SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
- --------------------------------------------------------------------------------
INTERPLAY ENTERTAINMENT CORP.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(1) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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4) Date Filed:
Notes:
INTERPLAY ENTERTAINMENT CORP.
16815 Von Karman Avenue
Irvine, California 92606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 18, 2001
To the Stockholders of Interplay Entertainment Corp.:
An Annual Meeting of Stockholders of Interplay Entertainment Corp., a
Delaware corporation (the "Company"), will be held at The Marriott Long Beach
Airport, 4700 Airport Plaza Drive, Long Beach, California, on Tuesday,
September 18, 2001 at 5:00 p.m., Pacific Time, to consider and vote on the
following matters described in the attached Proxy Statement:
(1) The election of six directors to serve until the next Annual Meeting
of Stockholders or until their successors are elected and duly qualified;
(2) The ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending December 31,
2001; and
(3) Such other business as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on August 13, 2001,
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any postponement and adjournment thereof.
The Board of Directors welcomes the personal attendance of stockholders at
the meeting. However, please sign and return the enclosed proxy, which you may
revoke at any time prior to its use, whether or not you expect to attend the
meeting. A self-addressed, postage prepaid envelope is enclosed for your
convenience. Your proxy will not be used if you attend the meeting and choose
to vote in person.
By Order of the Board of Directors
/s/ Brian Fargo
Brian Fargo
Chairman of the Board of Directors
and Chief Executive Officer
Irvine, California
September 7, 2001
INTERPLAY ENTERTAINMENT CORP.
16815 Von Karman Avenue
Irvine, California 92606
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 18, 2001
5:00 p.m., Pacific Time
----------------
Solicitation and Revocation of Proxies
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Interplay Entertainment Corp., a Delaware corporation (the
"Company"), and the Company will bear the cost of such solicitation.
Solicitation of proxies will be primarily by mail, although some of the
officers, directors and employees of the Company may solicit proxies personally
or by telephone. No additional compensation will be paid to directors, officers
or other regular employees for such services. The Company will reimburse
brokerage houses and other custodians, nominees or fiduciaries for their
expenses in sending proxy materials to their principals.
The persons named as proxies were designated by the Board of Directors and
are currently serving as officers of the Company. All properly executed proxies
will be voted (except to the extent that authority to vote has been withheld)
and where a choice has been specified by the stockholder as provided in the
proxy, it will be voted in accordance with the specification so made. Proxies
submitted without specification will be voted FOR the election as directors of
the nominees proposed by the Board of Directors; and FOR the ratification of
Arthur Andersen LLP as the Company's independent auditors. As to any other
business properly submitted to the stockholders at the annual meeting, the
persons named in the proxy will vote as recommended by the Board of Directors
or, if no recommendation is given, in their discretion.
Any stockholder may revoke a proxy at any time before it is voted at the
meeting by a proxy bearing a later date. A proxy may also be revoked by any
stockholder by delivering written notice of revocation to the Secretary of the
Company or by voting in person at the meeting. Attendance at the meeting will
not, by itself, revoke a proxy.
This Proxy Statement and proxy are being mailed to stockholders of the
Company on or about September 7, 2001. The mailing address of the executive
offices of the Company is 16815 Von Karman Avenue, Irvine, California 92606.
Voting at the Meeting
Only record holders of common stock of the Company and record holders of the
Company's Series A preferred stock at the close of business on August 13, 2001,
will be entitled to notice of, and to vote at, the meeting. As of the record
date, there were 44,985,708 shares of the Company's common stock outstanding,
and 383,354 shares of the Company's Series A preferred stock outstanding. Each
share of common stock is entitled to one vote at the meeting and the holders of
Series A preferred stock currently have aggregate voting power equivalent to
7,619,047 shares of common stock. The presence in person or by proxy of the
holders of a majority of the votes entitled to be cast constitutes a quorum for
the transaction of business at the annual meeting. Abstentions and broker non-
votes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions are counted in tabulating
the votes cast on proposals presented to stockholders, whereas broker non-votes
are not counted for purposes of determining whether a proposal has been
approved. Ratification of the selection of Arthur Andersen, LLP as the
Company's independent auditors, and approval of any other matter that properly
comes before the annual meeting, must be accomplished by the affirmative vote
of at least a majority of the shares present or represented and entitled to be
voted at the annual meeting.
1
The Company's stockholders have cumulative voting rights when voting on the
election of members of the Company's Board of Directors. Cumulative voting
rights entitle each stockholder to the number of votes he or she would
otherwise have in the absence of cumulative voting rights, multiplied by the
number of directors to be elected. Each stockholder may cast all of the
resulting votes for a single director, or may distribute them among the
directors to be elected at the stockholder's discretion. In order to determine
how many votes a stockholder is entitled to cast as a consequence of cumulative
voting rights, the stockholder multiplies the total number of shares of the
Company's common stock owned by the number of directors being elected, in this
case six. The total that results is the number of votes the stockholder may
cast in the election of directors. The seven nominees receiving the most votes
will be elected. The proxies solicited by the Board of Directors confer
discretionary authority on the proxy holders to cumulate votes to elect the
nominees listed in this Proxy Statement. The proxy holder may cumulate votes to
elect one or several directors as may be necessary to elect the maximum number
of nominees.
PROPOSAL ONE
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect the maximum
number of the six proposed nominees named below unless contrary instructions
are given in the proxy. The election of directors shall be by the affirmative
vote of the holders of a plurality of the shares voting in person or by proxy
at the meeting. Each director is to hold office until the next annual meeting
or until his successor is duly elected and qualified.
The names and information concerning the persons nominated by the Board of
Directors to become directors at the meeting are set forth below. The Company's
Board of Directors recommends that you vote FOR the election of each of the
nominees named below. Shares represented by the proxies will be voted FOR the
election to the Board of Directors of the persons named below, with cumulative
votes cast as the proxies deem necessary to elect such persons, unless
authority to vote for nominees has been withheld in the proxy. Although each of
the persons named below has consented to serve as a director if elected and the
Board of Directors has no reason to believe that any of the nominees named
below will be unable to serve as a director, if any nominee withdraws or
otherwise becomes unavailable to serve, the persons named as proxies will vote
for any substitute nominee designated by the Board of Directors. The Board of
Directors does not have a nominating committee. The following information
regarding the nominees is relevant to your consideration of the slate proposed
by the Board of Directors:
Nominees for Director
Director
Name Age Principal Occupation Since
---- --- -------------------- --------
Brian Fargo............. 38 Chairman and Chief Executive Officer 1983
Herve Caen.............. 39 Chief Executive Officer, Titus Interactive, SA 1999
Eric Caen............... 36 President, Titus Interactive, SA 1999
Michel Welter(1)(2)..... 43 President, CineGroupe International N/A
Michel Henri Vulpillat.. 39 Consultant, Edge Consulting N/A
Nathan Peck............. 76 Consultant, PLN Associates, Inc. N/A
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(1) To serve as a member of the Audit Committee of the Board of Directors
following his election.
(2) To serve as a member of the Compensation Committee of the Board of
Directors following his election.
2
Brian Fargo, Chairman of the Company's Board of Directors, founded the
Company in 1983 and has served as the Company's chief executive officer since
that time. Prior to June 1995, Mr. Fargo also served as the Company's
President. Mr. Fargo also currently serves as a member of the Board of
Directors of the Interactive Digital Software Association.
Herve Caen joined the Company as President and a director in November 1999.
Mr. Caen has served as Chairman of the Board of Directors and Chief Executive
Officer of Titus Interactive SA, an interactive entertainment software company,
since 1991. Mr. Caen also serves as Managing Director of Titus Interactive
Studio since 1985, Titus SARL since 1991 and Digital Integration Services since
1998. Mr. Caen has also served as Chief Executive Officer of Titus Software
Corporation since 1988, Chairman of Titus Software UK Limited since 1991,
Representative Director of Titus Japan KK since 1998, Manager of VIE
Acquisition Holdings LLC since 2000, and Manager of VIE Acquisition Group LLC
since 2001.
Eric Caen has served as a director of the Company since November 1999. Mr.
Caen has served as a Director and as President of Titus Interactive SA since
1991. Mr. Caen also has served as Vice President of Titus Software Corporation
since 1988, Secretary and Director of Titus Software UK Limited since 1991,
Director of Titus Japan KK and Director of Digital Integration Limited since
1998, and Director of Virgin Interactive Entertainment Ltd. since 2000. 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.
Michel Welter is a first time nominee to the Company's Board of Directors.
Mr. Welter is currently President of CineGroupe International, a position he
has held since January of 2001. From 1991 to October of 2000, Mr. Welter served
as President of Saban International Enterprises, where he organized and managed
the international merchandising division of the company, and was responsible
for international co-productions and acquisitions. In addition, Mr. Welter has
served as an executive officer with various European companies related to Fox
Family Worldwide, Inc.
Michel Henri Vulpillat is a first time nominee to the Company's Board of
Directors. Mr. Vulpillat is a consultant with Edge Consulting, a company he has
owned and operated since 1994. Edge Consulting is a management and operations
consulting firm which provides services primarily to the video game industry.
Among other services, Edge Consulting provides international consulting for
companies that intend on expanding their operations worldwide, with expertise
in technical, legal, operational, strategic, and management areas. Mr.
Vulpillat is also currently serving as a director of Titus Interactive, SA.
Nathan Peck is a first time nominee to the Company's Board of Directors. Mr.
Peck is a consultant with PLN Associates, Inc., a company he has owned and
operated since January of 1999. Through PLN Associates, Inc., Mr. Peck provides
management and financial advisory services to private and publicly traded
emerging and middle-market companies. Mr. Peck has also served as a director
and consultant of Virgin Interactive Entertainment, Limited since November
1998. Virgin is a developer, publisher and distributor of video games in
Europe, and is owned by Titus Interactive, SA. In addition, Mr. Peck has served
as a consultant for Global One Distribution, Inc. during 1998 and Ozisoft
International, Inc. during 1998 and 1997.
Board Committees
The Company has two standing committees of the Board of Directors: an Audit
Committee and a Compensation Committee. In May 2001, the Board of Directors
also formed a Special Committee for the purpose of reviewing potential
strategic transactions.
Audit Committee.
The Audit Committee reviews the functions and approves the services of the
Company's management and independent auditors pertaining to the Company's
financial statements, and reviews and evaluates the Company's accounting
principles and reporting practices and its system of internal accounting
controls. In
3
April 2000, the Board of Directors adopted a written charter for the Audit
Committee, delineating the Audit Committee's functions, powers and duties, a
copy of which is attached to this Proxy Statement as Annex I. All members of
the Audit Committee are non-employee directors and satisfy suggested Securities
and Exchange Commission and National Association of Securities Dealers
standards with respect to independence, financial expertise and experience,
except that Mr. Baxter served as Vice President, Corporate Affairs and General
Counsel to the Company until December 1998 and was elected to the Audit
Committee as permitted under applicable rules. The Audit Committee met two
times during fiscal year 2000. To ensure independence, the Audit Committee also
meets separately with the Company's independent public accountants and
management.
Report of the Audit Committee of the Board of Directors.
Management is responsible for the Company's internal controls and the
financial reporting process. Our independent auditors are responsible for
performing an independent audit of our consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report on
our financial statements. The Audit Committee's responsibility is to monitor
and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent auditors. The Audit Committee discussed with the
independent auditors matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees).
Our independent auditors also provided to the Audit Committee the written
disclosure required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors the auditing firm's independence. The
Committee also considered whether non-audit services provided by the
independent auditors during the last fiscal year were compatible with
maintaining the independent auditors' independence.
Based upon the Audit Committee's discussion with management and the
independent auditors and the Audit Committee's review of the representation of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 filed with the Securities
and Exchange Commission.
Members of the Audit Committee:
Robert F. Sirotek
R. Stanley Roach
Kevin F. Baxter
Compensation Committee.
The Compensation Committee determines the annual salary, bonus and other
benefits, including incentive compensation awards, of the Company's executive
officers and directors, and recommends new employee benefit plans and changes
to existing plans to the Company's Board of Directors. The Compensation
Committee met one time during fiscal year 2000.
Attendance at Meetings
During the fiscal year ended December 31, 2000, the Board of Directors held
a total of eight meetings. Each member of the Board of Directors attended at
least 75% of the meetings of the Board and of the committees of which he was a
member.
4
Director Compensation
The Company currently compensates outside directors at the rate of $5,000
per quarter based on attendance at quarterly meetings, $5,000 per year for each
standing committee of which the director is a member, stock options for 25,000
shares for the first year of directorship, and 5,000 shares for each subsequent
year of directorship. In April 2000, the Company granted to R. Stanley Roach an
option to purchase up to 20,000 shares of the Company's common stock,
exercisable at $3.50 per share. In August 2000, the Company granted to Mr.
Roach an option to purchase up to 5,000 shares of the Company's common stock,
exercisable at $2.44 per share. The Roach options are each for a term of ten
years and vest over the first five years.
In April 2001 the Company granted Keven Baxter an option to purchase up to
25,000 shares of the Company's common stock, exercisable at $1.51 per share. In
June 2001, the Company granted Robert Sirotek an option to purchase up to
25,000 shares of the Company's common stock, exercisable at $2.85 per share.
The Baxter and Sirotek options are for a term of ten years, and vest over the
first three years.
In June 2001, the Board of Directors approved compensation of $20,000 for
each member of the Special Committee, which consisted of Messrs. Roach and
Baxter.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission, or SEC, initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the
Company. Officers, directors and ten-percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on the review of copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2000 all of
the Company's officers, directors and ten-percent stockholders complied with
all applicable Section 16(a) filing requirements with the following exception:
Brian Fargo failed to timely file a Form 4 in connection with a sale of stock
in December 2000.
5
Security Ownership of Certain Beneficial Owners and Management
The following sets forth certain information concerning the beneficial
ownership of the Company's outstanding common stock as of August 13, 2001 for
(i) each person (or group of affiliated persons) who is known by the Company to
own beneficially five percent or more of the Company's common stock, (ii) each
director of the Company, (iii) each of the Named Executive Officers, and (iv)
all directors and executive officers of the Company as a group.
Percentage
Shares of
Beneficially Outstanding
Name and Address of Beneficial Owner Owned(1) Shares Owned
------------------------------------ ------------ ------------
Brian Fargo...................................... 4,619,378(2) 8.4%
16815 Von Karman Avenue
Irvine, CA 92606
Universal Studios, Inc. ......................... 4,658,216 8.5%
100 Universal City Plaza
Universal City, CA 91608
Titus Interactive SA............................. 27,576,390(3) 50.2%
Herve Caen(4)....................................
Eric Caen(4).....................................
20432 Corisco Street
Chatsworth, CA 91311
Manuel Marrero................................... 200,000(5) *
Richard S.F. Lehrberg............................ 829,543(6) 1.5%
Keven F. Baxter.................................. 0 *
R. Stanley Roach................................. 5,000(7) *
Robert F. Sirotek................................ 0 *
Michel Welter.................................... 0 *
Michel Henri Vulpillat(9)........................ 0 *
Nathan Peck...................................... 0 *
All Directors, Nominees for Directors, and
Executive Officers as a Group (11 persons)...... 37,888,527(8) 69.0%
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* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options currently
exercisable, or exercisable within 60 days of August 13, 2001, are deemed
outstanding for computing the percentage of the person holding such options
but are not deemed outstanding for computing the percentage of any other
person. Except as indicated by footnote and subject to community property
laws where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Includes 1,115,000 shares subject to warrants and options exercisable
within 60 days of August 13, 2001.
(3) Includes 460,298 shares subject to warrants exercisable within 60 days of
August 13, 2001, and 7,619,531 shares issuable upon conversion of shares of
Series A Preferred Stock held by Titus if such conversion occurred on
August 13, 2001. Titus holds 383,354 shares, or 100% of the Company's
Series A Preferred Stock.
(4) Messrs. Herve Caen and Eric Caen, who are officers, directors and principal
shareholders of Titus, disclaim beneficial ownership of the shares held by
Titus, except to the extent of the pecuniary interest therein.
(5) Consists of 200,000 shares subject to options exercisable within 60 days of
August 13, 2001.
(6) Includes 510,374 shares subject to options exercisable within 60 days of
August 13, 2001.
(7) Consists of 5,000 shares subject to options exercisable within 60 days of
August 13, 2001.
(8) Includes 2,290,672 shares subject to warrants and options exercisable
within 60 days of August 13, 2001, and 7,619,531 shares issuable upon
conversion of shares of Series A Preferred Stock.
(9) Mr. Vulpillat is currently director of Titus Interactive, SA ("Titus") and
owns less than 0.1% of the outstanding capital stock of Titus. Mr.
Vulpillat disclaims beneficial ownership of the Company's shares held by
Titus.
6
EXECUTIVE OFFICERS OF THE REGISTRANT
Summary Information Concerning Executive Officers Who Are Not Director Nominees
and Certain Significant Employees
The following table sets forth certain information regarding the Company's
executive officers who are not also nominees for the Board of Directors and
certain significant employees, and their ages as of June 29, 2001:
Name Age Position with the Company
---- --- -------------------------
Manuel Marrero...... 43 Chief Financial Officer and Chief Operating Officer
Phillip G. Adam..... 46 Vice President of Business Development
Gary Dawson......... 52 Vice President of Sales
Cal Morrell......... 45 President of GamesOnline.com, Inc.
Jill S. Goldworn.... 36 President of Interplay OEM, Inc.
David Perry......... 33 President of Shiny Entertainment, Inc.
Background Information Concerning Executive Officers who are not Director
Nominees and Certain Significant Employees
Manuel Marrero joined the Company in April 1999 as its Chief Financial
Officer and Chief Operating Officer. Prior to joining the Company, from July
1996 through March 1999, Mr. Marrero served as Chief Financial Officer, Senior
Vice President and Corporate Secretary of Precision Specialty Metals, Inc., a
leading high precision conversion mill for stainless steel and high performance
alloys, from July 1996. From October 1993 through July 1996 Mr. Marrero served
as the Senior Vice President, Chief Financial Officer and corporate secretary
for Autologic Information International, Inc., a manufacturer of computerized
image setting and publications systems equipment and software for the
publishing industry.
Phillip G. Adam joined the Company as Vice President of Sales and Marketing
in December 1990 and has served as Vice President of Business Development of
the Company since October 1994. Prior to joining the Company, from January 1984
to December 1990, Mr. Adam served as President of Spectrum Holobyte, an
interactive entertainment software publisher, where he was a co-founder. From
May 1990 to May 1996, Mr. Adam served as the Chairman or a member of the Board
of Directors of the Software Publishers Association and, during part of such
period, as President of the Software Publishers Association. From March 1997 to
March 1998 Mr. Adam served as the Chairman of the Public Policy Committee of
the Interactive Digital Software Association.
Gary Dawson was appointed as the Company's Vice President of Sales in
November 1999. Prior to joining the Company, 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.
Cal Morrell joined the Company as Vice President of Marketing in September
1998 and has served as President of GamesOnline.com, Inc. since September 2000.
Prior to joining the Company, from March 1997 to August 1998, Mr. Morrell
served as Senior Vice President of Games On-Line, Inc. dba Engage, and prior to
that served as Vice President of Marketing & Internet for Legacy Software, a
software developer, from June 1996 to February 1997, as well as Director of
Worldwide Consumer Software of the United Kingdom subsidiary of International
Business Machines, Inc., a world-wide computer company, from January 1995 to
June 1996. From June 1993 to December 1994, Mr. Morrell served as Brand Manager
at IBM's Consumer Division.
Jill S. Goldworn has served as President of Interplay OEM, Inc., the
Company's OEM subsidiary, since December 1996. Prior to that, Ms. Goldworn
served as Vice President, OEM and Merchandising of the Company since June 1995.
Prior to that, Ms. Goldworn served as Director of the OEM division of the
Company from September 1992 to June 1995. Prior to joining the Company, from
November 1991 to August 1992, Ms. Goldworn served as Director of Contract Sales
of PC Globe, Inc., a publisher of desktop geography software.
7
David Perry has served as President of Shiny Entertainment, Inc. since
October 1993. Mr. Perry founded Shiny, developer of Earthworm Jim, in October
1993. Prior to founding Shiny, from January 1991 to September 1993, Mr. Perry
served as a consulting engineer for Virgin Interactive Entertainment Inc., an
interactive entertainment software publisher.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
earned during the last three fiscal years ended December 31, 2000, by the
Company's Chief Executive Officer and each of the three other most highly
compensated executive officers of the Company whose total salary and bonus
during such year exceeded $100,000 (collectively, the "Named Executive
Officers").
Summary Compensation Table
Long-Term
Compensation
------------
Annual Compensation Securities
Name and Principal ---------------------- Underlying All Other
Position Year Salary Bonus Options (#) Compensation(1)
------------------ ---- ---------- --------- ------------ ---------------
Brian Fargo................. 2000 $ 200,000(2) -- -- $2,917
Chief Executive Officer 1999 200,000 -- 500,000 --
1998 210,417 -- 150,000 --
Herve Caen.................. 2000 $ 62,500(3) -- -- --
President 1999 -- -- -- --
1998 -- -- -- --
Manuel Marrero.............. 2000 $ 198,000 $ 100,000 150,000 $2,228
Chief Financial Officer and 1999 158,775 -- 150,000 --
Chief Operating Officer 1998 -- -- -- --
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(1) Consists of matching payments made under the Company's 401(k) plan (see
"--Employee Benefit Plans--401(k) Plan").
(2) In November 1999 Mr. Fargo entered into an employment agreement with the
Company providing for an annual base salary of $250,000. Mr. Fargo has
waived payment of $50,000 of his annual salary, but may require the
Company to re-commence payment of his full salary at any time.
(3) Mr. Caen joined the Company in November 1999 at an annual base salary of
$250,000.
8
Stock Option Grants During Year Ended December 31, 2000
The following table sets forth certain information concerning stock options
granted to the Named Executive Officers during the year ended December 31,
2000.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Percent of Price
Number of Total Appreciation for
Securities Options Option Term
Underlying Granted to Exercise ($)(3)
Options Employees In Price Expiration -----------------
Name Granted(1) Fiscal Year ($/Sh) Date(2) 5% 10%
---- ---------- ------------ -------- ---------- -------- --------
Manuel Marrero... 150,000 16.1% $2.44 8/3/10 $230,175 $583,310
- --------
(1) Represents options granted pursuant to the Company's 1997 Plan. All such
options were granted at an exercise price equal to, or greater than, the
fair market value of the common stock on the date of grant.
(2) Options granted pursuant to the 1997 Plan expire 10 years from the date of
grant.
(3) Represents amounts that may be realized upon exercise of the options
immediately prior to expiration of their terms assuming appreciation of 5%
and 10% over the option term. The 5% and 10% numbers are calculated based
on rules required by the Securities and Exchange Commission and do not
reflect the Company's estimate of future stock price growth. The actual
value realized may be greater or less than the potential realizable value
set forth.
Aggregate Option Exercises and 2000 Year-End Option Values
Shown below is information relating to the exercise of stock options during
the year ended December 31, 2000, for each of the Named Executive Officers, and
the year-end value of unexercised options.
Number of Securities Value of
Underlying Unexercised in-
Shares Unexercised Options the-Money Options
Acquired at Year-End at Year-End
on Value (Exercisable/ (Exercisable/
Name Exercise Realized Unexercisable Unexercisable)(1)
---- -------- -------- -------------------- -----------------
Brian Fargo........... -- -- 215,000/435,000 $35,000/$105,000
Herve Caen............ -- -- 0/0 $0/$0
Manuel Marrero........ -- -- 150,000/150,000 $93,375/$18,375
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(1) Represents an amount equal to difference between the closing sale price
for the Company's common stock on the Nasdaq National Market on December
29, 2000, and the option exercise price, multiplied by the number of
unexercised in-the-money options.
Employment Agreements
The Company has entered into an employment agreement with Brian Fargo for a
term of three years through November 2002, pursuant to which he currently
serves as the Company's Chairman of the Board of Directors and Chief Executive
Officer. The employment agreement provides for a base salary of $250,000 per
year, with such annual raises as may be approved by the Board of Directors,
plus annual bonuses at the discretion of the Board of Directors. In the event
that Mr. Fargo's employment is terminated by the Company without cause or he
resigns for good reason as set forth in the agreement, the Company is required
to pay Mr. Fargo 150% of his base salary and 75% of his imputed annual bonuses
for the remainder of the term of the agreement, which payments are contingent
upon Mr. Fargo's non-competition with the Company, as defined in the agreement.
Mr. Fargo is also entitled to participate in the incentive compensation and
other employee benefit plans established by the Company from time to time. Mr.
Fargo has waived payment of $50,000 of his annual salary. He may require the
Company to re-commence payment of his full salary at any time.
9
The Company has entered into an employment agreement with Herve Caen for a
term of three years through November 2002, pursuant to which he currently
serves as the Company's President. The employment agreement provides for an
annual base salary of $250,000, with such annual raises as may be approved by
the Board of Directors, plus annual bonuses at the discretion of the Board of
Directors. Mr. Caen is also entitled to participate in the incentive
compensation and other employee benefit plans established by the Company from
time to time.
The Company has entered into an employment agreement with Manuel Marrero for
a term of five years through March 15, 2004, pursuant to which he currently
serves as the Company's Chief Financial Officer and Chief Operating Officer.
The employment agreement provides for a base salary of $198,000 per year, with
such annual raises as may be approved by the Board of Directors, plus annual
bonuses at the discretion of the Board of Directors. In the event that Mr.
Marrero's employment is terminated by the Company without cause, the Company is
required to pay Mr. Marrero his base salary plus a $50,000 annual bonus for the
longer of (i) a period of one year following the termination or (ii) through
the end of the term of the employment agreement. Such post-termination payments
are contingent upon Mr. Marrero's non-competition with the Company, as defined
in the agreement.
The Company has entered into an employment agreement with Feargus Urquhart,
President of the Company's Black Isle division, for a term of three years
through February 20, 2003. The employment agreement provides for a starting
annual base salary of $150,000, adjustable for inflation.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of R. Stanley Roach and Keven
Baxter. No member of the Compensation Committee or executive officer of the
Company has a relationship that would constitute an interlocking relationship
with executive officers and directors of another entity. During 2000, decisions
regarding executive compensation were made by the Compensation Committee.
Directors who were members of the Compensation Committee during 2000 were James
Barnett and Mr. Roach. None of the 2000 members of the Compensation Committee
nor any of the Company's 2000 executive officers or directors had a
relationship that would constitute an interlocking relationship with executive
officers and directors of another entity.
REPORT OF THE COMPENSATION COMMITTEE
The following report is submitted by the Compensation Committee of the Board
of Directors with respect to the executive compensation policies established by
the Compensation Committee and recommended to the Board of Directors and
compensation paid or awarded to executive officers for the fiscal year ended
December 31, 2000.
The Compensation Committee determines the annual salary, bonus and other
benefits, including incentive compensation awards, of the Company's executive
officers and recommends new employee benefit plans and changes to existing
plans to the Company's Board of Directors. The Compensation Committee met one
time during fiscal year 2000.
Compensation Policies and Objectives
The Company's executive compensation policy is designed to attract and
retain exceptional executives by offering compensation for superior performance
that is highly competitive with other well-managed organizations. The
Compensation Committee measures executive performance on an individual and
corporate basis.
10
There are three components to the Company's executive compensation program,
as follows:
Base Salary. Base salaries for executives and other key employees are
determined by individual financial and non-financial performance, position in
salary range and general economic conditions of the Company. For purposes of
administering base pay, all executive positions are evaluated and placed in
appropriate salary grades. Salary range midpoint levels are reviewed on an
annual basis to ensure competitiveness with a peer group of comparable
entertainment software companies. In recommending salaries for executive
officers, the Compensation Committee (i) reviews the historical performance of
the executives, and (ii) formally reviews specific information provided by its
accountants and other consultants, as necessary, with respect to the
competitiveness of salaries paid to the Company's executives.
Annual Bonus. Annual bonuses for executives and other key employees are tied
directly to the Company's financial performance as well as individual
performance. The purpose of annual cash bonuses is to reward executives for
achievements of corporate, financial and operational goals. Annual cash bonuses
are intended to reward the achievement of outstanding performance. If certain
objective and subjective performance goals are not met, annual bonuses are
reduced or not paid.
Long-Term Incentives. The purpose of these plans is to create an opportunity
for executives and other key employees to share in the enhancement of
stockholder value through stock options. The overall goal of this component of
pay is to create a strong link between the management of the Company and its
stockholders through management stock ownership and the achievement of specific
corporate financial measures that result in the appreciation of Company share
price. Stock options are awarded in order to tie the executive officers'
interests to the Company's performance and align those interests closely with
those of the Company's stockholders. The Compensation Committee generally has
followed the practice of granting options on terms that provide that the
options become exercisable in cumulative installments over a three to five year
period. The Compensation Committee believes that this feature not only provides
an employee retention factor but also makes longer-term growth in share prices
important for those receiving options.
Chief Executive Officer Compensation
The salary, annual raises and annual bonus of Brian Fargo, the Company's
Chief Executive Officer, are determined in accordance with Mr. Fargo's
Employment Agreement with the Company. Mr. Fargo's Employment Agreement
provides for a base salary of $250,000 per year, with annual raises and bonuses
as may be approved at the discretion of the Company's Board of Directors. (see
"Employment Agreements," above). The amounts of any annual raises or bonuses
are determined in accordance with the policies and objectives set forth above.
The Compensation Committee did not increase Mr. Fargo's compensation, or award
Mr. Fargo any options, during 2000.
11
Deductibility of Executive Compensation
The Company is required to disclose its policy regarding qualifying
executive compensation deductibility under Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides that, for purposes of the
regular income tax and the alternative minimum tax, the otherwise allowable
deduction for compensation paid or accrued with respect to a covered employee
of a public corporation is limited to no more than $1 million per year. It is
not expected that the compensation to be paid to the Company's executive
officers for fiscal 2000 will exceed the $1 million limit per officer. The
Company's 1991 Stock Option Plan, 1994 Stock Option Plan and 1997 Stock
Incentive Plan are structured so that any compensation deemed paid to an
executive officer when he exercises an outstanding option under the plan, with
an exercise price equal to the fair market value of the option shares on the
grant date, will qualify as performance-based compensation that will not be
subject to the $1 million limitation.
The Compensation Committee
of the Board of Directors
/s/ R. Stanley Roach
/s/ Keven Baxter
R. Stanley Roach
Keven Baxter
Notwithstanding anything to the contrary set forth in the Company's previous
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report and
the performance graph below shall not be incorporated by reference into any
such filings.
12
Common Stock Price Performance
Set forth below is a line graph comparing the cumulative stockholder return
on the Company's common stock with the cumulative total return of the MG
Industry Group 820 (Multimedia/Graphics Software) and the Nasdaq Market Index
for the period that commenced June 19, 1998, and ended on December 31, 2000.
The graph assumes $100 invested June 16, 1998, in the Company's common stock,
the MG Industry Group 820 (Multimedia/Graphics Software) and the Nasdaq Market
Index, with the reinvestment of all dividends. The Performance Graph is not
necessarily an indicator of future price performance.
[PERFORMANCE GRAPH APPEARS HERE]
MG Industry Group 820
Interplay (Multimedia/
Measurement Date Entertainment Corp. Graphics Software) Nasdaq Market Index
- ---------------- ------------------- --------------------- -------------------
06/19/98 100.00 100.00 100.00
06/30/98 95.83 100.00 100.00
09/30/98 53.13 69.97 90.13
12/31/98 29.69 91.60 117.16
03/31/99 39.58 88.21 130.90
06/30/99 43.23 90.79 142.43
09/30/99 35.42 102.04 144.75
12/31/99 48.96 124.56 213.79
3/31/00 58.33 133.04 243.25
6/30/00 43.75 112.67 209.22
9/30/00 63.55 118.78 193.07
12/31/00 42.72 89.98 129.74
13
Certain Relationships and Related Transactions
Transactions With Fargo
In March 2000, the Company and Mr. Fargo entered into a joint venture
agreement pursuant to which each of the Company and Mr. Fargo would contribute
up to $1 million, as well as licenses for intellectual property suitable for
development as film projects. The contributions would be at each party's
discretion. During fiscal 2000, Mr. Fargo contributed $360,000 to the joint
venture. Proceeds from the joint venture, if any, would be allocated to each
party in accordance with its capital contributions and then to the party
contributing the intellectual property that generated the proceeds. The joint
venture was terminated in September 2000.
In April 2001, the Company borrowed $3 million from Mr. Fargo for the
purpose of repaying the outstanding balance on its line of credit from Titus.
The Fargo loan is for a term of one year, bears interest at an annual rate of
10%, and is otherwise subject to the terms of a Secured Promissory Note and a
Security Agreement with Mr. Fargo, both dated April 12, 2001. Also in April
2001, Mr. Fargo gave a $2 million personal guaranty of the Company's line of
credit from LaSalle Business Credit, Inc. In consideration for the loan and the
guaranty, the Company issued to Mr. Fargo a three-year Warrant for 500,000
shares of the Company's common stock, exercisable at $1.75 per share.
In connection with an acquisition of the Company's stock by Universal
Studios, Inc. in 1994, the Company's Board of Directors awarded Mr. Fargo a
bonus of $1 million. Mr. Fargo deferred payment of the bonus, and there is
currently a remaining unpaid balance of $282,000.
Transactions with Titus and Fargo
In March 1999, the Company entered into a Stock Purchase Agreement with
Titus Interactive SA and Brian Fargo (the "Titus I Agreement"). Under the terms
of the Titus I Agreement, the Company issued Two Million Five Hundred Thousand
(2,500,000) shares of its common stock to Titus in exchange for consideration
of Ten Million Dollars ($10,000,000). Pursuant to the terms of the Stock
Purchase Agreement, the purchase price was recalculated based on the average
closing price per share of the Company's common stock as reported by Nasdaq
during the ten trading days ended June 30, 1999 and the purchase price was
recalculated again based on the average closing price per share of the
Company's common stock as reported by Nasdaq during the ten trading days ending
August 20, 1999. Pursuant to the June 30, 1999, adjustment, the Company issued
to Titus 1,161,771 additional shares of common stock without additional
consideration, for a total of 3,661,771 shares, and issued to Titus a
promissory note in the principal amount of $1,120,202.90, bearing interest at
the rate of 10% per annum and due January 1, 2000. As a result of the August
1999 recalculation, and following stockholder approval of the transaction, the
purchase price was adjusted to $2.20, and the number of shares of common stock
to be issued under the Titus I Agreement was adjusted to 4,545,455. In August
1999, the Company issued to Titus the remaining 883,684 shares of common stock,
and Titus cancelled the June 1999 promissory note.
In May 1999 the Company signed a letter of intent with Titus pursuant to
which Titus loaned the Company $5,000,000 and the Company and Titus agreed to
negotiate certain additional transactions. Pursuant thereto, on July 20, 1999,
the Company and Titus entered into a Stock Purchase Agreement (the "Titus II
Agreement") providing for the sale and issuance of Six Million Two Hundred
Fifty Thousand (6,250,000) shares of Company's common stock to Titus in
exchange for total consideration of $25,000,000, including the $5,000,000
previously loaned to the Company. Upon the closing of the Titus II Agreement
(the "Closing"), Interplay, Titus and Fargo entered into a Stockholder
Agreement pursuant to which: (a) Titus and Fargo each had the right to
designate two directors and together had the right to designate the remaining
three directors to the Company's Board of Directors; (b) Titus and Fargo
granted to each other a right of first refusal with respect to either party's
sale of the Company's stock; (c) Interplay granted Titus and Fargo preemptive
rights with respect to the Company's future issuances of stock; (d) Titus and
Fargo granted each other co-sale rights with respect to either party's sale of
the Company's stock; and (e) the Company was restricted from amending its
Certificate of Incorporation or Bylaws. The Stockholder Agreement has since
terminated but is on file with the
14
Securities and Exchange Commission as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the Quarter Ended September 30, 1999.
In addition, at the Closing the Company entered into Employment Agreements
with each of Brian Fargo and Herve Caen, pursuant to which Messrs. Fargo and
Caen are employed as Chief Executive Officer and President, respectively, of
the Company, which agreements each have an initial term of three years. Titus
and Fargo have also entered into an Exchange Agreement, which was consummated
concurrent with the Titus II Agreement, pursuant to which Fargo exchanged
2,000,000 shares of the Company's common stock for 96,666 shares of Titus
common stock.
In April 2000, the Company entered into a Stock Purchase Agreement with
Titus (the "Titus III Agreement") providing for the issuance to Titus of
719,424 shares of the Company's newly-designated Series A Preferred Stock (the
"Preferred Stock") with certain voting and conversion rights, and Warrants to
purchase up to 500,000 shares of the Company's common stock, in return for
consideration from Titus in the form of $20,000,000 cash and Titus's agreement
to certain obligations. Among the obligations that the Titus III Agreement
imposed upon Titus were: (i) that Titus provide a $20 million guaranty (the
"Titus Guaranty") of the Company's line of credit from Greyrock Capital; (ii)
that Titus extend to the Company a $5 million supplemental line of credit; and
(iii) that Titus provide the Company with financial reports required by
Greyrock Capital as a condition to the release of $2.5 million in cash
collateral held by Greyrock Capital. The Preferred Stock bears a six percent
per annum cumulative dividend. The Company was obligated to repay to Titus any
amounts that Titus may pay under the Titus Guaranty, and such repayment was
secured by a second-priority security interest in the Company's assets.
Moreover, as a condition of the Titus Guaranty, the Company granted Titus a
right of first refusal on the Company's sale of assets for $100,000 or more. In
December 2000 through March 2001 the Company drew approximately $3 million on
the Titus line of credit. The Titus line of credit was repaid in full and
terminated, and the Titus Guaranty was released, in April 2001.
Titus can convert the Preferred Stock into the Company's common stock at any
time following May 31, 2001. The number of shares of the Company's common stock
to be issued upon such conversion is determined by multiplying the number of
shares of Preferred Stock to be converted by the conversion ratio applicable at
the time. The conversion ratio is defined as a fraction, the numerator of which
is the initial purchase price per share of the Preferred Stock, $27.80, and the
denominator of which (the "Denominator") is adjustable. The initial Denominator
is the lower of $2.78 or 85% of the average market price of the Company's
common stock for the 20 trading days preceding the date of conversion. The
ratio shall be adjusted to account for stock splits or similar other changes in
the Company's capital structure. To date, Titus has converted 336,070 shares of
Preferred Stock for 6,679,306 shares of Common Stock.
The Company may redeem any unconverted shares of Preferred Stock at the
original purchase price, plus accrued but unpaid dividends, at any time prior
to its conversion. In addition, the Preferred Stock is entitled to voting power
equivalent to the voting power of the shares of the Company's common stock into
which the Preferred Stock can be converted, subject to a maximum of 7,619,047
aggregate votes for all Preferred Stock shares.
There were three Warrants issued in connection with the Titus III Agreement
for the purchase of the Company's common stock in the amounts of 350,000
shares, 100,000 shares, and 50,000 shares. All three Warrants are exercisable
at $3.79 per share, and are for a term of 10 years. The 350,000 share Warrant
and the 50,000 share Warrant are fully exercisable. The 100,000 share warrant
is exercisable as to 60,298 shares pursuant to a pre-determined calculation,
which provides that the 100,000 share warrant is exercisable in proportion to
the amount drawn on the Line of Credit by the Company.
The Company is obligated to register all of the Company's common stock
issued pursuant to the Titus I Agreement and the Titus II Agreement, and all of
the common stock issuable upon conversion of the Series A Preferred Stock and
the Warrants issued pursuant to the Titus III Agreement.
In June 2000, the Company and Titus entered into a Technology and Content
License Agreement by which Titus licensed the content for the game "Messiah",
the trademarks "Mummy" and "Kingpin", and the game
15
engine for Messiah. In connection with such license, Titus paid the Company an
advance payment of royalties of $3 million.
In May 2001, the Company entered into an agreement with Titus, Fargo and
Herve Caen by which the Company agreed: (i) not to assert that any facts
contained in Titus's May 15, 2001 Schedule 13D/A filing was untrue; (ii) to
call an annual meeting of the Company's stockholders by August 15, 2001 with no
less than 40 days' notice, and with a record date of the day before any
redemption of Series A Preferred Stock but in no case later than June 19, 2001;
and (iii) not to amend its Bylaws or Certificate of Incorporation prior to the
annual meeting. Herve Caen agreed not to deliver any notice of a meeting of the
Company's stockholders prior to June 1, 2001.
In September of 2001, the Company, Titus and Messrs. Richard S.F. Lehrberg,
Robert Sirotek, R. Stanley Roach, Keven Baxter and Brian Fargo, then members of
the Board of Directors of the Company, entered into an agreement whereby the
Company and these members of the Board of Directors agreed that Richard S.F.
Lehrberg, Robert Sirotek, and R. Stanley Roach would resign from the Company's
Board of Directors and Nathan Peck, Michel Welter, and Michel Henri Vulpillat
would be appointed to replace the resigning directors of the Company. The
Company also agreed with Titus to nominate Brian Fargo, Herve Caen, Eric Caen,
Michel Henri Vulpillat, Michel Welter and Nathan Peck for election as directors
at the meeting. In exchange, Titus agreed to provide the Company with limited
financial support and discharge any and all claims which Titus may have against
Brian Fargo, Keven Baxter, and the resigning directors.
Transactions with Titus and Virgin
In February 1999, the Company acquired a 43.9% interest in VIE Acquisition
Group, LLC ("VIE"), the parent entity of Virgin Interactive Entertainment
Limited ("Virgin"). Management of VIE was governed by an Operating Agreement,
to which the Company became a party. In connection with the acquisition, the
Company entered into an International Distribution Agreement with Virgin.
Pursuant to the International Distribution Agreement, Virgin hired the
Company's European sales and marketing personnel and is distributing
substantially all of the Company's titles in Europe, the Commonwealth of
Independent States, Africa and the Middle East. The International Distribution
Agreement required the Company to pay to Virgin: (i) a commission of 15% of the
net proceeds received by Virgin for the distribution of the Company's products,
with a fixed minimum of (Pounds)4.5 million and (ii) an overhead fee of $1.5
million for the period ending June 30, 2002. Also, in connection with the
acquisition of equity in Virgin's parent, the Company entered into a Product
Publishing Agreement with Virgin pursuant to which the Company published
substantially all of Virgin's titles in North and South America and Japan. The
Company, VIE and Virgin also entered into a Termination Agreement which
provided terms for the Company's withdrawal as a member of VIE and termination
of the International Distribution Agreement.
In early 2000, Titus acquired the holder of a 50.1% equity interest in VIE.
In early 2000, Titus acquired the remaining 6% of VIE.
In May 2000, the Company and Virgin amended the International Distribution
Agreement to, among other things, eliminate the overhead fees and minimum
commissions payable by the Company.
In April 2001, the Company settled certain disputes with Virgin relating to
minimum commissions payable by and the Company and net past due balances owed
by Virgin to the Company, and amended the International Distribution Agreement,
the Termination Agreement and the Product Publishing Agreement. As a result of
the settlement, VIE redeemed the Company's interest in VIE and Virgin paid the
Company $3.1 million in net past due balances owed under the International
Distribution Agreement. In addition, the Company will pay Virgin an one-time
marketing fee of $333,000 for the period ended June 30, 2001, and monthly
overhead fees of $111,000 per month for a nine month period beginning April
2001 and $83,000 per month for a six month period beginning January 2002, with
no further commitment for overhead fees for the remainder of the term of the
International Distribution Agreement. The Product Publishing Agreement was
amended such that it would only cover the publishing rights for a product
currently known as "Lotus".
16
Other Transactions
Beginning in March 1998, the Company has entered into Indemnification
Agreements with all of its directors and executive officers providing for
indemnification of such persons by the Company in certain circumstances.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, the Company's
independent accountants for the fiscal year ended December 31, 2000, to audit
the financial statements of the Company for the fiscal year ending December 31,
2001. The Board of Directors recommends that you vote FOR the ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection. Representatives of Arthur
Andersen LLP, are expected to be present at the meeting with the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
The persons named in the enclosed proxy will vote FOR the appointment of
Arthur Andersen LLP unless contrary instructions are given in the proxy. The
appointment of Arthur Andersen LLP shall be by the affirmative vote of the
holders of a majority of the shares voting on the proposal in person or by
proxy at the meeting.
The Company incurred the following fees for audit and other services
performed by Arthur Andersen LLP with respect to fiscal 2000:
Audit Fees....................................................... $196,500
Financial Information, Systems Design and Implementation Fees.... --
All Other Fees................................................... $219,209
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 2001 Annual
Meeting of stockholders and presentation in the Company's proxy statement with
respect to such meeting should arrange for such proposal to be delivered to the
Company's offices, 16815 Von Karman Avenue, Irvine, California 92606, addressed
to the Secretary, no later than August 11, 2001 in order to be considered for
inclusion in the Company's proxy statement relating to the meeting. Matters
relating to such proposals, including the number and length thereof,
eligibility of persons entitled to have such proposals included and other
aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
On May 21, 1998 the Securities and Exchange Commission adopted an amendment
to Rule 14a-4, as promulgated under the Securities and Exchange Act of 1934, as
amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
With respect to the Company's 2001 Annual Meeting of stockholders, if the
Company is not provided notice of a stockholder proposal, which the stockholder
has not previously sought to include in the Company's proxy statement, by
August 11, 2001, the Company will be allowed to use its voting authority as
described above.
17
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any matters other than those set forth herein and in the Notice of Annual
Meeting of stockholders that will come before the meeting. Should any other
matters arise requiring the vote of stockholders, it is intended that proxies
will be voted in respect thereto in accordance with the best judgment of the
person or persons voting the proxies.
Please return your proxy as soon as possible. Unless a quorum consisting of
a majority of the outstanding shares entitled to vote is represented at the
meeting, no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed postage prepaid return envelope. Please act promptly
to ensure that you will be represented at this important meeting.
THE COMPANY IS, TOGETHER HEREWITH, MAILING TO EACH STOCKHOLDER OF THE
COMPANY, A COPY (WITHOUT EXHIBITS) OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000. ADDITIONAL COPIES CAN BE OBTAINED FROM THE SECRETARY,
INTERPLAY ENTERTAINMENT CORP., 16815 VON KARMAN AVENUE, IRVINE, CALIFORNIA
92606.
By Order of the Board of Directors
/s/ Brian Fargo
Brian Fargo
Chairman of the Board of Directors
and Chief Executive Officer
September 7, 2001
18
ANNEX I
INTERPLAY ENTERTAINMENT CORP.
----------------
CHARTER
of the
AUDIT COMMITTEE
of the
BOARD OF DIRECTORS
----------------
1 Establishment. The Board of Directors (the "Board") of Interplay
Entertainment Corp. (the "Corporation") has established a committee of the
Board known as the Audit Committee (the "Committee").
2 Purpose. The Committee is established to (i) oversee and review the
functions of the Corporation's management ("Management") and independent
auditor with regard to the Corporation's financial accounting and reporting;
(ii) maintain open communication among the Corporation's independent auditor
(the "Independent Auditor"), the Board, and the Corporation's management; and
(iii) participate, with the Independent Auditor and Management, in the
assessment of the quality of the Corporation's financial reporting.
3 Membership. The Committee shall consist of Board members, appointed by the
Board, who meet the requirements set forth herein.
3.1 Independence. Committee members shall be independent of Management
and, in the Board's judgment, free of any relationship or interest that
would interfere with their exercise of independent judgment as a Committee
member. In particular, and without limiting the preceding sentence,
Committee members shall not:
3.1.1 Currently or at any time within the preceding three years be
employed by the Corporation or any affiliate, parent or predecessor
entity;
3.1.2 Currently or at any time within the preceding three years be a
member of the immediate family of a current executive officer of the
Corporation or an affiliate of the Corporation;
3.1.3 Be an executive of a business organization, other than the
Corporation, in which any of the Corporation's officers serve as a
member of the compensation committee or equivalent body;
3.1.4 Be a partner, controlling shareholder or executive officer of
a business organization that has a business relationship with the
Corporation; or
3.1.5 Have a direct business relationship with the Corporation.
3.2 Other Qualifications.
3.2.1 All Committee members shall currently be, or within a
reasonable time become, financially literate. Financial literacy means
having the ability to read and understand financial statements,
including balance sheets, income statements and cash flow statements.
3.2.2 At least one Committee member shall have accounting or related
financial management expertise. Financial management expertise includes
holding a professional certificate in accounting, or having financial
sophistication resulting from experience as a chief executive officer,
chief financial officer or other senior officer with financial
oversight responsibilities.
4 Non-Member Participants. Unless circumstances make such participation
inappropriate, the Committee shall involve representatives of the Independent
Auditor and Management in the Committee's proceedings.
A-1
5 Duties. While flexibility in the Committee's procedures is required in
order to fully carry out the Committee's purposes, the Committee's duties shall
include all of the following:
5.1 Recommend to the Board, after due research, the continued engagement
of the current Independent Auditor or the engagement of a new Independent
Auditor.
5.2 For each audit:
5.2.1 Obtain from the Independent Auditor a representation of its
independence and its ultimate accountability to the Board and the
Committee.
5.2.2 Meet with representatives of the Independent Auditor and
Management to review the scope and procedures for the audit;
5.2.3 At the audit's conclusion, review with representatives of the
Independent Auditor and Management the effectiveness and adequacy of
the Corporation's accounting and financial controls, and the quality of
the Corporation's financial reporting, and elicit recommendations for
improvement;
5.2.4 At the audit's conclusion, review with representatives of the
Independent Auditor and Management the plans for the ensuing year with
regard to financial controls, accounting and reporting.
5.3 Review with representatives of the Independent Auditor and
Management the financial statements contained in the Corporation's annual
reports and quarterly reports.
5.4 If warranted, provide representatives of the Independent Auditor the
opportunity to meet with the Committee in the absence of representatives of
Management.
5.5 Investigate all matters within the Committee's purview that are
brought to the Committee's attention, including any significant
disagreement between the Independent Auditor and Management, or any
restriction of the scope of the Independent Auditor's work from the scope
approved by the Committee.
5.6 Submit minutes of the Committee's proceedings to the Board and, when
warranted, discuss its proceedings and conclusions with the Board.
A-2
INTERPLAY ENTERTAINMENT CORP.
PROXY SOLICITED BY BOARD OF DIRECTORS
Brian Fargo and Manuel Marrero, and each or either of them, with full power
of substitution, are hereby appointed proxies to vote the stock of the
undersigned in Interplay Entertainment Corp. at the Annual Meeting of
stockholders on September 18, 2001, and at any postponement and adjournment
thereof, to be held at The Marriott Long Beach Airport, 4700 Airport Plaza
Drive, Long Beach, California, at 5:00 p.m., Pacific Standard Time.
Management recommends that you vote FOR Proposal 1 and FOR Proposal 2.
1. PROPOSAL 1. ELECTION OF DIRECTORS.
[_]FOR all Nominees [_]WITHHOLD AUTHORITY to
listed below, or to vote for all Nominees
cumulate votes among listed below
such nominees
(except as indicated to the contrary below)
Brian Fargo, Herve Caen, Eric Caen, Michel Welter, Michel Henri
Vulpillat, and Nathan Peck.
INSTRUCTION: To withhold authority to vote for any individual Nominee, write
that Nominee's name in the space provided below.
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2. PROPOSAL 2. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2001.
[_] FOR [_] AGAINST [_] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof,
including procedural and other matters relating to the conduct of the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS PROVIDED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE SIX DIRECTOR NOMINEES LISTED ABOVE, OR TO
CUMULATE VOTES AMONG SUCH NOMINEES, AND FOR PROPOSAL 2.
Please sign exactly as name
appears hereon.
______________________________
______________________________
Date: __________________, 2001
When shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
PLEASE IMMEDIATELY DATE, SIGN AND RETURN THIS CARD IN THE ENCLOSED ENVELOPE.
THANK YOU FOR YOUR PROMPT ATTENTION TO THIS IMPORTANT MATTER.