3DO Reacquires 11% of Outstanding Shares

Stock Swapped for M2-Related Rights in Deal

July 24, 1997

The 3DO Company today announced that it has received 3.2 million shares of its own common stock (NASDAQ: THDO) from Matsushita Electric Industrial Co., Ltd. in exchange for the termination of certain rights originally granted to 3DO with respect to its M2 technology. The binding agreement with Matsushita follows the recent closing of a $20 million cash deal with Samsung concerning the sale of certain assets and license of other technologies relating to its former hardware business.

“This deal exemplifies our continued commitment to our shareholders and demonstrates our resolve to be a strong software company,” said Trip Hawkins, Chairman and CEO, The 3DO Company.

“Now, all of our assets are strategically focused to help us achieve our software potential.“

In 1995, 3DO licensed its next-generation, interactive M2 technology to Matsushita. Yet, however, Matsushita has not announced any definitive plans to bring M2 products to market. Under the agreement, 3DO will relinquish its rights to develop and distribute software and peripherals that are compatible with M2 hardware products. In addition, the company will give up its royalties with respect to Matsushita’s potential use of the M2 technology, as well as certain other rights. In exchange, Matsushita has returned to 3DO all the 3.2 million shares of 3DO stock that it previously owned. 3DO’s common stock closed yesterday at $3.90 per share, valuing the deal at nearly $13 million.

“We’re a software company now, and we felt our future M2 rights did not have as much monetary and strategic value to the company and our shareholders as did the elimination of the potential overhang which the 3DO shares held by Matsushita represented,” continued Hawkins.

“This deal recaptures 11 percent of our outstanding shares, which is a big increase in value for our shareholders that are looking to us to build a successful software company. Personally, I’m very excited about the games that we currently have in development, and I’m pleased with the company’s financial strength and with management’s strategies for growing our software publishing business.”

With the proceeds from the Samsung deal, the remainder of the revenue from the M2 license with Matsushita, and the continued strong sales of 3DO’s most recent release, Heroes of Might and Magic® II, the company has the cash and strong line-up of products in development needed to become a leader in the video game software industry.

3DO will announce the June quarter financial results next week on Wednesday, July 30 after the market closes.

This release contains forward looking statements. The forward-looking statements are subject to risks and uncertainties. Potential risks and uncertainties include, without limitation, market demand and acceptance for the company’s current and future software products, the company’s ability to develop and ship future products, and the consequences of competitive factors in the marketplace.

Further information on potential factors which could affect these forward-looking statements and the company’s financial results are included in the company’s filings with the Securities and Exchange Commission, including the company’s Report on Form 10-K for the fiscal year ended March 31, 1997, and the company’s Reports on Form 10-Q for the fiscal quarters ended September 30, 1996, and December 30, 1996.