SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
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[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Iwerks Entertainment, Inc.
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<PAGE>
IWERKS ENTERTAINMENT, INC.
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 7, 2000
-----------
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of Iwerks Entertainment, Inc. (the "Company"), to be held
at 4520 West Valerio Street in Burbank, California at 10:00 a.m., local time.
The Annual Meeting is being held for the following purposes:
1. To elect one Class III Director to hold office for three years and
until his respective successor has been elected;
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only stockholders of record of the Common Stock of the Company at the close
of business on October 30, 2000 are entitled to notice of and to vote at the
Annual Meeting and at any adjournments or postponements thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to complete and return the enclosed Proxy as promptly as possible in the
enclosed postage prepaid envelope. Any record holder attending the Annual
Meeting may vote in person, even though he or she has returned a Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ JEFFREY M. DAHL
--------------------------------------
Jeffrey M. Dahl
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER & SECRETARY
4520 West Valerio Street
Burbank, California
November 7, 2000
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU ARE A RECORD HOLDER AND ATTEND THE MEETING, YOU MAY, IF YOU
PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
IWERKS ENTERTAINMENT, INC.
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 7, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Iwerks Entertainment, Inc., a Delaware
corporation ("Iwerks" or the "Company"), for use at the 2000 Annual Meeting of
the Company's Stockholders (the "Annual Meeting") to be held at 4520 West
Valerio Street in Burbank, California at 10:00 a.m., local time, and at any
adjournments or postponements thereof, for the purposes set forth in this Proxy
Statement and in the attached Notice of Annual Meeting of Stockholders.
Accompanying this Proxy Statement is the Board of Directors Proxy for the Annual
Meeting, which you may use to vote on the proposals described in this Proxy
Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted as indicated on the proposals described in this Proxy Statement unless
otherwise directed. A record holder may revoke his or her Proxy at any time
before it is voted either by filing with the Secretary of the Company, at its
principal executive offices, a written notice of revocation or a duly executed
Proxy bearing a later date, or by attending the Annual Meeting and expressing a
desire to vote his or her shares in person.
The close of business on October 30, 2000 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournments or postponements thereof. At the record
date, 3,540,911 shares of the Company's common stock, par value $.001 per share
("Common Stock"), were outstanding. The Common Stock is the only outstanding
class of securities entitled to vote at the meeting. At the record date, the
Company had approximately 798 stockholders of record. A stockholder is entitled
to cast one vote for each share of Common Stock held on the record date (each a
"Share") on all matters to be considered at the Annual Meeting. Abstentions will
be counted toward the tabulation of votes cast on proposals submitted to
stockholders and will have the same effect as negative votes, while broker
non-votes will not be counted as votes for or against such matters. The
presence, in person or by Proxy, of a majority of the votes entitled to be cast
by the stockholders entitled to vote at the Annual Meeting is necessary to
constitute a quorum. Abstentions and broker non-votes will be counted as present
for the purposes of determining if a quorum is present.
The Company's principal executive offices are located at 4520 West
Valerio Street, Burbank, California 91505-1046 and its telephone number is
(818) 841-7766. This Proxy Statement and the accompanying Proxy were mailed
to all stockholders entitled to vote at the Annual Meeting on or about
November 13, 2000.
<PAGE>
ELECTION OF CLASS III DIRECTOR
In accordance with the Company's Amended and Restated Certificate of
Incorporation, as amended ("Certificate of Incorporation"), and Bylaws, as
amended ("Bylaws"), the Company's Board of Directors (the "Board") is divided
into three classes. At each annual meeting of the Company's stockholders,
directors constituting one class are elected for three-year terms. The Company's
Bylaws provide that the Board shall consist of not less than five and not more
than nine members as determined from time to time by the Board. The Board
currently consists of two Class I Directors, with terms expiring in 2002, one
Class II Director, with a term expiring in 2001, and one Class III Director,
with a term expiring in 2000. At the Annual Meeting, one Class III Director will
be elected. If the number of directors is changed, any increase or decrease is
to be apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible. Directors may be removed only with cause
by the vote of a majority of the stockholders then entitled to vote. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the nominee named below. If the nominee is unable or unwilling to serve as a
director at the time of the Annual Meeting or any postponement or adjournment
thereof, the proxies will be voted for such nominee as shall be designated by
the current Board to fill the vacancy. The Company has no reason to believe that
the nominee will be unwilling or unable to serve if elected as a director.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEE
LISTED BELOW.
The Board proposes the election of the following nominee as a Class III
Director:
Bruce Beda
If elected, the nominee is expected to serve until the 2003 Annual Meeting
of the Company's stockholders. The approval of the nominee for election as a
Class III Director requires the affirmative vote of a plurality of the votes
cast for the election of directors at the Annual Meeting.
Page 2
<PAGE>
INFORMATION WITH RESPECT TO NOMINEE, CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
nominee, continuing directors and executive officers of the Company as of
October 15, 2000.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
APPOINTED
NAME AGE DIRECTOR POSITION WITH COMPANY
---- --- -------- ---------------------
<S> <C> <C> <C>
NOMINEE:
CLASS III DIRECTOR
(term to expire in 2003)
Bruce Beda(1)(2) 59 1998 Director
CONTINUING DIRECTORS:
CLASS I DIRECTORS
(terms to expire in 2002)
Donald W. Iwerks(3) 71 1986 Co-Founder and Director
Chairman of the Board
Gary J. Matus(1) 52 1996 Interim Chief Executive
Officer and Director
CLASS II DIRECTOR
(term to expire in 2001)
Peter Hanelt(1)(2) 55 1998 Director
OTHER EXECUTIVE
OFFICERS:
Jeffrey M. Dahl 38 Senior Vice President, Chief
Financial Officer and
Secretary
Donald Stults 62 Chief Operating Officer
---------------------------
<FN>
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Nominating Committee
</FN>
</TABLE>
The executive officers of Iwerks are appointed by and serve at the
discretion of the Board. There is no family relationship between any director
and any executive officer of Iwerks.
DONALD W. IWERKS is a co-founder of Iwerks and has been a director since
Iwerks' inception and has served as Chairman of the Board since February 2000.
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.
GARY J. MATUS has been a director of Iwerks since July 1996 and has served
as interim Chief Executive Officer since February 2000. He also is a general
partner of Beneventure Capital, a high technology venture capital and merchant
bank headquartered in San Francisco. From December 1989 to
Page 3
<PAGE>
May 1998, Mr. Matus served as Executive Vice President of Bank of America, N.T.
& S.A., and served as Chief Marketing Officer. From 1989 to 1995, Mr. Matus
served as Head of the Entertainment and Media Industries Group at Bank of
America, N.T. & S.A. Mr. Matus launched and managed the first California-based
office for the worldwide consulting firm of Egon Zehnder International, and
early in his career worked for the Colgate Palmolive Company.
PETER HANELT has been a director of Iwerks since July 1998. On October 1998
Mr. Hanelt was appointed Chief Executive Officer of Natural Wonders, Inc., a
specialty retailer of affordable family gifts inspired by the wonders of science
and nature. Prior thereto, from April 1997 to February 1998, Mr. Hanelt was a
principle of Regent Pacific Management Corporation, a consulting firm. Mr.
Hanelt served as Chief Operating Officer and Chief Financial Officer of Esprit
de Corp, an apparel manufacturer, wholesaler and retailer, from October 1993 to
February 1997, and as President, Retail Division of Espirit De Corp from August
1995 to April 1996. Also, Mr. Hanelt served as Vice President, Finance and
Operations of Saint Francis Memorial Hospital, the private hospital, from
September 1992 to October 1993, and Acting Chief Operating Officer and Chief
Financial Officer of Post Tool, Inc., the multi-state retailer of power and hand
tools, from August 1990 to September 1992. Mr. Hanelt also serves as board
director of Shoe Pavilion, Inc., the largest independent off-price footwear
retailer on the West Coast, Patelco Credit Union, Interhealth Nutraceuticals and
Natural Wonders, Inc.
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 Natural
Wonders, a retailer of nature and science merchandise.
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.
DONALD STULTS has been with Iwerks since March 1997 and in March 2000 was
appointed Chief Operating Officer. Mr. Stults was Founder and President of
Pioneer Technology Corp. which was acquired by Iwerks in March 1997. Prior to
founding Pioneer, Mr. Stults was with Klynveld, Peat, Marwick & Goerdeler (KPMG
International) as a Management Consultant, and DataGraphix, Inc., a manufacturer
of computer graphics equipment where he was a Product Manager.
Page 4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board held a total of six meetings during the fiscal year ended
June 30, 2000. The Board has an Audit Committee, a Compensation Committee and a
Nominating Committee. During the fiscal year ended June 30, 2000, the Audit
Committee held a total of four meetings. During the fiscal year ended June 30,
2000, the Compensation Committee held one meeting. During the fiscal year ended
June 30, 2000, each director except Mr. Dag Tellefsen 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. Mr. Tellefsen attended four out of the six
meetings of the Board.
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. Bruce Beda and Peter Hanelt and the
Nominating Committee consists of Mr. Donald W. Iwerks.
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"),
the 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Dag Tellefsen, Bruce Beda and Peter Hanelt served as members of the
Board's Compensation Committee during the year ended June 30, 2000.
The Company has no interlocking relationships involving any of its
Compensation Committee members which would be required by the Securities and
Exchange Commission (the "SEC") to be reported in this Proxy Statement and no
officer or employee of the Company presently serves on its Compensation
Committee.
REPORT OF COMPENSATION COMMITTEE
The following report of the Compensation Committee to the Board shall not
be deemed to be incorporated by reference into any filing by the Company under
either the Securities Act of 1933, as amended ("Securities Act"), or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that
incorporates future Securities Act or Exchange Act filings in whole or in part
by reference.
Page 5
<PAGE>
GENERAL
The Compensation Committee of the Board (the "Committee") is responsible
for establishing and administering the policies that govern executive
compensation and benefit practices. All decisions of the Committee are subject
to the approval of the Board. The Committee currently is comprised of Messrs.
Bruce Beda and Peter Hanelt.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to (1) provide
levels of compensation that integrate pay and incentive plans with the Company's
strategic goals, so as to align the interests of executive management with the
long-term interests of the Company's stockholders, (2) attract, motivate and
retain executive talent capable of achieving the strategic business goals of the
Company, (3) recognize outstanding individual contributions, and (4) provide
compensation opportunities which are competitive to those offered by other
entertainment technology companies of similar size and performance. To achieve
these goals, the Company's executive compensation program consists of three main
elements: (i) base salary, (ii) annual cash bonus and (iii) long-term
incentives. Each element of compensation has an integral role in the total
executive compensation program. The Company also provides to its employees
(including other officers of the Company) medical, dental, and long-term
disability insurance and other customary employee benefits.
BASE SALARY
Base salaries for executive officers are determined on an annual basis by
evaluating each executive officer's position, duties, responsibilities, tenure,
performance and potential contributions to the Company. This determination also
takes into account the compensation practices of similarly situated companies
for comparable positions. The financial performance of the Company also is
considered. Finally, factors consistent with the Company's overall compensation
policy are taken into account.
ANNUAL CASH BONUSES
Executive officers are eligible for annual incentive bonuses in amounts
determined at the discretion of the Committee. The Committee considers an award
of an annual bonus subjectively, taking into account factors such as the
financial performance of the Company, increases in stockholder value, the
achievement of corporate goals and individual performance. Mr. Dahl received a
bonus in the amount of $24,300 for the fiscal year ended June 30, 2000. None of
the Company's other executive officers earned bonus awards in fiscal 2000.
LONG-TERM INCENTIVES
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options. The Committee is
responsible for selecting the individuals to whom grants should be made, the
timing of grants, the determination of the per share exercise price and the
number of shares subject to each option awarded. The Committee believes that
stock options provide the Company's executive officers with the opportunity to
purchase and maintain an equity interest in the Company and to share in the
appreciation of the value of the Common Stock. The Committee believes that stock
options directly motivate an executive to maximize long-term stockholder value.
The options incorporate vesting periods in order to encourage key employees to
continue in the employ of the Company. The Committee considers the grant of each
option subjectively, considering factors such as the individual performance of
executive officers and competitive compensation packages in the industry.
Page 6
<PAGE>
DETERMINATION OF CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. Goldwater served as Chief Executive Officer of the Company from
February 20, 1998 until February 7, 2000. Mr. Goldwater's overall compensation
was established through arm's length negotiations with the Committee, which at
the time consisted of Messrs. Dag Tellefsen and Don Iwerks, at a level which was
based on his proven talent and executive expertise in the film exhibition
industry and which is believed to be comparable to what would have been
available to Mr. Goldwater at a company similar to Iwerks. Pursuant to Mr.
Goldwater's employment agreement, Mr. Goldwater was compensated at an annual
rate equal to $330,000 during his first year of employment with the Company,
which commenced on February 20, 1998. Each year thereafter, his salary was
increased by 5% over the previous year's base salary. Mr. Goldwater was
compensated in this manner until his departure from Iwerks in February 2000.
Mr. Matus was appointed interim Chief Executive Officer in February 2000.
As interim Chief Executive Officer, Mr. Matus is compensated pursuant to a
consulting agreement described under "Certain Transactions with Management,"
below. Mr. Matus' compensation was established through negotiations with the
Committee, which at the time consisted of Messrs. Dag Tellefsen, Bruce Beda and
Peter Hanelt. Pursuant to Mr. Matus' consulting agreement, Mr. Matus is
compensated at a rate of $10,000 per month. Mr. Matus was granted a fully vested
option to acquire 100,000 shares of the Company's common stock at an exercise
price of $1.625 per share, exercisable at any time within ten years after the
date of the agreement after the occurrence of an event that triggers payment of
the bonus (see below). A one-time cash bonus of $100,000 is payable to Mr. Matus
if either or both of the following occur: (i) a change in control, or (ii)
Iwerks engages in an equity financing transaction whereby the Company issues
Company common stock, preferred stock, other equity securities, options,
warrants or other rights to acquire the same and receives gross proceeds from
the financing of not less than three million dollars. Such a trigger event must
occur by December 31, 2000 in order for the bonus to be payable.
SUMMARY
The Committee believes that its executive compensation philosophy of paying
its executive officers by means of base salaries, annual cash bonuses and
long-term incentives, as described in this report, serves the interests of the
Company and the Company's stockholders.
COMPENSATION COMMITTEE: Bruce Beda
Peter Hanelt
Page 7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, as to the Chief Executive Officer and as to
each of the other three most highly compensated officers whose compensation
exceeded $100,000 during the last fiscal year (the "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 YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) COMPENSATION
POSITION
----------------------- --------- -------------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles Goldwater (3) 2000 $ 247,373 -- $ 8,000 -- $ 29,155(4)
Former Chief 1999 330,000 -- 12,000 11,255(5)
Executive 1998 134,538 4,000 250,000 1,890(6)
Officer; Former
President and
Former Chairman of
the Board
Gary J. Matus (7) 2000 $ 22,500 100,000
Interim Chief
Executive
Officer; Director
Jeffrey M. Dahl (8) 2000 $ 140,481 $ 24,300 $ 12,000 25,000 $ 3,709(9)
Chief Financial 1999 112,923 12,000 10,706 3,026(9)
Officer, 1998 96,404 7,000 2,885(9)
Senior Vice
President,
Secretary
Donald Stults (10) 2000 $ 132,804 $ 6,000 $15,000(11)
Chief Operating 1999 90,000 18,320(11)
Officer 1998 90,000 18,490(11)
Jon Corfino (12) 2000 $ 101,214 -- $ 8,000 $45,485(13)
Former Senior Vice 1999 125,793 -- 12,000 12,632 3,626(9)
President 1998 116,495 7,000 2,256(9)
of Film and
Executive in
Charge of Production
----------------------
<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. Mr.
Goldwater's tenure as Chief Executive Officer and President terminated in
February 2000.
(4) Represents (i) $27,956 payment pursuant to a settlement agreement and (ii)
$1,199 payment pursuant to the Company's 401(k) plan.
Page 8
<PAGE>
(5) Includes (i) $9,365 payment 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.
(6) Represents the dollar value of term life insurance premiums paid by Iwerks.
(7) Mr. Matus joined Iwerks as a director in July 1996. Mr. Matus was appointed
interim Chief Executive Officer in February 2000.
(8) 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.
(9) Represents payments pursuant to the Company's 401(k) plan.
(10) Mr. Stults joined Iwerks in March 1997. Mr. Stults was appointed Chief
Operating Officer in March 2000.
(11) Represents royalties on Linear Loop Projectors.
(12) Mr. Corfino resigned from his position with Iwerks in February 2000.
(13) Represents (i) $42,837 of compensation paid from February 18, 2000 to June
30, 2000 pursuant to a Consulting Agreement, and (ii) $2,648 paid pursuant
to the Company's 401(k) plan.
</FN>
</TABLE>
Page 9
<PAGE>
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, 2000 to the Named
Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------- POTENTIAL REALIZABLE
VALUE AT
PERCENT OF ASSUMED ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR OPTION
GRANTED TO TERM(1)
NUMBER OF EMPLOYEES EXERCISE OR -----------------------------
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED(2) YEAR(3) PER SHARE(4) DATE 5% 10%
-------------------------------------- ----------- ------------------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles Goldwater (5)..... -- -- -- -- -- --
Gary J. Matus (6) 100,000 52.95% $1.625 2/15/10 $102,000 $259,000
Jeffrey M. Dahl (7)....... 10,000 5.30% $1.690 2/10/10 $27,530 $43,830
15,000 7.94% $1.625 3/15/10 $15,330 $38,850
Jon Corfino (8)........... -- -- -- -- -- --
Donald Stults (9) -- -- -- -- -- --
----------------------
<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) Other than the options granted to Mr. Matus, 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.
The options granted to Mr. Matus are immediately and fully vested and
exercisable on the date of the grant.
(3) Options covering an aggregate of 188,861 shares were granted to eligible
employees during the fiscal year ended June 30, 2000.
(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. His
tenure as Chief Executive Officer and President terminated in February
2000.
(6) Mr. Matus joined Iwerks as a director in July 1996. He was appointed
interim Chief Executive Officer in February 2000.
(7) Mr. Dahl was appointed as Iwerks' Senior Vice President, Chief Financial
Officer and Secretary in February 1999.
(8) Mr. Corfino resigned from his position with Iwerks in February 2000.
(9) Mr. Stults joined Iwerks in March 1997. He was appointed Chief Operating
Officer in March 2000.
</FN>
</TABLE>
Page 10
<PAGE>
STOCK OPTIONS HELD AT FISCAL YEAR-END
During the fiscal year ended June 30, 2000, 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 SmallCap Market on June 30, 2000 ($0.97 per share).
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF ALL
NUMBER OF UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
-------------------------- ------------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---------------------------- -------------------------- ------------------------
<S> <C> <C>
Charles Goldwater (1)..... 0/0 $0/0
Gary J. Matus (2) 100,000/0 $0/0
Jeffrey M. Dahl (3)....... 8,100/40,240 $0/0
Jon Corfino (4)........... 17,063/0 $0/0
Donald Stults (5) 13,092/1,194 $0/0
-------------------------
<FN>
(1) Mr. Goldwater resigned as Chairman of the Board in September 1999. His
tenure as Chief Executive Officer and President terminated in February
2000.
(2) Mr. Matus joined Iwerks as a director in July 1996. He was appointed
interim Chief Executive Officer in February 2000.
(3) Mr. Dahl was appointed as Iwerks' Senior Vice President, Chief Financial
Officer and Secretary in February 1999.
(4) Mr. Corfino resigned from his position with Iwerks in February 2000.
(5) Mr. Stults joined Iwerks in March 1997. He was appointed Chief Operating
Officer in March 2000.
</FN>
</TABLE>
Page 11
<PAGE>
EXCHANGE OF STOCK OPTIONS
During the fiscal year ended June 30, 2000, no exchanges of any stock
options occurred. The cancellation and exchange of certain stock options held by
any executive officer, including the Named Executive Officers, during the last
10 completed fiscal years is provided in the following table:
<TABLE>
<CAPTION>
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF EXERCISE ORIGINAL
UNDERLYING STOCK AT PRICE AT NEW OPTION TERM
OPTIONS TIME OF TIME OF EXERCISE REMAINING AT
AMENDED AMENDMENT AMENDMENT PRICE DATE OF
NAME DATE (#) ($) ($) ($) AMENDMENT
----------------------- --------- ------------ ------------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles Goldwater(1) -- -- -- -- -- --
Bruce Hinckley(2) 7/16/98 10,116(9) $1.8125 $5.375 $1.8125(18) 103 months
7/16/98 27,358(10) 1.8125 6.625 1.8125 98 months
Jeffrey M. Dahl(3) 7/16/98 3,372(11) $1.8125 $5.375 1.8125 103 months
7/16/98 3,333(12) 1.8125 5.4375 1.8125 99 months
Daniel Griesmer(4) -- -- -- -- -- --
Jon Corfino(5) 7/16/98 6,744(13) $1.8125 $5.375 $1.8125 103 months
7/16/98 9,063(14) 1.8125 5.00 1.8125 87 months
7/16/98 2,417(15) 1.8125 4.875 1.8125 80 months
7/16/98 989(16) 1.8125 5.50 1.8125 65 months
7/25/94 3,000(17) 5.50 25.50 5.50 113 months
Jack Shishido(6) -- -- -- -- -- --
Gary J. Matus(7) -- -- -- -- -- --
Donald Stults(8) -- -- -- -- -- --
-------------------------
<FN>
(1) Mr. Goldwater resigned as Chairman of the Board in September 1999. His
tenure as Chief Executive Officer and President terminated in February
2000.
(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. Griesmer resigned from his position with Iwerks in December 1999.
(5) Mr. Corfino resigned from his position with Iwerks in February 2000.
(6) Mr. Shishido resigned from his position with Iwerks in August 1999.
(7) Mr. Matus was appointed interim Chief Executive Officer in February 2000.
(8) Mr. Stults was appointed Chief Operating Officer in March 2000.
(9) Represents 30,000 stock options that were cancelled and exchanged for
10,116 amended options.
(10) Represents 100,000 stock options that were cancelled and exchanged for
27,358 amended options.
(11) Represents 10,000 stock options that were cancelled and exchanged for 3,372
amended options.
Page 12
<PAGE>
(12) Represents 10,000 stock options that were cancelled and exchanged for 3,333
amended options.
(13) Represents 20,000 stock options that were cancelled and exchanged for 6,744
amended options.
(14) Represents 25,000 stock options that were cancelled and exchanged for 9,063
amended options.
(15) Represents 6,500 stock options that were cancelled and exchanged for 2,417
amended options.
(16) Represents 3,000 stock options that were cancelled and exchanged for 989
amended options.
(17) Represents 3,000 stock options that were cancelled and exchanged for 3,000
amended options
(18) The new exercise price for each cancellation and exchange is the fair
market value of the Common Stock as of the grant date of the amended
options.
</FN>
</TABLE>
COMPENSATION COMMITTEE: Bruce Beda
Peter Hanelt
Page 13
<PAGE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
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. Mr. Iwerks is
currently serving as Chairman of the Board. Iwerks entered into a consulting
agreement with Mr. Iwerks under which a one-time bonus of $100,000 shall be paid
to Mr. Iwerks if either or both of the following events occur: (i) a change in
control, or (ii) Iwerks engages in an equity financing transaction whereby the
Company issues common stock, preferred stock, other equity securities, options,
warrants or other rights to acquire the same and receives gross proceeds from
the financing of not less than three million dollars. Such a trigger event must
occur by December 31, 2000 in order for the bonus to be payable.
Effective February 7, 2000, Mr. Goldwater's employment with Iwerks
terminated. Pursuant to Mr. Goldwater's Settlement Agreement, and promissory
note executed in connection with the Settlement Agreement, Mr. Goldwater is
entitled to receive $363,424.92 from Iwerks, which amount was derived from Mr.
Goldwater's yearly salary and payable in bi-weekly installments until the Note's
maturity date of May 24, 2001. In the fiscal year ended June 30, 2000, Mr.
Goldwater received $27,956 under the Settlement Agreement. Pursuant to the
Settlement Agreement, Mr. Goldwater released all further obligations of Iwerks
to make payment under normal separation policies and procedures. In addition,
Mr. Goldwater's ability to exercise any available stock options was terminated
under the Settlement Agreement.
Mr. Griesmer's employment with Iwerks terminated in November 1999. Mr.
Griesmer continued to receive salary and benefits due under the term of his
employment contract until February 29, 2000. Mr. Griesmer's options to purchase
common stock remaining as of February 29, 2000 will terminate February 28,
2001.
Mr. Corfino's tenure as Iwerks' Senior Vice President of Film and Executive
in Charge of Production terminated in February 2000. Mr. Corfino and Iwerks
entered into a consulting agreement in February 2000 under which Mr. Corfino
received compensation of $8,437 per month. The term of this agreement ended in
August 2000. Also pursuant to the consulting agreement, Mr. Corfino was fully
vested with 17,603 options to purchase Iwerks common stock which expire on
February 22, 2001. Mr. Corfino received COBRA coverage during the six month term
of the consulting agreement, plus reimbursable expenses.
Mr. Dahl was appointed Iwerks' Senior Vice President, Chief Financial
Officer and Secretary in February 1999. Pursuant to a bonus agreement between
Mr. Dahl and Iwerks, a one-time cash bonus of $100,000 is payable to Mr. Dahl if
either or both of the following events occur: (i) a change in control, or (ii)
Iwerks engages in an equity financing transaction whereby the Company issues
Company common stock, preferred stock, other equity securities, options,
warrants or other rights to acquire the same and receives gross proceeds from
the financing of not less than three million dollars.
Iwerks entered into an agreement with Mr. Dahl that would protect him in
the case of a termination without "cause," a "defacto termination" or a "change
in control" of Iwerks, each as defined below. This agreement is intended to
provide certain benefits to Mr. Dahl 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
Page 14
<PAGE>
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. 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 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
Page 15
<PAGE>
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, Mr.
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,
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. The benefit package described above shall be referred to
herein as a "Separation Package." Additionally, all the stock options held by
Mr. Dahl which are not vested as of the date of termination shall become vested
and immediately exercisable and shall remain exercisable for a period of 12
months following the date of termination.
In the event of a change in control, Mr. Dahl may terminate his 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 change in control and receive his
Separation Package. Also, if Iwerks terminates Mr. Dahl's employment for any
reason at any time within the one-year period following the date of a change in
control, then he shall receive his Separation Package. In addition to the
Separation Package and without regard to whether his employment is terminated
following a change in control, upon the occurrence of a change in control, all
options then held by Mr. Dahl 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.
Mr. Matus was appointed interim Chief Executive Officer effective February
15, 2000 pursuant to a consulting agreement with Iwerks. Mr. Matus shall receive
$10,000 in compensation per month, prorated for any partial months worked. Mr.
Matus was granted a fully vested option to acquire 100,000 shares of the
Company's common stock at an exercise price of $1.625 per share, exercisable at
any time within ten years after the date of the agreement after the occurrence
of an event that triggers payment of the bonus (see below). A one-time cash
bonus of $100,000 is payable to Mr. Matus if either or both of the following
events occur: (i) a change in control, or (ii) Iwerks engages in an equity
financing transaction whereby the Company issues Company common stock, preferred
stock, other equity securities, options, warrants or other rights to acquire the
same and receives gross proceeds from the financing of not less than three
million dollars. Such a trigger event must occur by December 31, 2000 in order
for the bonus to be payable.
Mr. Stults was employed by Iwerks in March 1997 pursuant to the Agreement
and Plan of Reorganization dated March 4, 1997, executed in connection with
Iwerks' acquisition of Pioneer Marketing Corporation. The terms of Mr. Stults'
employment entitled him to an annual salary of $90,000, severance pay of $90,000
if terminated without cause prior to March 4, 2002, and the same benefits
generally applicable to all employees of Iwerks. Effective March 24, 2000, Mr.
Stults was appointed Chief Operating Officer of Iwerks. Pursuant to the
Promotion Agreement executed in connection with the appointment, the terms of
Mr. Stults' employment remain the same, except that annual compensation and
severance pay were set at $175,000.
Page 16
<PAGE>
Effective August 27, 1999, Mr. Shishido's employment with Iwerks
terminated. Pursuant to Mr. Shishido's separation agreement with Iwerks, Mr.
Shishido received, for the six month period following termination, 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 an aggregate of 442,857 shares of Common Stock at exercise prices
ranging from $5.01 per share to $10.50 per share. 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 $14.00 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 $35.00 per share on each of the
30 consecutive trading days prior to the date that notice of redemption is
given. Each of Messrs. Guber and Schaeffer served as directors of Iwerks from
September 1999 to January 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of 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, 2000,
all of the Company's executive officers, directors and greater-than-ten percent
stockholders complied with all Section 16(a) filing requirements.
Page 17
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change
in the cumulative return to the holders of the Common Stock with the cumulative
return of The Nasdaq Stock Market (U.S. & Foreign) Index and The NASDAQ
Miscellaneous Amusement & Recreation Service Index for the period commencing
July 1, 1995 and ending on June 30, 2000. The stock price performance on the
following graph is not necessarily indicative of future stock price performance.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN*
--------------------------------------------------
6/95 6/96 6/97 6/98 6/99 6/00
<S> <C> <C> <C> <C> <C> <C>
IWERKS ENTERTAINMENT, INC. 100 247 109 42 27 7
THE NASDAQ MISCELLANEOUS AMUSEMENT & 100 128 155 202 287 425
RECREATION SERVICE INDEX
THE NASDAQ STOCK MARKET (U.S. & FOREIGN) 100 111 90 101 87 84
INDEX
<FN>
*The total return assumes that dividends were reinvested and is based on a $100
investment.
</FN>
</TABLE>
Page 18
<PAGE>
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 29, 2000 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 these 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 that person (and
only that person) by reason of these acquisition rights on or before November
28, 2000, 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., 4520 West Valerio Street,
Burbank, California 91505-1046.
<TABLE>
<CAPTION>
Number Percent
Name and Address of of Class
Shares Owned
--------------------------------------------- ----------------------- ---------------------
<S> <C> <C>
Charles Goldwater (1).................... 30,000 *
Donald W. Iwerks (2)..................... 226,031 6.1%
Gary J. Matus (3)........................ 116,706 3.2%
Dag Tellefsen (4)........................ 179,700 4.9%
Peter Hanelt (5)......................... 9,144 *
Jeffrey M. Dahl (6)...................... 10,957 *
Bruce Beda (7)........................... 13,430 *
Donald Stults (8) 13,092 *
Heartland Advisors, Inc. (9)............. 968,166 26.2%
790 North Milwaukee Street
Milwaukee, WI 53202
All executive officers and directors as
a group (6 persons) (10)................. 389,360 10.5%
-------------------------
<FN>
(1) Based on information contained in a Form 4 filing dated March 11, 1999.
(2) Includes 217,420 shares of Common Stock held by the Donald and Betty Iwerks
1995 Family Trust and 8,611 shares of Common Stock underlying options which
are or will become exercisable on or before November 28, 2000. Mr. Iwerks
resigned as Chief Technical Officer of Iwerks effective as of
Page 19
<PAGE>
December 31, 1995. Mr. Iwerks currently serves as Chairman of the Board and
is a consultant to Iwerks.
(3) Includes 115,278 shares of Common Stock underlying options which are or
will become exercisable on or before November 28, 2000.
(4) Includes 17,076 shares of Common Stock underlying options which are or will
become exercisable on or before November 28, 2000. Includes 151,437 shares
of Common Stock owned by Meriken Nominees Limited as nominee for Glenwood
Ventures, 10,688 shares owned by Glenwood Management and 500 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 4,859 shares of Common Stock underlying options which are or will
become exercisable on or before November 28, 2000.
(6) Includes 8,100 shares of Common Stock underlying options which are or will
become exercisable on or before November 28, 2000.
(7) Includes 4,859 shares of Common Stock underlying options which are or will
become exercisable on or before November 28, 2000.
(8) Consists of options to purchase shares of Common Stock which are will
become exercisable on or before November 28, 2000.
(9) Based on information contained in a Schedule 13G/A dated March 10, 2000.
(10) Includes 154,799 shares of Common Stock underlying options which are or
will become exercisable on or before November 28, 2000.
</FN>
</TABLE>
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 2001 Annual
meeting of the Company's stockholders for inclusion in the Company's proxy
statement and proxy form relating to such annual meeting must submit such
proposal to the Company at its principal executive offices by August 31, 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young, LLP, independent public accountants, were selected by the
Board to serve as independent public accountants of the Company for the year
ended June 30, 2000. The Audit Committee has not yet had the opportunity to
review with Ernst & Young, LLP the proposed terms of their engagement to audit
the Company's financial statements for the fiscal year ending June 30, 2001; and
until the terms of such engagement have been finalized and agreed upon, the
Audit Committee cannot finalize its selection of independent public accountants
for such year. Representatives of Ernst & Young, LLP are expected to be present
at the Annual Meeting, and will be afforded the opportunity to make a statement
if they desire to do so, and to be available to respond to appropriate questions
from stockholders.
Page 20
<PAGE>
SOLICITATION OF PROXIES
It is expected that the solicitation of proxies will be primarily by mail.
The cost of solicitation by management will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their reasonable disbursements in forwarding solicitation material
to such beneficial owners. Proxies may also be solicited by certain of the
Company's directors and officers, without additional compensation, personally or
by mail, telephone, telegram or otherwise for the purpose of soliciting such
proxies.
ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED JUNE 30, 2000 WILL BE MADE
AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, IWERKS ENTERTAINMENT, INC., 4520 WEST VALERIO STREET, BURBANK,
CALIFORNIA 91505-1046.
ON BEHALF OF THE BOARD OF DIRECTORS
/S/ JEFFREY M. DAHL
------------------------------------
Jeffrey M. Dahl
Secretary
4520 West Valerio Street,
Burbank, California 91505-1046
November 7, 2000
Page 21
<PAGE>
IWERKS ENTERTAINMENT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned, a stockholder of IWERKS ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby appoints Jeffrey M. Dahl as the proxy of the
undersigned, with full power of substitution, to attend, vote and act for the
undersigned at the Annual Meeting of Stockholders of the Company (the
"Meeting"), to be held on December 7, 2000, and any postponements or
adjournments thereof, and in connection herewith, to vote and represent all of
the shares of the Company which the undersigned would be entitled to vote, as
follows:
The Board of Directors recommends a WITH vote on Proposal 1.
1. ELECTION OF CLASS III DIRECTOR, as provided in the Company's
Proxy Statement:
___ WITH ___ WITHOUT Authority to vote for the nominee listed
below.
INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR THE NOMINEE, LINE
THROUGH OR OTHERWISE STRIKE OUT THE NAME BELOW)
Bruce Beda
The undersigned hereby revokes any other proxy to vote at such Meeting, and
hereby ratifies and confirms all that said proxy may lawfully do by virtue
hereof. WITH RESPECT TO SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE
MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF, SAID PROXY IS AUTHORIZED
TO VOTE IN ACCORDANCE WITH ITS BEST JUDGMENT.
This Proxy will be voted in accordance with the instructions set forth
above. THIS PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR THE
ELECTION OF THE CLASS III DIRECTOR NAMED, AND AS SAID PROXY SHALL DEEM ADVISABLE
ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING, UNLESS OTHERWISE
DIRECTED.
Page 1
<PAGE>
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated November 7, 2000 relating to the
Meeting.
Date: ____________________, ____
-----------------------------------
-----------------------------------
Signature(s) of Stockholder(s)
(See Instructions Below)
The signature(s) hereon should
correspond exactly with the name(s)
of the stockholder(s) appearing on
the Stock Certificate. If stock is
jointly held, all joint owners
should sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If signer is a
corporation, please sign the full
corporation name, and give title of
signing officer.
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF IWERKS ENTERTAINMENT, INC.
Page 2
