SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-22558
IWERKS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4439361
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
No.)
4540 West Valerio Street
Burbank, CA 91505-1046
(Address of principal executive offices and zip code)
(818) 841-7766
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.001 par value per share
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-K or any Amendment to this
Form 10-K. [ ]
At October 15, 1999, there were outstanding 12,390,581 shares of the
registrant's common stock, par value $.001 per share ("Common Stock"), and the
aggregate market value of the shares held on that date by non-affiliates of
registrant, based on the closing price ($.81 per share) of the Common Stock, on
the Nasdaq National Market on that date, was $6,134,454. For purposes of this
computation, it has been assumed that the shares beneficially held by directors
and executive officers of registrant were "held by affiliates"; this assumption
is not to be deemed to be an admission by such persons that they are affiliates
of registrant.
<PAGE>
General
Iwerks Entertainment, Inc. ("Iwerks" or the "Company") hereby amends its
Annual Report on Form 10-K for the fiscal year ended June 30, 1999, by deleting
its responses for Items 9, 10, 11 and 12 contained in its Annual Report on Form
10-K filed September 28, 1999 and replacing such Items as set forth in this
Amendment No. 1 to Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of October 15, 1999:
<TABLE>
<CAPTION>
NAME AND POSITION AGE COMMENCEMENT OF SERVICES
<S> <C> <C>
Peter Guber 57 September 1999
Chairman of the Board and Director
Paul Schaeffer 52 September 1999
Vice Chairman of the Board
and Director
Charles Goldwater 48 February 1998
Chief Executive Officer, President
and Director
Bruce Beda (1)(2) 58 July 1998
Director
Peter Hanelt (1)(2) 54 July 1998
Director
Donald W. Iwerks (3) 70 January 1986
Director
Gary J. Matus (1) 51 July 1996
Director
Dag Tellefsen (2)(3) 57 March 1993
Director
Jon Corfino 41 July 1993
Senior Vice President of Film and
Executive in Charge of Production
Jeffrey M. Dahl 37 October 1996
Senior Vice President,
Chief Financial Officer
and Secretary
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<PAGE>
Daniel Griesmer 51 March 1998
Senior Vice President - General Manager
<FN>
-------------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Nominating Committee
</FN>
</TABLE>
PETER GUBER joined Iwerks as a director and Chairman of the Board in
September 1999. Mr. Guber is the co-founder of Mandalay Entertainment Group,
which includes Mandalay Pictures, Mandalay Television, Mandalay Sports
Entertainment, Mandalay Media Arts and Mandalay E-Media, and has served as its
Chairman and Chief Executive Officer since its inception in 1995. Prior thereto,
from 1989 to 1995, Mr. Guber served as Chairman and Chief Executive Officer of
Sony Pictures Entertainment.
PAUL SCHAEFFER joined Iwerks as a director and Vice Chairman of the
Board in September 1999. Mr. Schaeffer is a co-founder of Mandalay Entertainment
Group and has served as its Vice Chairman and Chief Operating Officer since its
inception in 1995. Prior thereto, from 1989 to 1995, Mr. Schaeffer served as
Executive Vice President of Sony Pictures Entertainment, overseeing worldwide
corporate operations including Worldwide Administration, Financial Affairs,
Human Resources, Corporate Affairs, Legal Affairs and Corporate Communications.
During his tenure, Mr. Schaeffer also had supervisory responsibility for the
rebuilding and renovation of Sony Pictures Studios.
CHARLES GOLDWATER has been a director of Iwerks and served as its Chief
Executive Officer and President since February 23, 1998. Mr. Goldwater served as
Chairman of the Board until September 1999. From September 1995 to December
1997, Mr. Goldwater served as Chief Executive Officer and President of Mann
Theatres (Cinamerica Theatres L.P.). Prior thereto, from 1990 to 1995, Mr.
Goldwater was Senior Vice President and General Manager of Sony/Loews Theaters.
BRUCE BEDA has been a director of Iwerks since July 1998. Since February
1995, Mr. Beda has served as President and Chief Executive Officer of Orion
Partners LLC, a private investment and consulting company. From December 1986 to
January 1995, Mr. Beda served as Chief Financial Officer of Venturedyne Ltd., a
private manufacturing conglomerate. Mr. Beda presently serves on the board of
directors of Stifel Financial Corp., a financial services company, and ECC
International Corp., a designer, manufacturer and marketer of
computer-controlled simulators.
PETER HANELT has been a director of Iwerks since July 1998. Since
February 1998, Mr. Hanelt has served as Chief Executive Officer and Chief
Financial Officer of Natural Wonders, Inc., a retailer of nature and science
gifts. Prior thereto, from April 1997 to February 1998, Mr. Hanelt was a
principal of Regent Pacific Management Corporation, a consulting firm. From
October 1993 to April 1997, Mr. Hanelt was both Chief Operating Officer and
Chief Financial Officer of Esprit de Corp, a wholesaler and retailer of apparel.
Mr. Hanelt also serves as director of Shoe Pavilion, Inc., an off-price footwear
retailer, Patelco Credit Union, Interhealth Nutraceuticals and Natural Wonders,
Inc.
DONALD W. IWERKS is a co-founder of Iwerks and has been a director since
Iwerks' inception. Mr. Iwerks served as Chief Technical Officer of Iwerks until
his retirement in December 1995 and as Vice Chairman of the Board until
September 1999. From 1950 to 1985, Mr. Iwerks was employed by the Walt Disney
Studios, where from 1965 to 1985 he was head of the Technical Engineering and
Manufacturing Division, which was responsible for the design and manufacture of
all film projection systems used in the Disney theme parks.
Page 3
<PAGE>
GARY J. MATUS has been a director of Iwerks since July 1996. Since May
1999, Mr. Matus has served as Chief Operating Officer of Themeware/Internet
Toolbox. From December 1989 to May 1999, Mr. Matus served as Executive Vice
President of Bank of America, N.T. & S.A., and served as Chief Marketing Officer
responsible for the bank's marketing operations from October 1996 to May 1999.
Prior thereto, from 1995 to 1996, Mr. Matus served as Head of Trust Investment
Management Private Banking, and, from 1989 to 1995, Mr. Matus served as Head of
the Entertainment and Media Industries Group at Bank of America, N.T. & S.A.
DAG TELLEFSEN has been a director of Iwerks since March 1993. Since
1982, Mr. Tellefsen has been the Managing General Partner of Glenwood
Management, a venture capital firm and Company stockholder. Mr. Tellefsen also
serves or has served as a director of ARIX Corp., KLA-Tencor Corporation and
Octel Communications Corporation.
JON CORFINO has served as Iwerks' Senior Vice President of Film and
Executive in Charge of Production since March 1998. Prior thereto, since July
1993, Mr. Corfino has held various positions with the Company, including Vice
President of Attractions, Vice President of Operations, Director of Studio
Operations and Production Manager.
JEFFREY M. DAHL, C.P.A. has served as Iwerks' Senior Vice President,
Chief Financial Officer and Secretary since February 1999. From October 1996 to
February 1999, Mr. Dahl served as Vice President and Controller of Iwerks. Prior
thereto, from January 1994 to October 1996, Mr. Dahl served as Controller of ACT
III Broadcasting Inc.
DANIEL GRIESMER has served as Iwerks' Senior Vice President - General
Manager since March 1998. From November 1995 to February 1998, Mr. Griesmer
served as Vice President, Theater Planning and Development of Mann Theatres
(Cinamerica Theatres, L.P.). Prior thereto, from 1990 to 1995, Mr. Griesmer held
various positions at Sony/Loews Theaters, the most recent of which was Assistant
Director of Facilities.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of Iwerks (the "Board") held a total of 7
meetings during the fiscal year ended June 30, 1999. The Board has an Audit
Committee, a Compensation Committee and a Nominating Committee. During the
fiscal year ended June 30, 1999, each director attended at least 75% of the
meetings of the Board held while he was a director and of the committees of the
Board on which he served.
The Audit Committee's functions include recommending to the Board the
engagement of the Company's independent auditors, reviewing and approving the
services performed by the independent auditors and reviewing and evaluating the
Company's accounting policies and internal accounting controls. The Compensation
Committee reviews and approves the compensation of officers and key employees,
including the granting of options under the Company's various stock incentive
plans. The Nominating Committee is responsible for proposing potential
candidates for the Board. Currently, the members of the Audit Committee are
Messrs. Gary J. Matus, Bruce Beda and Peter Hanelt, the members of the
Compensation Committee are Messrs. Dag Tellefsen, Bruce Beda and Peter Hanelt
and the members of the Nominating Committee are Messrs. Dag Tellefsen and Donald
W. Iwerks.
Page 4
<PAGE>
COMPENSATION OF DIRECTORS
Upon the initial election or appointment to the Board of any person who
is not then a current employee or officer of the Company (an "Outside
Director"), such Outside Director is granted, effective as of the date of the
first meeting of the Board attended by the Outside Director after his or her
appointment or election, a ten year option to purchase 10,000 shares of Common
Stock. Each Outside Director who is then serving on the Board is granted
effective on the date of each annual meeting of the Company's stockholders (or
any special meeting in lieu of an annual meeting), a ten year option to purchase
the number of shares of Common Stock determined by dividing $50,000 by the per
share fair market value of the Common Stock on the date of grant, up to a
maximum of 25,000 shares. All of the above-described options vest over four
years. In addition, each Outside Director receives an annual retainer fee of
$8,000, which is paid quarterly. Further, each Outside Director is entitled to
receive $1,000 for in-person Board meetings, $500 for telephonic Board meetings
and committee meetings and reimbursement for travel expenses incurred on behalf
of Iwerks. With the exception of reimbursement for travel expenses incurred on
behalf of Iwerks, Messrs. Peter Guber and Paul Schaeffer do not receive any of
the other compensation for serving as directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Dag Tellefsen and Donald W. Iwerks served as members of the
Board's Compensation Committee through July 16, 1998. Since July 16, 1998, the
Compensation Committee has been composed of Messrs. Dag Tellefsen, Bruce Beda
and Peter Hanelt. Mr. Iwerks is a co-founder of Iwerks and served as Chief
Technical Officer of Iwerks until his retirement in December 1995. Beginning
July 1997, in addition to his director fees, Mr. Iwerks has received and will
continue to receive a monthly consulting fee of $5,000.
The Company has no interlocking relationships involving any of its
Compensation Committee members which would be required by the Securities and
Exchange Commission ("SEC") to be reported herein, and no officer or employee of
the Company presently serves on its Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's executive officers, directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the SEC. Executive
officers, directors and greater-than-ten percent stockholders are required by
SEC regulations to furnish the Company with all Section 16(a) forms they file.
Based solely on its review of the copies of the forms received by it and written
representations from certain reporting persons that they have complied with the
relevant filing requirements, the Company believes that, during the year ended
June 30, 1999, all of the Company's executive officers, directors and
greater-than-ten percent stockholders complied with all Section 16(a) filing
requirements.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, as to the Chief Executive Officer and as
to each of the other four most highly compensated officers whose compensation
exceeded $100,000 during the last fiscal year (the
Page 5
<PAGE>
"Named Executive Officers"), information concerning all compensation paid for
services to the Company in all capacities for each of the three fiscal years
ended June 30 indicated below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------------------------------- ------------
Other Annual Stock Option All Other
Name & Principal Position Year Salary Bonus Compensation(1) Awards(2) Compensation
- ------------------------- ---- ------ ----- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles Goldwater (3) 1999 $ 330,000 -- $ 12,000 -- $ 11,255(4)
Chief Executive Officer, 1998 134,538 -- 4,000 250,000 1,890(5)
President and Former
Chairman of the
Board
Bruce Hinckley (6) 1999 $ 138,583 -- $ 8,000 -- $202,552(7)
Former Executive Vice 1998 172,115 -- 7,000 -- 2,740(8)
President, Chief 1997 110,769 $37,000 -- 37,474 --
Financial Officer
and Secretary
Jeffrey M. Dahl (9) 1999 $ 112,923 -- $ 12,000 25,000 $ 3,026(8)
Senior Vice President, 1998 96,404 -- 7,000 -- 2,885(8)
Chief Financial 1997 60,308 $12,000 -- 6,705 --
Officer and
Secretary
Daniel Griesmer 1999 $ 131,580 -- $ 12,000 -- $ 3,797(8)
Senior Vice President- 1998 40,000 -- 5,968 75,000 --
General Manager
Jon Corfino 1999 $ 125,793 -- $ 12,000 25,000 $ 3,626(8)
Senior Vice President 1998 116,495 -- 7,000 -- 2,526(8)
of Film and Executive 1997 114,799 $15,000 -- 6,744 --
in Charge of
Production
Jack Shishido (10) 1999 $ 156,923 -- $ 12,000 -- $ 3,508(8)
Former Senior Vice
President of Worldwide
Sale
<FN>
________________________
(1) Represents a stipend to defray a portion of the Named Executive Officer's
commuting expenses.
(2) All numbers reflect the number of shares of Common Stock subject to
options granted during the fiscal year.
(3) Mr. Goldwater resigned as Chairman of the Board in September 1999
concurrent with Mr. Peter Guber's appointment as Chairman of the Board.
(4) Includes (i) $9,365 paid pursuant to the Company's 401(k) plan and (ii)
$1,890 which represents the dollar value of term life insurance premiums
paid by Iwerks.
(5) Represents the dollar value of term life insurance premiums paid by
Iwerks.
Page 6
<PAGE>
(6) Mr. Hinckley resigned from his positions with Iwerks in February 1999.
(7) Includes (i) $200,000 in severance payments made pursuant to Mr.
Hinckley's second amended and restated separation agreement with the
Company and (ii) $2,552 paid pursuant to the Company's 401(k) plan.
(8) Paid pursuant to the Company's 401(k) plan.
(9) Mr. Dahl joined Iwerks as Vice President and Controller in October
1996. Mr. Dahl was appointed Senior Vice President, Chief Financial
Officer and Secretary in February 1999.
(10) Mr. Shishido resigned from his position with Iwerks in August 1999.
</FN>
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant
of stock options made during the fiscal year ended June 30, 1999 to the Named
Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants Potential Realizable Value at
------------------------------------------- Assumed Annual Rates of Stock
Percent of Price Appreciation for Option
Total Options Term(1)
Number of Granted to Exercise or -----------------------------
Options Employees in Base Price Per Expiration
Name Granted(2) Fiscal Year(3) Share(4) Date 5% 10%
- ------------------------- ---------- -------------- -------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles Goldwater (5)..... -- -- -- -- -- --
Bruce Hinckley (6)........ -- -- -- -- -- --
Jeffrey M. Dahl (7)....... 25,000 6.95% $1.25 4/12/09 $19,653 $49,804
Daniel Griesmer........... -- -- -- -- -- --
Jon Corfino............... 25,000 6.95% $1.25 4/12/09 $19,653 $49,804
Jack Shishido (8)......... -- -- -- -- -- --
<FN>
_________________________
(1) The potential realizable value is based on the assumption that the Common
Stock appreciates at the annual rate shown (compounded annually) from the
date of grant until the expiration of the option term. These amounts are
calculated pursuant to applicable requirements of the SEC and do not
represent a forecast of the future appreciation of the Common Stock.
(2) Each of the option grants set forth on this chart are exercisable with
respect to one-fourth (1/4) of the total shares granted, rounded up to the
nearest whole share, on the first anniversary of the date of grant, and
thereafter exercisable with respect to one-forty-eighth (1/48) of the
total shares, rounded up to the nearest whole share, on the first day of
each month until all shares have become exercisable. The options may, at
the discretion of the Administrator, become immediately exercisable upon
certain change of control events. All of the options set forth in this
chart were granted for a term of 10 years.
(3) Options covering an aggregate of 359,577 shares were granted to eligible
employees during the fiscal year ended June 30, 1999.
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<PAGE>
(4) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain
conditions.
(5) Mr. Goldwater resigned as Chairman of the Board in September 1999
concurrent with Mr. Peter Guber's appointment as Chairman of the Board.
(6) Mr. Hinckley resigned from his positions with Iwerks in February 1999.
(7) Mr. Dahl was appointed as Iwerks' Senior Vice President, Chief Financial
Officer and Secretary in February 1999.
(8) Mr. Shishido resigned from his position with Iwerks in August 1999.
</FN>
</TABLE>
STOCK OPTIONS HELD AT FISCAL YEAR END
During the fiscal year ended June 30, 1999, no Named Executive Officer
exercised any stock options. The following table sets forth, for each of the
Named Executive Officers, certain information regarding the number of shares of
Common Stock underlying stock options held at fiscal year-end and the value of
options held at fiscal year-end based upon the last reported sales price of the
Common Stock on the Nasdaq National Market on June 30, 1999 ($1.06 per share).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
Value of All Unexercised
Number of Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End
-------------------------- ------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- -------------------------- -------------------------- ------------------------
<S> <C> <C>
Charles Goldwater (1)..... 116,665/133,335 $0/0
Bruce Hinckley (2)........ 37,474/0 $0/0
Jeffrey M. Dahl (3)....... 0/31,705 $0/0
Daniel Griesmer........... 23,437/51,563 $0/0
Jon Corfino............... 15,500/44,213 $480/0
Jack Shishido (4)......... 0/0 $0/0
<FN>
____________________
(1) Mr. Goldwater resigned as Chairman of the Board in September 1999
concurrent with Mr. Peter Guber's appointment as Chairman of the Board.
(2) Mr. Hinckley resigned from his positions with Iwerks in February 1999.
(3) Mr. Dahl was appointed as Senior Vice President, Chief Financial Officer
and Secretary in February 1999.
(4) Mr. Shishido resigned from his position with Iwerks in August 1999.
</FN>
</TABLE>
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of October 15, 1999 certain
information relating to the ownership of Common Stock by (a) each person known
by Iwerks to be the beneficial owner of more than 5% of the outstanding shares
of the Common Stock, (b) each of the directors of Iwerks, (c) each of the Named
Executive Officers and (d) all of the executive officers and directors of Iwerks
as a group. Except as may be indicated in the footnotes to the table and subject
to applicable community property laws, each of such persons has the sole voting
and investment power with respect to the shares owned. Beneficial ownership has
been determined in accordance with Rule 13d-3 under the Exchange Act. Under this
Rule, certain shares may be deemed to be beneficially owned by more than one
person (such as where persons share voting power or investment powers). In
addition, shares are deemed to be beneficially owned by a person if the person
has the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided; in computing
the percentage ownership of any person, the amount of shares outstanding is
deemed to include the amount of shares beneficially owned by such person (and
only such person) by reason of these acquisition rights on or before December
14, 1999, regardless of whether the market price for the shares underlying such
acquisition rights is substantially lower than the price at which the shares may
be acquired. As a result, the percentage of outstanding shares of any person as
shown in the following table does not necessarily reflect the person's actual
voting power at any particular date. Unless otherwise indicated, the address of
each person is c/o Iwerks Entertainment, Inc., 4540 West Valerio St., Burbank,
California 91505-1046.
<TABLE>
<CAPTION>
Number Percent
of of Class
Name and Address Shares Owned
- ---------------------------------------- -------------- ---------------
<S> <C> <C>
Charles Goldwater(1)................... 159,165 1.28%
Donald W. Iwerks(2).................... 779,049 6.29
Gary J. Matus(3)....................... 44,328 *
Dag Tellefsen(4)....................... 606,663 4.90
Jon Corfino(5)......................... 24,102 *
Peter Hanelt(6)........................ 24,166 *
Peter Guber............................ 0 *
Paul Schaeffer......................... 0 *
Daniel Griesmer(7)..................... 28,125 *
Jack Shishido(8)....................... 19,062 *
Jeffrey M. Dahl(9)..................... 11,955 *
Bruce Hinckley(10)..................... 52,474 *
Bruce Beda(11)......................... 39,166 *
Heartland Advisors, Inc.(12)........... 3,394,022 27.39
790 North Milwaukee Street
Milwaukee, WI 53202
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<PAGE>
Dimensional Fund Advisors, Inc.(13).... 844,420 6.82
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
All executive officers and directors as
a group (11 persons) (14).............. 1,716,719 13.86
<FN>
- ------------------------
* Less than one percent.
(1) Includes 129,165 shares of Common Stock underlying options which are or
will become exercisable on or before December 14, 1999.
(2) Includes 760,970 shares of Common Stock held by the Donald and Betty
Iwerks 1995 Family Trust and 18,079 shares of Common Stock underlying
options which are or will become exercisable on or before December 14,
1999. Mr. Iwerks resigned as Chief Technical Officer of Iwerks effective
as of December 31, 1995. Mr. Iwerks currently serves on the Board and is a
consultant to Iwerks.
(3) Includes 39,328 shares of Common Stock underlying options which are or
will become exercisable on or before December 14, 1999.
(4) Includes 37,474 shares of Common Stock underlying options which are or
will become exercisable on or before December 14, 1999. Includes 530,031
shares of Common Stock owned by Meriken Nominees Limited as nominee for
Glenwood Ventures, 37,408 shares owned by Glenwood Management and 1,750
shares owned by Dag Tellefsen and Associates, all of which Mr. Tellefsen
disclaims beneficial interest. Mr. Tellefsen is a principal of Glenwood
Ventures, Glenwood Management and Dag Tellefsen and Associates.
(5) Includes 21,102 shares of Common Stock underlying options which are or
will become exercisable on or before December 14, 1999.
(6) Includes 9,166 shares of Common Stock underlying options which are or will
become exercisable on or before December 14, 1999.
(7) Consists of options to purchase shares of Common Stock which are or will
become exercisable on or before December 14, 1999.
(8) Includes 14,062 shares of Common Stock underlying options which are or
will become exercisable on or before December 14, 1999.
(9) Includes 1,955 shares of Common Stock underlying options which are or will
become exercisable on or before December 14, 1999.
(10) Includes 37,474 shares of Common Stock underlying options which are or
will become exercisable on or before December 14, 1999.
(11) Includes 9,166 shares of Common Stock underlying options which are or will
become exercisable on or before December 14, 1999.
(12) Based on information provided by a representative of Heartland Advisors,
Inc. to the Company on October 7, 1999.
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<PAGE>
(13) Based on information contained in a Schedule 13G dated February 11, 1999.
(14) Includes 293,560 shares of Common Stock underlying options which are
or will become exercisable on or before December 14, 1999.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Donald W. Iwerks, the Company's Chief Technical Officer, retired from
full time employment with the Company effective December 31, 1995. At that time,
Mr. Iwerks was 66 years of age. Beginning January 1, 1997, Mr. Iwerks began
receiving "Outside Director" fees. Mr. Iwerks continued to work on a part-time
basis, generally two or three days a week, and as compensation for this work he
received a $50,000 advisory fee for services rendered through June 30, 1997 and
continued to receive Company health benefits coverage until September 1, 1997.
Beginning July 1997, in addition to his director fees, Mr. Iwerks has received
and will continue to receive a monthly consulting fee of $5,000.
Iwerks has entered into an employment agreement with Mr. Charles
Goldwater effective February 23, 1998 pursuant to which Mr. Goldwater shall
serve as Chairman of the Board, Chief Executive Officer and President for an
initial three year term (the "Initial Term"). Mr. Goldwater resigned as Chairman
of the Board in September 1999 concurrent with Mr. Peter Guber's appointment as
Chairman of the Board. Iwerks may extend the term of the agreement for an
additional two year period (the "Additional Term") upon the same terms and
conditions as during the Initial Term. Mr. Goldwater's base salary for the
period ended June 30, 1998 was payable at an annual rate of $330,000. Commencing
on the first day of the fiscal year ended June 30, 1999, Mr. Goldwater's base
salary for each fiscal year during the Initial Term and the Additional Term
shall be increased by an amount equal to 5% of the base salary prevailing during
the prior fiscal year. Commencing in fiscal 1999, Mr. Goldwater is entitled to a
performance based bonus, the amount of which will vary depending upon the
performance of Iwerks as compared to the goals established by the Compensation
Committee of the Board on an annual basis. Mr. Goldwater was granted options to
purchase 250,000 shares of Common Stock upon commencement of his employment. Of
the 250,000 options, 150,000 were priced at the closing sale price of the Common
Stock on February 19, 1998 (the "Closing Price"), the date prior to the
execution of the employment agreement. Of the remaining options, 50,000 are
priced at 125% of the Closing Price and 50,000 are priced at 150% of the Closing
Price. Of the options granted to Mr. Goldwater, 50,000 vested on February 20,
1998 with the remaining options vesting in equal monthly installments over four
years from the date of the grant.
Iwerks has entered into an employment agreement with Mr. Daniel Griesmer
effective March 2, 1998 pursuant to which Mr. Griesmer shall serve as Senior
Vice President - General Manager for an initial two year term (the "Initial
Term"). Iwerks may extend the term of the agreement for an additional two year
period (the "Additional Term") upon the same terms and conditions as during the
Initial Term. Mr. Griesmer's base salary for the period ended June 30, 1998 was
payable at an annual rate of $130,000. Commencing on March 2, 1999, Mr.
Griesmer's base salary for each subsequent year during the Initial Term and the
Additional Term shall be increased by an amount equal to 4% of the base salary
prevailing during the prior year. Commencing in fiscal 1999, Mr. Griesmer is
entitled to a performance based bonus, the amount of which will vary depending
upon the performance of Iwerks as compared to the goals established by the
Compensation Committee of the Board on an annual basis. Mr. Griesmer was granted
options to purchase 75,000 shares of Common Stock upon commencement of his
employment. Of the 75,000 options, 60,000 were priced at the closing sale price
of the Common Stock on February 27, 1998 (the "Closing Price"), the trading day
prior to the effective date of the employment agreement. The remaining 15,000
options are priced at 125% of the Closing Price. Of the options granted to Mr.
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Griesmer, 18,750 vested on March 2, 1999 with the remaining options vesting in
equal monthly installments over the following three years.
Iwerks entered into agreements with Messrs. Goldwater, Griesmer, Corfino
and Dahl that would protect each officer in the case of a termination without
"cause," a "defacto termination" or a "change in control" of Iwerks, each as
defined below. These agreements are intended to provide certain benefits to the
officers upon the occurrence of any of these events. For "cause" is defined to
mean (a) an act of fraud, embezzlement or similar conduct by the officer
involving Iwerks, (b) any action by the officer involving the arrest of such
officer for violation of any criminal statute constituting a felony or a
misdemeanor involving moral turpitude if the Board reasonably determines that
the continuation of the officer's employment after such event would have an
adverse impact on the operations or reputation of Iwerks in the financial
community, (c) gross misconduct or habitual negligence in the performance of the
officer's duties, (d) an act constituting a breach of the officer's fiduciary
duty to Iwerks under the Delaware General Corporation Law, as amended, or (e) a
continuing, repeated and willful failure or refusal by the officer to perform
his duties. A "defacto termination" is defined to include any of the following
events: (a) Iwerks reduces the officer's base salary in an aggregate amount in
excess of 10% from that paid in the prior fiscal year, except as part of a
general reduction of compensation of executive officers, (b) Iwerks fails to
cause the officer to remain an executive officer of Iwerks, (c) the officer was
not afforded the authority, powers, responsibilities and privileges customarily
accorded to an executive with his or her title or (d) Iwerks requires the
officer's primary services to be rendered in an area other than Iwerks'
principal offices in the greater Los Angeles metropolitan area. With respect to
Messrs. Goldwater and Griesmer, a "change in control" is defined to mean (a) the
acquisition by any individual, entity or group (within the meaning of the
Exchange Act) of 25% or more of the combined voting power of the then
outstanding voting securities of Iwerks entitled to vote in the election of
directors, (b) liquidation, dissolution, reorganization, merger or consolidation
of Iwerks, except where (i) more than 60% of the combined voting power of the
then outstanding voting securities of the resulting corporation entitled to vote
in the election of directors shall be owned by substantially all of the persons
who were owners immediately prior to such event in substantially the same
proportions as their respective ownership immediately prior to such event, (ii)
no person owns 25% or more of the combined voting power of the resulting
corporation or (iii) at least a majority of the members of the Board shall have
been members of the Board at the time of the execution of the initial agreement
providing for such event or (c) a change in the membership of the Board such
that the directors sitting on the Board on the date of each respective agreement
referred to herein cease to constitute at least a majority of the Board
following the event. With respect to Messrs. Corfino and Dahl, a "change in
control" is defined to mean (a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the combined voting
power of the then outstanding voting securities of Iwerks entitled to vote
generally in the election of directors (the "Outstanding Voting Securities");
provided, however, that neither of the following acquisitions shall constitute a
change in control: (i) any acquisition by Iwerks or (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by Iwerks or
any corporation controlled by Iwerks; (b) individuals who, as of the date of the
agreement, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of the agreement whose
election, or nomination for election by the stockholders of Iwerks, shall be
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board; (c) approval by the stockholders of Iwerks of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation: (i) more than 60% of the combined
voting power
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of the then outstanding voting securities of the corporation resulting from such
reorganization, merger, or consolidation, which may be Iwerks (the "Resulting
Corporation") entitled to vote generally in the election of directors (the
"Resulting Corporation Voting Securities") shall then be owned beneficially,
directly or indirectly, by all or substantially all of the Persons who were the
beneficial owners of Outstanding Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially the same proportions
as their respective ownership of Outstanding Voting Securities immediately prior
to such reorganization, merger, or consolidation; (ii) no Person (excluding
Iwerks, any employee benefit plan (or related trust) of Iwerks, the Resulting
Corporation, and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 25% or more of
the combined voting power of Outstanding Voting Securities) shall own
beneficially, directly or indirectly 25% or more of the combined voting power of
the Resulting Corporation Voting Securities and (iii) at least a majority of the
members of the Board shall have been members of the Incumbent Board at the time
of the execution of the initial agreement providing for such reorganization,
merger or consolidation or (d) approval by the stockholders of Iwerks of (x) a
complete liquidation or dissolution of Iwerks or (y) the sale or other
disposition of all or substantially all of the assets of Iwerks, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 60% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors ("Buyer Voting
Securities"), shall be owned beneficially, directly or indirectly, by all or
substantially all of the Persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such sale or other
disposition, in substantially the same proportion as their respective ownership
of Outstanding Voting Securities, immediately prior to such sale or other
disposition; (ii) no Person (excluding Iwerks and any employee benefit plan (or
related trust) of Iwerks or Buyer and any Person that shall immediately prior to
such sale or other disposition own beneficially, directly or indirectly, 25% or
more of the combined voting power of Outstanding Voting Securities), shall own
beneficially, directly or indirectly, 25% or more of the combined voting power
on Buyer Voting Securities and (iii) at least a majority of the members of the
board of directors of Buyer shall have been members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition or assets of Iwerks.
In the event of a termination without cause or a defacto termination, (a) Mr.
Goldwater will receive (i) a cash amount equal to the base salary which would
have been payable to him over the remaining term of his employment agreement,
but not less than 18 months (24 months if termination occurs during, or upon the
expiration of, the initial term of Mr. Goldwater's employment agreement), as
computed based on Mr. Goldwater's base salary at the date of notice of
termination, (ii) a cash amount equal to the pro rated portion, based on time
served, of the performance bonus (100% of the performance bonus if Iwerks
achieved 100% of its scheduled performance goals in the fiscal year in which
termination occurs) which would have been paid to him under Iwerks' performance
bonus plan for the fiscal year in which the termination occurs if his employment
had continued through the end of the fiscal year and Iwerks had achieved 100% of
its scheduled performance goals, (iii) his automobile allowance, (iv) paid up
COBRA benefits for himself and his family and (v) other applicable benefits
under Iwerks' operative employee benefit and welfare plans then in effect; (b)
Mr. Griesmer will receive (i) a cash amount equal to the base salary which would
have been payable to him over the remaining term of his employment agreement,
but not less than 15 months (18 months if termination occurs during, or upon the
expiration of, the initial term of his employment agreement), as computed based
on his base salary at the date of notice of termination, (ii) a cash amount
equal to the pro rated portion, based on time served, of the performance bonus
(100% of the performance bonus if Iwerks achieves 100% of its scheduled
performance goals in the fiscal year in which termination occurs) which would
have been paid to him under Iwerks' performance bonus plan for the fiscal year
in which the termination occurs if his
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employment had continued through the end of the fiscal year and Iwerks had
achieved 100% of its scheduled performance goals, (iii) his automobile
allowance, (iv) paid up COBRA benefits for himself and his family and (v) other
applicable benefits under Iwerks' operative employee benefit and welfare plans
then in effect and (c) Messrs. Corfino and Dahl will receive (i) a cash amount
equal to the base salary which would have been payable to them over the 12
months following the date of termination (18 months if termination occurred on
or before July 1, 1999), computed at the annual rate in effect at the date of
termination, (ii) a cash amount equal to the pro rated portion of the
performance bonus (computed by reference to the actual number of days they are
employed during the applicable fiscal year) which would have been paid to them
under Iwerks performance bonus plan for the fiscal year in which the termination
occurs (if any such plan is then in effect) if their employment had continued
through the end of the fiscal year and Iwerks had achieved 100% of its scheduled
performance goals and (iii) paid up COBRA benefits for them and their respective
families for 12 months following termination (18 months if termination occurred
on or before July 1, 1999). Each of the benefit packages described above shall
be referred to herein as a "Separation Package." Additionally, all the stock
options held by these officers which are not vested as of the date of
termination (and in the case of Messrs. Goldwater and Griesmer, during the 12
month period following termination) shall become vested and immediately
exercisable and shall remain exercisable for a period of (a) with respect to
Messrs. Goldwater and Griesmer, three years following the date of termination
and (b) with respect to Messrs. Corfino and Dahl, 12 months following the date
of termination (18 months if termination occurred on or before July 1, 1999).
In the event of a change in control, each of Messrs. Goldwater and
Griesmer may terminate their respective employment commencing with the third
month anniversary of the change in control and terminating on the six-month
anniversary of the change in control and receive (a) in the case of Mr.
Goldwater, (i) a cash amount equal to the base salary which would have been
payable to him over the remaining term of his employment agreement, but not less
than 24 months, as computed based on Mr. Goldwater's base salary at the date of
notice of termination, (ii) a cash amount equal to the pro rated portion, based
on time served, of the performance bonus which would have been paid to him under
Iwerks' performance bonus plan for the fiscal year in which the termination
occurs, if his employment had continued through the end of the fiscal year and
Iwerks had achieved 100% of its scheduled performance goals, (iii) his
automobile allowance, (iv) paid up COBRA benefits for himself and his family and
(v) other applicable benefits under Iwerks' operative employee benefit and
welfare plans then in effect for the remaining term of his employment agreement,
but not less than 24 months, and (b) in the case of Mr. Griesmer, (i) a cash
amount equal to the base salary which would have been payable to him over the
remaining term of his employment agreement, but not less than 18 months, as
computed based on his base salary at the date of notice of termination, (ii) a
cash amount equal to the pro rated portion, based on time served, of the
performance bonus which would have been paid to him under Iwerks' performance
bonus plan for the fiscal year in which the termination occurs, if employment
had continued through the end of the fiscal year and Iwerks had achieved 100% of
its scheduled performance goals, (iii) his automobile allowance, (iv) paid up
COBRA benefits for himself and his family and (v) other applicable benefits
under Iwerks' operative employee benefit and welfare plans then in effect for
the remaining term of his employment agreement, but not less than 18 months. In
addition, upon the occurrence of a change in control, all options then held by
Messrs. Goldwater or Griesmer, as applicable, which are not yet vested shall
vest as of the date of a change in control and shall become immediately
exercisable and remain exercisable for a three-year period following the change
in control.
In the event of a change in control, Messrs. Corfino and Dahl may
terminate their respective employment with Iwerks effective 30 days after the
giving of notice at any time commencing with the sixth month anniversary of the
change in control and terminating on the one-year anniversary of the
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change in control and receive their respective Separation Package. Also, if
Iwerks terminates either officer's employment for any reason at any time within
the one-year period following the date of a change in control, then such officer
shall receive his Separation Package. In addition to the Separation Package and
without regard to whether the officer's employment is terminated following a
change in control, upon the occurrence of a change in control, all options then
held by such officer which are not yet vested shall vest as of the date of a
change in control and shall become immediately exercisable. These options shall
remain exercisable for 12 months following the date of the change in control.
Effective February 5, 1999, Mr. Hinckley's employment with Iwerks
terminated. Pursuant to Mr. Hinckley's second amended and restated separation
agreement with the Company, Mr. Hinckley has received $200,000. Mr. Hinckley
also received paid up COBRA benefits for himself and his family for the 3 months
following the date of termination. Finally, all options held by Mr. Hinckley on
the date of termination shall become vested and immediately exercisable and
shall remain exercisable for a period of 15 months following the date of
termination, at which time, to the extent unexercised, they shall terminate.
Effective August 27, 1999, Mr. Shishido's employment with Iwerks
terminated. Pursuant to Mr. Shishido's separation agreement with Iwerks, Mr.
Shishido has received $1,058.46. For the six month period following Mr.
Shishido's termination of employment with the Company, Mr. Shishido shall
receive additional payments of $6,400 every two weeks, a monthly auto allowance
of $1,000 and paid up COBRA benefits for himself and his family. Finally, all
options held by Mr. Shishido on the date of termination were terminated.
Effective September 8, 1999, Iwerks sold for $250,000 to family trusts
established by Messrs. Peter Guber and Paul Schaeffer (the "Trusts"), warrants
to purchase approximately 10% of its outstanding Common Stock at exercise prices
ranging from $1.43 per share to $3.00 per share (the closing sale price of the
Common Stock on the date of sale was $0.8125). The warrants may not be exercised
until September 8, 2001 unless (a) the closing price of Common Stock on its
trading market is at least $4.00 per share on each of the ten consecutive
trading days prior to the date that notice of exercise is given, or (b) a change
of control of Iwerks occurs. Thereafter, the warrants may be exercised at any
time until September 7, 2004. Iwerks has the right to redeem the unexercised
portion of the warrants at any time after September 8, 2001 for the ratable
portion of the warrant purchase price if the closing price of the Common Stock
on its trading market is more than $10.00 per share on each of the 30
consecutive trading days prior to the date that notice of redemption is given.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
IWERKS ENTERTAINMENT, INC.
/S/ Charles Goldwater
---------------------------------------
By: Charles Goldwater
Title: Chief Executive Officer,
President and Director
Date: October 27, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE TITLE
<S> <C> <C>
/S/ Charles Goldwater
- ---------------------------- October 27, 1999 Chief Executive Officer, President
Charles Goldwater and Director (Principal Executive
Officer)
/S/ Jeffrey M. Dahl
- ---------------------------- October 27, 1999 Senior Vice President, Chief
Jeffrey M. Dahl Financial Officer and Secretary
(Principal Finance Officer)
/S/ Bruce E. Palmore
- ---------------------------- October 27, 1999 Vice President/Controller (Principal
Bruce E. Palmore Accounting Officer)
/S/ Peter Guber
- ---------------------------- October 27, 1999 Chairman of the Board and Director
Peter Guber
/S/ Paul Schaeffer
- ---------------------------- October 27, 1999 Vice Chairman of the Board and
Paul Schaeffer Director
/S/ Bruce Beda
- ---------------------------- October 27, 1999 Director
Bruce Beda
/S/ Peter Hanelt
- ---------------------------- October 27, 1999 Director
Peter Hanelt
/S/ Donald W. Iwerks
- ---------------------------- October 27, 1999 Director
Donald W. Iwerks
- ---------------------------- October 27, 1999 Director
Gary J. Matus
/S/ Dag Tellefsen
- ---------------------------- October 27, 1999 Director
Dag Tellefsen
</TABLE>
