As filed with the Securities and Exchange Commission on May 15, 1996
Registration No. 333-02720
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IWERKS ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4439361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4540 WEST VALERIO STREET, BURBANK, CALIFORNIA 91505-1046 (818)841-7766
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
ROY A. WRIGHT
4540 WEST VALERIO STREET
BURBANK, CALIFORNIA 91505-1046
(818) 841-7766
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
C.N. FRANKLIN REDDICK III, ESQ.
TROOP MEISINGER STEUBER & PASICH, LLP
10940 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 824-7000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list of Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION DATED MAY 15, 1996
PROSPECTUS
IWERKS ENTERTAINMENT, INC.
315,000 SHARES OF COMMON STOCK
(par value $0.001 per share)
This Prospectus relates to the sale of an aggregate of 315,000 shares
(the "Shares") of the common stock, par value $.001 per share (the "Common
Stock") of IWERKS Entertainment, Inc. (the "Company") offered for the account
of a certain stockholder of the Company (the "Selling Stockholder"). The
Common Stock offered by the Selling Stockholder was acquired by the Selling
Stockholder in connection with the acquisition by the Company of the Selling
Stockholder's interest in a subsidiary of the Company. See "Selling
Stockholder and Plan of Distribution." The Selling Stockholder may from time
to time sell all or a portion of the Common Stock which may be offered by him
under this Prospectus in routine brokerage transactions in the over-the-
counter market, at prices and terms prevailing at the time of sale. The
Selling Stockholder may also make private sales directly or through brokers.
The Selling Stockholder may pay customary brokerage fees, commissions and
expenses relating to the sale of the Shares. The Company will pay all
expenses of the offering. The Selling Stockholder and the brokers executing
selling orders on behalf of the Selling Stockholder may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in which event commissions received by such brokers
may be deemed underwriting commissions under the Act.
The Company will not receive any proceeds from the sale of the Common
Stock offered by the Selling Stockholder. The Common Stock is quoted on the
National Association of Securities Dealers, Inc., National Market System
("NASDAQ NMS") under the symbol "IWRK." On May 10, 1996, the closing bid for
the Common Stock on the NASDAQ NMS was $10.375.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMPANY'S COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is ______, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). These
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following regional offices of
the Commission: Seven World Trade Center, Suite 1300, New York, New York
10048, and 500 West Madison Street, Chicago, Illinois 60661. Copies of the
material can be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock is traded on NASDAQ NMS and the
Company's reports, proxy or information statements, and other information
filed with NASDAQ may be inspected at NASDAQ's offices at 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus omits certain of the information contained or
incorporated by reference in the registration Statement of which this
Prospectus is a part, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. Any statement contained herein
concerning the provisions of any document are not necessarily complete, and,
in each instance, reference is made to the copy of the document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by this reference.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-3 (the
"Registration Statement) under the Securities Act of 1933, as amended (the
"Act") with respect to the Common Stock offered hereby. This Prospectus,
which constitutes part of the Registration Statement does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and
the Common Stock offered hereby, reference is hereby made to such Registration
Statement, exhibits and schedules which may be obtained from the Commission's
principal office in Washington, D.C., upon payment of the fees prescribed by
the Commission. Statements contained in this Prospectus as to the contents of
any contract, agreement or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the 1934 Act, are incorporated by reference into this
Prospectus:
(1) Registrant's Report on Form 10-K for the year ended June 30, 1995;
(2) Registrant's Report on Form 10-Q for the quarter ended September 30,
1995;
(3) Registrant's Report on Form 10-Q for the quarter ended December 31,
1995;
(4) Registrant's Current Report on Form 8-K dated April 5, 1996;
(5) Registrant's Report on Form 10-Q for the quarter ended March 31,
1996; and
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(6) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the Commission for
the purpose of registering the Common Stock under Section 12(g) of the
Exchange Act, together with any amendments thereto.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the securities covered by this Prospectus
shall be deemed to be incorporated by reference herein and to be part hereof
from the date of filing of such documents. Any statement contained herein or
in a document, all or a portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the oral or written
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such
exhibits are expressly incorporated by reference into such documents).
Written requests for such copies should be directed to Francis T. Phalen,
Chief Financial Officer, Iwerks Entertainment, Inc., 4540 West Valerio Street,
Burbank, California 91505-1046. Telephone inquiries may be directed to
Iwerks Entertainment, Inc., at (818) 841-7766.
THE COMPANY
The Company is a leading provider of high-resolution, proprietary motion
picture theater attractions. The Company's products combine advanced theater
systems with entertainment or educational software to create high-impact
"attractions" which draw audiences into the action. The Company's products
include ride simulation, giant screen, 360 degree, 3-D, and various other
special attractions. In addition, the Company owns and operates a fleet of
touring ride simulation theatres.
The Company is a Delaware corporation with principal executive offices
located at 4540 West Valerio Street, Burbank, California 91505, telephone
number (818) 841-7766.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN OR INCORPORATED IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN
EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON
STOCK OFFERED HEREBY.
DEPENDENCE ON PRODUCTION OF FILM SOFTWARE
The Company's ability to implement its business strategy is depends in
large part upon its ability to successfully create, produce and market
entertainment and educational film software for exhibition in its theater
systems. The size and quality of the Company's library of film software titles
is a material factor in competing for sales of the Company's attractions and
developing the Company's base of recurring revenue. The Company has invested
$2.0 million, $5.0 million, $2.6 million and $67,000 in film software during
fiscal 1993, 1994 and 1995 and the six months ended December 31,1995. At
December 31, 1995, the Company had recorded on its balance sheet film
inventory with a net value of $3.6 million. The Company generally produces
and develops specialty films and videos for its library with production
budgets in a range of approximately $100,000 to $2.0 million. While the
Company may enter into participation, licensing or other financing
arrangements with third parties in order to minimize its financial involvement
in production, the Company is generally subject to substantial financial risks
relating to the production and development of new entertainment and
educational software. The Company
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typically is required to pay for the production of software during the
production period prior to release and typically is unable to recoup these
costs from revenues from exhibition licenses prior to 24 to 36 months
following release. There can be no assurance that the Company will be able to
create and produce additional software for its library which will be perceived
by its customers to be of high quality or high entertainment value.
The Company periodically reviews the net realizable value of its film
inventory and makes adjustments to its carrying value when appropriate. In
fiscal 1995, the Company reduced its film inventory by $3.4 million. While
the current carrying value of the Company's film inventory reflects
management's belief that the Company will realize the net value recorded on
the Company's balance sheet, there can be no assurance that the Company will
be able to do so. A determination by the Company to write down any material
portion of its film inventory will have a materially adverse impact on the
Company's results of operations.
DEPENDENCE OF OWNED AND OPERATED OPERATIONS UPON SPONSORSHIP REVENUES
The Company derived $3.7 million and approximately $4.2 million of
revenues for the fiscal year ended June 30, 1995 and the nine months ended March
31, 1996, respectively, from sponsorship of its fleet of touring motion
simulators. Sponsorship revenues prior to January 1996 were primarily derived
from a single contract with a major telecommunications company that has
sponsored the Company's touring motion simulators since March 1994. In
January 1996, the Company entered into a sponsorship contract with a foreign
sponsor, which contract is scheduled to expire in August 1996. There can be no
assurance that the Company will be able to extend or replace its existing
sponsorship arrangements when they expire. If the Company is unable to maintain
sponsorship revenues in the future at levels commensurate with that
experienced in the past, it could have a material adverse effect on the
revenues and gross profit margins derived by the Company from its Owned and
Operated attractions which would be mitigated, in part, by any additional
revenues derived by the Company from deployment of the touring units at other
venues.
INTENSE COMPETITION; UNPREDICTABILITY OF CONSUMER TASTES
Competition in each of the markets in which the Company competes is
intense. IWERKS' principal direct competition for customers comes from
manufacturers of competing movie-based attractions, and in the case of
amusement and theme parks, manufacturers of traditional amusement park
attractions. In addition to its direct competitors, IWERKS also faces
competition from systems integrators and some amusement and theme parks
developing and constructing their own attractions. Many of the Company's
competitors have better name recognition, and substantially greater financial
and other resources than IWERKS.
Additionally, the out-of-home entertainment industry in general is
undergoing significant changes, primarily due to technological developments as
well as changing consumer tastes. Numerous companies are developing and are
expected to develop new entertainment products for the out-of-home
entertainment industry in response to these developments that are or may be
directly competitive with the Company's products. There is severe competition
for financial, creative and technological resources in the Company's industry
and there can be no assurance that the Company's existing products will
continue to compete effectively or that its products under development will
ever be competitive. Further, the commercial success of the Company's products
is ultimately dependent upon audience reaction. The Company believes that
audience reaction will to a large extent be influenced by the audience's
perception of how the Company's products compare with other available
entertainment options out of the home. There can be no assurance that new
developments in out-of-home entertainment will not result in changes in
consumer tastes that will make the Company's products less competitive.
HISTORY OF OPERATING LOSSES; FLUCTUATING PERIODIC OPERATING RESULTS AND CASH
FLOW
The Company has sustained substantial operating losses in three of
its last five fiscal years. As of March 31, 1996, the Company's accumulated
deficit was $20.7 million. Although the Company reported profits for the nine
months ended March 31, 1996, there can be no assurance that the Company will
be consistently profitable on either a quarterly or an annual basis or that it
will be able to sustain revenue growth in the future.
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The Company has experienced quarterly fluctuations in operating results
and anticipates that these fluctuations will continue in future periods. The
Company's operating results and cash flow can fluctuate substantially from
quarter to quarter and periodically as a result of the timing of theater
system deliveries, contract signings, the mix of theater systems shipped, the
completion of custom film contracts and the amount of revenues from portable
simulation theater and film licensing agreements. In particular, fluctuations
in theater system deliveries from quarter to quarter can materially affect
quarterly and periodic operating results, and theater system contract signings
can materially affect quarterly or periodic cash flow. While a significant
portion of the Company's expense levels are relatively fixed, and the timing
of increases in expense levels is based in large part on the Company's
forecasts of future sales. If net sales are below expectations in any given
period, the adverse impact on results of operations may be magnified by the
Company's inability to adjust spending quickly enough to compensate for the
sales shortfall. The Company may also choose to reduce prices or increase
spending in response to market conditions, which may have a material adverse
effect on the Company's results of operations.
Over the last eight quarters, certain events have contributed to
fluctuations in the Company's results of operations and financial condition.
In the fourth quarter of fiscal 1994, the Company experienced certain cost
overruns on two of its new products, along with some accelerated research and
development costs associated with those products. In the third quarter of
fiscal 1995, the Company's cost of sales increased dramatically as a percent
of sales as a result of a one-time $4.5 million write-down of certain assets,
primarily film costs, and third and fourth quarter sales and general
administration expenses increased as a result of restructuring charges related
to the closure of the Company's Sarasota, Florida facility, its consolidation
of its operations and litigation costs associated with the settlement of a
securities class action lawsuit, pursuant to which certain warrants are being
issued.
INTERNATIONAL OPERATIONS
A significant portion of the Company's sales are made to customers
located outside of the United States, primarily in the Far East, Europe and
Canada. During fiscal 1993, 1994 and 1995, 53%, 43%, and 55% of the Company's
revenues, respectively, were derived from sales outside the United States.
Except for sales made to the Japanese market which accounted for 14% of the
Company's revenues for fiscal 1995, during fiscal 1995 no sales to any single
foreign market accounted for 10% or more of the Company's revenues. The
Company expects that international operations will continue to account for a
substantial portion of its revenues in the near future and maintains an office
in Hong Kong to support sales to Asia and one office in Holland to support
sales in Europe. International operations and sales may be subject to
political and economic risks, including political instability, currency
controls, exchange rate fluctuations, and changes in import/export
regulations, tariff and freight rates. In addition, various forms of
protectionist trade legislation have been proposed in the United States and
certain other countries. Any resulting changes in current tariff structures or
other trade and monetary policies could adversely affect the Company's
international operations. Political and economic factors have been identified
by the Company with respect to certain of the markets in which it competes.
There can be no assurance that these factors will not result in customers of
the Company defaulting on payments due to the Company, or in the reduction of
potential purchases of the Company's products.
CURRENT TRENDS IN THE GLOBAL ECONOMY
The Company's revenues and profitability are dependent on the strength of
the national and international economies. In a recessionary environment, sales
of the Company's products and products of other entertainment companies may be
adversely affected. Theme parks and other out-of-home entertainment venues
may also experience a downturn in sales which could reduce the funds available
for capital improvements resulting in price and other concessions and
discounts by the Company in order to maintain sales activity. Although the
Company has not experienced a reduction in unit sales of its products to date,
certain of its competitors have reported that the recent recession in the
United States has had an adverse impact on their sales activity. Consequently,
the Company is unable to predict to what extent, or for what period, a
recessionary climate would adversely affect sales of the Company's products.
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DEPENDENCE ON SENIOR MANAGEMENT; RECENT CHANGES TO KEY PERSONNEL
Since January 1995, all of the Company's executive officers have changed.
The recruitment, retention and motivation of skilled executives, sales,
technical and creative personnel and other employees are important to the
Company's operations. The Company's recent history has placed, and could
continue to place, a significant strain on the Company's management and other
resources. In addition, there is competition for management and creative
personnel in the Company's industries. Although the Company has not
experienced significant problems in recruiting retaining qualified personnel,
there can be no assurance that it will not encounter such problems in the
future. Should any key executive officer cease to be affiliated with the
Company before a qualified replacement is found, the Company's business could
be materially adversely affected.
VOLATILITY OF STOCK PRICE
The Company's stock price has been, and is likely to continue to be,
highly volatile. The market price of the Common Stock has fluctuated
substantially in recent periods. During the 12 months prior to the date of
this Prospectus, the Company's market price has ranged from a low of $2.875
per share to a high of $11.875 per share. Future announcements concerning the
Company or its competitors, quarterly variations in operating results,
introduction of new products or changes in product pricing policies by the
Company or its competitors and acquisition or loss of significant customers
may affect or be perceived to affect the Company's operations, or changes in
earnings estimates by analysts, among other factors, could cause the market
price of the Common Stock to fluctuate substantially. In addition, stock
markets have experienced extreme price and volume volatility in recent years.
This volatility has had a substantial effect on the market prices of
securities of many smaller public companies for reasons frequently unrelated
to the operating performance of the specific companies. These broad market
fluctuations may adversely affect the market price of the Common Stock. There
can be no assurance that the market price of the Common Stock will not decline
below the public offering price.
LITIGATION
IWERKS was named as a defendant in two actions entitled KRAVITS V. IWERKS
ENTERTAINMENT, INC., et al., U.S. District Court, Central District of
California, Case No. 95-2541-AWT and SOBEL V. IWERKS ENTERTAINMENT, INC., ET
AL., U.S. District Court, Central District of California, Case No. 95-4159-DT.
By order dated July 31, 1995, these actions were consolidated, and a Second
Amended Consolidated Complaint (the "Second Amended Complaint") was filed on
August 30, 1995.
The Second Amended Complaint, purporting to be a class action filed by
persons claiming to have been stockholders of the Company, named as defendants
the Company and certain of its current and former officers and directors. The
Second Amended Complaint alleged that the defendants made public statements,
in connection with the October 1993 initial public offering and thereafter,
which were false and misleading. The complaint asserted claims under Section
11 of the Securities Act of 1933 (the "1933 Act") and Section 10(b) of the
Securities Exchange Act of 1934 (the "1934 Act") and controlling person claims
under Section 15 of the 1933 Act and Section 20 of the 1934 Act) on behalf of
a purported class of persons who purchased or otherwise acquired the Company's
common stock during the period October 18, 1993 through May 16, 1995. The
Second Amended Complaint seeks unspecified damages.
On November 27, 1995, the Company entered into a Stipulation of
Settlement providing for the creation of a settlement fund to be made
available to satisfy claims of class members, and providing for the dismissal
with prejudice of the Second Amended Complaint and the release of all claims
that were or potentially could have been set forth therein. The Company did
not admit liability as part of this proposed settlement. The settlement fund
is to include $1,750,000 in cash (funded by the Company's insurance carrier),
250,000 shares of the Company's Common Stock, and 500,000 warrants to purchase
the Company's common Stock. The distribution of the settlement fund is
subject to a Plan of Allocation, which provides, among other things, that
certain portions of the settlement fund not claimed by class members or used
to pay certain costs related to the settlement will be returned to the Company
or its insurer. The settlement is subject to Court approval. On November 30,
1995, the Court
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issued an order preliminarily approving the settlement and set a hearing for
February 26, 1996 to determine whether the settlement is fair and reasonable
to the Company and the class. Such hearing took place and the Court
determined that the settlement was fair and reasonable.
IWERKS has also been named as a defendant in an action filed on April
15, 1996, entitled HOLLINGSWORTH V. IWERKS ENTERTAINMENT, INC., et al.,
Circuit Court of the 12th Judicial District for Sarasota, Florida, Case No.
CA-01 96-1930. Hollingsworth, a former director of the Company and former
chief executive officer and founder of Omni Films International, Inc.
("Omni"), seeks unspecified damages arising from alleged misstatements in
connection with the acquisition by the Company of Omni in May 1994. The
Company has not yet filed an answer to the complaint. The Company, however,
intends to vigorously defend against this action.
The Company is also a party to various other actions arising in the
ordinary course of business which, in the opinion of management, will not have
a material adverse impact on the Company's financial condition.
There can be no assurance that the Company will not become a party to
other lawsuits in the future.
ENVIRONMENTAL MATTERS AND OTHER GOVERNMENTAL REGULATIONS
Under various Federal, state and local environmental laws and
regulations, a current or previous owner or occupant of real property may
become liable for the costs of removal or remediation of hazardous substances
at such real property. Such laws and regulations often impose liability
without regard to fault. The Company leases its corporate headquarters and
manufacturing facilities. The Company could be held liable for the costs of
remedial actions with respect to hazardous substances on such properties under
the terms of the governing lease and/or governing law. Although the Company
has not been notified of, and is not otherwise aware of, any current
environmental liability, claim or non-compliance, there can be no assurance
that the Company will not be required to incur remediation or other costs in
the future in connection with its leased properties. In addition, the
Company's subcontractors and other third parties which it has contractual
relations with are similarly subject to such laws.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue up to
1,000,000 shares of Preferred Stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action
by the Company's stockholders. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
Preferred Stock. While the Company has no present intention to issue shares
of Preferred Stock, such issuance, while providing desirable flexibility in
connection with the possible acquisitions and other corporate purposes, could
have the effect of delaying, deferring or preventing a change in control of
the Company and entrenching existing management. In addition, such Preferred
Stock may have other rights, including economic rights senior to the Common
Stock, and, as a result, the issuance thereof could have a material adverse
effect on the market value of the Common Stock.
A number of provisions of the Company's Certificate of Incorporation and
By-Laws and certain Delaware laws and regulations relating to matters of
corporate governance, certain rights of Directors and the issuance of
preferred stock without stockholder approval, may be deemed to have and may
have the effect of making more difficult, and thereby discouraging, a merger,
tender offer, proxy contest or assumption of control and change of incumbent
management, even when stockholders other than the Company's principal
stockholders consider such a transaction to be in their best interest.
In addition, the Company has adopted a Stockholder Rights Plan (the
"Agreement"). Pursuant to the Agreement each outstanding share of the
Company's Common Stock has received one Right as a dividend that becomes
exercisable upon certain triggering events related to an unsolicited takeover
attempt of the Company.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock offered by the Selling Stockholders hereunder.
SELLING STOCKHOLDER AND PLAN OF DISTRIBUTION
All shares of Common Stock offered hereby are owned by the Selling
Stockholder, who acquired such shares in connection with the acquisition by
the Company of the Selling Stockholder's minority interest in one of the
Company's subsidiaries. At May 13, 1996, the Selling Shareholder owned
315,000 shares of the Company's Common Stock, and held fully vested options to
purchase 3,886 shares of the Company's Common Stock.
Selling Stockholder Shares To Be Sold
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W. Thomas Gimple 315,000
1806 Beryl Lane
Newport Beach, California 90278
The Selling Stockholders may sell all or a portion of the shares of
Common Stock offered hereby from time to time in brokerage transactions in the
over-the-counter market at prices and terms prevailing at the times of such
sales. The Selling Stockholders may also make private sales directly or
through brokers. The Selling Stockholders may individually pay customary
brokerage commissions and expenses. In connection with any sales, the Selling
Stockholders and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act, in which event
commissions received by such brokers may be deemed underwriting commissions
under such Act.
Under the 1934 Act and the regulations thereunder, any person engaged in
a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the shares of Common Stock of the Company during the applicable
"cooling off" periods prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Stockholders will
need to comply with applicable provisions of the 1934 Act and the rules and
regulations thereunder including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of
Common Stock by the Selling Stockholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company has adopted provisions in its Certificate of Incorporation
which limit the liability of its directors. As permitted by applicable
provisions of the Delaware General Corporation Law (the "Delaware Law"),
directors will not be liable to the Company for monetary damages arising from
a breach of their fiduciary duty as directors in certain circumstances. Such
limitation does not affect liability for any breach of a director's duty to
the Company or its stockholders (i) with respect to any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) with
respect to approval by the director of any transaction from which he derives
an improper personal benefit, (iii) with respect to acts or omissions
involving an absence of good faith, that he believes to be contrary to the
best interests of the Company or its stockholders, that involve intentional
misconduct or a knowing and culpable violation of law, that constitute an
unexcused pattern or inattention that amounts to an abdication of his duty to
the Company or its stockholders, or that show a reckless disregard for his
duty to the Company or its stockholders in circumstances in which he was, or
should have been aware, in the ordinary course of performing his duties, or a
risk of serious injury to the Company or its stockholders, or (iv) based on
transactions between the Company and its directors or another corporation with
interrelated directors or on improper distributions, loans or
8
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guarantees under applicable sections of Delaware Law. Such limitation of
liability also does not affect the availability of equitable remedies such as
injunctive relief or rescission.
The Company's Bylaws provide that the Company must indemnify its
directors and officers to the full extent permitted by Delaware Law, including
circumstances in which indemnification is otherwise discretionary under
Delaware Law, and the Company has entered into indemnification agreements (the
"Indemnification Agreements") with its directors providing such indemnity.
The Indemnification Agreements constitute binding agreements between the
Company and each of the other parties thereto, thus preventing the Company
from modifying its indemnification policy in a way that is adverse to any
person who is a party to an Indemnification Agreement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers
and controlling persons of the Company pursuant to the above statutory
provisions or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Troop Meisinger Steuber & Pasich, LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements and schedule of Iwerks
Entertainment, Inc. appearing in Iwerks Entertainment, Inc.'s Annual Report
(Form 10-K) for the year ended June 30, 1995, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements and schedule are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering are as follows:
Amount
-------
Registration Fee Under Securities Act of 1933 . . . . . . . . . . . . .$835.02
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $*
Blue Sky Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . $*
Printing and Engraving Certificates . . . . . . . . . . . . . . . . . . . . $*
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . .$2,000.00
Accounting Fees and Expense . . . . . . . . . . . . . . . . . . . . . . . . $*
Registrar and Transfer Agent Fees . . . . . . . . . . . . . . . . . . . . . $*
Miscellaneous Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . $*
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2835.02
========
_________________
* Not applicable or none.
Item 15. Indemnification of Directors and Officers.
The Company has adopted provisions in its Certificate of Incorporation
which limit the liability of its directors. As permitted by applicable
provisions of the Delaware General Corporation Law (the "Delaware Law"),
directors will not be liable to the Company for monetary damages arising from
a breach of their fiduciary duty as directors in certain circumstances. Such
limitation does not affect liability for any breach of a director's duty to
the Company or its stockholders (i) with respect to any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) with
respect to approval by the director of any transaction from which he derives
an improper personal benefit, (iii) with respect to acts or omissions
involving an absence of good faith, that he believes to be contrary to the
best interests of the Company or its stockholders, that involve intentional
misconduct or a knowing and culpable violation of law, that constitute an
unexcused pattern or inattention that amounts to an abdication of his duty to
the Company or its stockholders, or that show a reckless disregard for his
duty to the Company or its stockholders in circumstances in which he was, or
should have been aware, in the ordinary course of performing his duties, or a
risk of serious injury to the Company or its stockholders, or (iv) based on
transactions between the Company and its directors or another corporation with
interrelated directors or on improper distributions, loans or guarantees under
applicable sections of Delaware Law. Such limitation of liability also does
not affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Bylaws provide that the Company must indemnify its
directors and officers to the full extent permitted by Delaware Law, including
circumstances in which indemnification is otherwise discretionary under
Delaware Law, and the Company has entered into indemnification agreements (the
"Indemnification Agreements") with its directors providing such indemnity.
The Indemnification Agreements constitute binding agreements between the
Company and each of the other parties thereto, thus preventing the Company
from
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modifying its indemnification policy in a way that is adverse to any person
who is a party to an Indemnification Agreement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index of this Registration Statement.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to the appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
discussed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Pre-
Effective Amendment No. 1 to Registration Statement on Form S-3 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Burbank, and the State of California on the 13th day of May, 1996.
IWERKS ENTERTAINMENT, INC.
(Registrant)
/s/ Francis T. Phalen
By:---------------------------------------
Francis T. Phalen
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
*
By: ----------------- Co-Chairman of the Board, May 13, 1996
Roy A. Wright Chief Executive Office
and President (Principal
Executive Officer)
/s/ Francis T. Phalen
By: ----------------- Director, Executive Vice May 13, 1996
Francis T. Phalen President and Chief
Financial Officer (Principal
Financial and Accounting
Officer
By: ----------------- Co-Chairman of the Board May 13, 1996
Paula Douglass
*
By: ----------------- Director May 13, 1996
Donald W. Iwerks
*
By: ----------------- Director May 13, 1996
Dag Tellefsen
/s/ Francis T. Phalen
By: ----------------- May 13, 1996
Francis T. Phalen
Attorney-in-Fact
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EXHIBIT INDEX
No. Item Page
- -- ---- ----
5.1 Opinion of Troop Meisinger Steuber & Pasich, LLP*
23.1 Consent of Ernst & Young LLP*
23.3 Consent of Troop Meisinger Steuber & Pasich, LLP (included
in Exhibit 5.1)*
______________
* Previously filed.
iii
