[4130 - THE 3DO COMPANY] [FILE NAME:3DO23A.ELX][VERSION - 1][08/10/99]
DETACH HERE
3DO23A
[X] PLEASE MARK VOTES AS
IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE AND FOR PROPOSALS 2
THROUGH 4.
1. To reelect one director for a term of three years.
Nominee: William A. Hall
[ ] FOR THE NOMINEE [ ] WITHHELD FROM THE NOMINEE
MARK HERE FOR ADDRESS [ ]
CHANGE AND NOTE BELOW
2. To approve an amendment to 3DO's Restated Certificate of Incorporation
to increase the authorized number of shares of Common Stock from
50,000,000 to 125,000,000 in order to accommodate future general
corporate purposes including potential acquisitions and financings.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an increase in the number of shares of Common Stock reserved
for issuance under the 1993 Incentive Stock Plan by 7,900,000 shares in
order to replenish shares previously approved by stockholders for
issuance under the plan that were reallocated and issued in conjunction
with 3DO's public stock offering in July 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the appointment of KPMG LLP as independent auditors for the
fiscal year ending March 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The undersigned hereby acknowledges receipt of (a) the Notice of 1999 Annual
Meeting of Stockholders of the Company, (b) the accompanying Proxy Statement,
and (c) the 1999 Annual Report of the Company.
Please sign exactly as your name appears on your stock certificate. If shares
are held in the names of two or more persons (including husband and wife, as
joint tenants or otherwise), all persons must sign. If shares are held by a
corporation, the proxy should be signed by the President or Vice President
and the Secretary or Assistant Secretary. Fiduciaries who execute the proxy
should give their full title.
Signature: ____________________________________ Date: ________________________
Signature: ____________________________________ Date: ________________________
