<PAGE>
Securities and Exchange Commission
Washington, DC 20549
FORM 10-K/A
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Fiscal Year ended December 31, 1999
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-24363
INTERPLAY ENTERTAINMENT CORP.
(Exact name of Registrant as specified in its charter)
___________________________
Delaware 33-0102707
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
16815 Von Karman Avenue, Irvine, California 92606
(Address of principal executive offices)
Registrant's telephone number, including area code: (949) 553-6655
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
___________________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
As of April 24, 2000, 30,022,538 shares of Common Stock of the Registrant
were issued and outstanding and the aggregate market value of voting common
stock held by non-affiliates was $20,756,280.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
AMENDMENT NO. 1
TO THE ANNUAL REPORT ON FORM 10-K FILED BY
INTERPLAY ENTERTAINMENT CORP. ON APRIL 17, 2000
The following Items comprising Part III were omitted from the Annual Report
on Form 10-K filed by Interplay Entertainment Corp. on April 17, 2000 (the "Form
10-K"), as permitted by rules and regulations promulgated by the Securities
Exchange Commission. Part III of that Form 10-K is hereby amended and restated
to insert those Items as set forth herein. All capitalized terms used herein
but not defined shall have the meanings ascribed to them in the Form 10-K.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Summary Information Concerning Directors, Executive Officers and Certain
Significant Employees
The following table sets forth certain information regarding the Company's
directors and executive officers and certain significant employees, and their
ages as of April 28, 2000:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Brian Fargo 37 Chairman of the Board of Directors and
Chief Executive Officer
Herve Caen 38 President and Director
Manuel Marrero 42 Chief Financial Officer and Chief Operating Officer
Phillip G. Adam 45 Vice President of Business Development
Gary Dawson 51 Vice President of Sales
Cal Morrell 44 Vice President of Marketing
Peter A. Bilotta 44 President of Interplay Productions Limited
Jill S. Goldworn 35 President of Interplay OEM, Inc.
David Perry 32 President of Shiny Entertainment, Inc.
Charles S. Paul 50 Director
Eric Caen 35 Director
James Barnett (1)(2) 42 Director
R. Stanley Roach(1)(2) 45 Director
</TABLE>
____________
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
Background Information Concerning Directors
Brian Fargo, Chairman of the Company's Board of Directors, founded the
Company in 1983 and has served as the Company's chief executive officer since
that time. Prior to June 1995, Mr. Fargo also served as the Company's President.
Mr. Fargo also currently serves as a member of the Board of Directors of the
Interactive Digital Software Association.
Herve Caen joined the Company as President and a director in November 1999.
Mr. Caen has served as Chairman of the Board of Directors and Chief Executive
Officer of Titus Interactive SA, an interactive entertainment software company,
since 1991. Mr. Caen also serves as Managing Director of Titus Interactive
Studio, Titus SARL and Digital Integration Services, which positions he has held
since 1985, 1991 and 1998, respectively. Mr. Caen also serves as Chief
Executive Officer of Titus Software Corporation, Chairman of Titus
-2-
<PAGE>
Software UK Limited and Representative Director of Titus Japan KK, which
positions he has held since 1988, 1991 and 1998, respectively.
Charles S. Paul has served as a director of the Company since October 1994.
Since February 2000, Mr. Paul has served as Chairman of iFilm Corp., an
Internet-based media company. Since March 1996, Mr. Paul has served as the
Chairman of the Board of Sega GameWorks L.L.C., a location-based entertainment
company. Mr. Paul previously served as Executive Vice President of Universal
Studios, Inc. ("Universal") from December 1986 to March 1995. Mr. Paul is a
director of National Golf Properties, Inc. and Entertainment Properties Trust,
both real estate investment trusts.
Eric Caen has served as a director of the Company since November 1999. Mr.
Caen has served as a Director and as President of Titus Interactive SA since
1991. Mr. Caen also serves as Vice President of Titus Software Corporation,
Secretary and Director of Titus Software UK Limited and Director of Titus Japan
KK and Digital Integration Limited, which positions he has held since 1988,
1991, 1998 and 1998, respectively. Mr. Caen has also served as Managing
Director of Total Fun 2, a French record production company, since 1998. Mr.
Caen served as Managing director of Titus SARL from 1988 to 1991.
James Barnett joined the Board in November 1999. Since September of 1999,
Mr. Barnett has served as President and Chief Executive Officer of ThirdAge
Media, the leading Internet media company for first wave baby boomers. Prior to
ThirdAge, Mr. Barnett was President and Chief Executive Officer of Infogrames
North America, a leading publisher and developer of video games and interactive
entertainment software, and Chairman, President and Chief Executive Officer of
Accolade, the predecessor company to Infogrames North America. Mr. Barnett's
tenure at Accolade began in 1994.
R. Stanley Roach Joined the Board in April 2000. From 1995 through 2000,
Mr. Roach served as Chief Operating Officer of Infogrames North America and as
Accolade's Executive Vice President of Marketing, Sales and Operations. From
1993 to 1995, Mr. Roach was a consultant in the consumer software industry.
Director Compensation
The Company's directors currently do not receive cash compensation for
attendance at Board of Directors or committee meetings. However, in the future,
non-employee directors may receive compensation for attendance and may be
reimbursed for certain expenses in connection with attendance at board and
committee meetings. In September 1998, Charles S. Paul, who currently serves on
the Company's Board of Directors, was granted an option to purchase up to 25,000
shares of the Company's common stock at an exercise price of $8.00 per share,
which option has a term of ten years, and vests over a period of five years
following the date of the grant. In April 2000, the Company granted to each of
James Barnett and R. Stanley Roach, both of whom are directors, an option to
purchase up to 20,000 shares of the Company's common stock. The Barnett and
Roach options are each for a term of ten years, vest over the first five years,
and are exercisable at $3.50 per share.
Background Information Concerning Executive Officers and Certain Significant
Employees
Manuel Marrero joined the Company in April 1999 as its Chief Financial
Officer and Chief Operating Officer. Prior to joining the Company, Mr. Marrero
served as Chief Financial Officer, Senior Vice President and Corporate Secretary
of Precision Specialty Metals, Inc., a leading high precision conversion mill
for stainless steel and high performance alloys, from July 1996. From October
1993 through July 1996 Mr. Marrero served as the Senior Vice President, Chief
Financial Officer and corporate secretary for Autologic Information
International, Inc., a manufacturer of computerized image setting and
publications systems equipment and software for the publishing industry.
Phillip G. Adam joined the Company as Vice President of Sales and Marketing
in December 1990 and has served as Vice President of Business Development of the
Company since October 1994. Prior to joining the Company, from January 1984 to
December 1990, Mr. Adam served as President of Spectrum Holobyte, an interactive
entertainment software publisher, where he was a co-founder. From May 1990 to
May 1996, Mr. Adam
-3-
<PAGE>
served as the Chairman or a member of the Board of Directors of the Software
Publishers Association and, during part of such period, as President of the
Software Publishers Association. From March 1997 to March 1998 Mr. Adam served
as the Chairman of the Public Policy Committee of the Interactive Digital
Software Association.
Gary Dawson was appointed as the Company's Vice President of Sales in
November 1999. Prior to joining the Company, beginning in 1996, Mr. Dawson was
Senior Vice President, Manufacturing and Production for Chorus Line, an apparel
manufacturer. From 1993 to 1996, Mr. Dawson served as Vice President and
General Manager, Lee Jeanswear for Lee Apparel, a manufacturer of denim
products.
Cal Morrell joined the Company as Vice President of Marketing in September
1998. Prior to joining the Company, from March 1997 to August 1998, Mr. Morrell
served as Senior Vice President of Games On-Line, Inc. dba Engage, and prior to
that served as Vice President of Marketing & Internet for Legacy Software from
June 1996 to February 1997, as well as Director of Worldwide Consumer Software
of IBM UK from January 1995 to June 1996. From June 1993 to December 1994, Mr.
Morrell served as Brand Manager at IBM Consumer Division.
Peter A. Bilotta has served as President of Interplay Europe since August
1994. Prior to joining the Company, from January 1992 to July 1994, Mr. Bilotta
served as Managing Director--Distributed Territories of Acclaim Entertainment
Ltd., an entertainment software publisher. Mr. Bilotta also served as Managing
Director and Chief Executive Officer of Arena Entertainment Inc., an interactive
entertainment software publisher, from March 1991 to December 1991. Mr. Bilotta
serves as a director of Interactive Media, Ltd., a privately-held interactive
entertainment software developer, and Bizarre Love Triangle, a privately-held
interactive entertainment software distributor.
Jill S. Goldworn has served as President of Interplay OEM, Inc., the
Company's OEM subsidiary, since December 1996. Prior to that, Ms. Goldworn
served as Vice President, OEM and Merchandising of the Company since June 1995.
Prior to that, Ms. Goldworn served as Director of the OEM division of the
Company from September 1992 to June 1995. Prior to joining the Company, from
November 1991 to August 1992, Ms. Goldworn served as Director of Contract Sales
of PC Globe, Inc., a publisher of desktop geography software.
David Perry has served as President of Shiny Entertainment, Inc. since
October 1993. Mr. Perry founded Shiny, developer of Earthworm Jim, in October
1993. Prior to founding Shiny, from January 1991 to September 1993, Mr. Perry
served as a consulting engineer for Virgin Interactive Entertainment Inc., an
interactive entertainment software publisher.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
Officers, directors and ten-percent Stockholders are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based solely on the review of copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1999, all of the Company's
officers, directors and ten-percent Stockholders complied with all applicable
Section 16(a) filing requirements, with the following exceptions: Titus
Interactive SA, a stockholder holding more than ten percent of the Company's
outstanding shares of common stock, filed two late reports, reporting two
transactions late. Each of the following persons filed one late report,
reporting one transaction late: Director and President Herve Caen; Director
Eric Caen; and Executive Vice President Richard S.F. Lehrberg. To the Company's
knowledge, there were no failures to file a required form.
-4-
<PAGE>
Item 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
earned during the last two fiscal years ended December 31, 1999, by the
Company's Chief Executive Officer and each of the three other most highly
compensated executive officers of the Company whose total salary and bonus
during such year exceeded $100,000, as well as two former executives who would
have met such criteria had their status as executives not terminated during the
year (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term All Other
Annual Compensation Compensation Compensation
------------------- ------------ ------------
Securities
Underlying
Name and Principal Position Year Salary Bonus Other(1) Options(#)
- ---------------------------- ---- ------ ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brian Fargo 1999 $200,000 -- -- 500,000 --
Chief Executive 1998 210,417 -- -- 150,000 --
Officer
Cal Morrell 1999 142,634 $31,200 $1,087 100,000 --
Vice President of 1998 130,000 11,200 -- -- --
Marketing
Richard S.F. Lehrberg(2) 1999 160,000 -- 4,333 -- --
Executive Vice President 1998 178,805 15,000 4,792 -- --
Manuel Marrero 1999 158,775(3) -- -- 150,000 --
Chief Financial Officer 1998 -- -- -- -- --
and Chief Operating Officer
Phillip G. Adam 1999 138,000 -- 4,140 -- --
Vice President, Business 1998 138,000 20,000 4,140 -- --
Development
Christopher J. Kilpatrick(4) 1999 124,946 -- 4,240 -- 475,582(5)
President 1998 234,722 $75,000 5,065 20,000 --
</TABLE>
_______________
(1) Consists of matching payments made under the Company's 401(k) plan (see
"--Employee Benefit Plans--401(k) Plan").
(2) Mr. Lehrberg's status as an executive officer terminated in December 1999.
(3) Mr. Marrero joined the Company in April 1999 at an annual base salary of
$198,000.
(4) Mr. Kilpatrick's employment by the Company terminated in May 1999.
(5) Consists of (i) severance pay in the amount of $275,582; and (ii) payment in
the amount of $200,000 under a guaranty of the value of certain of Mr.
Kilpatrick's shares of Company stock (see "Certain Relationships and Related
Transactions -- Transactions With Fargo").
-5-
<PAGE>
Stock Option Grants During Year Ended December 31, 1999
The following table sets forth certain information concerning stock options
granted to the Named Executive Officers during the year ended December 31, 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees In Price Expiration Option Term ($)(3)
Name Granted(1) Fiscal Year ($/Sh) Date(2) 5% 10%
- ---------------------------- ---------- ---------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brian Fargo 500,000 22.4% $2.28 11/7/09 $716,939 $1,816,866
Manuel Marrero 150,000 6.7% $1.94 5/6/09 $183,001 $ 463,779
Cal Morrell 50,000 2.2% $1.94 5/6/09 $ 61,002 $ 154,593
Cal Morrell 25,000 1.1% $2.69 7/7/09 $ 42,293 $ 107,179
Cal Morrell 25,000 1.1% $1.88 11/30/09 $ 29,558 $ 74,905
</TABLE>
________________
(1) Represents options granted pursuant to the Company's 1997 Plan. All such
options were granted at an exercise price equal to, or greater than, the
fair market value of the common stock on the date of grant. Mr. Fargo's
options vest at the rate of 25% per year; Mr. Marrero's options fully vested
upon the change of control effected as a result of the Company's April 2000
transaction with Titus Interactive SA; Mr. Morrell's options vest at the
rate of 20% per year.
(2) Options granted to such individuals pursuant to the 1997 Plan expire 10
years from the date of grant.
(3) Represents amounts that may be realized upon exercise of the options
immediately prior to expiration of their terms assuming appreciation of 5%
and 10% over the option term. The 5% and 10% numbers are calculated based on
rules required by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth. The actual value
realized may be greater or less than the potential realizable value set
forth.
Aggregate Option Exercises And 1999 Year-End Option Values
Shown below is information relating to the exercise of stock options during
the year ended December 31, 1999, for each of the Named Executive Officers, and
the year-end value of unexercised options.
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised in-the-
Unexercised Options Money Options at
at Year-End Year-End
Shares Acquired (Exercisable/ (Exercisable/
Name on Exercise Value Realized Unexercisable) Unexercisable)(1)
- ---- ---------------- -------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
Brian Fargo -- -- 60,000/90,000 $ 0/$0
Phillip G. Adam -- -- 0/0 $ 0/$0
Christopher J. Kilpatrick 251,528 $400,000 0/0 $ 0/$0
Richard S.F. Lehrberg -- -- 572,874/0 $1,598,318/$0
Manuel Marrero -- -- 0/150,000 $ 0/$150,000
Cal Morrell -- -- 0/100,000 $ 0/$82,750
</TABLE>
_______________
(1) Represents an amount equal to difference between the closing sale price for
the Company's common stock on the Nasdaq National Market on December 31,
1999, and the option exercise price, multiplied by the number of unexercised
in-the-money options.
-6-
<PAGE>
Employment Agreements
The Company has entered into an employment agreement with Brian Fargo for a
term of three years through November 2002, pursuant to which he currently serves
as the Company's Chairman of the Board of Directors and Chief Executive Officer.
The employment agreement provides for a base salary of $250,000 per year, with
such annual raises as may be approved by the Board of Directors, plus annual
bonuses at the discretion of the Board of Directors. In the event that Mr.
Fargo is terminated without cause or resigns for good reason as set forth in the
agreement, the Company is required to pay Mr. Fargo 150% of his base salary and
75% of his imputed annual bonuses for the remainder of the term of the
agreement, which payments are contingent upon Mr. Fargo's non-competition with
the Company, as defined in the agreement. Mr. Fargo is also entitled to
participate in the incentive compensation and other employee benefit plans
established by the Company from time to time.
The Company has entered into an employment agreement with Herve Caen for a
term of three years through November 2002, pursuant to which he currently serves
as the Company's President. The employment agreement provides for an annual
base salary of $250,000, with such annual raises as may be approved by the Board
of Directors, plus annual bonuses at the discretion of the Board of Directors.
Mr. Caen is also entitled to participate in the incentive compensation and other
employee benefit plans established by the Company from time to time.
The Company has entered into an employment agreement with Manuel Marrero
for a term of five years through March 15, 2004, pursuant to which he currently
serves as the Company's Chief Financial Officer and Chief Operating Officer.
The employment agreement provides for a base salary of $198,000 per year, with
such annual raises as may be approved by the Board of Directors, plus annual
bonuses at the discretion of the Board of Directors. In the event that Mr.
Marrero is terminated without cause, the Company is required to pay Mr. Marrero
his base salary plus a $50,000 annual bonus for the longer of (i) a period of
one year following the termination or (ii) through the end of the term of the
employment agreement. Such post-termination payments are contingent upon Mr.
Marrero's non-competition with the Company, as defined in the agreement.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Messrs. Barnett and Roach.
No member of the Compensation Committee or executive officer of the Company has
a relationship that would constitute an interlocking relationship with executive
officers and directors of another entity. During 1999, decisions regarding
executive compensation were made by the Compensation Committee. Directors who
were members of the Compensation Committee during 1999 were Charles S. Paul, Mr.
Barnett and Kenneth Kay. None of the 1999 members of the Compensation Committee
nor any of the Company's 1999 executive officers or directors had a relationship
that would constitute an interlocking relationship with executive officers and
directors of another entity.
REPORT OF THE COMPENSATION COMMITTEE
The following report is submitted by the Compensation Committee of the
Board of Directors with respect to the executive compensation policies
established by the Compensation Committee and recommended to the Board of
Directors and compensation paid or awarded to executive officers for the fiscal
year ended December 31, 1999.
The Compensation Committee determines the annual salary, bonus and other
benefits, including incentive compensation awards, of the Company's executive
officers and recommends new employee benefit plans and changes to existing plans
to the Company's Board of Directors. The Compensation Committee met one time
during fiscal year 1999.
-7-
<PAGE>
Compensation Policies and Objectives
The Company's executive compensation policy is designed to attract and
retain exceptional executives by offering compensation for superior performance
that is highly competitive with other well-managed organizations. The
Compensation Committee measures executive performance on an individual and
corporate basis.
There are three components to the Company's executive compensation program,
and each is consistent with the stated philosophy as follows:
Base Salary. Base salaries for executives and other key employees are
determined by individual financial and non-financial performance, position in
salary range and general economic conditions of the Company. For purposes of
administering base pay, all executive positions are evaluated and placed in
appropriate salary grades. Salary range midpoint levels are reviewed on an
annual basis to ensure competitiveness with a peer group of comparable
entertainment software companies. In recommending salaries for executive
officers, the Compensation Committee (i) reviews the historical performance of
the executives, and (ii) formally reviews specific information provided by its
accountants and other consultants, as necessary, with respect to the
competitiveness of salaries paid to the Company's executives.
Annual Bonus. Annual bonuses for executives and other key employees are
tied directly to the Company's financial performance as well as individual
performance. The purpose of annual cash bonuses is to reward executives for
achievements of corporate, financial and operational goals. Annual cash bonuses
are intended to reward the achievement of outstanding performance. If certain
objective and subjective performance goals are not met, annual bonuses are
reduced or not paid.
Long-Term Incentives. The purpose of these plans is to create an
opportunity for executives and other key employees to share in the enhancement
of Stockholder value through stock options. The overall goal of this component
of pay is to create a strong link between the management of the Company and its
Stockholders through management stock ownership and the achievement of specific
corporate financial measures that result in the appreciation of Company share
price. Stock options are awarded in order to tie the executive officers'
interests to the Company's performance and align those interests closely with
those of the Company's Stockholders. The Compensation Committee generally has
followed the practice of granting options on terms that provide that the options
become exercisable in cumulative installments over a three to five year period.
The Compensation Committee believes that this feature not only provides an
employee retention factor but also makes longer-term growth in share prices
important for those receiving options.
Chief Executive Officer Compensation
The salary, annual raises and annual bonus of Brian Fargo, the Company's
Chief Executive Officer, are determined in accordance with Mr. Fargo's
Employment Agreement with the Company. Mr. Fargo's Employment Agreement
provides for a base salary of $250,000 per year, with annual raises and bonuses
as may be approved at the discretion of the Company's Board of Directors. (see
"Employment Agreements," above). The amounts of any annual raises or bonuses
are determined in accordance with the policies and objectives set forth above.
In connection with the Company's November 1999 sale of stock to Titus
Interactive SA, Mr. Fargo was granted an option to purchase 500,000 shares of
the Company's common stock. The option vests in equal amounts on each of the
first four anniversaries of the grant of the option. The Compensation Committee
believes it is crucial to the Company's long-term success to continue to tie the
Chief Executive Officer's incentive to the Company's performance and to align
individual financial interests with those of the Company's Stockholders.
Deductibility of Executive Compensation
The Company is required to disclose its policy regarding qualifying
executive compensation deductibility under Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides that, for purposes of the
regular income tax and the alternative minimum tax, the otherwise allowable
deduction for compensation paid or accrued with respect to a covered employee of
a public corporation is limited to no more than $1 million per year.
-8-
<PAGE>
It is not expected that the compensation to be paid to the Company's executive
officers for fiscal 1999 will exceed the $1 million limit per officer. The
Company's 1991 Stock Option Plan, 1994 Stock Option Plan and 1997 Stock
Incentive Plan are structured so that any compensation deemed paid to an
executive officer when he exercises an outstanding option under the plan, with
an exercise price equal to the fair market value of the option shares on the
grant date, will qualify as performance-based compensation that will not be
subject to the $1 million limitation.
The Compensation Committee of the
Board of Directors
James Barnett
R. Stanley Roach
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Annual Report on Form 10-K, in whole or in part, the foregoing
Report and the performance graph below shall not be incorporated by reference
into any such filings.
Common Stock Price Performance
Set forth below is a line graph comparing the cumulative Stockholder return
on the Company's common stock with the cumulative total return of the MG
Industry Group 820 (Multimedia/Graphics Software) and the Nasdaq Market Index
for the period that commenced January 1, 1999, and ended on December 31, 1999.
The graph assumes $100 invested January 1, 1999, in the Company's common stock,
the MG Industry Group 820 (Multimedia/Graphics Software) and the Nasdaq Market
Index, with the reinvestment of all dividends. The Performance Graph is not
necessarily an indicator of future price performance.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MG Industry Group 820
Interplay (Multimedia/
Measurement Date Entertainment Corp. Graphics Software) Nasdaq Market Index
---------------- ------------------- --------------------- -------------------
<S> <C> <C> <C>
06/19/98 100.00 100.00 100.00
06/30/98 95.83 100.00 100.00
09/30/98 53.13 69.97 90.13
12/31/98 29.69 91.60 117.16
03/31/99 39.58 88.21 130.90
06/30/99 43.23 90.79 142.43
09/30/99 35.42 102.04 144.75
12/31/99 48.96 124.56 213.79
</TABLE>
-9-
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth certain information concerning the beneficial
ownership of the Company's outstanding common stock as of March 31, 2000, for
(i) each person (or group of affiliated persons) who is known by the Company to
own beneficially five percent or more of the Company's common stock, (ii) each
director of the Company, (iii) each of the Named Executive Officers, and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Percentage of
Beneficially Outstanding
Name and Address of Beneficial Owner Owned(1) Shares Owned
- ------------------------------------ ------------ -------------
<S> <C> <C>
Brian Fargo 4,031,378(2) 13.4%
16815 Von Karman Avenue
Irvine, CA 92606
Universal Studios, Inc. 4,658,216 15.5%
100 Universal City Plaza
Universal City, CA 91608
Titus Interactive SA 13,167,255(3) 43.9%
Herve Caen (4)
Eric Caen (4)
20432 Corisco Street
Chatsworth, CA 91311
Manuel Marrero 150,000(5) *
Christopher J. Kilpatrick(6) 75,528(7) *
Richard S.F. Lehrberg(8) 591,875(9) 2.0%
Charles S. Paul 5,000(10) *
James Barnett 0 *
R. Stanley Roach 0 *
All Directors and Executive Officers as a Group
(7 persons) 18,305,315(11) 60.9%
</TABLE>
________________
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options currently
exercisable, or exercisable within 60 days of March 31, 2000, are deemed
outstanding for computing the percentage of the person holding such options
but are not deemed outstanding for computing the percentage of any other
person. Except as indicated by footnote and subject to community property
laws where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Includes 460,000 shares subject to warrants and options exercisable within
60 days of March 31, 2000.
(3) Includes 350,000 shares subject to warrants exercisable within 60 days of
March 31, 2000.
(4) Messrs. Herve Caen and Eric Caen, who are officers, directors and principal
shareholders of Titus, disclaim beneficial ownership of the shares held by
Titus, except to the extent of the pecuniary interest therein.
(5) Consists of 150,000 shares subject to options exercisable within 60 days of
March 31, 2000.
(6) Mr. Kilpatrick resigned as an executive officer and director in May 1999.
(7) Shares are subject to certain restrictions pursuant to the Agreement and
General Release dated May 21, 1999, between the Company and Mr. Kilpatrick.
(8) Mr. Lehrberg resigned as an executive officer and director in December
1999.
(9) Includes 510,374 shares subject to options exercisable within 60 days of
March 31, 2000.
(10) Consists of 5,000 shares subject to options exercisable within 60 days of
March 31, 2000.
(11) Includes 1,537,874 shares subject to warrants and options exercisable
within 60 days of March 31, 2000.
-10-
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions With Fargo
In connection with the November 1998 amendment of the Company's line of
credit agreement with Greyrock Capital, Brian Fargo, the Company's Chairman and
Chief Executive Officer, provided a $5.0 million personal guaranty, through May
31, 1999, of the Company's obligations under the line of credit. In March 1999,
in connection with Brian Fargo's extension, from May 31, 1999 through December
21, 2000, of his $5.0 million guaranty, the Company agreed to assume Mr. Fargo's
obligations under an agreement between Mr. Fargo and Christopher J. Kilpatrick
(the "Kilpatrick Agreement"). Under the terms of the Kilpatrick Agreement as
assumed by the Company, the Company guaranteed that Mr. Kilpatrick will receive
an aggregate of $1.0 million in pre-tax proceeds (the "Guaranty Amount") from
the periodic sale of shares of the Company's common stock issued to him upon
exercise of his options to purchase 271,528 shares of the Company's common
stock. In 1999, Mr. Kilpatrick received $400,000 in proceeds from the sale of
such shares. Additionally, the Company paid Mr. Kilpatrick $200,000, which was
deducted from the balance of the Guaranty Amount. Further, approximately
$200,000 was deducted from the remaining balance of the Guaranty Amount as an
income tax withholding for 1999. Although substantially the entire remaining
outstanding balance of the Guaranty Amount will be offset as an income tax
withholding for the year 2000, the Company has committed to pay to Mr.
Kilpatrick approximately $13,000 to reimburse certain expenses that Mr.
Kilpatrick has incurred.
In March 2000, the Company entered into a Film Production Joint Venture
Agreement with Mr. Fargo under which Mr. Fargo will provide up to $1.0 million
to fund the marketing of certain of the Company's game concepts, characters and
trademarks as motion picture projects. Under the terms of the Film Production
Joint Venture Agreement, net profits that the venture generates from the
Company's properties would be allocated first to reimburse Mr. Fargo for the
amount of his contributions, and then to the Company. In addition, certain
intellectual properties owned by Mr. Fargo may be marketed by the venture. Any
net profits that the venture generates from Fargo properties will be allocated
to Mr. Fargo.
Transactions With Fargo and Universal
The Company, Mr. Fargo and Universal entered into a Stock Purchase
Agreement, dated January 25, 1994, for the purchase of common stock. On March
30, 1994, pursuant to the Stock Purchase Agreement, Universal purchased
1,824,897 shares of common stock from the Company for a purchase price of $15
million and 1,216,598 shares of common stock from Mr. Fargo for a purchase price
of $10 million. Pursuant to the Stock Purchase Agreement, the Company, Mr. Fargo
and Universal entered into an Option Agreement, dated March 30, 1994, pursuant
to which Mr. Fargo granted Universal an option to purchase additional shares of
common stock held by Mr. Fargo. Pursuant to such Option Agreement, Universal
purchased 1,216,598 additional shares of common stock from Mr. Fargo at a price
of $9.10 per share on April 25, 1995 and 1,150,123 additional shares of common
stock at a price of $14.62 per share on April 26, 1996, such that Universal
became a 35% owner of the Company as of April 25, 1995 and a 45% owner of the
Company as of April 26, 1996. In order to acquire sufficient shares of common
stock for sale to Universal on each of the three sale dates, Mr. Fargo acquired
such number of shares as was required for sale to Universal from existing
shareholders of the Company in simultaneous transactions. Pursuant to the Stock
Purchase Agreement, the Company, Mr. Fargo and Universal entered into a
Shareholders' Agreement dated March 30, 1994, as amended October 8, 1996 and in
March 1998, which contains certain restrictions on transfer of shares, rights of
first refusal, voting provisions, registration rights and certain restrictions
on corporate actions. Only the mutual rights of first refusal as between
Universal and Mr. Fargo and the registration rights of Universal and Mr. Fargo
survived the closing of the initial public offering of the Company's common
stock. For his services in connection with such transaction, Mr. Fargo was
awarded a bonus of $1.0 million by the Board of Directors on March 28, 1994. Mr.
Fargo has agreed to defer the payment of such bonus to a future date.
The Company has entered into three Merchandising License Agreements with
MCA/Universal Merchandising Inc., a subsidiary of Universal. Pursuant to an
agreement dated May 23, 1994, the Company had the exclusive right to use the
theme and characters of the Waterworld motion picture in software products for
specified platforms. Such right expired July 31, 1998. Pursuant to an
agreement dated May 23, 1994, the Company has the
-11-
<PAGE>
non-exclusive right to use the theme and characters of the Casper motion picture
in software products for specified platforms for a period of three years
following the release of such motion picture. Pursuant to an agreement dated
April 16, 1996, the Company has the exclusive right to the theme and characters
of the Flipper motion picture for an interactive story book product on specified
platforms until June 1, 2001. Each of the agreements provide for the Company to
pay specified advances against royalties and for specified royalty guarantees.
To date, the Company has paid a total of $0.6 million, $0.6 million and $30,000,
respectively, in advances and royalty payments under such agreements. In
addition, pursuant to a letter agreement dated September 27, 1996, with
Universal Interactive Studios, a subsidiary of Universal ("UIS"), the Company
has the exclusive distribution rights in North America for PlayStation versions
of Disruptor (the "Disruptor Agreement"), plus the exclusive rights to
manufacture, publish and distribute Disruptor on any video game platform outside
of North America. On August 16, 1995, the Company and UIS entered into an
exclusive distribution agreement pursuant to which UIS agreed to distribute the
Company's interactive software products in Europe through UIS's affiliate, MCA
Home Video, Inc., which in turn distributes through Cinema International
Corporation ("CIC"). The distribution agreement was subsequently terminated. In
March 1998, the Company entered into an agreement with UIS whereby the Company
agreed to pay to UIS all remaining amounts owed to UIS. Such amounts totaled
$1.4 million and were paid in June 1998.
Transactions with Engage and Fargo
In June 1995, the Company formed a subsidiary to divest Games On-Line,
Inc., dba Engage Games Online ("Engage"), which formerly operated as a division
of the Company. Pursuant to a Stock Purchase Agreement dated June 30, 1995, the
Company sold 10,000,000 shares of common stock of Engage to Mr. Fargo for
$237,000. In connection with such sale, the Company and Mr. Fargo entered into
an Option Agreement dated June 30, 1995, granting the Company an option to
repurchase all of such shares at an aggregate exercise price of $337,000 at any
time prior to June 30, 2005 (the "Termination Date"). In conjunction with a
financing agreement between Engage and Mr. Fargo, the Option Agreement was
amended in March 1998 to reduce the shares subject to such option to 19% of the
shares held by Mr. Fargo and to reduce the exercise price to $250,000. In the
event the Company elects not to exercise its option to repurchase the shares,
upon certain events Universal has an option to purchase the shares at the same
exercise price. If Universal exercises its option to purchase the shares, the
Company has an option to purchase such shares from Universal at the $250,000
exercise price until the Termination Date.
Prior to March 1996, the Company loaned Engage approximately $1.8 million
to fund the operations of Engage, which debt was evidenced by a convertible
demand promissory note dated March 29, 1996, bearing interest at the prime rate
plus two percent per annum. Approximately, $0.8 million of the principal amount
was repaid to the Company in a number of installments during 1996 and 1997. In
connection with a secured debt financing in August 1997, the remaining
outstanding principal of approximately $1.0 million was converted into a secured
convertible promissory note bearing interest at a rate of eight percent per
annum. As part of the August 1997 transaction, the Company loaned an additional
$100,000 to Engage on the same terms.
In March 1996, the Company entered into an agreement with Engage which,
among other things, provides that the Company will provide certain
administrative services to Engage, and grants Engage the exclusive right to use
certain of the Company's products in Internet-based on-line services. Engage
owes the Company approximately $1.2 million under that agreement.
The Company is co-lessee with Engage under a lease with General Electric
Capital Corporation ("GECC") for equipment utilized by Engage. The Company has
possession of substantially all of the equipment covered by such lease. As of
March 31, 2000, the Company's obligations to GECC through the term of the lease
are approximately $11,000.
Transactions with Titus and Fargo
In March 1999, the Company entered into a Stock Purchase Agreement with
Titus Interactive SA and Brian Fargo (the "Titus I Agreement"). Under the terms
of the Titus I Agreement, the Company issued Two Million Five Hundred Thousand
(2,500,000) shares of its common stock to Titus in exchange for consideration of
Ten Million Dollars ($10,000,000). Pursuant to the terms of the Stock Purchase
Agreement, the purchase price was
-12-
<PAGE>
recalculated based on the average closing price per share of the Company's
common stock as reported by Nasdaq during the ten trading days ended June 30,
2000, and the purchase price was recalculated again based on the average closing
price per share of the Company's common stock as reported by Nasdaq during the
ten trading days ending August 20, 2000. Pursuant to the June 30, 2000,
adjustment, the Company issued to Titus 1,161,771 additional shares of common
stock without additional consideration, for a total of 3,661,771 shares, and
issued to Titus a promissory note in the principal amount of $1,120,202.90,
bearing interest at the rate of 10% per annum and due January 1, 2000.
As a result of the August 1999 recalculation, the purchase price was
adjusted to $2.20, and the number of shares of common stock to be issued under
the Titus I Agreement was adjusted to 4,545,455. However, Nasdaq rules required
Stockholder approval for the issuance to Titus of shares of common stock over
and above the 3,661,771 shares already issued. On August 24, 1999, the
Company's Stockholders approved the Titus I Agreement. As a result of the
Stockholder approval, the Company issued to Titus the remaining 883,684 shares
of common stock, and Titus cancelled the June 1999 promissory note.
Under the terms of the Titus I Agreement, the Company is obligated to
register all of the shares of the Company's common stock purchased by Titus
pursuant to the terms and conditions of the Titus I Agreement. Also, in
connection with the Titus I Agreement, Mr. Fargo agreed to not sell, assign,
pledge, mortgage or otherwise dispose of or transfer any shares of his
personally-held shares of the Company's common stock without the prior written
consent of Titus.
In May 1999 the Company signed a letter of intent with Titus pursuant to
which Titus loaned the Company $5,000,000 and the Company and Titus agreed to
negotiate certain additional transactions. Pursuant thereto, on July 19, 1999,
the Company and Titus entered into a Stock Purchase Agreement (the "Titus II
Agreement") providing for the sale and issuance of Six Million Two Hundred Fifty
Thousand (6,250,000) shares of Company's common stock to Titus in exchange for
total consideration of $25,000,000, including the $5,000,000 previously loaned
to the Company. Upon the closing of the Titus II Agreement (the "Closing"), the
Company, Titus and Fargo entered into a Stockholder Agreement, pursuant to which
(a) Titus and Fargo would enter into certain voting agreements with respect to
the shares of common stock held by them, (b) Titus and Fargo would each grant to
the other certain rights of first refusal and tag-along rights with respect to
the shares of common stock held by them, (c) the Company would grant to Titus a
right of first refusal with respect to the issuance of certain equity securities
by the Company, and (d) the Company would agree not to take certain actions
without the prior approval of Titus and Fargo. In addition, at the Closing the
Company entered into Employment Agreements with each of Brain Fargo and Herve
Caen, pursuant to which Messrs. Fargo and Caen are employed as Chief Executive
Officer and President, respectively, of the Company, which agreements shall each
have an initial term of three years. Titus and Fargo have also entered into an
Exchange Agreement, which was consummated concurrent with the Titus II
Agreement, pursuant to which Fargo exchanged 2,000,000 shares of the Company's
common stock for 96,666 shares of Titus common stock. At the Closing, Titus
cancelled the May 1999 promissory note.
In April 2000, the Company entered into a Stock Purchase Agreement with
Titus (the "Titus III Agreement") providing for the issuance to Titus of 719,424
shares of the Company's newly-designated Series A Preferred Stock (the
"Preferred Stock") with certain voting and conversion rights, and Warrants to
purchase up to 500,000 shares of the Company's common stock, in return for
consideration from Titus in the form of $20,000,000 cash and Titus's agreement
to certain obligations. Among the obligations that the Titus III Agreement
imposed upon Titus were: (i) that Titus provide a $20 million guaranty (the
"Titus Guaranty") of the Company's principal line of credit from Greyrock
Capital; (ii) that Titus extend to the Company a $5 million supplemental line of
credit; and (iii) that Titus provide the Company with financial reports required
by Greyrock Capital as a condition to the release of $2.5 million in cash
collateral held by Greyrock Capital. The Preferred Stock bears a six percent per
annum cumulative dividend, with accrued but unpaid dividends convertible into
the Company's common stock.
The Company is obligated to repay to Titus any amounts that Titus may pay
under the Titus Guaranty, and such repayment is secured by a second-priority
security interest in the Company's assets. Moreover, as a condition of the
Titus Guaranty, the Company has granted Titus a right of first refusal on the
Company's sale of assets for $100,000 or more.
-13-
<PAGE>
Titus can convert the Preferred Stock into the Company's common stock at
any time following the earlier to occur of: (i) 180 days after Greyrock
Capital's demand to Titus for payment under the Titus Guaranty; or (ii) May 31,
2001. The number of shares of the Company's common stock to be issued upon such
conversion is determined by multiplying the number of shares of Preferred Stock
to be converted by the conversion ratio applicable at the time. The conversion
ratio is defined as a fraction, the numerator of which is the initial purchase
price per share of the Preferred Stock, $27.80, and the denominator of which
(the "Denominator") is adjustable. The initial Denominator is the lower of
$2.78 or 85% of the average market price of the Company's common stock for the
20 trading days preceding the date of conversion. The ratio can be adjusted to
account for stock splits or similar other changes in the Company's capital
structure.
If Greyrock Capital makes a demand to Titus for payment under the Titus
Guaranty, a further adjustment of the Denominator will apply. Prior to any
conversion of the Preferred Stock following a demand for payment under the Titus
Guaranty, however, Titus is obligated to grant the Company a 180-day period
during which the Company can cure any underlying default on the Company's
principal line of credit with Greyrock Capital, or repay any amounts that Titus
has paid under the Titus Guaranty. If the Company were to effect such cure
during the cure period, the conversion ratio would revert to its previous value
as if no payment, and no demand for payment, had ever been made under the Titus
Guaranty. If the Company does not effect such cure within the cure period, the
applicable Denominator shall be a minimum of $0.466818926, with adjustments
upward depending on the trading price of the Company's common stock at the time
of conversion. The effect of the stock price-dependent adjustments is that the
Preferred Stock would be convertible, under such circumstances, into up to
approximately 42.8 million shares of the Company's common stock, less 50,000
shares for each $0.01 that the trading price of the Company's common stock is
above $3.00 per share at the time of conversion.
The Company may redeem any unconverted shares of Preferred Stock at the
original purchase price, plus accrued but unpaid dividends, at any time
following the later to occur of (i) the termination of the Titus Guaranty; or
(ii) the repayment to Titus of any amounts that Titus may pay under the Titus
Guaranty. In addition, the Preferred Stock is entitled to voting power
equivalent to the voting power of the shares of the Company's common stock into
which the Preferred Stock can be converted.
The supplemental line of credit that Titus has extended to the Company in
connection with the Titus III Agreement bears interest at the maximum legal
rate, not to exceed 12% per annum. There were three Warrants issued in
connection with the Titus III Agreement for the purchase of the Company's common
stock in the amounts of 350,000 shares, 100,000 shares, and 50,000 shares,
respectively. All three Warrants are exercisable at $3.79 per share, and are
for a term of 10 years. The 350,000 share Warrant is exercisable immediately.
The 100,000 share warrant is exercisable only in proportion to the extent to
which the Company draws upon the $5 million supplemental line of credit extended
by Titus. The 50,000 share warrant is exercisable only if the Company's audited
pre-tax net income for the fiscal year ended December 31, 2000, is less than
$2,115,000.
The Company is obligated to register all of the Company's common stock
issued pursuant to the Titus II Agreement and the Titus III Agreement. In
Connection with the Titus III Agreement, Mr. Fargo has granted to Titus an
irrevocable proxy to vote all of his shares of common stock in favor of the
Titus III Agreement.
Other Transactions
Beginning in March 1998, the Company has entered into Indemnification
Agreements with all of its directors and executive officers providing for
indemnification of such persons by the Company in certain circumstances.
In May 1999, in connection with the termination of Mr. Kilpatrick's
employment with the Company, the Company assumed certain guaranty obligations of
Brian Fargo to Mr. Kilpatrick relating to the value of Mr. Kilpatrick's options
to purchase shares of the Company's common stock (see "Transactions with Fargo,"
above).
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Irvine,
State of California, on the 28th day of April, 2000.
INTERPLAY ENTERTAINMENT CORP.
(Registrant)
By: /s/ Brian Fargo
--------------------------------------
Brian Fargo
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ Brian Fargo Chief Executive Officer April 28, 2000
- -----------------------
Brian Fargo and Chairman of the Board
(Principal Executive Officer)
/s/ Herve Caen President and Director April 28, 2000
- -----------------------
Herve Caen
/s/ Manuel Marrero Chief Financial Officer and April 28, 2000
- -----------------------
Manuel Marrero Chief Operating Officer
(Principal Financial and Accounting
Officer)
/s/ * Director April 28, 2000
- -----------------------
Eric Caen
/s/ * Director April 28, 2000
- -----------------------
James Barnett
/s/ * Director April 28, 2000
- -----------------------
Charles S. Paul
/s/ R. Stanley Roach Director April 28, 2000
- -----------------------
R. Stanley Roach
*By: /s/ Brian Fargo
------------------------------
Brian Fargo, Attorney-in-Fact
</TABLE>
-15-
