Updated: 09:31 AM EST
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Pixar Package to Lasseter Included Well-Timed Options
By STEVE STECKLOW, The Wall Street Journal
Steve Jobs helped negotiate an employment contract with a top film director that included a large stock-options grant with an especially well-timed date, according to a person familiar with the matter.
The options grant, part of a 2001 employment contract reached between Pixar Inc. and noted animated-film director John Lasseter, carried the lowest share price of the previous year -- on a date more than three months before the employment contract was actually signed. Mr. Jobs, then Pixar's chairman and chief executive, signed the agreement on behalf of Pixar.
It remains unclear what role, if any, Mr. Jobs played in selecting the prior grant date of the agreement's stock options. The grant is one of several the Emeryville, Calif., movie company awarded at yearly lows, a pattern that has raised questions about whether the Pixar grants were improperly backdated.
Pixar was bought last year by Walt Disney Co., which is conducting an internal investigation into Pixar's options-granting practices. Federal prosecutors in San Francisco also are looking into Pixar options and are awaiting the conclusion of the Disney probe, according to people familiar with the matter. Mr. Jobs sits on Disney's board and is its largest individual shareholder. Mr. Lasseter is Disney's chief creative officer of its animation studios.
Disney declined to comment beyond its previous statements. Disney referred all questions for Mr. Jobs to Apple Inc., where a spokeswoman said he wasn't available.
In November, Disney Chief Executive Bob Iger said that "we aren't aware of any basis under which stock options that were issued by Pixar would have a material impact on our financial statements." The company declined to make Mr. Lasseter available for comment. Mr. Lasseter appeared yesterday at a Disney analysts meeting in Orlando, Fla., where he unveiled plans for a third "Toy Story" movie.
The prosecutors and the Securities and Exchange Commission already are examining Mr. Jobs's role in stock-options backdating at Apple, where he is chief executive. An internal probe by Apple recently cleared him of any wrongdoing but said Mr. Jobs "was aware or recommended the selection of some favorable grant dates."
Pixar and Apple are two of nearly 140 companies under federal investigation for possible stock-options manipulation. Options let recipients buy company shares some time in the future, usually at the price on the day they are granted -- meaning recipients profit when shares rise above their grant-date price. Backdating involves pretending that the grant was made earlier than it actually was, at a lower price, thus enhancing potential profit.
SEC filings show that on March 21, 2001, Mr. Jobs signed a new, 10-year employment agreement with Mr. Lasseter, a two-time Oscar winner whose directing credits include "Toy Story" and "A Bug's Life." The contract superseded a seven-year contract that Pixar had signed with the director in 1997.
By late 2000, after two "Toy Story" hit movies, Mr. Lasseter had become the animation world's biggest superstar, and was seen as Pixar's most-valuable asset. Mr. Jobs was therefore anxious to lock him into a long-term contract, according to a person familiar with the matter. He may have been concerned that a competitor might try to poach Mr. Lasseter. Indeed, Disney appeared interested in the animator. Then-CEO Michael Eisner had wooed Mr. Lasseter, and another person familiar with the matter says that within Disney there was discussion of whether he could be hired.
The new Pixar contract included a $5 million signing bonus, a $2.5 million annual salary and one million stock options. But the options weren't priced on the date of the contract. "In connection with the Employment Agreement, Mr. Lasseter was previously granted an option to purchase 1,000,000 shares of our common stock at the fair market value on the date of such grant," according to Pixar documents filed with the SEC.
The options were dated Dec. 6, 2000, carrying a strike price of the stock's close the day before. That price marked the yearly low and was at the bottom of a months-long slide. By the close of trading on March 20, the day before the contract was signed, Pixar's shares had climbed 24%, increasing Mr. Lasseter's potential profit by $6.4 million. Between 2003 and last year, Mr. Lasseter exercised and sold about 880,000 of the options, adjusted for a two-for-one split, at various prices before converting the remaining shares to Disney shares when the acquisition took place, SEC records show.
Mr. Lasseter's Dec. 2000 grant featured several peculiarities that raise questions about when he actually received them, according to a review of SEC filings.
Under SEC rules at the time, Mr. Lasseter was required to report the options grant to the SEC no later than 45 days after the end of Pixar's fiscal year -- which meant a deadline of mid-February 2001. But the grant wasn't reported until May 9, 2001 -- 84 days past the deadline for disclosing the options to the SEC and 49 days after the new contract was signed. Moreover, on April 30, 2001, Pixar told the SEC that Mr. Lasseter's filing "will be filed late," without any explanation.
According to a person familiar with the situation, Pixar prepared and filed SEC filings on behalf of its executives.
In his 1997 contract, Mr. Lasseter also received stock options. He reported those to the SEC within two weeks of the grant date, nearly a year before the agency's deadline. He included them on a form reporting the exercise of some earlier options he had received. At the time, the SEC gave corporate insiders a choice of reporting option grants either on so-called Form 4s in which they reported other stock transactions or on separate annual Form 5s which could be filed later.
Mr. Lasseter had a similar opportunity to report his options grant with the December 2000 date. On March 12, 2001 -- nine days before he signed his new employment contract -- Mr. Lasseter filed a Form 4 with the SEC reporting the sale of some Pixar shares. But he didn't include any mention of the options dated in December. Mr. Lasseter wasn't the only Pixar employee to be awarded options with the timely Dec. 6, 2000, grant date and a strike price the day before. So was Edwin Catmull, who co-founded Pixar with Mr. Jobs. Mr. Catmull received 500,000 options.
As it happened, Mr. Catmull reported exercising on Dec. 5 some other options he had, and reported that exercise to the SEC in a Form 4 filing on Jan. 9, 2001. But the filing made no mention of the 500,000-option grant of Dec. 6, 2000. He reported that grant to the SEC in a Form 5 filing on Feb. 13, 2001.
Mr. Catmull had recently been promoted. On Jan. 24, 2001, Pixar announced that he had been named president. Disney declined to make Mr. Catmull, who is now president of the combined Disney and Pixar animation studios, available for comment.
Another peculiarity that raises questions of when Mr. Lasseter actually received the grant is contained in the wording of the employment agreement. According to his new contract, his December 2000 options vested, or became exercisable, "on an equal monthly basis over the ten years of the [employment] agreement." Since the agreement wasn't signed until March 21, 2001, that would mean that the options began vesting in April 2001.
Yet Mr. Lasseter's Form 5 filing seems to contradict this, stating that the options carried an expiration date of Dec. 6, 2010, or 10 years after the grant date, and that they will "vest each month over a 10-year period." That suggests they began vesting in January 2001.
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Pixar Package to Lasseter Included Well-Timed Options
By STEVE STECKLOW, The Wall Street Journal
Steve Jobs helped negotiate an employment contract with a top film director that included a large stock-options grant with an especially well-timed date, according to a person familiar with the matter.
The options grant, part of a 2001 employment contract reached between Pixar Inc. and noted animated-film director John Lasseter, carried the lowest share price of the previous year -- on a date more than three months before the employment contract was actually signed. Mr. Jobs, then Pixar's chairman and chief executive, signed the agreement on behalf of Pixar.
It remains unclear what role, if any, Mr. Jobs played in selecting the prior grant date of the agreement's stock options. The grant is one of several the Emeryville, Calif., movie company awarded at yearly lows, a pattern that has raised questions about whether the Pixar grants were improperly backdated.
Pixar was bought last year by Walt Disney Co., which is conducting an internal investigation into Pixar's options-granting practices. Federal prosecutors in San Francisco also are looking into Pixar options and are awaiting the conclusion of the Disney probe, according to people familiar with the matter. Mr. Jobs sits on Disney's board and is its largest individual shareholder. Mr. Lasseter is Disney's chief creative officer of its animation studios.
Disney declined to comment beyond its previous statements. Disney referred all questions for Mr. Jobs to Apple Inc., where a spokeswoman said he wasn't available.
In November, Disney Chief Executive Bob Iger said that "we aren't aware of any basis under which stock options that were issued by Pixar would have a material impact on our financial statements." The company declined to make Mr. Lasseter available for comment. Mr. Lasseter appeared yesterday at a Disney analysts meeting in Orlando, Fla., where he unveiled plans for a third "Toy Story" movie.
The prosecutors and the Securities and Exchange Commission already are examining Mr. Jobs's role in stock-options backdating at Apple, where he is chief executive. An internal probe by Apple recently cleared him of any wrongdoing but said Mr. Jobs "was aware or recommended the selection of some favorable grant dates."
Pixar and Apple are two of nearly 140 companies under federal investigation for possible stock-options manipulation. Options let recipients buy company shares some time in the future, usually at the price on the day they are granted -- meaning recipients profit when shares rise above their grant-date price. Backdating involves pretending that the grant was made earlier than it actually was, at a lower price, thus enhancing potential profit.
SEC filings show that on March 21, 2001, Mr. Jobs signed a new, 10-year employment agreement with Mr. Lasseter, a two-time Oscar winner whose directing credits include "Toy Story" and "A Bug's Life." The contract superseded a seven-year contract that Pixar had signed with the director in 1997.
By late 2000, after two "Toy Story" hit movies, Mr. Lasseter had become the animation world's biggest superstar, and was seen as Pixar's most-valuable asset. Mr. Jobs was therefore anxious to lock him into a long-term contract, according to a person familiar with the matter. He may have been concerned that a competitor might try to poach Mr. Lasseter. Indeed, Disney appeared interested in the animator. Then-CEO Michael Eisner had wooed Mr. Lasseter, and another person familiar with the matter says that within Disney there was discussion of whether he could be hired.
The new Pixar contract included a $5 million signing bonus, a $2.5 million annual salary and one million stock options. But the options weren't priced on the date of the contract. "In connection with the Employment Agreement, Mr. Lasseter was previously granted an option to purchase 1,000,000 shares of our common stock at the fair market value on the date of such grant," according to Pixar documents filed with the SEC.
The options were dated Dec. 6, 2000, carrying a strike price of the stock's close the day before. That price marked the yearly low and was at the bottom of a months-long slide. By the close of trading on March 20, the day before the contract was signed, Pixar's shares had climbed 24%, increasing Mr. Lasseter's potential profit by $6.4 million. Between 2003 and last year, Mr. Lasseter exercised and sold about 880,000 of the options, adjusted for a two-for-one split, at various prices before converting the remaining shares to Disney shares when the acquisition took place, SEC records show.
Mr. Lasseter's Dec. 2000 grant featured several peculiarities that raise questions about when he actually received them, according to a review of SEC filings.
Under SEC rules at the time, Mr. Lasseter was required to report the options grant to the SEC no later than 45 days after the end of Pixar's fiscal year -- which meant a deadline of mid-February 2001. But the grant wasn't reported until May 9, 2001 -- 84 days past the deadline for disclosing the options to the SEC and 49 days after the new contract was signed. Moreover, on April 30, 2001, Pixar told the SEC that Mr. Lasseter's filing "will be filed late," without any explanation.
According to a person familiar with the situation, Pixar prepared and filed SEC filings on behalf of its executives.
In his 1997 contract, Mr. Lasseter also received stock options. He reported those to the SEC within two weeks of the grant date, nearly a year before the agency's deadline. He included them on a form reporting the exercise of some earlier options he had received. At the time, the SEC gave corporate insiders a choice of reporting option grants either on so-called Form 4s in which they reported other stock transactions or on separate annual Form 5s which could be filed later.
Mr. Lasseter had a similar opportunity to report his options grant with the December 2000 date. On March 12, 2001 -- nine days before he signed his new employment contract -- Mr. Lasseter filed a Form 4 with the SEC reporting the sale of some Pixar shares. But he didn't include any mention of the options dated in December. Mr. Lasseter wasn't the only Pixar employee to be awarded options with the timely Dec. 6, 2000, grant date and a strike price the day before. So was Edwin Catmull, who co-founded Pixar with Mr. Jobs. Mr. Catmull received 500,000 options.
As it happened, Mr. Catmull reported exercising on Dec. 5 some other options he had, and reported that exercise to the SEC in a Form 4 filing on Jan. 9, 2001. But the filing made no mention of the 500,000-option grant of Dec. 6, 2000. He reported that grant to the SEC in a Form 5 filing on Feb. 13, 2001.
Mr. Catmull had recently been promoted. On Jan. 24, 2001, Pixar announced that he had been named president. Disney declined to make Mr. Catmull, who is now president of the combined Disney and Pixar animation studios, available for comment.
Another peculiarity that raises questions of when Mr. Lasseter actually received the grant is contained in the wording of the employment agreement. According to his new contract, his December 2000 options vested, or became exercisable, "on an equal monthly basis over the ten years of the [employment] agreement." Since the agreement wasn't signed until March 21, 2001, that would mean that the options began vesting in April 2001.
Yet Mr. Lasseter's Form 5 filing seems to contradict this, stating that the options carried an expiration date of Dec. 6, 2010, or 10 years after the grant date, and that they will "vest each month over a 10-year period." That suggests they began vesting in January 2001.