The company negotiated accelerated leasehold terminations and reductions in space and base rent costs in order to meet its financial needs. The necessary moves to and from buildings was recently completed. Savings from this cost reduction will contribute to the company's expected return to profitability in the quarter ending June 30, 2002.

The largest savings came from negotiations with Chicago-based Equity Office Properties Trust that will save 3DO nearly $40 million. Equity cut the firm's Redwood City office space in half, leaving 3DO with only 80,000-sf. Equity also cut the lease term in half, from 13 years to 6.5 years. In exchange, 3DO paid a $1.1 million termination fee to the real estate company.

"This is a huge win for 3DO in terms of operating cash flow, and means as much to the company as a $15 million capital raise," says Trip Hawkins, chairman and chief executive officer. "And yet we were able to move without disruption and we still have plenty of space to meet our needs for the foreseeable future. We will explain how we will account for this considerable benefit when we have our conference call for the June, 2002 quarter."