-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MCGw3hw+E8G/c9OOAof5C00fpehVXaRXMLDixJ9HsHFTA6LZgIywq9wG6XKaXVYs YrraCSJ7U4P7t3X2pBxD4g== /in/edgar/work/0001017062-00-002373/0001017062-00-002373.txt : 20001121 0001017062-00-002373.hdr.sgml : 20001121 ACCESSION NUMBER: 0001017062-00-002373 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20001120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERPLAY ENTERTAINMENT CORP CENTRAL INDEX KEY: 0001057232 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 330102707 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-50252 FILM NUMBER: 772877 BUSINESS ADDRESS: STREET 1: 16815 VON KARMAN AVE CITY: IRVINE STATE: CA ZIP: 92606 BUSINESS PHONE: 9495536655 MAIL ADDRESS: STREET 1: 16815 VON KARMAN AVE CITY: IRVINE STATE: CA ZIP: 92606 S-3 1 0001.txt FORM S-3 REGISTRATION STATEMENT As Filed With the Securities and Exchange Commission on November 17, 2000 Registration No. 333-________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ------------ INTERPLAY ENTERTAINMENT CORP. (Exact name of registrant as specified in its charter) Delaware 33-0102707 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 16815 Von Karman Avenue, Irvine, California 92606 (949) 553-6655 (Address, including zip code, and telephone number, including area code of registrant's principal executive offices) --------------- Brian Fargo Interplay Entertainment Corp. 16815 Von Karman Avenue Irvine, California 92606 (949) 553-6655 (Name, address, including zip code, and telephone number, including area code of agent for service) Copy to: K.C. Schaaf, Esq. Jeffrey B. Coyne, Esq. Stradling Yocca Carlson & Rauth, A Professional Corporation 660 Newport Center Drive Newport Beach, California 92660
Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] __________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------------------------- Title of securities to be Amount to be registered Proposed maximum aggregate Amount of registration fee registered offering price/(1)/ - ---------------------------------------------------------------------------------------------------------------------------------- Common Stock, $0.001 par value 13,336,511 $48,761,618 $12,873 shares - ----------------------------------------------------------------------------------------------------------------------------------
(1) The offering price is estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) using the average of the high and low price reported by the Nasdaq National Market for the Common Stock on November 15 2000, which was approximately $3.65625 per share. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. PROSPECTUS Dated November 17, 2000 INTERPLAY ENTERTAINMENT CORP. 13,336,511 Shares of Common Stock ($0.001 par value) _________ This prospectus relates to the offer and sale from time to time of up to 13,336,511 shares of our Common Stock that are held by certain of our current stockholders named in this prospectus for their own benefit or by donees, transferees, pledgees or other successors in interest of such stockholders that receive such shares as a gift or other non-sale related transfer. The shares of our Common Stock offered pursuant to this prospectus were originally issued to the selling stockholders in connection with private placements of our shares to those stockholders pursuant to stock purchase agreements we entered into with each of those stockholders. The prices at which such stockholders may sell the shares in this offering will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any of the proceeds from the sale of the shares. We will bear all expenses of registration incurred in connection with this offering. The stockholders whose shares are being registered hereby will bear all selling and other expenses. Our Common Stock is traded on the Nasdaq National Market under the symbol "IPLY." On November 15, 2000, the last reported sale price of our Common Stock was $3.7188 per share. See "Risk Factors" beginning on page 2 to read about the risks you should consider carefully before buying shares of our Common Stock. _________ The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement containing this prospectus, which has been filed with the Securities and Exchange Commission, is declared effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. _________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. _________ The date of this Prospectus is November 17, 2000. TABLE OF CONTENTS
Page About Interplay............................................................ 2 Risk Factors............................................................... 2 Where You Can Find Additional Information.................................. 15 Use of Proceeds............................................................ 16 Selling Stockholders....................................................... 16 Plan of Distribution....................................................... 18 Legal Matters.............................................................. 18
SOME OF THE STATEMENTS CONTAINED IN THIS PROSPECTUS DISCUSS FUTURE EXPECTATIONS, CONTAIN PROJECTIONS OF RESULTS OF OPERATIONS OR FINANCIAL CONDITION OR STATE OTHER "FORWARD-LOOKING" INFORMATION. SUCH STATEMENTS CAN BE IDENTIFIED BY THE USE OF "FORWARD-LOOKING" TERMINOLOGY, SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE," "CONTINUE" OR OTHER SIMILAR WORDS. THESE STATEMENTS ARE SUBJECT TO KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THE STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" ON PAGE 2. ABOUT INTERPLAY Interplay Entertainment Corp. (sometimes referred to in this prospectus as the "Company") is a leading developer, publisher and distributor of interactive entertainment software for both core gamers and the mass market. We were incorporated in the State of California in 1982 and reincorporated in the State of Delaware in May 1998. We are most widely known for our titles in the action/arcade, adventure/role-playing games and strategy/puzzle categories. We have produced titles for many of the most popular interactive entertainment software platforms, and currently balance our development efforts by publishing interactive entertainment software for PCs and video game consoles such as the Sony PlayStation. We release products through Interplay, Shiny Entertainment, Digital Mayhem, Black Isle Studios, 14 degrees East, our distribution partners and our wholly owned subsidiary Interplay OEM, Inc. We seek to publish interactive entertainment software titles that are, or have the potential to become, franchise software titles that can be leveraged across several releases and/or platforms, and we have published many such successful franchise titles to date. In addition, we secure licenses to use popular intellectual properties, such as Star Trek, Caesars Palace and Advanced Dungeons & Dragons, for incorporation into certain of our products. Our executive offices are located at 16815 Von Karman Avenue, Irvine, California 92606, and our telephone number is (949) 553-6655. RISK FACTORS In evaluating an investment in our Common Stock, you should carefully consider the following risk factors and other information contained in or incorporated by reference into this prospectus. Some information in this prospectus may contain "forward looking" statements that discuss future expectations of our financial condition and results of operations. The risk factors noted in this section and other factors could cause our actual results to differ materially from those contained in any forward-looking statements. 2 Liquidity; Future Capital Requirements We used net cash in operations of $16.6 million and $26.4 million during the nine months ended September 30, 2000 and the year ended December 31, 1999, respectively. At September 30, 2000, our working capital was $5 million. We cannot assure you that we will ever generate positive cash flow from operations. Our ability to fund our capital requirements out of our available cash, lines of credit and cash generated from our operations depends on a number of factors. Some of these factors include the progress of our product development programs, the rate of growth of our business, and our products' commercial success. Our principal line of credit expires in April 2001, and our lender has informed us that it does not intend to renew that line of credit. If we are unable to replace our line of credit or obtain alternative financing, our lender could foreclose on its security interest in our assets, and certain of our stockholders could suffer significant dilutions (see "Control by Titus", below). We have been notified by Titus Interactive SA ("Titus"), our principal stockholder, that they believe they are no longer obligated to fund the $5 million line of credit they extended to us in April 2000. Under the circumstances, we will likely have to seek additional funds through debt or equity financings, product licensing or distribution transactions or other sources of financing in order to provide ourselves with enough working capital. If we issue additional equity securities, our existing stockholders could suffer a large amount of dilution in their ownership. In the event we have to raise additional working capital from other sources, we cannot assure you that we will be able to raise additional working capital on acceptable terms, if at all. In the event we cannot raise additional working capital, we would have to take additional actions to continue to reduce our costs, including selling or consolidating certain operations, delaying, canceling or scaling back product development and marketing programs and other actions. These measures could materially and adversely affect our ability to publish successful titles, and these measures may not be enough to generate operating profits. We might have to get the approval of other parties, including our financial lender and/or Titus, for some of these measures, and we cannot assure you that we would be able to obtain those approvals. In addition, there is a risk that our Common Stock may be delisted from the Nasdaq National Market (see "Continued Listing on the Nasdaq National Market," below). If such delisting were to occur, our ability to raise equity capital could be significantly impaired. Fluctuations in Operating Results; Uncertainty of Future Results; Seasonality Our operating results have fluctuated a great deal in the past and will probably continue to fluctuate significantly in the future, both on a quarterly and an annual basis. Many factors may cause or contribute to these fluctuations, and many of these factors are beyond our control. Some of these factors include the following: . delays in shipping our products . demand for our products . demand for our competitors' products . the size and rate of growth of the market for interactive entertainment software . changes in PC and video game console platforms . the number of new products and product enhancements released by us and our competitors . changes in our product mix . the number of our products that are returned . the timing of orders placed by our distributors and dealers . the timing of our development and marketing expenditures . price competition . the level of our international and OEM, royalty and licensing net revenues. Many factors make it difficult to accurately predict the quarter in which we will ship our products. Some of these factors include: 3 . the uncertainties associated with the interactive entertainment software development process . long manufacturing lead times for Nintendo-compatible products . possible production delays . the approval process for products compatible with the Sony Computer Entertainment, Nintendo and Sega video game consoles . approvals required from other licensors . the timing of the release and market penetration of new game hardware platforms. Because of the limited number of products we introduce in any particular quarter, a delay in the introduction of a product may materially and adversely affect our operating results for that quarter, and may not be recaptured in later quarters. Such delays have had a significant adverse effect on our operating results in certain past quarters. A significant portion of our operating expenses is relatively fixed, and planned expenditures are based largely on sales forecasts. If net revenues do not meet our expectations in any given quarter, operating results may be materially adversely affected. The interactive entertainment software industry is highly seasonal, with the highest levels of consumer demand occurring during the year-end holiday buying season. As a result, our net revenues, gross profits and operating income have historically been highest during the second half of the year. Revenues are also materially affected by new product releases. Our failure or inability to introduce products on a timely basis to meet these seasonal increases in demand may have a material adverse effect on our business, operating results and financial condition. We may over time become increasingly affected by the industry's seasonal patterns. Although we seek to reduce the effect of such seasonal patterns on our business by distributing our product release dates more evenly throughout the year, we cannot assure you that these efforts will be successful. We cannot assure you that we will be profitable in any particular period given the uncertainties associated with software development, manufacturing, distribution and the impact of the industry's seasonal patterns on our net revenues. As a result of the foregoing factors it is likely that our operating results in one or more future periods will fail to meet or exceed the expectations of securities analysts or investors. In that event, the trading price of our Common Stock would likely be materially adversely affected. Significant Recent Losses We have experienced significant net losses in recent periods, including losses of $7.3 million and $41.7 million for the nine months ended September 30, 2000 and the year ended December 31, 1999, respectively. These losses resulted largely from delays in the completion of certain products, a higher than expected level of product returns and markdowns on products released during the year, and the cost of restructuring our operations, including international distribution arrangements. These losses also resulted from lower than expected worldwide sales of certain releases, as well as from operating expense levels that were high relative to our revenue level. We may experience similar problems in current or future periods and we may not be able to generate sufficient net revenues or adequate working capital, or bring our costs into line with revenues, so as to attain or sustain profitability in the future. Dependence on New Product Introductions; Risk of Product Delays and Product Defects Our products typically have short life cycles, and we depend on the timely introduction of successful new products to generate net revenues, to fund operations and to replace declining net revenues from older products. These new products include enhancements of or sequels to our existing products and conversions of previously released products to additional platforms. If in the future, for any reason, net revenues from new products fail to replace declining net revenues from existing products, our business, operating results and financial condition could be materially adversely affected. The timing and success 4 of new interactive entertainment software product releases remains unpredictable due to the complexity of product development, including the uncertainty associated with new technology. The development cycle of new products is difficult to predict but typically ranges from 12 to 24 months with six to 12 months for adapting a product to a different technology platform. The success of any particular software product can also be negatively impacted by delays in the introduction, manufacture or distribution of the platform for which the product was developed (see "Rapidly Changing Technology; Platform Risks"). In the past, we have frequently experienced significant delays in the introduction of new products, including certain products currently under development. Because net revenues associated with the initial shipments of a new product generally constitute a high percentage of the total net revenues associated with a product, any delay in the introduction of, or the presence of a defect in, one or more new products expected in a period could have a material adverse effect on the ultimate success of these products and on our business, operating results and financial condition. The cost of developing and marketing new interactive entertainment software has increased in recent years due to such factors as the increasing complexity and content of interactive entertainment software, the increasing sophistication of hardware technology and consumer tastes and the increasing costs of obtaining licenses for intellectual properties. We expect this trend to continue. We cannot assure you that our new products will be introduced on schedule, if at all, or that, if introduced, these products will achieve significant market acceptance or generate significant net revenues for us. In addition, software products as complex as the ones we offer may contain undetected errors when first introduced or when new versions are released. We cannot assure you that, despite testing prior to release, errors will not be found in new products or releases after shipment, resulting in loss of or delay in market acceptance. This loss or delay could have a material adverse effect on our business, operating results and financial condition. Uncertainty of Market Acceptance; Dependence on Hit Titles Consumer preferences for interactive entertainment software are always changing and are extremely difficult to predict. Historically, few interactive entertainment software products have achieved continued market acceptance. Instead, a limited number of releases have become "hits" and have accounted for a substantial portion of revenues in our industry. Further, publishers with a history of producing hit titles have enjoyed a significant marketing advantage because of their heightened brand recognition and consumer loyalty. We expect the importance of introducing hit titles to increase in the future. We cannot assure you that our new products will achieve significant market acceptance, or that we will be able to sustain this acceptance for a significant length of time if we achieve it. We also cannot assure you that product life cycles will be sufficient to permit us to recover product development and other associated costs. Most of our products have a relatively short life cycle and sell for a limited period of time after their initial release, usually less than one year. We believe that these trends will continue in our industry and that our future revenue will continue to be dependent on the successful production of hit titles on a continuous basis. Because we introduce a relatively limited number of new products in a given period, the failure of one or more of these products to achieve market acceptance could have a material adverse effect on our business, operating results and financial condition. Further, if we do not achieve market acceptance, we could be forced to accept substantial product returns or grant significant markdown allowances to maintain our relationship with retailers and our access to distribution channels. For example, we had significantly higher than expected product returns and markdowns during the year ended December 31, 1999 and we cannot assure you that higher than expected product returns and markdowns will not continue in the future. In the event that we are forced to accept significant product returns or grant significant markdown allowances, our business, operating results and financial condition could be materially adversely affected. 5 Control by Titus Titus currently owns 12,817,255 shares, or approximately 43 percent, of our outstanding Common Stock, and 719,424 shares of our Series A Preferred Stock that have voting power equivalent to up to 7,619,047 shares of Common Stock, and are convertible into at least 7,194,240 shares of Common Stock at any time after May 2001 if not previously redeemed by the Company. As such, Titus currently holds approximately 54% of the total voting power of our stock. Titus also holds warrants for up to 500,000 shares of our Common Stock. In addition, if we default on our line of credit and Titus is obligated to pay on their $20 million corporate guarantee of our line of credit, the Series A Preferred Stock could become convertible into, and have voting rights equal to, up to 42.8 million shares of our Common Stock, which would constitute approximately 75 percent of our Common Stock as of the date hereof. In connection with Titus' investment, Herve Caen, Titus' chairman and chief executive officer, serves as our president and as a member of our Board of Directors, and Herve Caen's brother Eric Caen, who is president and a director of Titus, also serves on our Board of Directors. As a consequence, Titus holds significant voting power with respect to the election of our Board of Directors and the right of approval of certain significant corporate actions, and Herve Caen and Eric Caen have substantial authority over our operations. As the Company's capital structure currently stands, in the event that the Stockholder Agreement pursuant to which our Board of Directors is currently nominated terminates, Titus would be able to elect 4 of 7 members of the Board of Directors. In such event, Titus would be able to set our dividend policy and otherwise exercise substantial control over our management. This control could prevent or hinder a sale of the Company on terms that are not acceptable to Titus. Moreover, Titus holds interests that may vary from those of the Company and its other stockholders, and Titus may exercise its control of the Company in the furtherance of such outside interests (see the subsections entitled "Liquidity; Future Capital Requirements" and "Distribution Agreement".) Continued Listing on the NASDAQ National Market Our Common Stock is currently quoted on the Nasdaq National Market under the symbol "IPLY." For continued inclusion on the Nasdaq National Market, a company must meet certain tests, including a minimum bid price of $1.00 and net tangible assets of at least $4 million. As of December 31, 1999, we were not in compliance with the minimum net tangible assets requirement, and did not return to compliance with that requirement until April 14, 2000. We were subject to a hearing before a Nasdaq Listing Qualifications Panel, which determined to continue the listing of our Common Stock on the Nasdaq National Market subject to certain conditions, all of which we have fulfilled. If we fail to satisfy the listing standards on a continuous basis, our Common Stock may be removed from listing on the Nasdaq National Market. If our Common Stock were delisted from the Nasdaq National Market, trading of our Common Stock, if any, would be conducted on the Nasdaq Small Cap Market, in the over-the-counter market on the so-called "pink sheets" or, if available, the NASD's "Electronic Bulletin Board." In any of those cases, investors could find it more difficult to buy or sell, or to obtain accurate quotations as to the value of, our Common Stock. The trading price per share of our Common Stock would most likely be reduced as a result. Distribution Agreement In connection with our acquisition of a 43.9 percent membership interest in Virgin Interactive Entertainment Limited's ("Virgin") parent entity in February 1999, we signed an International Distribution Agreement with Virgin. Under this Agreement, we appointed Virgin as our exclusive distributor for substantially all of our products in Europe, the CIS, Africa and the Middle East, subject to certain reserved rights, for a seven-year period. We pay Virgin a distribution fee for marketing and distributing our products, as well as certain direct costs and expenses. Virgin has been inconsistent in 6 meeting its obligations to deliver to us the proceeds obtained from their distribution of our products. Because of the exclusive nature of the Agreement, if Virgin were to continue to be inconsistent in meeting its obligations to deliver to us proceeds from distribution, or were to experience problems with its business, or otherwise to fail to perform under the Agreement, our business, operating results and financial condition could be materially and adversely affected. Virgin is in the process of recapitalizing its business. In September 2000, Titus advanced certain amounts to Virgin in anticipation of converting this advance into equity in Virgin's parent entity. Titus and the Company are negotiating the terms of such a conversion whereby it is anticipated that the Company's 43.9% membership interest in Virgin's parent entity would be reduced. In June 2000, we amended the International Distribution Agreement with Virgin to, among other things, eliminate the overhead fees and minimum commissions payable by us. Virgin has disputed the validity of this amendment, and claims that the Company is obligated, among other things, to pay a contribution to their overhead of up to approximately $9.3 million annually, subject to decrease by the amount of commissions earned by Virgin on its distribution of our products. We believe that the amendment is legally binding and we will vigorously defend our position. However, we cannot assure you that we will be successful in our defense. Virgin has earned approximately $2.5 million in commissions through September 30, 2000, and our forecasts indicate that Virgin may earn $2.0 million in additional commissions for the period of October 1, 2000, through December 31, 2000. If we are unable to successfully defend our position against Virgin's claims, we estimate that our maximum exposure would be $4.8 million. Dependence on Third Party Software Developers We rely on third party interactive entertainment software developers for the development of a significant number of our interactive entertainment software products. As there continues to be high demand for reputable and competent third party developers, we cannot assure you that third party software developers that have developed products for us in the past will continue to be available to develop products for us in the future. Many third party software developers have limited financial resources, which could expose us to the risk that such developers may go out of business prior to completing a project. In addition, due to our limited control over third party software developers, we cannot assure you that such developers will complete products for us on a timely basis or within acceptable quality standards, if at all. Due to increased competition for skilled third party software developers, we have had to agree to make advance payments on royalties and guaranteed minimum royalty payments to intellectual property licensors and game developers, and we expect to continue to enter into these kinds of arrangements. If the products subject to these arrangements do not have sufficient sales volumes to recover these royalty advances and guaranteed payments, we would have to write-off unrecovered portions of these payments, which could have a material adverse effect on our business, operating results and financial condition. Further, we cannot assure you that third party developers will not demand renegotiation of their arrangements with the Company. Rapidly Changing Technology; Platform Risks The interactive entertainment software industry is subject to rapid technological change. New technologies, including operating systems such as Microsoft Windows 98 and 2000, technologies that support multi-player games, new media formats such as on-line delivery and digital video disks ("DVDs") and planned releases in the near future of new video game platforms such as the Sony Playstation 2, the Nintendo Gamecube and the Microsoft X-Box could render our current products or products in development obsolete or unmarketable. We must continually anticipate and assess the emergence of, and market acceptance of, new interactive entertainment software platforms well in advance of the time the 7 platform is introduced to consumers. Because product development cycles are difficult to predict, we must make substantial product development and other investments in a particular platform well in advance of introduction of the platform. If the platforms for which we develop software are not released on a timely basis or do not attain significant market penetration, our business, operating results and financial condition could be materially adversely affected. Alternatively, if we fail to develop products for a platform that does achieve significant market penetration, then our business, operating results and financial condition could also be materially adversely affected. The emergence of new interactive entertainment software platforms and technologies and the increased popularity of new products and technologies may materially and adversely affect the demand for products based on older technologies. The broad range of competing and incompatible emerging technologies may lead consumers to postpone buying decisions with respect to products until one or more emerging technologies gain widespread acceptance. This postponement could have a material adverse effect on our business, operating results and financial condition. We are currently developing products for Microsoft Windows 98 and 2000, and Sony PlayStation 2. We are also planning to develop product for new platforms expected to be introduced in 2001 by Microsoft and Nintendo. Our success will depend in part on our ability to anticipate technological changes and to adapt our products to emerging game platforms. We cannot assure you that we will be able to anticipate future technological changes, to obtain licenses to develop products for those platforms on favorable terms or to create software for those new platforms. Any failure to do so could have a material adverse effect on our business, operating results and financial condition. Industry Competition; Competition for Shelf Space The interactive entertainment software industry is intensely competitive and new interactive entertainment software programs and software platforms are regularly introduced. Our competitors vary in size from small companies to very large corporations with significantly greater financial, marketing and product development resources than we have. Due to these greater resources, certain of our competitors can undertake more extensive marketing campaigns, adopt more aggressive pricing policies, pay higher fees to licensors of desirable motion picture, television, sports and character properties and pay more to third party software developers than we can. We believe that the main competitive factors in the interactive entertainment software industry include: . product features . brand name recognition . access to distribution channels . quality . ease of use, price, marketing support and quality of customer service. We compete primarily with other publishers of PC and video game console interactive entertainment software. Significant competitors include: . Electronic Arts Inc. . Activision, Inc. . Infogrames Entertainment . Microsoft Corporation . LucasArts Entertainment Company . Midway Games Inc. . Acclaim Entertainment, Inc. . Havas Interactive . Hasbro, Inc. . The 3DO Company 8 . Take Two Interactive Software, Inc. . Eidos PLC . THQ Inc. In addition, integrated video game console hardware/software companies such as Sony Computer Entertainment, Nintendo and Sega compete directly with us in the development of software titles for their respective platforms. Large diversified entertainment companies, such as The Walt Disney Company, many of which own substantial libraries of available content and have substantially greater financial resources, may decide to compete directly with us or to enter into exclusive relationships with our competitors. We also believe that the overall growth in the use of the Internet and on-line services by consumers may pose a competitive threat if customers and potential customers spend less of their available home PC time using interactive entertainment software and more using the Internet and on-line services. Retailers of our products typically have a limited amount of shelf space and promotional resources, and there is intense competition among consumer software producers, and in particular interactive entertainment software products, for high quality retail shelf space and promotional support from retailers. To the extent that the number of consumer software products and computer platforms increases, competition for shelf space may intensify and may require us to increase our marketing expenditures. Due to increased competition for limited shelf space, retailers and distributors are in an increasingly better position to negotiate favorable terms of sale, including price discounts, price protection, marketing and display fees and product return policies. Our products constitute a relatively small percentage of any retailer's sale volume, and we cannot assure you that retailers will continue to purchase our products or to provide our products with adequate levels of shelf space and promotional support. A prolonged failure in this regard may have a material adverse effect on our business, operating results and financial condition. Dependence on Distribution Channels; Risk of Customer Business Failures; Product Returns We currently sell our products directly through our own sales force to mass merchants, warehouse club stores, large computer and software specialty chains through catalogs in the U.S. and Canada, as well as to certain distributors. Outside North America, we generally sell products to third party distributors. Our sales are made primarily on a purchase order basis, without long-term agreements. The loss of, or significant reduction in sales to, any of our principal retail customers or distributors could materially adversely affect our business, operating results and financial condition. The distribution channels through which publishers sell consumer software products evolve continuously through a variety of means, including consolidation, financial difficulties of certain distributors and retailers, and the emergence of new distributors and new retailers such as warehouse chains, mass merchants and computer superstores. As more consumers own PCs, the distribution channels for interactive entertainment software will likely continue to change. Mass merchants have become the most important distribution channels for retail sales of interactive entertainment software. A number of these mass merchants have entered into exclusive buying arrangements with other software developers or distributors, which arrangements could prevent us from selling certain of our products directly to that mass merchant. If the number of mass merchants entering into exclusive buying arrangements with our competitors were to increase, our ability to sell to such merchants would be restricted to selling through the exclusive distributor. Because sales to distributors typically have a lower gross profit than sales to retailers, this would have the effect of lowering our gross profit. This trend could have a material adverse impact on our business, operating results and financial condition. In addition, emerging methods of distribution, such as the Internet and on-line services, may become more important in the future, and it will be important for us to maintain access to these channels of distribution. 9 We cannot assure you that we will maintain access or that our access will allow us to maintain our historical sales volume levels. Distributors and retailers in the computer industry have from time to time experienced significant fluctuations in their businesses, and a number have failed. The insolvency or business failure of any significant distributor or retailer of our products could have a material adverse effect on our business, operating results and financial condition. We typically make sales to distributors and retailers on unsecured credit, with terms that vary depending upon the customer and the nature of the product. Although we have insolvency risk insurance to protect against our customers' bankruptcy, insolvency or liquidation, this insurance contains a significant deductible and a co-payment obligation, and the policy does not cover all instances of non-payment. In addition, while we maintain a reserve for uncollectible receivables, the reserve may not be sufficient in every circumstance. As a result, a payment default by a significant customer could have a material adverse effect on our business, operating results and financial condition. We are exposed to the risk of product returns and markdown allowances with respect to our distributors and retailers. We allow distributors and retailers to return defective, shelf-worn and damaged products in accordance with negotiated terms, and also offer a 90-day limited warranty to our end users that our products will be free from manufacturing defects. In addition, we provide markdown allowances to our customers to manage our customers' inventory levels in the distribution channel. Although we maintain a reserve for returns and markdown allowances, and although our agreements with certain of our customers place certain limits on product returns and markdown allowances, we could be forced to accept substantial product returns and provide markdown allowances to maintain our relationships with retailers and our access to distribution channels. Product return and markdown allowances that exceed our reserves could have a material adverse effect on our business, operating results and financial condition. In this regard, our results of operations for the year ended December 31, 1999 were adversely affected by a higher than expected level of product returns and markdown allowances, which reduced our net revenues. We may continue to experience such high levels of product returns and markdown allowances in future periods, which could have a material adverse effect on our business, operating results and financial condition. Shares Eligible for Future Sale In 1999, we entered into two Stock Purchase Agreements with Titus, pursuant to which Titus purchased 10,795,455 shares of our Common Stock from us for an aggregate purchase price of $35 million. As part of the agreements, Titus' chairman and chief executive officer became our president, and our chairman and chief executive officer exchanged 2 million personal shares of our Common Stock for an agreed upon number of Titus shares. As a result of these transactions, Titus currently owns approximately 43 percent of our outstanding common stock. In addition, Titus purchased 719,424 shares of Preferred Stock from us in April 2000. The Preferred Stock is convertible by Titus, redeemable by us, and accrues a six percent dividend per year. Titus may convert the Preferred Stock at any time after May 2001, at which time the Preferred Stock shares would be convertible into at least 7,194,240 shares of our Common Stock. Titus also received warrants to purchase up to 500,000 shares of our Common Stock. If we default on the line of credit, and Titus is forced to pay on their corporate guarantee, the Series A Preferred Stock may become convertible into up to 42.8 million shares of our Common Stock. We have agreed to register all of the unregistered shares of our Common Stock held by Titus for resale under the Securities Act of 1933, as amended. This registration could temporarily impair our ability to raise capital through the sale of our equity securities, and, if such registered shares are sold, could have a material adverse effect on the market price of our Common Stock. 10 Dependence upon Third Party Licenses Many of our products, such as our Star Trek, Advanced Dungeons and Dragons and the Caesar's Palace titles, are based on original ideas or intellectual properties licensed from other parties. We cannot assure you that we will be able to obtain new licenses, or renew existing licenses, on commercially reasonable terms, if at all. For example, Viacom Consumer Products, Inc. has granted the Star Trek license to another party upon the expiration of our rights in 2002. If we are unable to obtain licenses for the underlying content that we believe offers the greatest consumer appeal, we would either have to seek alternative, potentially less appealing licenses, or release the products without the desired underlying content, either of which could have a material adverse effect on our business, operating results and financial condition. We cannot assure you that acquired properties will enhance the market acceptance of our products based on those properties. We also cannot assure you that our new product offerings will generate net revenues in excess of their costs of development and marketing or minimum royalty obligations, or that net revenues from new product sales will meet or exceed net revenues from existing product sales. Dependence on Licenses from and Manufacturing by Hardware Companies We are required to obtain a license to develop and distribute software for each of the video game console platforms for which we develop products, including a separate license for each of North America, Japan and Europe. We have obtained licenses to develop software for the Sony PlayStation and PlayStation 2, as well as video game platforms from Nintendo, Microsoft and Sega. We cannot assure you that we will be able to obtain licenses from hardware companies on acceptable terms or that any existing or future licenses will be renewed by the licensors. In addition, Sony Computer Entertainment, Nintendo and Sega each have the right to approve the technical functionality and content of the Company's products for such platform prior to distribution. Due to the nature of the approval process, we must make significant product development expenditures on a particular product prior to the time we seek these approvals. Our inability to obtain these approvals could have a material adverse effect on our business, operating results and financial condition. Hardware companies such as Sony Computer Entertainment, Nintendo, Sega and Microsoft may impose upon their licensees a restrictive selection and product approval process, such that those licensees are restricted in the number of titles that will be approved for distribution on the particular platform. While we have prepared our future product release plans taking this competitive approval process into consideration, if we incorrectly predict its impact and fail to obtain approvals for all products in our development plans, this failure could have a material adverse effect on our business, operating results and financial condition. We depend upon Sony Computer Entertainment, Nintendo and Sega for the manufacture of our products that are compatible with their respective video game consoles. As a result, Sony Computer Entertainment, Nintendo, Sega and Microsoft have the ability to raise prices for supplying these products at any time and effectively control the timing of our release of new titles for those platforms. PlayStation and Dreamcast products consist of CD-ROMs and are typically delivered by Sony Computer Entertainment and Sega, respectively, within a relatively short lead time. Other media may entail longer lead times depending on the manufacturer. If we experience unanticipated delays in the delivery of video game console products from Sony Computer Entertainment, Sega, Nintendo or Microsoft, or if actual retailer and consumer demand for our interactive entertainment software differs from our forecast, our business, operating results and financial condition could be materially adversely affected. Dependence on Key Personnel Our success depends to a significant extent on the continued service of our key product design, development, sales, marketing and management personnel, and in particular on the leadership, strategic 11 vision and industry reputation of our founder and Chief Executive Officer, Brian Fargo. Our future success will also depend upon our ability to continue to attract, motivate and retain highly qualified employees and contractors, particularly key software design and development personnel. Competition for highly skilled employees is intense, and we cannot assure you that we will be successful in attracting and retaining such personnel. Specifically, we may experience increased costs in order to attract and retain skilled employees. Our failure to retain the services of Brian Fargo or other key personnel or to attract and retain additional qualified employees could have a material adverse effect on our business, operating results and financial condition. Risks Associated with International Operations; Currency Fluctuations Our international net revenues accounted for 28 and 30 percent of our total net revenues for the nine months ended September 30, 2000 and 1999, respectively. In February 1999, we entered into an International Distribution Agreement with Virgin for the exclusive distribution of our products in selected international territories. We intend to continue to expand our direct and indirect sales, marketing and product localization activities worldwide. This expansion will require a great deal of management time and attention and financial resources in order to develop improved international sales and support channels. We cannot assure you, however, that we will be able to maintain or increase international market demand for our products. Our international sales and operations are subject to a number of inherent risks, including the following: . the impact of recessions in foreign economies . the time and financial costs associated with translating and localizing products for international markets . longer accounts receivable collection periods . greater difficulty in accounts receivable collection . unexpected changes in regulatory requirements . difficulties and costs of staffing and managing foreign operations . foreign currency exchange rate fluctuations . political and economic instability . dependence on Virgin as an exclusive distributor for Europe. These factors may have a material adverse effect on our future international net revenues and, consequently, on our business, operating results and financial condition. We currently do not engage in currency hedging activities. Although exposure to currency fluctuations to date has been insignificant, we cannot assure you that fluctuations in currency exchange rates in the future will not have a material adverse effect on net revenues from international sales and licensing, and thus on our business, operating results and financial condition. Risks Associated with New European Currency On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing sovereign currencies and a new European currency, the euro. These eleven countries adopted the euro as the common legal currency on that date. We make a significant portion of our sales to these countries. Consequently, we anticipate that the euro conversion will, among other things, create technical challenges to adapt information technology and other systems to accommodate euro-denominated transactions. The euro conversion may also limit our ability to charge different prices for our products in different markets. While we anticipate that the conversion will not cause major disruption of our business, the conversion may have a material effect on our business or financial condition. 12 Protection of Proprietary Rights We regard our software as proprietary and rely on a combination of patent, copyright, trademark and trade secret laws, employee and third party nondisclosure agreements and other methods to protect our proprietary rights. We own or license various copyrights and trademarks, and hold the rights to one patent application related to the software engine for one of our titles. While we provide "shrinkwrap" license agreements or limitations on use with our software, it is uncertain to what extent these agreements and limitations are enforceable. We are aware that some unauthorized copying occurs within the computer software industry, and if a significantly greater amount of unauthorized copying of our interactive entertainment software products were to occur, our operating results could be materially adversely affected. While we use copy protection on some of our products, we do not provide source code to third parties unless they have signed nondisclosure agreements with respect to that source code. We rely on existing copyright laws to prevent unauthorized distribution of our software. Existing copyright laws afford only limited protection. Policing unauthorized use of our products is difficult, and software piracy can be a persistent problem, especially in certain international markets. Further, the laws of certain countries where our products are or may be distributed either do not protect our products and intellectual property rights to the same extent as the laws of the U.S. or are weakly enforced. Legal protection of our rights may be ineffective in such countries, and as we leverage our software products using emerging technologies, such as the Internet and on-line services, our ability to protect our intellectual property rights and to avoid infringing others' intellectual property rights may be diminished. We cannot assure you that existing intellectual property laws will provide adequate protection for our products in connection with these emerging technologies. As the number of interactive entertainment software products in the industry increases and the features and content of these products continues to overlap, software developers may increasingly become subject to infringement claims. Although we make reasonable efforts to ensure that our products do not violate the intellectual property rights of others, we cannot assure you that claims of infringement will not be made. Any such claims, with or without merit, can be time consuming and expensive to defend. From time to time, we receive communications from third parties regarding such claims. We cannot assure you that existing or future infringement claims against us will not result in costly litigation or require us to license the intellectual property rights of third parties, either of which could have a material adverse effect on our business, operating results and financial condition. Entertainment Software Rating System; Governmental Restrictions Legislation is periodically introduced at the state and federal levels in the U.S. and in foreign countries to establish a system for providing consumers with information about graphic violence and sexually explicit material contained in interactive entertainment software products. Such a system would include procedures for interactive entertainment software publishers to identify particular products within defined rating categories and communicate these ratings to consumers through appropriate package labeling and through advertising and marketing presentations. In addition, many foreign countries have laws that permit governmental entities to censor the content of certain works, including interactive entertainment software. In certain instances, we may be required to modify our products to comply with the requirements of these governmental entities, which could delay the release of those products in those countries. Those delays could have a material adverse effect on our business, operating results and financial condition. While we currently voluntarily submit our products to industry-created review boards and publish their ratings on our game packaging, we believe that mandatory government-run interactive entertainment software products rating systems eventually will be adopted in many countries that represent significant markets or potential markets for our products. Due to the uncertainties inherent in the implementation of such rating systems, confusion in the marketplace may occur, and we are unable to 13 predict what effect, if any, such rating systems would have on our business. In addition to such regulations, certain retailers have in the past declined to stock certain of our products because they believed that the content of the packaging artwork or the products would be offensive to the retailer's customer base. While to date these actions have not had a material adverse effect on our business, operating results or financial condition, we cannot assure you that similar actions by our distributors or retailers in the future would not have a material adverse effect on our business, operating results and financial condition. Control by Directors and Officers Including Titus, our directors and executive officers beneficially own voting stock with total of about 60 percent of the aggregate Common Stock voting power in the Company. In addition, Titus holds Preferred Stock entitled to 7,619,047 votes, or approximately 20 percent of overall voting power. Together, Titus and our directors and executive officers could, under certain circumstances, gain substantial additional voting power. See "Factors Affecting Future Performance - - Control by Titus". These stockholders can control substantially all matters requiring our stockholders' approval, including the election of directors (subject to our stockholders' cumulative voting rights) and the approval of mergers or other business combination transactions. This concentration of voting power could discourage or prevent a change in control. Development of Internet/On-Line Services or Products We seek to establish an on-line presence by creating and supporting sites on the Internet. Our future plans envision conducting and supporting on-line product offerings through these sites or others. Our ability to successfully establish an on-line presence and to offer online products will depend on several factors outside our control. These factors include the emergence of a robust online industry and infrastructure and the development and implementation of technological advancements to the Internet to increase bandwidth to the point that will allow us to conduct and support on-line product offerings. Because global commerce and the exchange of information on the Internet and other similar open, wide area networks are relatively new and evolving, we cannot assure you that a viable commercial marketplace on the Internet will emerge from the developing industry infrastructure or that the appropriate complementary products for providing and carrying Internet traffic and commerce will be developed. We also cannot assure you that we will be able to create or develop a sustainable or profitable on-line presence or that we will be able to generate any significant revenue from on-line product offerings in the near future, if at all. If the Internet does not become a viable commercial marketplace, or if this development occurs but is insufficient to meet our needs or if such development is delayed beyond the point where we plan to have established an on-line service, our business, operating results and financial condition could be materially adversely affected. Risks Associated with Acquisitions As part of our strategy to enhance distribution and product development capabilities, we intend to review potential acquisitions of complementary businesses, products and technologies. Some of these acquisitions could be material in size and scope. While we will continue to search for appropriate acquisition opportunities, we cannot assure you that the Company will be successful in identifying suitable acquisition opportunities. If we do identify any potential acquisition opportunity, we cannot assure you that we will consummate the acquisition, and if the acquisition does occur, we cannot assure you that it will be successful in enhancing our business or will increase our earnings. As the interactive entertainment software industry continues to consolidate, we may face increased competition for acquisition opportunities, which may inhibit our ability to complete suitable transactions or increase their cost. Future acquisitions could also divert substantial management time, result in short term reductions in 14 earnings or special transactions or other charges and may be difficult to integrate with existing operations or assets. We may, in the future, issue additional shares of Common Stock in connection with one or more acquisitions, which may dilute our stockholders. Additionally, with respect to future acquisitions, our stockholders may not have an opportunity to review the financial statements of the entity being acquired or to vote on these acquisitions. Anti-Takeover Effects; Delaware Law and Certain Charter and Bylaw Provisions Our Certificate of Incorporation and Bylaws, as well as Delaware corporate law, contain certain provisions that could delay, defer or prevent a change in control and could materially adversely affect the prevailing market price of our Common Stock. Certain of these provisions impose various procedural and other requirements that could make it more difficult for stockholders to take certain corporate actions. Stock Price Volatility The trading price of our Common Stock has been and could continue to be subject to wide fluctuations in response certain factors, including: . quarter to quarter variations in results of operations . our announcements of new products . our competitors' announcements of new products . our product development or release schedule . general conditions in the computer, software, entertainment, media or electronics industries . changes in earnings estimates or buy/sell recommendations by analysts . investor perceptions and expectations regarding our products, plans and strategic position and those of our competitors and customers . other events or factors In addition, the public stock markets experience extreme price and trading volume volatility, particularly in high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons often unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our Common Stock. WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed a registration statement on Form S-3 with the SEC with respect to the Common Stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules that are part of the registration statement. You may read and copy any document we file at the SEC's public reference rooms in Washington D.C. We refer you to the registration statement and the exhibits and schedules thereto for further information with respect to us and our Common Stock. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC's website at www.sec.gov. We are subject to the information and periodic reporting requirements of the Securities Exchange Act and, in accordance with those requirements, will continue to file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will 15 be available for inspection and copying at the SEC's public reference rooms and the SEC's website referred to above. The SEC allows us to "incorporate by reference" the information we file with the SEC, which means that we can disclose important information to you by referring to those documents. We incorporate by reference the documents listed below and any additional documents filed by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of securities is terminated. The information we incorporate by reference is an important part of this prospectus, and any information that we file later with the SEC will automatically update and supersede this information. The documents we incorporate by reference are: 1. our Annual Report on Form 10-K for the year ended December 31, 1999, as amended; 2. our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000; 3. our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000; 4. our Quarterly Report on Form 10-Q for the quarter ended September 30, 2000; 5. the description of our capital stock contained in our Registration Statement on Form 8-A; 6. the Current Report on Form 8-K dated May 26, 2000; and 7. all other reports filed by us pursuant to Section 13(a) or 15(d) of the SEC Exchange Act since December 31, 1999. You may request a copy of these filings, at no cost, by writing or calling us at Interplay Entertainment Corp., 16815 Von Karman Avenue, Irvine, California 92606, telephone number (949) 553-6655, Attention: Victor Sze. You should rely only on the information contained in this prospectus or any supplement and in the documents incorporated by reference above. We have not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus or any supplement or in the documents incorporated by reference is accurate on any date other than the date on the front of those documents. USE OF PROCEEDS The proceeds from the sale of each selling stockholder's Common Stock will belong to that selling stockholder. We will not receive any proceeds from such sales. SELLING STOCKHOLDERS In connection with the private placement of shares of Common Stock to certain stockholders, we agreed to file a registration statement with the SEC to register the shares of our Common Stock we issued to those stockholders for resale by them, and to keep the registration statement effective until certain shares registered hereunder are sold. The registration statement of which this prospectus is a part was filed with the SEC pursuant to the stock purchase agreements we entered into with each of the selling stockholders. The following table sets forth: (1) the name of each of the stockholders for whom we are registering shares under this registration statement; (2) the number of shares of our Common Stock owned by each such stockholder prior to this offering, and (3) the number of shares, and (if one percent or more) 16 the percentage of the total of the outstanding shares, of our Common Stock to be owned by each such stockholder after this offering, assuming that all of the shares of our Common Stock owned by each such stockholder are sold and that such stockholders acquire no additional shares of our Common Stock prior to the completion of this offering.
Percentage of Common Stock Owned Common Stock Common Stock Upon Common Stock Owned Being Offered Owned Upon Completion Prior to the Pursuant to this Completion of of this Name Offering Prospectus this Offering Offering ------------------------------ ------------------ ---------------- -------------- --------------- RuneCraft Limited/(1)/ 484,848 484,848 0 * Titus Interactive, SA/(2)/ 13,167,255 12,795,455 371,800 1.2 Richard S. F. Lehrberg/(3)/ 705,000 56,208 648,792 2.1
____________________ * less than 1% (1) In April 1999, we entered into a Restricted Stock Purchase Agreement with RuneCraft Limited ("RuneCraft") pursuant to which RuneCraft purchased 484,848 shares of our Common Stock in exchange for rights to certain products. The Restricted Stock Purchase Agreement requires us to register the stock purchased, and provides us with rights to repurchase the stock under certain circumstances. To our knowledge, the number of shares of Common Stock that RuneCraft Limited owned prior to this offering consists solely of those shares of Common Stock issued in connection with a Stock Purchase Agreement that we entered into with RuneCraft in April 1999. (2) In March 1999, we entered into a Stock Purchase Agreement with Titus Interactive SA pursuant to which we sold Titus a total of 4,545,455 shares of our Common Stock. In July 1999, we entered into another Stock Purchase Agreement with Titus, pursuant to which we sold Titus 6,250,000 shares of our Common Stock in November 1999. In connection with the second Stock Purchase Agreement, Brian Fargo, our Chairman and Chief Executive Officer, entered into an Exchange Agreement with Titus pursuant to which he exchanged 2,000,000 shares of his own shares of our Common Stock for 96,666 shares of Titus Common Stock in November 1999. Titus currently owns 12,817,255 shares of our Common Stock, or approximately 42.5% of our outstanding Common Stock, and 719,424 shares of our Series A Preferred Stock constituting 100% of our outstanding Preferred Stock. Herve and Eric Caen, both executive officers of Titus, became members of our Board of Directors in November 1999. Herve Caen also began serving as our President in November 1999. The number of shares of Common Stock that Titus beneficially owned prior to this offering includes (a) the 4,545,455 shares of Common Stock we issued Titus in connection with the March 1999 Stock Purchase Agreement, (b) the 6,250,000 shares of Common Stock we issued Titus in connection with the July 1999 Stock Purchase Agreement, (c) the 2,000,000 shares of Brian Fargo's Common Stock that Titus received in November 1999 in exchange for 96,666 shares of Titus Common Stock, (d) 21,800 shares of our Common Stock that Titus purchased on the open market in February 1999, (e) 350,000 shares of stock subject to a warrant exercisable within sixty (60) days the date of this prospectus. (3) Mr. Lehrberg received 56,208 shares of our Common Stock in connection with his retirement as our Executive Vice President in 1999, and we have agreed to register such shares of stock. To our knowledge, the number of shares of Common Stock that Mr. Lehrberg owned prior to this offering includes 169,626 shares of our Common Stock currently held by Mr. Lehrberg, and 17 options to purchase 535,374 shares of our Common Stock that are exercisable by Mr. Lehrberg within sixty (60) days of the date of this prospectus, that are beneficially owned by Mr. Lehrberg under federal securities laws. PLAN OF DISTRIBUTION The shares of our Common Stock offered pursuant to this prospectus may be offered and sold from time to time by the selling stockholders listed in the preceding section, or their donees, transferees, pledgees or other successors in interest that receive such shares as a gift or other non-sale related transfer. These selling stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. All or a portion of the Common Stock offered by this prospectus may be offered for sale from time to time on the Nasdaq National Market or on one or more exchanges, or otherwise at prices and terms then obtainable, or in negotiated transactions. The distribution of these securities may be effected in one or more transactions that may take place on the over-the-counter market, including, among others, ordinary brokerage transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling stockholders. We will not receive any part of the proceeds from the sale of Common Stock. The selling stockholders and intermediaries through whom such securities are sold may be deemed "underwriters" within the meaning of the Securities Act, in which event commissions received by such intermediary may be deemed to be underwriting commissions under the Securities Act. We will pay all expenses of the registration of securities covered by this prospectus. The selling stockholders will pay any applicable underwriters' commissions and expenses, brokerage fees or transfer taxes. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed on by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. 18 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 14. Other Expenses of Issuance and Distribution - ----------------------------------------------------- The following sets forth the costs and expenses, all of which shall be borne by the Registrant, in connection with the offering of the shares of Common Stock pursuant to this Registration Statement: Securities and Exchange Commission Fee.. $12,873 Accounting Fees and Expenses*........... 10,000 Legal Fees and Expenses*................ 2,000 Printing Costs*......................... 1,000 Miscellaneous Expenses*................. 1,000 ------- Total.............................. $26,873 ======= * Estimated
Item 15. Indemnification of Directors and Officers. - --------------------------------------------------- (a) As permitted by the Delaware law, the Registrant's amended and restated certificate of incorporation eliminates the liability of directors to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent otherwise required by Delaware law. The Registrant also carries directors and officers liability insurance. (b) The Registrant's amended and restated certificate of incorporation provides that the Registrant will indemnify each person who was or is made a party to any proceeding by reason of the fact that such person is or was its director or officer against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith to the maximum extent authorized by Delaware law. The Registrant's bylaws provide for a similar indemnity to its directors and officers to the fullest extent authorized by Delaware law. (c) The Registrant has entered into indemnification agreements with each of its directors and officers providing for the indemnification of its directors and officers against any and all expenses, judgments, fines, penalties and amounts paid in settlement, to the fullest extent permitted by law. Item 16. Exhibits. - ------------------- 5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation. 10.1 Stock Purchase Agreement dated March 18, 1999 by and between the Company and Titus Interactive SA (incorporated herein by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998) 10.2 Restricted Stock Purchase Agreement dated April 30, 1999 by and between the Company and Runecraft Limited. 10.3 Stock Purchase Agreement dated July 20, 1999 by and among the Company, Titus Interactive SA and Brian Fargo (incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the three month period ended June 30, 1999). 10.4 Exchange Agreement dated July 20, 1999 by and among Titus Interactive SA, Brian Fargo, Herve Caen and Eric Caen (incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the three month period ended June 30, 1999). II-1 10.5 Agreement and Release dated November 30, 1999 by and between the Company and Richard S.F. Lehrberg. 23.1 Consent of Arthur Andersen LLP, independent public accountants. 23.2 Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation (included in Exhibit 5.1). 24.1 Power of Attorney (included on signature page to the registration statement at page II-4). Item 17. Undertakings. - ---------------------- The undersigned Registrant hereby undertakes: (a) (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. II-2 (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it has met all of the requirements for filing on Form S-3 and has caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on the 15th day of November, 2000. INTERPLAY ENTERTAINMENT CORP. By: /s/ Brian Fargo ------------------------------- Brian Fargo, Chairman and Chief Executive Officer POWER OF ATTORNEY We, the undersigned officers and directors of Interplay Entertainment Corp., do hereby constitute and appoint Brian Fargo and Manuel Marrero, and each of them, our true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, or any related registration statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- /s/ Brian Fargo Chairman of the Board and Chief November 15, 2000 - --------------------------------- Executive Officer Brian Fargo (Principal Executive Officer) /s/ Manuel Marrero Chief Financial Officer and Chief - --------------------------------- Operating Officer (Principal November 15, 2000 Manuel Marrero Financial Officer and Principal Accounting Officer) /s/ R. Stanley Roach - --------------------------------- Director November 15, 2000 R. Stanley Roach
II-4 Signature Title Date --------- ----- ---- /s/ James Barnett - --------------------------------- Director November 15, 2000 James Barnett /s/ Richard S.F. Lehrberg - --------------------------------- Director November 15, 2000 Richard S.F. Lehrberg
II-5 EXHIBIT INDEX
Exhibit Sequential Number Description Page Number - ------ ----------- ----------- 5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation. 10.1 Stock Purchase Agreement dated March 18, 1999 by and between the Company and Titus Interactive SA (incorporated herein by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998). 10.2 Restricted Stock Purchase Agreement dated April 30, 1999 by and between the Company and Runecraft Limited. 10.3 Stock Purchase Agreement dated July 20, 1999 by and among the Company, Titus Interactive SA and Brian Fargo (incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the three month period ended June 30, 1999). 10.4 Exchange Agreement dated July 20, 1999 by and among Titus Interactive SA, Brian Fargo, Herve Caen and Eric Caen (incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the three month period ended June 30, 1999). 10.5 Agreement and Release dated November 30, 1999 by and between the Company and Richard S.F. Lehrberg. 23.1 Consent of Arthur Andersen LLP, independent public accountants. 23.2 Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation (included in the Opinion filed as Exhibit 5.1). 24.1 Power of Attorney (included on signature page to the registration statement at page II-4).
II-6 EX-5.1 2 0002.txt OPINION OF STRADLING YOCCA CARLSON & RAUTH EXHIBIT 5.1 [Stradling Yocca Carlson & Rauth Letterhead] November 16, 2000 Interplay Entertainment Corp. 16815 Von Karman Ave. Irvine, CA 92606 Re: Registration Statement on Form S-3 Ladies and Gentlemen: At your request, we have examined the form of Registration Statement on Form S-3 (the "Registration Statement") being filed by Interplay Entertainment Corp., a Delaware corporation (the "Company"), with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 13,336,511 shares of the Company's Common Stock, $0.001 par value (the "Common Stock"), (i) 484,848 shares of which were issued to RuneCraft Limited ("RuneCraft") in connection with a Stock Purchase Agreement dated April 30, 1999 between the Company and RuneCraft, (ii) 4,545,455 shares of which were issued to Titus Interactive, SA ("Titus") by the Company in connection with the Stock Purchase Agreement dated March 18, 1999 between the Company, Titus and Brian Fargo, (iii) 6,250,000 shares of which were issued to Titus by the Company on November 9, 1999 in connection with the Stock Purchase Agreement dated July 20, 1999 between the Company, Titus and Brian Fargo, (iv) 2,000,000 shares of which were issued to Titus by Brian Fargo on November 9, 1999, in connection with the Exchange Agreement dated July 20, 1999 among the Company, Titus, Brian Fargo, Herve Caen and Eric Caen and (v) 56,208 shares of which were issued to Richard S. F. Lehrberg ("Lehrberg," and, together with RuneCraft and Titus, the "Selling Stockholders") in connection with an Agreement and Release dated November 30, 1999 between the Company and Lehrberg. The shares of Common Stock may be offered for resale from time to time by and for the account of the Selling Stockholders of the Company as named in the Registration Statement. We have reviewed the corporate actions of the Company in connection with this matter and have examined such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion. Based on the foregoing, it is our opinion that the 13,336,511 shares of Common Stock covered by the Registration Statement have been duly authorized and validly issued, and are fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ STRADLING YOCCA CARLSON & RAUTH EX-10.2 3 0003.txt RESTRICTED STOCK PURCHASE AGREEMENT DATED 04/30/99 EXHIBIT 10.2 RESTRICTED STOCK PURCHASE AGREEMENT THIS RESTRICTED STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of this 30th day of April, 1999, between RUNECRAFT LIMITED, a corporation organized under the laws of the United Kingdom, whose principal place of business is Unit 44/45, Batley Business and Technology Centre, Batley, West Yorkshire WF17 6ER, Company Registration Number 3349033 (hereinafter referred to as "Purchaser"), and INTERPLAY ENTERTAINMENT CORP., a Delaware corporation, whose principal place of business is 16815 Von Karman Avenue, Irvine, California 92606 (hereinafter referred to as the "Company"). A. WHEREAS, the Company and Purchaser have entered into that certain Multi-Product Agreement of even date herewith (the "Multi-Product Agreement"), pursuant to which Purchaser agreed to develop certain property on a work-for- hire basis for the Company in exchange for, among other things, Common Stock of the Company. B. WHEREAS, this Agreement is intended to effect the issuance of such Common Stock pursuant to the Multi-Product Agreement. C. WHEREAS, the board of directors of the Company has determined that the fair market value as of the date hereof is Two and One-Sixteenth Dollars ($2.0625) per share (the "Fair Market Value per Share"). NOW, THEREFORE, in consideration of the mutual promises and covenants set forth below, the parties hereto hereby agree as follows: 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall ----------- have their meanings as set forth in the Multi-Product Agreement. 2. ISSUANCE OF SHARES. The Company hereby sells to Purchaser and ------------------ Purchaser hereby purchases from the Company an aggregate of Four Hundred Eighty- Four Thousand Eight Hundred Forty-Eight (484,848) shares of Common Stock, $.001 par value, of the Company (the "Shares"), subject to the terms and conditions herein set forth. 3. CONSIDERATION. In exchange for the Shares, Purchaser shall perform its ------------- obligations under the Multi-Product Agreement. 4. VESTED AND NONVESTED SHARES DEFINED. Certain of the Shares owned by ----------------------------------- the Purchaser shall be subject to (a) restrictions on transfer and (b) the right and option of the Company to purchase the Shares as set forth herein. Hereinafter, the Shares which are not subject to such restrictions and right of the Company to purchase the Shares are sometimes referred to as "Vested Shares," and the Shares which are not so vested are sometimes referred to as the "Nonvested Shares". For purposes of this Agreement, the Shares shall vest and become Vested Shares in accordance with the following: upon the Company's Acceptance of each Product, 10% of the Shares originally issued to Purchaser hereunder shall become Vested Shares. Fractional Shares shall be rounded to the nearest whole number and half Shares shall be rounded up to the nearest whole number. 5. RESTRICTIONS ON TRANSFER. The Nonvested Shares shall not be sold, ------------------------ exchanged, transferred, pledged, hypothecated or otherwise disposed of, shall not be assigned or transferred, directly or indirectly and shall not be subject to execution, attachment or similar process, and any attempted sale or other disposition shall be null and void. 6. RIGHT OF PURCHASE. ----------------- a. In the event the Company exercises one of its Stock Repurchase Options resulting from a Delayed Delivery, a Missed Delivery, or a Cancelled Product, the Company, or its assignees, shall have an unconditional option to purchase from the Purchaser 10% of the Shares originally issued to Purchaser hereunder. The purchase price to be paid by the Company for such Shares shall be $0.001 per Share. Such option shall be exercised in accordance with Section 6(b) of this Agreement. b. For ninety (90) days after the date a Stock Repurchase Option arises, the Company, or its assignees, shall have the right to repurchase all or any part of such Shares resulting from the application of Section 6(a) by giving the Purchaser and/or any other person obligated to transfer the Shares written notice of the number of such Shares which the Company desires to purchase. The Company shall deliver to the Purchaser and/or any other person obligated to transfer the Shares, within such ninety (90) day period, a written notice indicating the number of Shares to be purchased by the Company, or its assignees. In the event that the Company, or its assignees, does not elect to exercise such Stock Repurchase Option under the terms of this Agreement and the Multi-Product Agreement within the above period, such Stock Repurchase Option shall expire. Such expiration shall not affect any other Stock Repurchase Options which the Company may have or obtain under the Multi-Product Agreement. c. In the event that the Company, or its assignees, has elected to exercise a Stock Repurchase Option as to part or all of the Shares within the period described above, the Company shall notify the Purchaser and/or any other person obligated to transfer the Shares as set forth in Section 6(b) above within the period described above and the Purchaser or such other person shall deliver to the Company, or its assignees, certificate(s) representing the Shares to be acquired by the Company within ten (10) days following the date of the notice from the Company, if in Purchaser's or such person's possession. The Company, or its assignees, shall deliver to the Purchaser against delivery of the Shares, checks of the Company, or its assignees, payable to the Purchaser and/or any other person obligated to transfer the Shares in the aggregate amount of the purchase price to be paid as set forth in Section 6(a) above or by cancellation of all or a portion of any outstanding indebtedness of Purchaser to the Company, or any combination thereof. -2- 7. S-3 REGISTRATION. ---------------- a. The Company shall use its best efforts to register all of the Shares on Form S-3 (or any similar form promulgated by the Securities and Exchange Commission) and undertake any related qualification or compliance prior to August 31, 1999. The Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 7: (a) if Form S-3 is not available for such offering by the Company; (b) if the Company shall furnish to Purchaser a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days; provided, however, that the Company shall not utilize this right more than once; or (c) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. b. The Company will use its best efforts to maintain the effectiveness for up to nine (9) months of any registration statement pursuant to which any of the Shares are being offered. c. Indemnification of Purchaser. ---------------------------- (1) The Company will indemnify and hold harmless Purchaser from and against any and all losses, claims, damages, expenses or liabilities (or any action in respect thereof), joint or several, to which it becomes subject under the Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse Purchaser for any legal or other expenses reasonably incurred by it, as such expenses are incurred, in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company); (ii) arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading; or (iii) any violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law; provided, however, that the indemnity contained in this Section 7(c) will not apply where such untrue statement or omission was made in such registration statement, preliminary or amended, preliminary prospectus or prospectus in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by or on behalf or Purchaser, expressly for use therein. Promptly after receipt by Purchaser of notice of the commencement of any action in respect of which indemnity may be sought against the Company, Purchaser will notify the Company in writing of the commencement thereof, and, subject to the provisions hereinafter stated, the Company shall assume the defense of such action (including the employment of counsel), and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company. Purchaser shall have the right to employ separate counsel in any such action and to participate in the defense thereof in the event the representation of Purchaser by counsel retained by or on the behalf of the Company would be inappropriate due to conflicts of interest between Purchaser and the Company, in which case the Company shall pay, as incurred, the fees and expenses of such separate counsel. (2) The Company shall not be liable to indemnify any person under this Section 7(c) for any settlement of any such action effected without the Company's consent (which consent shall not be unreasonably withheld). The Company shall not, except with the approval of Purchaser (which -3- approval will not be unreasonably withheld), consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation. d. Indemnification of Company. Purchaser will indemnify and hold -------------------------- harmless the Company, each of its directors, each of its officers who have signed the registration statement, each underwriter of the Shares (including any broker or dealer through whom any of such shares may be sold) and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities (or any action in respect thereof), joint or several, to which they or any of them may become subject under the Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer, underwriter or controlling person for any legal or other expenses reasonably incurred by it, as such expenses are incurred, in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by Purchaser, expressly for use therein; provided, however, that Purchaser's obligations hereunder shall be limited to an amount equal to the proceeds to Purchaser of the shares sold in such registration. Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against Purchaser, the Company will notify Purchaser in writing of the commencement thereof, and Purchaser shall, subject to the provisions hereinafter stated, assume the defense of such action (including the employment of counsel, who shall be counsel satisfactory to the Company) and the payment of expenses insofar as such action shall relate to the alleged liability in respect of which indemnity may be sought against Purchaser. The Company and each such director, officer, underwriter or controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof in the event the representation of the Company, any of its officers or directors or any underwriter or controlling person by counsel retained by or on the behalf of Purchaser would be inappropriate due to conflicts of interest between any such person and any other party represented by such counsel in such proceeding or action, in which case Purchaser shall pay, as incurred, the fees and expenses of such separate counsel. Notwithstanding the two preceding sentences, if the action is one in which the Company may be obligated to indemnify Purchaser pursuant to Section 7(b), the Company shall have the right to assume the defense of such action, subject to the right of Purchaser to participate therein as permitted by Section 7(b). Purchaser shall not be liable to indemnify any person for any settlement of any such action effected without Purchaser's consent (which consent shall not be unreasonably withheld). Purchaser shall not, except with the approval of the Company (which approval shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the party being so indemnified of a release from all liability in respect to such claim or litigation. e. Contribution. If the indemnification provided for in this Section ------------ 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in -4- connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. f. Expenses. The Company shall bear all costs and expenses of the -------- registration contemplated by this Agreement, including, but not limited to, printing, reasonable legal and accounting expenses, Securities and Exchange Commission filing fees and "blue sky" fees and expenses; provided, however, that the Company shall have no obligation to pay or otherwise bear any portion of the underwriter's commissions or discounts attributable to Purchaser's Shares being offered and sold by Purchaser, or any of such expenses if the payment of such expenses by the Company is prohibited by the laws of a state in which such offering is qualified and only to the extent so prohibited. -5- 8. LEGENDS. Each certificate representing the Shares now or hereafter ------- owned by the Purchaser shall be endorsed with the following legend: "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND REPURCHASE RIGHTS IN FAVOR OF THE CORPORATION AND/OR ITS NOMINEE(S), AS SET FORTH IN A RESTRICTED STOCK PURCHASE AGREEMENT. TRANSFER OF THESE SHARES MAY BE MADE ONLY IN COMPLIANCE WITH THE PROVISIONS OF SAID AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF SAID CORPORATION. SUCH TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS ARE BINDING ON TRANSFEREES OF THESE SHARES." 9. INVESTMENT REPRESENTATIONS. -------------------------- a. Purchaser represents and warrants that it is acquiring the Shares for its own account, not as a nominee or agent, for investment and not with a view to or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933 (the "1933 Act"). b. Purchaser understands that (i) the Shares have not been registered under the 1933 Act in reliance on a specific exemption therefrom, that they must be held by Purchaser indefinitely, and that Purchaser must therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the 1933 Act or is exempt from such registration; (ii) each certificate representing the Shares will be endorsed with the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. and (iii) the Company will instruct any transfer agent not to register the transfer of any of the Shares unless the conditions specified in the foregoing legend are satisfied. c. Purchaser has been furnished with such materials and has been given access to such information relating to the Company as Purchaser or its qualified representative has requested and Purchaser has been afforded the opportunity to ask questions regarding the Company and the Shares, all as it has found necessary to make an informed investment decision. d. Purchaser represents and warrants that it is either an accredited investor within the meaning of Regulation D under the 1933 Act, or by reason of its business or financial experience, or the business or financial experience of its professional advisor, it has the capacity to protect its own interests in connection with this transaction. 10. DEPOSIT OF SHARES. Company shall deposit the stock certificate(s) ----------------- representing the Shares with Purchaser. 11. RECAPITALIZATION. In the event that, as the result of a stock split ---------------- or stock dividend or combination of shares or any other change, or exchange for other securities, by reclassification, or -6- recapitalization of the Shares, the Purchaser shall be entitled to new or additional or different shares of stock or securities, the certificate or certificates for, or other evidences of, such new or additional or different shares or securities shall be imprinted with the legends provided in Sections 8 and 9 above, and shall be delivered to Purchaser. 12. SHARES FREE AND CLEAR. All Shares purchased by the Company (or its --------------------- assignees) pursuant to Section 6 of this Agreement shall be delivered by the Purchaser free and clear of all claims, liens and encumbrances of every nature (except the provisions of this Agreement, the Company's Certificate of Incorporation, as amended, and any conditions concerning the Shares imposed pursuant to any applicable provisions of federal or state securities laws), and the purchaser thereof shall acquire full and complete title and right to all of the Shares, free and clear of all claims, liens and encumbrances of every nature (again except for the provisions of this Agreement, the Company's Certificate of Incorporation, as amended, and such securities laws). 13. STOP-TRANSFER NOTICES. The Purchaser understands and agrees that, in --------------------- order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop-transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 14. MISCELLANEOUS ------------- a. Notices. Any notice required or permitted to be given to a party ------- pursuant to the provisions of this Agreement shall be in writing and shall be effective upon personal delivery or three (3) days following deposit with an internationally recognized courier service, postage prepaid and properly addressed to the party to be notified as set forth below such party's signature or at such other address as such party may designate by ten (10) days' advance written notice to the other parties hereto. b. Successors and Assigns. This Agreement and the rights and ---------------------- obligations of the parties hereunder shall inure to the benefit of, and be binding upon, their respective permitted successors, assigns and legal representatives. c. Severability. In the event one or more of the provisions of this ------------ Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. d. Amendments and Waivers. Any amendment or modification of this ---------------------- Agreement shall be effective only if evidenced by a written instrument executed by duly authorized representatives of the parties hereto. Any party may waive its individual rights hereunder, either prospectively or retroactively, which shall be effective only if evidenced by a written instrument executed by a duly authorized representative of such party. In no event shall such waiver of any rights hereunder constitute the waiver of such rights in any future instance unless the waiver so specifies in writing. e. Governing Law. This Agreement is being executed and delivered and ------------- is intended to be performed in, and shall be governed by and construed in accordance with, the laws of the State of California. -7- f. Attorneys' Fees. If any party shall bring an action in law or --------------- equity against another to enforce or interpret any of the terms, covenants and provisions of this Agreement, the prevailing party in such action shall be entitled to reasonable attorneys' fees which the other party hereby agrees to pay. g. Entire Agreement. This Agreement, along with the Multi-Product ---------------- Agreement, constitutes the entire agreement between the parties pertaining to its subject matter and supersedes all prior or contemporaneous written or oral agreements and understandings of the parties, either express or implied. h. Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be an original but all of which together shall constitute one instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -8- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year indicated above. COMPANY: INTERPLAY ENTERTAINMENT CORP. By:________________________________ Its:_______________________________ PURCHASER: RUNECRAFT LIMITED By:________________________________ Its:_______________________________ -9- EX-10.5 4 0004.txt AGREEMENT & RELEASE DATED NOVEMBER 30, 1999 EXHIBIT 10.5 AGREEMENT AND RELEASE This Agreement and Release (this "Agreement") is entered into as of November 30, 1999 by Interplay Entertainment Corp., a Delaware corporation ("Interplay") and Richard S.F. Lehrberg ("Lehrberg"), with reference to the following facts: A. Interplay has employed Lehrberg since 1991, and currently employs Lehrberg. B. Lehrberg has agreed to defer his 1994 and 1995 bonuses from Interplay in the aggregate amount of $139,000. C. Lehrberg has agreed to defer $40,000 of his 1999 salary from Interplay. D. Interplay and Lehrberg agree that 2001 will be the last year of the Company's employment of Lehrberg. E. In consideration for the payment of deferred amounts, and for the further consideration set forth in Exhibit "A", Lehrberg has agreed to release ----------- Interplay from any claims that Lehrberg may have against Interplay. Accordingly, the parties agree as follows: 1. Payments to Lehrberg. -------------------- 1.1. Payment Upon Execution. Upon execution of this Agreement, ---------------------- Interplay shall pay Lehrberg all of the following: 1.1.1. $50,000 in the form of a company check drawn upon immediately available funds. 1.1.2. 56,208 shares of Interplay common stock. Stock issued under this Section 1.1.2 shall be not have been registered with the Securities ------------- and Exchange Commission when issued. Interplay shall use its diligent efforts to so register the stock at the earliest practicable time. 1.2. Future Payments. --------------- 1.2.1. Time and Amount of Payments. Interplay shall pay to --------------------------- Lehrberg the following amounts at the following times: a. $42,000 on April 30, 2000; b. $42,000 on July 31, 2000; and c. $39,000 on October 31, 2000. 1.2.2. Manner of Payment. The payments set forth in Section ----------------- ------- 1.2.1 shall be in one of the following forms, or in any combination of the - ----- following forms (at Interplay's election): a. A company check drawn upon immediately available funds; and b. A vested and immediately exercisable option under Interplay's 1997 Stock Incentive Plan, as then amended, to purchase a number of shares of Interplay's common stock such that the aggregate market price of such shares minus the aggregate exercise price of such shares equals the amount of the payment to be made. 1.3. Payments Subject to Tax Withholding. All payments hereunder are ----------------------------------- subject to Interplay's customary tax withholdings. 2. Employment. ---------- 2.1. Employment for Remainder of 1999. Interplay shall employ -------------------------------- Lehrberg for the remainder of 1999 on the currently-existing terms of employment between Interplay and Lehrberg. At the end of 1999 Lehrberg shall cease accruing vacation time and paid sick days. On or before January 15, 2000, Interplay shall pay to Lehrberg the cash equivalent of any of Lehrberg's accrued and unused vacation time and paid sick days. 2.2. Resignation. Concurrent with the execution of this ----------- Agreement, Lehrberg shall execute a resignation from the offices of Director of Interplay and Director of Interplay Productions Limited, effective December 31, 1999, in the form attached as Exhibit "A". ----------- 2.3. Employment for 2000 and 2001. Concurrent with the ---------------------------- execution of this Agreement, Interplay and Lehrberg shall enter into an employment agreement, in the form attached hereto as Exhibit "B", providing for ----------- Interplay's employment of Lehrberg during the years 2000 and 2001. 3. Lehrberg Release. ---------------- 3.1. Release. For consideration set forth herein and in Exhibit "A", ------- ----------- Lehrberg releases Interplay from any and all obligations, liability, actions, causes of action, damages, and claims of any kind whatsoever arising out of or relating to any dealings involving Interplay and Lehrberg accruing prior to the date of this Agreement, whether such claims are known or unknown (each a Claim and collectively the "Claims"). Lehrberg acknowledges full and complete settlement and satisfaction of all Claims. 3.2. Binding Effect. This release shall bind Lehrberg and his -------------- administrators, successors and assigns, and shall inure to the benefit of Interplay and its predecessors, agents, employees, shareholders, officers, directors, attorneys, representatives, successors, assigns, partners, and affiliate entities (each a "Beneficiary" and collectively the "Beneficiaries"). 3.3. Representations and Warranties. Lehrberg represents and ------------------------------ warrants, for the benefit of Beneficiaries, as follows: -2- 3.3.1. That he has had the opportunity to seek legal counsel and is familiar with California Civil Code Section 1542, which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing this release, which if known by him must have materially affected his settlement with the debtor." Lehrberg waives all rights and benefits he may have under this code section, as well as under any other statute or common law principle of similar effect. 3.3.2. That he has not assigned or transferred, or purported to assign or transfer, to any other person any of the Claims, and that he is fully entitled to release the Claims. 3.3.3. That no representations, inducements, promises, agreements or warranties, oral or otherwise, have been made to Lehrberg that have not been embodied in this Agreement, and that he has entered into this Agreement without any reliance upon any such representations, inducements, promises, agreements or warranties. 3.4. Covenant Against Future Actions. Lehrberg will forever ------------------------------- refrain from commencing, prosecuting, joining as plaintiff or claimant, or otherwise aiding any lawsuit, action or other proceeding against any Beneficiary in connection with any Claim. 4. Miscellaneous. ------------- 4.1. Counterparts. This Agreement may be executed in one or ------------ more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.2. Entire Agreement. This Agreement constitutes the entire ---------------- agreement between the parties on the subject matter hereof. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all the parties. No waiver shall be binding unless executed in writing by the party making the waiver. No provision of this Agreement shall be interpreted for or against the drafting party. 4.3. Further Assurances. Each party agrees to execute and ------------------ acknowledge such other instruments as may be reasonably necessary to effect the transactions contemplated herein. 4.4. Governing Law. This Agreement shall be construed in accordance ------------- with and governed by the laws of the State of California, without regard to conflicts of laws principles. 4.5. Headings. Titles or captions contained herein are inserted as a --------- convenience and for reference, and in no way define, limit, extend or describe the scope of this Agreement or any provision thereof. 4.6. Notices. All notices, statements and other documents that ------- any party is required or desires to give to the other party hereunder shall be given in writing and shall be served in person, by express mail, by certified mail, by overnight delivery, or by facsimile to the -3- applicable address set forth below, or at such other addresses as may be designated in writing by such party in accordance with the terms of this Section ------- 4.6. - ---- If to Interplay: Interplay Entertainment Corp. Attention: Chief Executive Officer 16815 Von Karman Avenue Irvine, California 92606 Facsimile: (949) 252-0667 If to Lehrberg: Richard S.F. Lehrberg 1085 University Avenue Palo Alto, California 94301 Facsimile: (650) 323-0230 4.7. Severability. If a court of competent jurisdiction finds ------------ any provision of this Agreement to be void, invalid or unenforceable, such provision shall be curtailed only to the extent necessary to bring such provision within the requirements of the law, and such curtailment shall not affect the validity and enforceability of any other provision of this Agreement. 4.8. Successors and Assigns. This Agreement shall be binding ---------------------- on, and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns. 4.9. Venue. The parties hereto agree that all actions or ----- proceedings arising directly or indirectly from this Agreement shall be arbitrated or litigated by arbitrators or in courts having a situs within Orange County, California, and hereby consent to the jurisdiction of any local, state or federal court in which such an action is commenced that is located in Orange County, California. The parties agree (a) not to disturb such choice of forum, and (b) to waive the personal service of any and all process upon them, and consent that all such service of process may be made by certified or registered mail, return receipt requested, addressed to the respective parties. Wherefore, the parties have caused this Agreement to be executed as of the date first set forth above. "LEHRBERG" "INTERPLAY" Interplay Entertainment Corp. ________________________________ By: ________________________________ Richard S.F. Lehrberg Brian Fargo Chief Executive Officer -4- EXHIBIT "A" Resignation To Whom It May Concern: Effective December 31, 1999, I, Richard S.F. Lehrberg, resign from the following offices: Director of Interplay Entertainment Corp. Director of Interplay Productions Limited _______________________________ Richard S.F. Lehrberg EXHIBIT "B" Employment Agreement 7 EX-23.1 5 0005.txt CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference in this registration statement on Form S-3 of our reports dated April 14, 2000 included in Interplay Entertainment Corp.'s Form 10-K for the years ended December 31, 1999 and 1998, the eight months ended December 31, 1997, and the year ended April 30, 1997. /s/ Arthur Andersen LLP Orange County, California November 15, 2000 -----END PRIVACY-ENHANCED MESSAGE-----