-----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, CCSikVerFMbR+Y7MY6l61Gnc51lI6PIB6mPM5Z6CeVs/F1NxCF0gRDoUfmRCnRVx l8Qtoixb5lgUDwyGXec4hw== 0001170918-03-000189.txt : 20030430 0001170918-03-000189.hdr.sgml : 20030430 20030430172957 ACCESSION NUMBER: 0001170918-03-000189 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERPLAY ENTERTAINMENT CORP CENTRAL INDEX KEY: 0001057232 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330102707 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24363 FILM NUMBER: 03674371 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 10-K/A 1 iec10ka-2002.txt 10-K/A 2002 - AMENDMENT NO. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 0-24363 INTERPLAY ENTERTAINMENT CORP. (Exact name of the registrant as specified in its charter) DELAWARE 33-0102707 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 16815 VON KARMAN AVENUE, IRVINE, CALIFORNIA 92606 (Address of principal executive offices) (949) 553-6655 (Registrant's telephone number, including area code) Securities registered pursuant of Section 12 (b) of the Act: None Securities registered pursuant of Section 12 (g) of the Act: COMMON STOCK, $0.001 PAR VALUE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] As of June 28, 2002, the aggregate market value of voting common stock held by non-affiliates was $3,056,628, based upon the closing price of the Common Stock on that date. As of April 25, 2003, 93,849,176 shares of Common Stock of the Registrant were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. AMENDMENT NO. 1 TO THE ANNUAL REPORT ON FORM 10-K FILED BY INTERPLAY ENTERTAINMENT CORP. ON APRIL 1, 2003 The following Items comprising Part III were omitted from the Annual Report on Form 10-K filed by Interplay Entertainment Corp. (the "Company," "we," "us," or "our") on April 1, 2003 (the "Form 10-K"), as permitted by rules and regulations promulgated by the Securities Exchange Commission. Part III of that Form 10-K is hereby amended and restated to insert those Items as set forth herein. All capitalized terms used herein but not defined shall have the meanings ascribed to them in the Form 10-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT SUMMARY INFORMATION CONCERNING DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES The following table sets forth certain information regarding our directors and executive officers and certain significant employees, and their ages as of April 28, 2003. Directors Age Present Position --------- --- ---------------- Herve Caen 41 Chairman of the Board of Directors, Chief Executive Officer and Interim Chief Financial Officer Eric Caen 37 Director Nathan Peck 78 Director Michel Vulpillat 41 Director Michel Welter (1) (2) 44 Director Maren Stenseth (1) (2) 41 Director R. Parker Jones (1) 46 Director Phillip G. Adam 49 President Gary Dawson 53 Chief Operating Officer (1) Member of the Audit Committee of the Board of Directors. (2) Member of the Compensation Committee of the Board of Directors. Herve Caen and Eric Caen are brothers. There are no other family relationships between any director and/or any executive officer. BACKGROUND INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS HERVE CAEN joined us as President and a director in November 1999. Mr. Caen was appointed Interim Chief Executive Officer in January 2002 to fill the vacancy created by Brian Fargo's resignation in January 2002, and was appointed Chief Executive Officer later that year. In October 2002, Mr. Caen was appointed Interim Chief Financial Officer to fill the vacancy created by the resignation of our former Chief Financial Officer at that time. Mr. Caen has served as Chairman of our Board of Directors since September 2001. Mr. Caen has served as Chairman of the Board of Directors of Titus Interactive SA, an interactive entertainment software company, since 1991. Mr. Caen also served as Chief Executive Officer of Titus Interactive SA from 1991 to December 31, 2002. Mr. Caen also serves as Managing Director of Titus Interactive Studio, Titus SARL and Digital Integration Services, which positions he has held since 1985, 1991 and 1998, respectively. Mr. Caen also serves as Chief Executive Officer of Titus Software Corporation, Chairman of Titus Software UK Limited and Representative Director of Titus Japan KK, which positions he has held since 1988, 1991 and 1998, respectively. ERIC CAEN has served as a director since November 1999. Mr. Caen has served as a Director and as President of Titus Interactive SA since 1991. In January 2003, Mr. Caen was appointed Chief Executive Officer of Titus Interactive SA. Mr. Caen also serves as Vice President of Titus Software Corporation, Secretary and Director of Titus Software UK Limited and Director of Titus Japan KK and Digital Integration Limited, which positions 2 he has held since 1988, 1991, 1998 and 1998, respectively. Mr. Caen has also served as Managing Director of Total Fun 2, a French record production company, since 1998. Mr. Caen served as Managing director of Titus SARL from 1988 to 1991. NATHAN PECK joined us as interim Chief Administrative Officer in August 2001 and a director in September 2001. Mr. Peck's term as interim Chief Administrative Officer expired on December 31, 2002. Mr. Peck, however, remains on our Board of Directors. Prior to joining us, from November 1998 to August 2001, Mr. Peck served as a director and consultant to Virgin Interactive Entertainment, Limited. Virgin Interactive Entertainment, Limited is a developer, publisher, and distributor of video games in Europe. Mr. Peck also served as a consultant and director of Synthean, Inc., a business software development company, and is currently serving as a consultant for Tag-It Pacific, Inc., a trim distribution company serving the apparel industry. MICHEL H. VULPILLAT joined our Board of Directors in September 2001. Mr. Vulpillat is currently the owner of Edge LLC, a consulting company in the fields of international business and business engineering started in 1996. Mr. Vulpillat currently serves on the Board of Directors of Titus Interactive S.A., and has served as Vice President of Special Operations of Titus Interactive since 1998. From 1988 to 1994, Mr. Vulpillat co-founded and served as Chief Executive Officer of Titus Software Corporation. Mr. Vulpillat received a Ph.D in thermodynamics and fluid mechanics from ENSAM, a French University, and received various French Diplomas in business and mechanical engineering. MICHEL WELTER joined our Board of Directors in September 2001. Mr. Welter also serves as President of CineGroupe International, a Canadian company, which develops, produces and distributes animated television series and movies. From 1990 to the end of 2000, Mr. Welter served as President of Saban Enterprises where he launched the international merchandising for the hit series "Power Rangers" and was in charge of international business development where he put together numerous co-productions with companies in Europe and Asia. MAREN STENSETH joined our Board of Directors in November 2001. Ms. Stenseth, a Certified Public Accountant, has worked in public accounting since 1986, concentrating on business management for the entertainment industry. In December 1999, Ms. Stenseth initiated her practice in Santa Monica, California specializing in income taxation and personal financial planning. From 1997 to 1999, Ms. Stenseth was a Manager of Satriano and Hilton, Certified Public Accountants. R. PARKER JONES joined our Board of Directors in December 2001. From June 1990 to the present, Mr. Jones has served as Director of Manulife Financial, the Toronto based financial services company with offices throughout North America. Mr. Jones' responsibilities have been primarily focused on the Los Angeles real estate portfolio. Prior to Manulife, Mr. Jones was Vice President, Marketing at Westgroup, Inc. and Assistant Vice President at Lowe Enterprises (1985-1990), both Los Angeles area real estate development concerns. Mr. Jones received his B.A. in Political Science from the University of California, Los Angeles. PHILLIP G. ADAM joined us as Vice President of Sales and Marketing in December 1990, served as our Vice President of Business Development since October 1994, and has served as our President since October 2002. Prior to joining us, from January 1984 to December 1990, Mr. Adam served as President of Spectrum Holobyte, an interactive entertainment software publisher, where he was a co-founder. From May 1990 to May 1996, Mr. Adam served as the Chairman or a member of the Board of Directors of the Software Publishers Association and, during part of such period, as President of the Software Publishers Association. From March 1997 to March 1998 Mr. Adam served as the Chairman of the Public Policy Committee of the Interactive Digital Software Association. GARY DAWSON was appointed as our Vice President of Sales and Marketing in November 1999, and has served as our Chief Operating Officer since October 2002. Prior to joining us, from 1996 to November 1999, Mr. Dawson was Senior Vice President, Manufacturing and Production for Chorus Line, an apparel manufacturer. From 1993 to 1996, Mr. Dawson served as Vice President and General Manager, Lee Jeanswear for Lee Apparel, a manufacturer of denim products. 3 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, requires our executive officers, directors, and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC"). Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2002, all our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements, except for the following: each of Herve Caen, our Chairman, Chief Executive Officer and Interim Chief Financial Officer, Eric Caen, a Director, and Titus Interactive S.A., our majority stockholder, filed one late Form 4, each reporting late five transactions that occurred in March 2002 and June 2002, respectively; and Michel Welter filed one Form 5, reporting late a transaction that occurred in November 2002 that should have been reported on Form 4. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth certain information concerning compensation earned during the last three fiscal years ended December 31, 2002, by our Chief Executive Officer and each of our four other most highly compensated executive officers whose total salary and bonus during such year exceeded $100,000 (collectively, the "Named Executive Officers"). No other executive officer serving at December 31, 2002, received total salary and bonus during 2002 in excess of $100,000. SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION ------------------- ------------ SECURITIES UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION - --------------------------- ---- ------ ----- ------------ ------------ Herve Caen (1)................ 2002 $ 250,000 -- -- (2) Chairman of the Board of 2001 250,000 -- -- -- Directors, Chief Executive 2000 62,500 -- -- -- Officer and Interim Chief Financial Officer Nathan Peck (3)............... 2002 $ 115,800 -- -- -- Interim Chief Administrative 2001 33,775 -- -- -- Officer 2000 -- -- -- -- Phillip Adam.................. 2002 $ 168,000 -- -- $ 5,331(4) President 2001 168,000 -- -- 5,137(4) 2000 168,000 -- -- 4,815(4) Gary Dawson................... 2002 $ 185,000 -- -- -- Chief Operating Officer 2001 185,000 -- -- -- 2000 185,000 -- -- -- - ---------- (1) Mr. Caen joined us in November 1999 at an annual base salary of $250,000. In March 2003, the Compensation Committee approved an annual base salary increase from $250,000 to $360,000, retroactive from December 1, 2002. The Compensation Committee also approved additional annual compensation of $100,000 to be paid to Mr. Caen for services as our interim Chief Financial Officer, retroactive from October 4, 2002. Mr. Caen waived payment of his salary from November 1999 through October 2000. (2) Mr. Caen received 1,000 shares of our Common Stock pursuant to a non-discretionary grant made under the terms of our Employee Stock Purchase Program.
4 (3) Mr. Peck joined us as interim Chief Administrative Officer in August 2001 at an annual base salary of $115,800. His pro-rated annual base salary for fiscal 2001 was $33,775. Mr. Peck was later appointed as a director in September 2001. Mr. Peck resigned as interim Chief Administrative Officer effective December 31, 2002 but remains a Director. (4) Mr. Adam's other compensation consists of matching payments made under our 401(k) plan. STOCK OPTION GRANTS IN FISCAL 2002 There were no stock options granted to the Named Executive Officers during the year ended December 31, 2002. AGGREGATE OPTION EXERCISES AND 2002 YEAR-END OPTION VALUES There were no exercises of stock options during the year ended December 31, 2002 for any of the Named Executive Officers. NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT AT YEAR-END YEAR-END SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/ NAME ON EXERCISE REALIZED UNEXERCISABLE) UNEXERCISABLE)(1) - ---- ----------- -------- -------------- ----------------- Herve Caen -- -- -- -- Nathan Peck -- -- -- -- Phillip Adam -- -- 8,000/2,000 $0/$0 Gary Dawson -- -- 81,667/3,333 -- - ---------- (1) Represents an amount equal to the difference between the closing sale price for our common stock ($0.06) on the Over-The-Counter Bulletin Board on December 31, 2002, and the option exercise price, multiplied by the number of unexercised in-the-money options. None of the options held by the Named Executive Officers were in-the-money at year-end. DIRECTOR COMPENSATION. We pay our non-employee directors cash compensation of $5,000 per quarter for attendance at Board of Directors and committee meetings. EMPLOYMENT AGREEMENTS We entered into an employment agreement with Herve Caen for a term of three years through November 2002, pursuant to which he currently serves as our Chairman of the Board of Directors, Chief Executive Officer and Interim Chief Financial Officer. The employment agreement provides for an annual base salary of $250,000, with such annual raises as may be approved by the Board of Directors, plus annual bonuses at the discretion of the Board of Directors. Mr. Caen is also entitled to participate in the incentive compensation and other employee benefit plans established by us from time to time. Mr. Caen waived payment of his salary from November 1999 through October 2000. In March 2003, the Compensation Committee approved an annual base salary increase from $250,000 to $360,000, retroactive from December 1, 2002. Because the term of his current agreement has expired, Mr. Caen is negotiating a new agreement with the Compensation Committee. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Compensation Committee currently consists of Michel Welter and Maren Stenseth. From September 2001 through July 2002, Mr. Vulpillat served on the Compensation Committee. Mr. Vulpillat currently serves as a member of the board of directors of Titus Interactive S.A., a company for which Mr. Herve Caen was Chief Executive Officer, and served in such capacity during fiscal 2002. During 2002, decisions regarding executive compensation were made by the 5 Compensation Committee. None of the 2002 members of the Compensation Committee nor any of our 2002 executive officers or directors had a relationship that would constitute an interlocking relationship with executive officers and directors of another entity. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of April 25, 2003, unless otherwise indicated, certain information relating to the ownership of our Common Stock by (i) each person known by us to be the beneficial owner of more than five percent of the outstanding shares of our Common Stock, (ii) each of our directors, (iii) each of the Named Executive Officers, and (iv) all of our executive officers and directors as a group. Except as may be indicated in the footnotes to the table and subject to applicable community property laws, each such person has the sole voting and investment power with respect to the shares owned. The address of each person listed is in care of us, 16815 Von Karman Avenue, Irvine, California 92606, unless otherwise set forth below such person's name. Number of Shares Of Common Stock Name and Address Beneficially Owned(1) Percent(2) - ---------------- --------------------- ---------- DIRECTORS: Herve Caen............................. 67,450,021 (3)(4) 71.9% Eric Caen.............................. 67,449,021 (3) 71.9% Michel Welter.......................... 48,333 (5) * Nathan Peck............................ 0 -- Michel Vulpillat....................... 54,833 (6) * Maren Stenseth......................... 8,333 (7) * R. Parker Jones........................ 8,333 (8) * NON-DIRECTOR NAMED EXECUTIVE OFFICERS: Phillip Adam 206,779 (9) * Gary Dawson 81,667 (10) -- 5% HOLDERS: Titus Interactive SA................... 67,449,021 (3) 71.9% Parc de l'Esplanade 12, rue Enrico Fermi St-Thibault-des-Vignes 77462 Lagny-sur-Marne Cedex France Universal Studios, Inc................. 4,658,216 5.0% 100 Universal City Plaza Universal City, CA 91608 Directors and Executive Officers as a Group (9 persons)................. 67,768,632 (11) 72.2% - ---------- * Less than one percent. (1) Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options currently exercisable, or exercisable within 60 days of April 25, 2003, are deemed outstanding for computing the percentage of the person holding such options but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The information as to shares beneficially owned has been individually furnished by the respective directors, Named Executive Officers, and other stockholders, or taken from documents filed with the SEC. (2) Based on 93,849,176 shares of common stock outstanding as of April 25, 2003. (3) Includes 460,298 shares subject to warrants exercisable within 60 days of April 25, 2003. Messrs. Herve Caen and Eric Caen are officers, directors and principal shareholders of Titus Interactive SA. In such capacities Messrs. Herve Caen and Eric Caen may be deemed to beneficially own shares of common stock beneficially held by Titus, but disclaim such beneficial ownership, except to the extent of their economic interest in these shares. 6 (4) Includes 1,000 shares of our Common Stock issued to Mr. Caen in 2002 pursuant to a non-discretionary grant made under the terms of our Employee Stock Purchase Program. (5) Includes 8,333 shares subject to stock options exercisable within 60 days of April 25, 2003. (6) Includes 8,333 shares subject to stock options exercisable within 60 days of April 25, 2003. Mr. Vulpillat is currently a director of Titus and owns less than 0.1% of the outstanding capital stock of Titus. Mr. Vulpillat disclaims beneficial ownership of our shares held by Titus. (7) Includes 8,333 shares subject to stock options exercisable within 60 days of April 25, 2003. (8) Includes 8,333 shares subject to stock options exercisable within 60 days of April 25, 2003. (9) Includes 8,000 shares subject to stock options exercisable within 60 days of April 25, 2003. (10) Includes 81,667 shares subject to stock options exercisable within 60 days of April 25, 2003. (11) Includes 460,298 shares subject to warrants, and 33,332 shares subject to options, exercisable within 60 days of April 25, 2003. EQUITY COMPENSATION PLANS INFORMATION The following table sets forth certain information regarding the Company's equity compensation plans as of December 31, 2002.
Plan Category Number of securities to Weighted-average Number of securities be issued upon exercise exercise price of remaining available for of outstanding options, outstanding options, future issuance under equity warrants and rights warrants and rights compensation plans (excluding securities reflected in column (a)) - -------------------------------------------------------------------------------------------------------- (a) (b) (c) Equity compensation plans 1,091,697 3.10 8,107,275 approved by security holders Equity compensation plans - - - not approved by security holders ----------------------------------------------------------------------------- Total 1,091,697 3.10 8,107,275 =============================================================================
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Our operations involve significant transactions with Titus Interactive S.A., our majority stockholder ("Titus"), Virgin Interactive Entertainment Limited, a wholly-owned subsidiary of Titus ("Virgin"), and Vivendi Universal Games, Inc. ("Vivendi"), an owner of 5 percent of our common stock (through its ownership of Universal Studios, Inc.). In addition, we obtained financing from our former Chairman. TRANSACTIONS WITH TITUS INTERACTIVE S.A. We perform distribution services on behalf of Titus for a fee, whereby we distribute certain titles throughout North America and Australia. In connection with such distribution services, we recognized fee income of $22,000 for the year ended December 31, 2002. In March 2002, Titus converted its remaining 383,354 shares of Series A preferred stock into approximately 47.5 million shares of our common stock. Titus now owns approximately 67 million shares of common stock, which represents approximately 71.9 percent of our outstanding common stock, our only voting security, as of April 25, 2003. Also in March 2002, we entered into a distribution agreement with Titus pursuant to which we granted to Titus the exclusive right to distribute one of our products for the Sony Playstation console in North America, South America and Central America in exchange for a minimum guarantee of $100,000 for the first 71,942 units of the product sold, plus $.69 per unit on any product sold above the 71,942 units. In April 2002, we entered into an agreement with Titus, pursuant to which, among other things, we sold to Titus all right, title and interest in the games "EarthWorm Jim", "Messiah", "Wild 9", "R/C Stunt Copter", "Sacrifice", "MDK", "MDK II", and "Kingpin", and Titus licensed from us the right to develop, publish, manufacture and distribute 7 the games "Hunter I", "Hunter II", "Icewind Dale I", "Icewind Dale II", and "BG: Dark Alliance II" solely on Nintendo Advance GameBoy game system for the life of the games. As consideration for these rights, Titus issued to us a promissory note in the principal amount of $3.5 million, which note bears interest at 6 percent per annum. The promissory note was due on August 31, 2002, and may be paid, at Titus' option, in cash or in shares of Titus common stock with a per share value equal to 90 percent of the average trading price of Titus' common stock over the 5 days immediately preceding the payment date. Pursuant to our April 26, 2002 agreement with Titus, on or before July 25, 2002, we had the right to solicit offers from and negotiate with third parties to sell the rights and licenses granted under the April 26, 2002 agreement. If we had entered into a binding agreement with a third party to sell these rights and licenses for an amount in excess $3.5 million, we would have rescinded the April 26, 2002 agreement with Titus and recovered all rights granted and released Titus from all obligations thereunder. The Company's efforts to enter into a binding agreement with a third party were unsuccessful. Moreover, we have provided Titus with a guarantee under this agreement, which provides that in the event Titus does not achieve gross sales of at least $3.5 million by June 25, 2003, and the shortfall is not the result of Titus' failure to use best commercial efforts, we will pay to Titus the difference between $3.5 million and the actual gross sales achieved by Titus, not to exceed $2 million. We continue to negotiate with Titus to repurchase these assets for a purchase price payable by canceling the $3.5 million promissory note, and any unpaid accrued interest thereon. Concurrently, we and Titus would terminate any executory obligations relating to the original sale, including our obligation to pay Titus up to $2 million if Titus does not achieve gross sales of at least $3.5 million by June 25, 2003, and we would obtain all or a portion of any rights or benefits Titus may have negotiated during the time it has been exploiting these assets. As Titus is our majority stockholder and the probability of the agreement being terminated, we have offset the related note receivable in the amount of $3.5 million against the deferred revenue in the amount of $3.5 million. As of December 31, 2002, Titus owed us $200,000, and we owed Titus $321,000. Amounts due to Titus at December 31, 2002 consisted primarily of trade payables. In March 2003, we entered into a note receivable with Titus Software Corp., or "TSC", a subsidiary of Titus, for $226,000. The note earns interest at 8 percent per annum and is due in February 2004. The note is secured by (i) 4 million shares of our common stock held by Titus, (ii) TSC's rights in and to a note receivable due from the President of Interplay and (iii) rights in and to TSC's most current video game title releases during 2003 and 2004. In April 2003, we paid Europlay I, LLC ("Europlay"), a financial advisor originally retained by Titus, and subsequently retained by us, $448,000 in connection with prior services provided by Europlay to us. TRANSACTIONS WITH VIRGIN, A WHOLLY OWNED SUBSIDIARY OF TITUS In February 1999, we entered into an International Distribution Agreement with Virgin, which provides for the exclusive distribution of substantially all of our products in Europe, Commonwealth of Independent States, Africa and the Middle East for a seven-year period, cancelable under certain conditions, subject to termination penalties and costs. Under this agreement, as amended, we pay Virgin a distribution fee based on net sales, and Virgin provides certain market preparation, warehousing, sales and fulfillment services on our behalf. Under an April 2001 settlement, we paid Virgin a monthly overhead fee of $83,000 per month for the six month period beginning January 2002, with no further overhead commitment for the remainder of the term of the International Distribution Agreement. In connection with the International Distribution Agreement, we incurred distribution commission expense of $0.9 million for the year ended December 31, 2002. In addition, we recognized overhead fees of $0.5 million for the year ended December 31, 2002. We have also entered into a Product Publishing Agreement with Virgin, which provides us with an exclusive license to publish and distribute substantially all of Virgin's products within North America, Latin America and South America for a royalty based on net sales. As part of the terms of an April 2001 settlement between Virgin and us, the Product Publishing Agreement was amended to provide for us to publish only one future title developed by Virgin. In 8 connection with the Product Publishing Agreement with Virgin, we earned $66,000 for performing publishing and distribution services on behalf of Virgin for the year ended December 31, 2002. In connection with the International Distribution Agreement, we sublease office space from Virgin in the United Kingdom. Rent expense paid to Virgin was $104,000 for the year ended December 31, 2002. In June 1997, we entered into a Development and Publishing Agreement with Confounding Factor in which we agreed to commission the development of the game "Galleon" in exchange for an exclusive worldwide license to fully exploit the game and all derivates including all publishing and distribution rights. Subsequently, in March 2002, we entered into a Term Sheet with Virgin, pursuant to which Virgin assumed all responsibility for future milestone payments to Confounding Factor to complete development of "Galleon" and Virgin acquired exclusive rights to ship the game in certain territories. Virgin paid an initial $511,000 to Confounding Factor, but then ceased making the required payments. Subsequently, Virgin proposed that Interplay refund the $511,000 to Virgin and void the Term Sheet (except with respect to Virgin's rights to publish Galleon in Japan), which the independent Committee of our Board of Directors rejected. While reserving our rights vis-a-vis Virgin, we then resumed making payments to Confounding Factor to protect our interests in "Galleon." We are currently negotiating a settlement with Virgin regarding "Galleon" publishing rights. In January 2003, we and Virgin entered into a waiver related to the distribution of a video game title in which we sold the European distribution rights to Vivendi. In consideration for Virgin relinquishing its rights, we agreed to pay Virgin $650,000 and will pay Virgin 50 percent of all proceeds in excess of the advance received from Vivendi. As of December 31, 2002 the Company had paid Virgin $220,000 of the $650,000 due under the waiver agreement. We paid the remaining balance of $430,000 in January 2003. In February 2003, Virgin Interactive Entertainment (Europe) Limited ("Virgin Europe"), the operating subsidiary of Virgin filed for a Company Voluntary Arrangement, or CVA, a process of reorganization in the United Kingdom which must be approved by Virgin's creditors. Virgin owed us approximately $1.8 million under our International Distribution Agreement at December 31, 2002. As of March 28, 2003, the CVA was rejected by Virgin Europe's creditors, and Virgin Europe is presently negotiating with its creditors to propose a new CVA. We do not know what affect approval of the CVA will have on our ability to collect amounts Virgin owes us. If the new CVA is not approved, we expect Virgin to cease operations and liquidate, in which event we will most likely not receive any amounts presently due us by Virgin, and will not have a distributor for our products in Europe and the other territories in which Virgin presently distributes our products. In March 2003, we made a settlement payment of approximately $320,000 to a third-party on behalf of Virgin Europe to protect the validity of certain of our license rights and to avoid potential third-party liability from various licensors of our products, and incurred legal fees in the amount of approximately $80,000 in connection therewith. Consequently, Virgin owes us $400,000 pursuant to the indemnification provisions of the International Distribution Agreement. TRANSACTIONS WITH VIVENDI In August 2001, we entered into a distribution agreement with Vivendi (an affiliate company of Universal Studios, Inc., which currently owns approximately 5 percent of our common stock at December 31, 2002 but does not have representation on our Board of Directors) providing for Vivendi to become our distributor in North America through December 31, 2003 for substantially all of our products, with the exception of products with pre-existing distribution agreements. OEM rights were not among the rights granted to Vivendi under the distribution agreement. Under the terms of the agreement, as amended, Vivendi earns a distribution fee based on the net sales of the titles distributed. Under the agreement, Vivendi made four advance payments to us $10.0 million. In amendments to the agreement, Vivendi agreed to advance us an additional $3.5 million. The distribution agreement, as amended, provides for the acceleration of the recoupment of the advances made to us, as defined. During the three months ended March 31, 2002, Vivendi advanced us an additional $3.0 million bringing the total amounts advanced to us under the distribution agreement with Vivendi to $16.5 million. In April 2002, the distribution agreement was further amended to provide for Vivendi to distribute substantially all of our products through December 31, 2002, except certain future products, which 9 Vivendi would have the right to distribute for one year from the date of release. As of August 1, 2002, all distribution advances relating to the August 2001 agreement from Vivendi were fully recouped or repaid. In August 2002, we entered into a new distribution agreement with Vivendi whereby Vivendi will distribute substantially all of our products in North America for a period of three years as a whole and two years with respect to each product giving a potential maximum term of five years. Under the August 2002 agreement, Vivendi will pay us sales proceeds less amounts for distribution fees, price concessions and returns. Vivendi is responsible for all manufacturing, marketing and distribution expenditures, and bears all credit, price concessions and inventory risk, including product returns. Upon our delivery of a gold master to Vivendi, Vivendi will pay us as a minimum guarantee, a specified percent of the projected amount due us based on projected initial shipment sales, which are established by Vivendi in accordance with the terms of the agreement. The remaining amounts are due upon shipment of the titles to Vivendi's customers. Payments for future sales that exceed the projected initial shipment sales are paid on a monthly basis. As of December 31, 2002, Vivendi had advanced us $3.6 million related to future minimum guarantees on undelivered products. In February 2003, the Company sold to Vivendi all future interactive entertainment publishing rights to the "Hunter: The Reckoning" franchise for $15 million, payable in installments. The Company retains the rights to the previously published "Hunter: The Reckoning" titles on Microsoft Xbox and Nintendo GameCube. TRANSACTIONS WITH BRIAN FARGO, A FORMER OFFICER OF THE COMPANY In connection with our working capital line of credit obtained in April 2001, we obtained a $2 million personal guarantee in favor of the bank, secured by $1.0 million in cash, from Brian Fargo, the former Chairman of the company. In addition, Mr. Fargo provided us with a $3.0 million loan, payable in May 2002, with interest at 10 percent. In connection with the guarantee and loan, Mr. Fargo received warrants to purchase 500,000 shares of our common stock at $1.75 per share, expiring in April 2011. In January 2002, the bank redeemed the $1.0 million in cash pledged by Mr. Fargo in connection with his personal guarantee, and subsequently we agreed to pay that amount back to Mr. Fargo. The amount was fully paid in April 2002 in connection with the sale of Shiny. 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized, at Irvine, California this 30th day of April 2003. INTERPLAY ENTERTAINMENT CORP. /s/ Herve Caen By:_________________________________ Herve Caen Its: Chief Executive Officer and Interim Chief Financial Officer (Principal Executive and Financial and Accounting Officer) 11 Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Herve Caen, certify that: 1. I have reviewed this annual report on Form 10-K/A of Interplay Entertainment Corp.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 30, 2003 /s/ Herve Caen ----------------------- Herve Caen Chief Executive Officer 12 Certification of Interim CFO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Herve Caen, certify that: 1. I have reviewed this annual report on Form 10-K/A of Interplay Entertainment Corp.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 30, 2003 /s/ Herve Caen ------------------------------- Herve Caen Interim Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----