<PAGE> 1
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
STUART ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of the transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[STUART LOGO]
STUART ENTERTAINMENT, INC.
3211 NEBRASKA AVENUE
COUNCIL BLUFFS, IOWA 51501
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
1997 Annual Meeting of Stockholders of Stuart Entertainment, Inc. (the
"Company") to be held at 10:00 a.m. local time on May 20, 1997 at The Hyatt
Regency O'Hare, 9300 West Byrn Mawr Avenue, Rosemont, Illinois.
At the Annual Meeting you are being asked (i) to elect directors, (ii) to
approve the Company's 1997 Employee Stock Purchase Plan and (iii) to ratify the
selection of Deloitte & Touche LLP to serve as the Company's independent
auditors for the year ending December 31, 1997.
You are urged to vote your proxy even if you currently plan to attend the
Annual Meeting. Please remember to sign and date the proxy card; otherwise, it
is invalid. Returning your proxy will not prevent you from voting in person but
will assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ LEONARD A. STUART
Leonard A. Stuart, Chairman of the
Board
April 18, 1997
<PAGE> 3
STUART ENTERTAINMENT, INC.
3211 NEBRASKA AVENUE
COUNCIL BLUFFS, IOWA 51501
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
---------------------
TO THE STOCKHOLDERS OF STUART ENTERTAINMENT, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders (the
"Meeting") of Stuart Entertainment, Inc. (the "Company") will be held at The
Hyatt Regency O'Hare, 9300 West Byrn Mawr Avenue, Rosemont, Illinois, on May 20,
1997 at 10:00 a.m. local time, for the following purposes:
1. To elect directors.
2. To consider and vote upon a proposal to approve the Company's 1997
Employee Stock Purchase Plan, as more fully described in the accompanying
proxy statement.
3. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the
Meeting and at any and all adjournments, postponements or continuations
thereof.
Only stockholders of record at the close of business on April 16, 1997 are
entitled to notice of and to vote at the Meeting or any adjournments,
postponements or continuations thereof.
You are cordially invited and urged to attend the Meeting. All
stockholders, whether or not they expect to attend the Meeting in person, are
requested to complete, date and sign the enclosed form of proxy and return it
promptly in the postage paid, return-addressed envelope provided for that
purpose. By returning your proxy promptly you can help the Company avoid the
expense of follow-up mailings to ensure a quorum so that the Meeting can be
held. Stockholders who attend the Meeting may revoke a prior proxy and vote
their proxy in person as set forth in the Proxy Statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
/s/ MICHAEL A. SCHALK
Michael A. Schalk, Secretary
Council Bluffs, Iowa
Dated: April 18, 1997
<PAGE> 4
STUART ENTERTAINMENT, INC.
3211 NEBRASKA AVENUE
COUNCIL BLUFFS, IOWA 51501
(712) 323-1488
---------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors (the "Board") of Stuart
Entertainment, Inc. (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held at The Hyatt Regency O'Hare, 9300 West
Byrn Mawr Avenue, Rosemont, Illinois, on May 20, 1997 at 10:00 a.m. local time,
and at any and all postponements, continuations or adjournments thereof
(collectively the "Meeting"). This Proxy Statement, the accompanying form of
proxy (the "Proxy") and the Notice of Annual Meeting will be first mailed or
given to the Company's stockholders on or about April 18, 1997.
All shares of the Company's common stock, $.01 par value per share (the
"Shares"), represented by properly executed and valid Proxies received in time
for the Meeting will be voted at the Meeting in accordance with the instructions
marked thereon or otherwise as provided therein, unless such Proxies have
previously been revoked. Unless instructions to the contrary are marked, or if
no instructions are specified, Shares represented by the Proxies will be voted
for the proposals set forth on the Proxy, and in the discretion of the persons
named as proxies, on such other matters as may properly come before the Meeting.
Any Proxy may be revoked at any time prior to the exercise thereof by submitting
another Proxy bearing a later date or by giving written notice of revocation to
the Company at the address indicated above or by voting in person at the
Meeting. Any notice of revocation sent to the Company must include the
stockholder's name and must be received prior to the Meeting to be effective.
VOTING
Only holders of record of Shares at the close of business on April 16, 1997
(the "Record Date") will be entitled to receive notice of and to vote at the
Meeting. On the Record Date there were 6,884,374 Shares outstanding, each of
which will be entitled to one vote on each matter properly submitted for vote to
the Company's stockholders at the Meeting. The presence, in person or by proxy,
of holders of a majority of Shares entitled to vote at the Meeting constitutes a
quorum for the transaction of business at the Meeting.
The directors and officers (and their affiliates) of the Company held
voting power, as of the Record Date, with respect to an aggregate of 4,461,338
Shares (approximately 65% of the outstanding Shares).
The election of each director nominee requires the affirmative vote of a
plurality of the Shares cast in the election of directors. The affirmative vote
of a majority of the outstanding Shares cast at the Meeting is required to
approve all other proposals being submitted to the stockholders for their
approval.
Votes cast by proxy will be tabulated by an automated system administered
by the Company's transfer agent. Votes cast by proxy or in person at the Meeting
will be counted by the persons appointed by the Company to act as election
inspectors for the Meeting. Abstentions, broker non-votes and Shares to which
authority to vote on any proposal is withheld, are each included in the
determination of the number of Shares present and voting at the Meeting for
purposes of obtaining a quorum. Each will be tabulated separately. Abstentions
will be counted in tabulations of the votes cast on proposals presented to
stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
<PAGE> 5
PROPOSAL I:
ELECTION OF DIRECTORS
GENERAL
The Board has nominated Messrs. Sangwoo Ahn, Albert F. Barber, Perry J.
Lewis, Harry Poll, Ronald G. Rudy, Richard D. Spizzirri, Ira Starr, Leonard A.
Stuart, Timothy R. Stuart and Stanley M. Taube for election as directors, to
serve until the 1998 Annual Meeting of Stockholders and until their successors
are elected and qualified. Each nominee is currently a member of the Board and
has consented to serve as a director if elected, and it is intended that the
Shares represented by properly executed Proxies will be voted for the election
of the director nominees except where authority to so vote is withheld. The
Board has no reason to believe that any of the director nominees will be unable
to serve as directors or become unavailable for any reason. If, at the time of
the Meeting, any of the director nominees shall become unavailable for any
reason, the persons entitled to vote the Proxy will vote, as such persons shall
determine, for such substituted nominee or nominees, if any, in his discretion.
Information is set forth below regarding the director nominees, including
the name and age of each director nominee, his principal occupation and business
experience during the past five years and the commencement of his term as a
director of the Company.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO ELECT
MESSRS. SANGWOO AHN, ALBERT F. BARBER, PERRY J. LEWIS, HARRY POLL, RONALD G.
RUDY, RICHARD D. SPIZZIRRI, IRA STARR, LEONARD A. STUART, TIMOTHY R. STUART AND
STANLEY M. TAUBE TO THE BOARD.
DIRECTORS
The following table sets forth the name and age of each nominee for
re-election, his principal occupation and business experience during the past
five years, and the year of commencement of his term as a director of the
Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ --------------------------------------------- --------
<S> <C> <C>
Sangwoo Ahn........... General partner of MLGAL Partners, L.P. since 1987 and a 1994
(58) managing director of Morgan Lewis Githens & Ahn, Inc., a
investment banking firm, since 1982. Mr. Ahn also serves as
a director of ITI Technologies, Inc., PAR Technology Corp.,
Kaneb Services, Inc., Kaneb Pipe Line Partners, L.P.,
Gradall Industries, Inc. and Quaker Fabric Corporation.
Albert F. Barber...... Vice Chairman of the Board and Chief Executive Officer since 1994
(51) December 1994; Consultant to the Company from June 1994 to
December 1994; President of CNBC, an NBC cable affiliate,
from 1990 to 1994; Executive Vice President and Chief
Financial Officer of NBC from 1987 to 1990.
Perry J. Lewis........ General partner of MLGAL Partners, L.P. since 1987 and a 1994
(59) managing director of Morgan Lewis Githens & Ahn, Inc., an
investment banking firm, since 1982. Mr. Lewis also serves
as a director of Quaker Fabric Corporation, ITI
Technologies, Inc., Gradall Industries, Inc., Aon
Corporation and Evergreen Media Corporation.
Harry Poll............ Chairman of the Board and Chief Executive Officer of Trade 1996
(66) Products, Inc. from 1974 to November 1996.
Ronald G. Rudy........ Executive Vice President since November 1996; President of 1996
(48) Trade Products, Inc. from 1980 to November 1996.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ --------------------------------------------- --------
<S> <C> <C>
Richard D. Spizzirri.. Senior Counsel to the law firm of Davis Polk & Wardwell 1996
(63) since 1995. Partner in Davis Polk & Wardwell from 1967
through 1995. Mr. Spizzirri is a member of the American Bar
Association and the Bar Association of the City of New York.
Mr. Spizzirri also serves as a director of Centocor, Inc.
and Sugen, Inc.
Ira Starr............. Managing director of Morgan Lewis Githens & Ahn, Inc., an 1994
(37) investment banking firm since 1994 and Vice President from
1988 to 1993. Mr. Starr also serves as a director of Haynes
International, Inc. and Quaker Fabric Corporation.
Leonard A. Stuart..... Chairman of the Board since 1985; Chief Executive Officer 1985
(54) of the Company from December 1986 to December 1994 and
President from December 1986 to March 1989 and from January
1990 to July 1992.
Timothy R. Stuart..... President since July 1992 and Chief Operating Officer since 1994
(43) December 1994; Executive Vice President from October 1991 to
July 1992; and Vice President Operations from March 1989 to
October 1991.
Stanley M. Taube...... Executive Vice President and a director of Grand Casinos, 1996
(60) Inc. since November, 1992; President of S.M. Taube & Co.,
Inc. from 1986 to November, 1992. Mr. Taube also serves as
a director of Innovative Gaming Corporation of America,
New Horizons Kids Quest, Inc. and Stratosphere Corporation.
</TABLE>
At each annual meeting of stockholders, the successors to the directors
whose terms then expire are elected to hold office for a term expiring at the
next succeeding annual meeting. Each director holds office until his successor
is elected and qualified.
Mr. Leonard A. Stuart and Timothy R. Stuart are brothers.
The current members of the Board, other than Messrs. Leonard A. Stuart,
Timothy R. Stuart, Poll and Rudy, were selected as directors pursuant to the
terms of a Securityholders' Agreement (the "Securityholders' Agreement").
Messrs. Poll and Rudy were appointed to the Board in connection with the
Company's acquisition (the "Acquisition") of Trade Products, Inc. in November
1996. The Securityholders' Agreement was amended in connection with the
Acquisition to increase the number of directors to ten. The Securityholders'
Agreement currently provides that the Board will be comprised of up to ten
members, four of whom an affiliate of Morgan Lewis Githens & Ahn, Inc. (the
"MLGA Affiliate") may, but shall not be required to designate for nomination,
and two of whom may, but shall not be required to, be designated jointly by both
Mr. Leonard Stuart and the MLGA Affiliate. The MLGA Affiliate has designated as
its nominees Messrs. Ahn, Lewis, Spizzirri and Starr. Mr. Stuart and the MLGA
Affiliate have jointly designated Messrs. Barber and Taube. The Securityholders'
Agreement also imposes certain transfer restrictions on the parties to the
Securityholders' Agreement and their affiliated transferees and provides such
parties and transferees with demand and incidental registration rights with
respect to the Shares.
BOARD MEETINGS
During 1996 the Board met four (4) times including the annual meeting of
directors following the 1996 Annual Meeting of Stockholders. During a director's
tenure, other than Messrs. Spizzirri and Taube, no director attended fewer than
75% of the aggregate of (i) the total number of meetings of the Board during
1996; and (ii) the total number of meetings held by all Committees of the Board
on which he served during 1996.
3
<PAGE> 7
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Board has an Audit Committee and during 1996 its
members were Messrs. Ahn, Lewis, Starr and Taube. The Audit Committee's duties
include the following: (i) making recommendations to the Board as to the
selection of the firm of independent auditors; (ii) reviewing the results of the
annual audit of the Company with the independent auditors and appropriate
management representatives; (iii) reviewing with the independent auditors such
major accounting policies of the Company as are deemed appropriate for review by
the Audit Committee; and (iv) reporting to the Board at each meeting of the
Board following a meeting of the Audit Committee concerning the Audit
Committee's activities. The Audit Committee met one (1) time in 1996 with each
director serving on the Audit Committee in attendance.
COMPENSATION COMMITTEE. The Board has a Compensation Committee and during
1996 its members were Messrs. Ahn, Lewis, Spizzirri and Starr. The Compensation
Committee performs the following duties: (i) considering and making
recommendations to the Board and the officers of the Company with respect to the
overall compensation policies of the Company; (ii) approving the compensation
payable to all officers of the Company; (iii) reviewing proposed compensation of
executives as provided in the Company's executive compensation plan; (iv)
advising management on all other executive compensation matters as requested;
and (v) reporting to the Board as and when appropriate with respect to all of
the foregoing. The Compensation Committee met one (1) time in 1996.
STOCK OPTION COMMITTEE. The Board has a Stock Option Committee and during
1996 its members were Messrs. Ahn, Lewis, Spizzirri and Starr. The Stock Option
Committee administers and interprets the Company's various stock option plans
and has authority to determine which persons shall be granted options under the
stock option plans and the terms and conditions of the stock option grants. The
Stock Option Committee met one (1) time in 1996 with each director serving on
the Stock Option Committee in attendance.
COMPENSATION OF DIRECTORS
The Company does not currently pay any directors fees; however, all
directors are reimbursed travel expenses relating to the attendance of each
meeting.
EXECUTIVE OFFICERS
Information is set forth below regarding the executive officers of the
Company, including their age, principal occupation during the last five years
and the date each first became an executive officer of the Company.
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE PRESENT EXECUTIVE OFFICE OF REGISTRANT SINCE
------------ ------------------------ -------------------
<S> <C> <C>
Leonard A. Stuart................. Chairman of the Board since 1985; Chief Executive 1986
(54) Officer of the Company from December 1986 to
December 1994 and President from December 1986 to
March 1989 and from January 1990 to July 1992.
Albert F. Barber.................. Vice Chairman of the Board and Chief Executive 1994
(51) Officer since December 1994; Consultant to the
Company from June 1994 to December 1994; President
of CNBC, an NBC cable affiliate, from 1990 to 1994;
Executive Vice President and Chief Financial
Officer of NBC from 1987 to 1990.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AND AGE PRESENT EXECUTIVE OFFICE OF REGISTRANT SINCE
------------ ------------------------ -------------------
<S> <C> <C>
Timothy R. Stuart................. President since July 1992 and Chief Operating 1989
(43) Officer since December 1994; Executive Vice
President from October 1991 to July 1992; and Vice
President Operations from March 1989 to October
1991.
Ronald G. Rudy.................... Executive Vice President since November 1996; 1996
(48) President of Trade Products from 1980 to November
1996.
Clement F. Chantiam............... Executive Vice President since November 1992 and 1989
(37) Vice President -- Manufacturing from March 1989 to
November 1992.
Roy L. Lister..................... Executive Vice President since December 1994 and 1994
(39) Vice President Operations from 1991 to 1992. Mr.
Lister has been an Executive Vice President of
Bazaar since 1992.
Gary L. Loebig.................... Senior Vice President -- Market and Product 1991
(49) Development since January 1995; Vice
President -- Marketing and Regulatory Compliance
from October 1991 to January 1995; and Director of
Marketing and Regulatory Compliance from January
1990 to October 1991.
Paul C. Tunink.................... Vice President -- Finance, Treasurer and Chief 1995
(38) Financial Officer since April 1995; Divisional Vice
President -- Finance of Younkers, Inc. from May
1992 to April 1995 and Director of Corporate
Accounting of Commtron Corporation from prior to
1991 to April 1992.
</TABLE>
Officers serve at the discretion of the Board and are elected at the first
meeting of the Board after each annual meeting of stockholders.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid by the Company to (i) the Chief Executive Officer ("CEO") and (ii) the
Company's other four most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000 for the last fiscal year (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- ---------------------------------- ---- --------- -------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Albert F. Barber,(2).............. 1996 330,298 50,000 100,000 5,472(3)
Chief Executive Officer 1995 300,000 0 0 5,472(3)
1994 9,231 75,000 900,000 204,677(4)
Timothy R. Stuart,................ 1996 172,862 20,000 27,000 3,865
President 1995 170,000 0 250,000 3,379
1994 116,200 0 0 2,304
Clement F. Chantiam,.............. 1996 132,236 15,000 13,500 2,950
Executive Vice President 1995 130,000 0 80,000 2,595
1994 116,100 0 0 2,304
Roy L. Lister,(5)................. 1996 132,500 8,000 13,500 2,500
Executive Vice President 1995 130,000 0 80,000 1,858
1994 2,500 0 0 0
Paul C. Tunink,(6)................ 1996 111,852 10,000 7,800 2,400
Vice President -- Finance, 1995 89,000 0 15,000 3,928(7)
Treasurer and Chief Financial
Officer
</TABLE>
- ---------------
(1) The stated amounts are Company contributions to a defined contribution
pension plan available to all Company employees, except as otherwise noted.
(2) Mr. Barber has been Chief Executive Officer of the Company since December
1994.
(3) Represents amounts paid for Mr. Barber by the Company for term life
insurance premiums.
(4) Represents amounts paid to Mr. Barber while serving as a consultant to the
Company during 1994.
(5) Mr. Lister has been an Executive Vice President of the Company since
December 1994.
(6) Mr. Tunink has been Vice President of the Company since April 1995.
(7) Represents amounts paid by the Company for Mr. Tunink's moving expenses.
The foregoing compensation table does not include certain fringe benefits
made available on a nondiscriminatory basis to all Company employees such as
group health insurance, dental insurance, long-term disability insurance,
vacation and sick leave. In addition, the Company makes available certain non-
monetary benefits to its executive officers with a view to acquiring and
retaining qualified personnel and facilitating job performance. The Company
considers such benefits to be ordinary and incidental business costs and
expenses. The aggregate value of such benefits in the case of each executive
officer listed in the above table, which cannot be precisely ascertained but
which is less than 10% of the cash compensation paid to each such executive
officer, is not included in such table.
6
<PAGE> 10
OPTION GRANTS TABLE
The following table provides information relating to the grant of stock
options to the CEO and the Named Executive Officers during the year ended
December 31, 1996.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL OR BASE EXPIRATION -------------------------------
NAME GRANTED(#) YEAR(2) PRICE($/SH) DATE 5% ($) 10% ($) 0% ($)
---- ---------- ---------- ----------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Albert F. Barber....................... 100,000 17 5.25 12/09/06 330,394 837,764 --
Timothy R. Stuart...................... 27,000 5 5.25 12/09/06 89,207 226,196 --
Clement F. Chantiam.................... 13,500 2 5.25 12/09/06 44,603 113,098 --
Roy L. Lister.......................... 13,500 2 5.25 12/09/06 44,603 113,098 --
Paul C. Tunink......................... 7,800 1 5.25 12/09/06 25,771 65,346 --
</TABLE>
- ---------------
(1) Potential realizable value is based on an assumption that the stock price of
the Shares appreciates at the annual rate shown (compounded annually) from
the date of grant until the end of the ten-year option term. These numbers
are calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.
(2) Options granted to employees during fiscal 1996 totaled 573,400.
AGGREGATED OPTION EXERCISE AND FISCAL YEAR-END OPTION TABLE
The following table provides information relating to the exercise of stock
options during the year ended December 31, 1996 by the CEO and each of the Named
Executive Officers and the 1996 fiscal year end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND F-Y END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS FY-END FY-END
(#)(1) ($)(1)
SHARES -------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Albert F. Barber........................ -- -- 700,000/--(2) --/--
Timothy R. Stuart....................... -- -- 292,000/-- --/--
Clement F. Chantiam..................... -- -- 79,500/29,000 --/--
Roy L. Lister........................... -- -- 64,500/29,000 --/--
Paul C. Tunink.......................... -- -- 12,600/10,200 --/--
</TABLE>
- ---------------
(1) The closing sale price of the Common Stock on December 31, 1996 ($4.50) was
used to calculate option value.
(2) Effective December 31, 1996, Mr. Barber surrendered for cancellation options
to purchase 300,000 shares of Common Stock at an exercise price of $20 per
share, which had been granted to him by the Company.
EMPLOYMENT AGREEMENTS
On December 14, 1994 the Company entered into an employment agreement (the
"Stuart Agreement"), with Leonard A. Stuart, the Chairman of the Board. Pursuant
to the Stuart Agreement, Mr. Stuart was to be employed for a period of five
years beginning December 13, 1994. Under the terms of the Stuart Agreement,
7
<PAGE> 11
Mr. Stuart received an annual salary of $200,000. In addition, the Company was
required to reimburse him for 80% of the following expenses related to the
operation of an office in Fort Lauderdale, Florida: rent for such office; salary
and benefits for one administrative assistant; telephone; stationery; postage
and similar items. He was also entitled to participate in customary employee
benefits programs maintained by the Company, including health, life, and
disability insurance, to the extent provided to other senior executives of the
Company. Effective as of February 1, 1996, the Stuart Agreement was superseded
by the Management Consulting Agreement between the Company and Len Stuart &
Associates, Ltd., a Cayman Islands corporation, pursuant to which Mr. Stuart
will provide consulting services to the Company. The terms of the Management
Consulting Agreement are substantially similar to the terms of the Stuart
Agreement. See "Certain Relationships and Related Transactions."
The Company also has an employment agreement, dated June 1, 1994, with
Albert F. Barber, the Chief Executive Officer and Vice Chairman of the Board
(the "Barber Agreement"). The Barber Agreement was amended on December 17, 1996,
to extend its term to December 31, 1998. The Barber Agreement is automatically
extended indefinitely until either the Company or Mr. Barber terminates the
Barber Agreement, at which time the Barber Agreement will terminate six months
after such notice.
For 1996, Mr. Barber received an annual base salary (the "Base Salary") of
$330,000 which was increased to $350,000 for 1997. The Base Salary will be
increased to $375,000 for 1998. In addition, Mr. Barber is eligible to receive a
cash bonus (the "Bonus") for services rendered during each calendar year covered
by the Barber Agreement pursuant to the following terms. Mr. Barber will be paid
a bonus equal to 50% of the Base Salary when the Company's earnings before
interest and income taxes ("EBIT") exceed the EBIT targeted amount (the
"Targeted Amount"), as approved by the Board of Directors each year, and an
additional increase of 10% of Base Salary to the extent EBIT equals or exceeds
105% of the Targeted Amount and an additional 2% to 4% of the Base Salary when
EBIT exceeds 105% of the Targeted Amount by a specific percentage.
The Company may terminate Mr. Barber's employment at any time for cause,
and in such event, all of Mr. Barber's rights to compensation would cease upon
his termination. If the termination is without cause, or as a result of a
disability or death, the Company will pay Mr. Barber, in addition to amounts
accrued in respective periods prior to the termination, his Base Salary for one
year from the date of termination (or, in the case of death, the proceeds of a
life insurance policy to be obtained by the Company on Mr. Barber's behalf), and
the Bonus, prorated to the time of termination, in a lump sum to be payable at
the time the Bonus for such calendar year would normally be paid. In the event
Mr. Barber terminates his employment within 90 days of a change of control of
the Company, Mr. Barber will continue to receive his Base Salary for two years
from the date of such termination and the applicable Bonus prorated and paid as
described above.
On November 13, 1996, the Company entered into a consulting agreement with
Mr. Poll, Chairman of the Board and Chief Executive Officer of Trade Products,
Inc. (the "Poll Agreement") and an employment agreement with Mr. Rudy, President
of Trade Products, Inc. (the "Rudy Agreement") as follows: (a) Mr. Poll will be
retained as a consultant for a period of seven years and will be paid $500 per
month during the seven year period. The Poll Agreement may be terminated at any
time for cause, and in such event, all of Mr. Poll's rights to compensation will
cease. In the event that termination is without cause or as a result of death,
the Company will be required to continue to pay Mr. Poll his compensation from
the date of termination through the remainder of the Poll Agreement; and (b) the
Rudy Agreement has a term of three years and provides for a base salary of
$200,000, $210,000 and $220,000, respectively. In addition, Mr. Rudy will be
eligible for a performance based bonus of $50,000 and will be granted stock
options under the Company's 1994 Performance Stock Option Plan as follows:
50,000 Shares with an exercise price of $5.00, 100,000 shares with an exercise
price of $10.00 per share and 100,000 Shares at $15.00 per share. The Rudy
Agreement may be terminated at any time for cause, and in such event, all of Mr.
Rudy's rights to compensation will cease. In the event that termination is
without cause or as a result of death, the Company will be required to continue
to pay Mr. Rudy the greater of the following: (i) the base salary through the
end of the term at the rate in effect on the date of termination; or (ii) for a
period of one year from the date of termination, at the rate in effect on the
date of termination. The Company's obligation to pay Mr. Rudy automatically
terminates upon a breach by Mr. Rudy of the noncompetition provisions of the
Rudy Agreement.
8
<PAGE> 12
COMPENSATION PURSUANT TO PLANS
STOCK OPTION PLANS. The Company has three stock option plans under which
options can be or have been granted: the 1985 Non-qualified Stock Option Plan,
the 1992 Non-qualified Stock Option Plan and the 1994 Performance Stock Option
Plan. Options to purchase 573,400 Shares were granted to directors and officers
under the 1994 Performance Stock Option Plan in 1996.
EMPLOYEE BENEFIT PLANS. The Company maintains a defined contribution
pension plan covering substantially all of its employees, including all
executive officers. Eligible employees may contribute up to 15% of their
salaries, not to exceed a government established maximum. Company contributions
are the sum of the Company's match of the first 2% of the employee's elective
contribution and a discretionary contribution of up to 2% of the salaries of all
employees eligible under the plan. Company contributions vest over a five-year
period. During 1996 the Company's contribution to the 401(k) Plan was $163,241.
The Company maintains a voluntary defined contribution plan covering
substantially all of its employees in Canada (the "Canadian Plan"). Eligible
employees may contribute up to 2 1/2% of their wages eligible under the Canadian
plan and the Company will match the contribution up to 2 1/2%. Eligible
employees may contribute additional amounts in excess of the 2 1/2%, but they
are not matched by the Company. During 1996, the Company's contribution to the
Canadian Plan was $110,440.
9
<PAGE> 13
REPORT OF THE BOARD ON EXECUTIVE COMPENSATION
During 1996, the Board was responsible for establishing compensation policy
and administering the compensation programs of the Company's executive officers.
The Board reviewed executive compensation policies, design of compensation
programs, and individual salaries and awards for the executive officers based on
performance criteria.
Pursuant to the rules regarding disclosure of Company policies concerning
executive compensation, this report is submitted by the Board for the year ended
December 31, 1996 and addresses the Company's compensation policies as they
affected the CEO and the Company's other executive officers, including the Named
Executive Officers.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company applies a consistent philosophy to compensation for all
employees, including executive officers. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives.
The goals of the executive compensation program are to align compensation
with business objectives and performance, and to enable the Company to attract,
retain and reward executive officers who contribute to the long-term success of
the Company. The Company's compensation program for executive officers is based
on the same principles applicable to compensation elements: cash and equity. The
process used by the Board in determining executive officer compensation levels
for each of these components takes into account both qualitative and
quantitative factors. Among the factors considered by the Board are the
recommendations of the CEO with respect to the compensation of the Company's
other key executive officers. However, the Board makes the final compensation
decisions concerning such officers. The CEO is compensated pursuant to the
Barber Agreement. See "EXECUTIVE COMPENSATION -- Employment Agreements."
The Board does not believe that Internal Revenue Code Section 162(m), which
denies a deduction for compensation payments in excess of $1,000,000 to the CEO
or a Named Executive Officer, is likely to be applicable to the Company in the
near future but will reconsider the implication of Section 162(m) if and when it
appears that the section may become applicable.
COMPENSATION ELEMENTS
For the year ended December 31, 1996 the Company's executive compensation
program included a base salary and grants of stock options.
Base Salary. Salaries for executive officers are determined by evaluating
subjectively the responsibilities of the position held and the experience and
performance of the individual and comparing base salaries for comparable
positions at peer group entities. Subject to an executive officer's individual
performance, the Board sets salaries at or about the median as reflected by such
information. The Board believes that such salaries were competitive within a
range that the Board believes to be reasonable and necessary to accomplish the
Company's compensation objectives.
In determining the base salaries for 1996, peer group data was reviewed
with the CEO for each executive position. In addition, the responsibility of
each position was reviewed, together with the executive officer's individual
performance for the prior year and objectives for the current year. In addition,
the Company's performance was compared to objectives for the prior year and
performance targets for the current year. Based on these criteria, the CEO
recommended to the Board a percentage range increase to the base salary for the
current year for each executive level position.
Stock Options. The long-term incentive component of the CEO's and the
executive officers' compensation is stock options. The Company believes that
providing executive officers with opportunities to acquire significant equity
positions in the Company and thus, the opportunity to share in its growth and
prosperity through the grant of stock options will enable the Company to attract
and retain qualified and experienced executive officers. Stock options represent
a valuable portion of the compensation program for the Company's
10
<PAGE> 14
executive officers. The exercise price of stock options is the fair market value
of the Shares on the date of the grant based on the closing bid price of the
Shares on the date of grant, and will only provide a benefit if the value of the
Shares increases. Grants of stock options to executive officers are made by the
Board upon the recommendation of the CEO and are based upon a percentage of each
executive officer's annualized salary, an evaluation of the executive officer's
past and expected future performance, the number of outstanding and previously
granted options, and discussions with the executive officer.
REPRICING OF STOCK OPTIONS
In December 1996, the Board granted Mr. Barber an option to purchase
100,000 Shares at an exercise price of $5.25 per Share (the "New Option").
Simultaneously, Mr. Barber surrendered for cancellation, options to purchase
300,000 Shares (the "Old Options"). The Old Options had an exercise price of
$20.00 per Share. The Old Options were granted as a part of Mr. Barber's initial
employment contract. Since the date of the grant of the Old Options, the price
of the Shares has not risen above $8.25 per Share. In order to provide Mr.
Barber with the incentive compensation that was agreed to as part of his
employment contract, the Board granted Mr. Barber the New Options. The Board
believes that providing Mr. Barber with an option to acquire a significant
equity position in the Company, and thus the opportunity to share in its growth
and prosperity, will align Mr. Barber's incentives with those of the Company and
the stockholders and reward him based upon the success of the Company.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK AT PRICE AT REMAINING AT
OPTIONS TIME OF TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT AMENDMENT PRICE ($) AMENDMENT
---- -------- ----------- ------------ ------------ --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Barber.............. 12/31/96 300,000 $4.50 $20.00 $5.25 8 years
</TABLE>
BOARD OF DIRECTORS
Sangwoo Ahn
Albert F. Barber
Perry J. Lewis
Harry Poll
Ronald G. Rudy
Richard Spizzirri
Ira Starr
Leonard A. Stuart
Timothy R. Stuart
Stanley M. Taube
11
<PAGE> 15
PERFORMANCE GRAPH
The graph and table below compare the total stockholder returns (assuming
reinvestment of dividends) of the Shares, the Nasdaq Stock Market and a group of
peer companies engaged in the manufacture of gaming products. The graph assumes
$100 invested on December 31, 1991 in the Shares and each of the indices. The
stock price performance data shown on the graph below are not necessarily
indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG STUART ENTERTAINMENT, INC., THE NASDAQ
STOCK MARKET AND A GROUP OF PEER
COMPANIES ENGAGED IN THE MANUFACTURE
OF GAMING PRODUCTS.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) COMPANY INDEX MARKET INDEX PEER INDEX
<S> <C> <C> <C>
12/31/91 100.00 100.00 100.00
12/31/92 137.50 116.40 214.30
12/31/93 95.8 133.6 233.9
12/30/94 75.0 130.6 141.7
12/29/95 120.8 184.7 135.1
12/31/96 75.0 227.2 193.6
</TABLE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDED IN THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE PRECEDING REPORT OF
THE COMPENSATION COMMITTEE AND PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.
PROPOSAL II:
PROPOSAL TO APPROVE THE COMPANY'S 1997
EMPLOYEE STOCK PURCHASE PLAN
In March 1997, the Board adopted, subject to stockholder approval, the
Company's 1997 Employee Stock Purchase Plan (the "Plan"). If approved by the
stockholders, the Plan provides eligible employees (defined below) with an
opportunity to purchase Shares through payroll deductions. The Plan is intended
to assist eligible employees in acquiring a stock ownership interest in the
Company pursuant to a plan that is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code") to help eligible employees provide for their future
security and to encourage them to remain in the employment of the Company and
its participating subsidiaries.
12
<PAGE> 16
The substance and effect of certain provisions of the Plan are described
below and the complete text of the proposed Plan is set forth in Appendix "A" to
this Proxy Statement. The following discussion is qualified in its entirety by
reference to the text of the proposed Plan.
SHARES RESERVED FOR THE PLAN
The aggregate number of Shares which may be purchased under the Plan shall
not exceed 300,000, subject to adjustment in the event of stock dividends, stock
splits, combination of Shares, recapitalizations, or other changes in the
outstanding common stock. Any such adjustment will be made by the Board. Shares
issued under the Plan may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares.
ELIGIBLE PARTICIPANTS
Full-time employees of the Company (or a subsidiary designated by the
Company) are eligible if they meet certain conditions. To be eligible the
employee must have completed six months of employment and the employee's
customary employment must be greater than 20 hours per week.
Approximately 1,425 employees would have been eligible to participate as of
December 31, 1996. MATERIAL FEATURES OF THE PLAN
Beginning July 1, 1997, the Company may make grants of options on January 1
and/or July 1 of each year the Plan is in effect or on such other date as the
Committee (as defined herein) shall designate. Each option period shall last for
six months ending on the June 30 or December 31 immediately following the grant
of options or on such dates as the Committee determines.
Each eligible employee on a date of exercise shall be entitled to purchase
Shares at a purchase price equal to 85% of the average of the reported highest
and lowest sale prices of Shares on the Nasdaq National Market on the applicable
date of exercise. Dates of exercise shall take place on the last day of each
month Common Stock is traded on the Nasdaq National Market, or such other
exchange on which the Common stock is traded, during the applicable option
period,
Payment for Shares purchased under the Plan will be made by authorized
payroll deductions from an eligible employee's Eligible Compensation (as defined
herein) or, when authorized by the Committee, an eligible employee may pay an
equivalent amount for such Shares. "Eligible Compensation" means an eligible
employee's total regular compensation payable from the Company or a
participating subsidiary of the Company during an option period.
Eligible employees who elect to participate in the Plan will designate a
stated whole percentage equaling at least 1%, but no more than 10% of Eligible
Compensation, to be deposited into a periodic deposit account. On each date of
exercise, the entire periodic deposit account of each participant in the Plan is
used to purchase whole and/or fractional Shares. The Company shall maintain a
stock purchase account for each participant to reflect the Shares purchased
under the Plan by each participant. No participant in the Plan is permitted to
purchase Shares under the Plan at a rate that exceeds $25,000 in fair market
value of Shares, determined at the time options are granted, for each calendar
year.
All funds received by the Company from the sale of Shares under the Plan
may be used for any corporate purpose.
NEW PLAN BENEFITS
It is not possible to determine how many eligible employees will
participate in the Plan in the future. Therefore, it is not possible to
determine with certainty the dollar value or number of Shares that will be
distributed under the Plan. The Company anticipates, however, that on the
average approximately 60,000 Shares will be distributed annually during the
five-year term of the Plan. Because participation in the Plan is optional, it is
not possible to determine the benefits or amounts that would have been received
by the
13
<PAGE> 17
CEO, Named Executive Officers, or any other directors or officers of the Company
under the Plan during 1996.
TAX TREATMENT
The Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Code, an employee who elects
to participate in an offering under the Plan will not realize income at the time
the offering commences or when the Shares purchased under the Plan are
transferred to him or her. If an employee disposes of such Shares after two
years from the date the offering of such Shares commences and after one year
from the date of the transfer of such shares to him or her, the employee will be
required to include in income, as compensation for the year in which such
disposition occurs, an amount equal to the lesser of (a) the excess of the fair
market value of such Shares at the time of disposition over the purchase price,
or (b) 15% of the fair market value of such Shares at the time the offering
commenced. The employee's basis in the Shares disposed of will be increased by
an amount equal to the amount so includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of the disposition will be a capital gain
or loss, either short-term or long-term, depending on the holding period for
such Shares. In such event, the Company (or the subsidiary by which the employee
is employed) will not be entitled to any tax deduction from income.
If any employee disposes of the Shares purchased under the Plan within such
two-year or one-year period, the employee will be required to include in income,
as compensation for the year in which such disposition occurs, an amount equal
to the excess of the fair market value of such Shares on the date of purchase
over the purchase price. The employee's basis in such Shares disposed of will be
increased by an amount equal to the amount includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of disposition will be a capital gain or
loss, either short-term or long-term, depending on the holding period for such
shares. In the event of a disposition within such two-year or one-year period,
the Company (or the subsidiary by which the employee is employed) will be
entitled to a tax deduction from income equal to the amount the employee is
required to include in income as a result of such disposition.
An employee who is a nonresident of the United States will generally not be
subject to the U.S. federal income tax rules described above with respect to
Shares purchased under the Plan.
PLAN ADMINISTRATION AND TERMINATION
The Board, or its delegate, shall appoint a committee (the "Committee"),
which shall be composed of one or more employees, to administer the Plan on
behalf of the Company. The Committee may delegate any or all of the
administrative functions under the Plan to such individuals, subcommittees, or
entities as the Committee considers appropriate. The Committee may adopt rules
and procedures not inconsistent with the provisions of the Plan for its
administration. The Committee's interpretation and construction of the Plan is
final and conclusive.
The Board may at any time, or from time to time, alter or amend the Plan in
any respect, except that, without approval of the Company's stockholders, no
amendment may increase the number of Shares reserved for purchase, or reduce the
purchase price per Share under the Plan, other than as described above.
The Board shall have the right to terminate the Plan or any offering at any
time for any reason. The Plan is anticipated to continue in effect through June
30, 2001.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL NO. II.
14
<PAGE> 18
PROPOSAL III:
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board, upon recommendation of the Audit Committee, has selected
Deloitte & Touche LLP to serve as independent auditors of the Company for the
year ending December 31, 1997. Representatives of Deloitte & Touche LLP will be
present at the Meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
stockholders.
Although it is not required to do so, the Board is submitting its selection
of the Company's independent auditors for ratification by the stockholders at
the Meeting in order to ascertain the views of stockholders regarding such
selection. Whether the proposal is approved or defeated the Board may reconsider
its selection.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" PROPOSAL NO. III.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of outstanding Shares as of April 16, 1997, by (i) each person who is
known by the Company to own beneficially five percent or more of the outstanding
Shares, (ii) the Company's directors, CEO, and other Named Executive Officers,
and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
PERCENT
NAME NUMBER OF CLASS
---- --------- --------
<S> <C> <C>
Leonard A. Stuart........................................... 1,331,887 19.2%
c/o Stuart Entertainment, Inc.
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
MLGA Fund II, L.P........................................... 3,690,053 48.8%
Two Greenwich Plaza
Greenwich, Connecticut 06830
Sangwoo Ahn(2)(3)........................................... 3,785,359 50.0%
Ira Starr................................................... 8,961 *
Perry Lewis(2).............................................. 3,770,359 49.8%
c/o MLGA Fund II, L.P.
Two Greenwich Plaza
Greenwich, Connecticut 06830
Albert F. Barber............................................ 700,000 11.0%
c/o Stuart Entertainment, Inc.
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
Timothy R. Stuart........................................... 315,000 4.4%
Clement F. Chantiam......................................... 124,500 1.8%
Roy Lister.................................................. 107,500 1.6%
Ronald R. Rudy(4)........................................... 350,000 4.9%
Harry Poll(4)............................................... 100,000 1.4%
Richard D. Spizzirri........................................ 30,000 *
Stanley M. Taube............................................ 30,000 *
All executive officers and directors as a group (17
persons).................................................. 7,056,096 74.9%
</TABLE>
- ---------------
* Less than one percent.
15
<PAGE> 19
(1) Shares are considered beneficially owned, for purposes of this table, only
if held by the person indicated, or if such person, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares the power to vote, to direct the voting of and/or to dispose
of or to direct the disposition of, such security, or if the person has the
right to acquire beneficial ownership within 60 days, unless otherwise
indicated. The foregoing share amounts include the following number of
shares which may be acquired pursuant to stock options or warrants
exercisable within 60 days of February 5, 1997: Mr. Barber, 700,000 shares,
Mr. Leonard A. Stuart, 100,000 shares; Mr. Timothy R. Stuart, 292,000
shares; Mr. Chantiam, 99,500 shares; Mr. Lister 84,500 shares; Mr. Lewis,
744,226 shares; Mr. Ahn, 744,226 shares; Mr. Starr, 1,282 shares; MLGA Fund
II, L.P., 732,259 shares, Mr. Rudy, 350,000 shares, Mr. Poll, 100,000
shares, Mr. Spizzirri, 10,000 shares, Mr. Taube, 30,000 shares; and all
executive officers and directors as a group, 2,588,740 shares.
(2) Includes 2,957,794 shares owned by MLGA Fund II, L.P. and 732,259 shares
owned by MLGA Fund II, L.P. pursuant to a currently exercisable warrant. The
Stockholders of Bingo Holdings, Inc., are MLGA Fund II, L.P. and MLGAL
Partners, L.P. The general partner of MLGA Fund II, L.P. is MLGAL Partners,
L.P. Messrs. Lewis and Ahn are general partners of MLGAL Partners, L.P. and
may be deemed to beneficially own these shares. Messrs. Lewis and Ahn
disclaim any beneficial interest in all shares owed by MLGA Fund II, L.P.
The business address of Messrs. Lewis, Starr and Ahn is c/o MLGA Fund II,
L.P., Two Greenwich Plaza, Greenwich, Connecticut 06830.
(3) Includes 15,000 shares owned by Mr. Ahn's children and 10,000 shares owned
by a family limited partnership. Mr. Ahn disclaims any beneficial interest
in all shares owned by his children and the family limited partnership.
(4) Includes 100,000 shares owned by Trade Products, Inc. pursuant to a
currently exercisable warrant. Messrs. Poll and Rudy own approximately 66%
and 28%, respectively, of the outstanding common stock of Trade Products,
Inc.
REPORTS UNDER SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and 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 Securities and
Exchange Commission and with the NASDAQ and to furnish the Company with copies.
Based solely on its review of the copies of the Section 16(a) forms
received by it, or written representations from certain reporting persons, the
Company believes that, during the last fiscal year, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with except for certain option grants for
executive officers which were reported on a year-end report on Form 5.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF LEN STUART AND ASSOCIATES LIMITED
On December 13, 1994, the Company acquired Len Stuart and Associates
Limited ("LSA"), the holding company for Bingo Press & Specialty Limited and
Niagara Bazaar & Novelty Limited, pursuant to a Stock Purchase Agreement (the
"LSA Agreement") among the Company, LSA and Mr. Leonard Stuart, Chairman of the
Board. Pursuant to the LSA Agreement, Mr. Stuart received $35.0 million, subject
to adjustment, as follows: (a) $30.0 million in immediately available funds; (b)
a senior subordinated note from the Company in the initial principal amount of
$5.0 million, which bears interest at 10% and matures on March 31, 2000 (the
"Stuart Note"); and (c) warrants to purchase 100,000 of the shares of the Common
Stock at an exercise prices of $5.75 per share. Subsequent to the acquisition of
LSA, and pursuant to the results of a post-closing audit, the Company paid Mr.
Stuart an additional $1.6 million as a purchase price adjustment. The Company
received a fairness opinion to the effect that the consideration paid to Mr.
Stuart
16
<PAGE> 20
was fair to the Company from a financial point of view. The Stuart Note was paid
in full on November 13, 1996.
CREDIT AGREEMENT
In connection with the Company entering into the Fourth Amendment to Credit
Agreement, which increased the maximum amount available under the revolving
facility from $20,000,000 to $23,000,000, Mr. Stuart and MLGAL Partners, L.P.,
of which Messrs. Lewis, Ahn and Starr are general partners, guaranteed the
payment of all amounts under the revolving facility in excess of $20,000,000.
These guarantees were released on November 13, 1996 in connection with the
Company entering into an amended and restated credit agreement.
LEASE AGREEMENT
In connection with the Acquisition, the Company entered into a Lease
Agreement with Partnership Leasing, L.L.C., a Washington limited liability
company, of which Harry Poll and Ronald G. Rudy, directors of the Company, are
the sole members. The term of the lease is for ten years with one ten-year
option and covers two buildings in Lynnwood, Washington with a total of 165,000
square feet. The rent is $924,000 per year, which is the current market price
for the facility as determined by a qualified independent commercial real estate
brokerage firm in an opinion of rental value delivered to the Company.
MANAGEMENT CONSULTING AGREEMENT
Effective February 1, 1996, the Company entered into a Management
Consulting Agreement (the "Management Consulting Agreement") with Len Stuart &
Associates, Ltd., a Cayman Islands corporation (the "Consultant"). The term of
the Management Consulting Agreement commenced on February 1, 1996 and ends on
December 12, 1999 (the "Expiration Date"), unless sooner terminated as provided
therein. Beginning on the Expiration Date, and on each anniversary thereafter of
the Expiration Date, the Management Consulting Agreement will automatically be
renewed for a term of one (1) year commencing on the first day immediately
following the Expiration Date, unless such renewal is rescinded by either party.
Under the terms of the Management Consulting Agreement, the Consultant is
entitled to receive an annual base fee of $200,000, which may be increased, but
not decreased, at the discretion of the Board of Directors. During the term of
the Management Consulting Agreement, the Consultant shall also be entitled to
receive reimbursement from the Company of all reasonable expenses incurred by it
in maintaining its offices including reasonable rent, phone, heating, air
conditioning, electric and stationery expenses and salary for an administrative
assistant of the Consultant's choice on a basis consistent with past and present
practices. Mr. Leonard Stuart is President of Len Stuart & Associates, Ltd. and
Chairman of the Board. The Company believes that the terms of the Management
Consulting Agreement are comparable to those which would have been obtainable
from unaffiliated third parties.
BAZAAR MANAGEMENT GROUP
The Company is a party to a consulting agreement (the "BMG Agreement")
dated July 1, 1995 with Bazaar Management Group, Inc. ("BMG"), of which Leonard
A. Stuart, Chairman of the Board, is the sole stockholder. Under the BMG
Agreement, BMG provides consulting services to the Company with respect to the
Company's business (the "Division) of placing pulltab tickets in convenience
stores, retail locations and bingo halls in Ontario, Canada. The net income
monthly of the Division is payable as follows: (a) 50% is applied to reduce
outstanding bank loans of the Division, (b) 50% of the remaining net income is
retained by the Company, and (c) 50% of the remaining net income is paid to BMG.
During 1995, the Company paid BMG $115,000. The Company believes that the terms
of the BMG Agreement are comparable to those which would have been obtainable
from unaffiliated third parties.
17
<PAGE> 21
KEN STUART CONSULTING AGREEMENT
In January 1995, the Company entered into a consulting agreement with Ken
Stuart, the brother of Leonard A. Stuart, the Chairman of the Board. Under the
agreement, Ken Stuart provides consulting and advisory services with respect to
the manufacture, marketing, sale and distribution of ink dabbers and is paid the
greater of (a) $189,000 or (b) 6.5% of the gross profit of sales of ink dabbers
by the Company and its subsidiaries, up to a maximum of $250,000 per year. The
consulting agreement further provides that if the Company exceeds its EBIT
target, as set by the Board, the maximum of $250,000 will be increased by the
same percentage that the Company exceeds the EBIT target. The consulting
agreement is terminable at will by either party; provided, however, if Ken
Stuart is terminated with or without cause, he is entitled to receive
compensation. The consulting agreement also contains certain non-competition
provisions. In 1996, Ken Stuart was paid commissions totaling approximately
$189,000. The Company believes that the terms of the consulting agreement are
comparable to those which would have been obtainable from unaffiliated third
parties.
BINGO VIDEO ENTERTAINMENT, INC.
In October 1992, the Company sold the assets of its retail branch in
Hollywood, Florida to Bingo Video Entertainment, Inc. ("Bingo Video"), a company
owned by a brother-in-law of Leonard A. Stuart for $262,000 payable in the form
of a promissory note ("Bingo Video Note"). The Bingo Video Note bears interest
at a rate of one percent above the Company's borrowing rate on its short-term
line of credit, is collateralized by the assets of Bingo Video and is guaranteed
by Mr. Stuart's brother-in-law and Len Stuart and Associates, a Florida
corporation wholly owned by Mr. Stuart. The principal balance of the Bingo Video
Note at December 31, 1996 was $140,000. Sales to Bingo Video for the year ended
December 31, 1996 were approximately $828,000. Sales to Bingo Video were made at
prices generally charged to the Company's largest customers.
SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of the Board, but may
also be made without additional remuneration by officers or employees of the
Company by telephone, telegraph, facsimile transmission or personal interview.
The expense of the preparation, printing and mailing of this Proxy Statement and
the enclosed form of Proxy and Notice of Annual Meeting, and any additional
material relating to the Meeting which may be furnished to stockholders by the
Board subsequent to the furnishing of this Proxy Statement, has been or will be
borne by the Company. The Company will reimburse banks and brokers who hold
Shares in their name or custody, or in the name of nominees for others, for
their out-of-pocket expenses incurred in forwarding copies of the proxy
materials to those persons for whom they hold such Shares. To obtain the
necessary representation of stockholders at the Meeting, supplementary
solicitations may be made by mail, telephone or interview by officers of the
Company or selected securities dealers. It is anticipated that the cost of such
supplementary solicitations, if any, will not be material.
ANNUAL REPORT
The Annual Report of the Company for the 1996 fiscal year will be mailed to
stockholders along with this Proxy Statement. THE COMPANY WILL, UPON WRITTEN
REQUEST AND WITHOUT CHARGE, PROVIDE TO ANY PERSON SOLICITED HEREUNDER A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. Requests should be
addressed to the Corporate Secretary of the Company at 3211 Nebraska Avenue,
Council Bluffs, Iowa 51501.
OTHER MATTERS
The Company is not aware of any business to be presented for consideration
at the Meeting, other than that specified in the Notice of Annual Meeting. If
any other matters are properly presented at the Meeting, it is the intention of
the persons named in the enclosed Proxy to vote in accordance with their best
judgment.
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STOCKHOLDER PROPOSALS
Any stockholder who intends to submit a proposal at the 1998 Annual Meeting
of Stockholders and who wishes to have the proposal considered for inclusion in
the proxy statement and form of proxy for that meeting must, in addition to
complying with the applicable laws and regulations governing submission of such
proposals, deliver the proposal to the Company for consideration no later than
December 1, 1998. Such proposals should be sent to the Corporate Secretary of
the Company at 3211 Nebraska Avenue, Council Bluffs, Iowa 51501.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial owners
of the Shares for which proxies are being solicited from you, and, if so, the
number of copies of this Proxy Statement and other soliciting materials you wish
to receive in order to supply copies to the beneficial owners of the Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS, WHETHER OR NOT
THEY EXPECT TO ATTEND THE MEETING IN PERSON, ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED
FOR THAT PURPOSE. BY RETURNING YOUR PROXY PROMPTLY YOU CAN HELP THE COMPANY
AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE MEETING
CAN BE HELD. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE A PRIOR PROXY AND
VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ MICHAEL A. SCHALK
Michael A. Schalk, Secretary
Council Bluffs, Iowa
April 18, 1997
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APPENDIX A
STUART ENTERTAINMENT, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
Stuart Entertainment, Inc., a Delaware corporation, hereby adopts this
Stuart Entertainment, Inc. 1997 Employee Stock Purchase Plan (the "Plan") as of
the Effective Date. The purposes of this Plan are as follows:
(1) To assist employees of the Company and its Participating
Subsidiaries in acquiring a stock ownership interest in the Company
pursuant to a plan which is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended.
(2) To help employees provide for their future security and to
encourage them to remain in the employment of the Company and its
Participating Subsidiaries.
1. DEFINITIONS.
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the following meaning unless the
context clearly indicates to the contrary (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the committee appointed to administer the Plan
pursuant to paragraph 10.
(c) "Company" means Stuart Entertainment, Inc., a Delaware
corporation.
(d) "Dates of Exercise" means the dates as of which an Option is
exercised and the Stock subject to that Option is purchased. With respect
to any Option, the Dates of Exercise are the last day of each month on
which Stock is traded on the Nasdaq National Market, or such other exchange
on which the Stock is traded, during the Option Period in which that Option
was granted.
(e) "Date of Grant" means the date as of which an Option is granted,
as set forth in paragraph 3(a).
(f) "Eligible Compensation" means total cash compensation received
from the Company or a Participating Subsidiary as regular compensation
during an Option Period. By way of illustration, and not by way of
limitation, Eligible Compensation includes regular compensation such as
salary, wages, overtime, shift differentials, bonuses, commissions, and
incentive compensation, but excludes relocation expense reimbursements,
foreign service premiums, tuition or other reimbursements, income realized
as a result of participation in any stock option, stock purchase, or
similar plan of the Company or any Participating Subsidiary.
(g) "Effective Date" means April 7, 1997.
(h) "Eligible Employee" means any employee of the Company or a
Participating Subsidiary who meets the following criteria:
(1) the employee does not, immediately after the Option is granted,
own (within the meaning of Section 423(b)(3) and 424(d) of the Code)
stock possessing five percent or more of the total combined voting power
or value of all classes of stock of the Company or of a Subsidiary;
(2) the employee has completed six months of employment for the
Company or a Subsidiary; and
(3) the employee's customary employment is 20 hours or more a week.
(i) "Option" means an option granted under the Plan to an Eligible
Employee to purchase shares of Stock.
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(j) "Option Period" means with respect to any Option the period
beginning upon the Date of Grant and ending on the 3-month period
immediately following the Date of Grant, whichever is earlier, or ending on
such other date as the Committee shall determine. No Option Period may
exceed 5 years from the Date of Grant.
(k) "Option Price" with respect to any Option has the meaning set
forth in paragraph 4(b).
(l) "Participant" means an Eligible Employee who has complied with the
provisions of paragraph 3(b).
(m) "Participating Subsidiary" means any present or future Subsidiary
that the Committee designates to be eligible to participate in the Plan,
and that elects to participate in the Plan.
(n) "Periodic Deposit Account" means the account established and
maintained by the Company to which shall be credited pursuant to Section
3(c) amounts received from Participants for the purchase of Stock under the
Plan.
(o) "Plan" means this Stuart Entertainment, Inc. 1997 Employee Stock
Purchase Plan.
(p) "Plan Year" means the calendar year.
(q) "Stock" means shares of common stock, par value $.01 per share, of
the Company.
(r) "Stock Purchase Account" means the account established and
maintained by the Company to which shall be credited pursuant to Section
4(c) Stock purchased upon exercise of an Option under the Plan.
(s) "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company, if at the time
of the granting of the Option, each of the corporations, other than the
last corporation, in the unbroken chain owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2. STOCK SUBJECT TO PLAN.
Subject to the provisions of paragraph 8 (relating to adjustment upon
changes in the Stock), the Stock which may be sold pursuant to Options granted
under the Plan shall not exceed in the aggregate 300,000 shares, and may be
newly issued shares or treasury shares or shares bought in the market, or
otherwise, for purposes of the Plan.
3. GRANT OF OPTIONS.
(a) GENERAL STATEMENT. The Company may grant Options under the Plan to
all Eligible Employees on January 1, April 1, July 1 and/or October 1 of
each Plan Year or on such other date as the Committee shall designate. The
term of each Option shall end on the last day of the Option Period with
respect to which the Option is granted. With respect to each Offering
Period, each Eligible Employee shall be granted an Option, on the Date of
Grant, for as many full and fractional shares of Stock as the Eligible
Employee may purchase with up to 10% of the Compensation he or she receives
during the Option Period (or during any portion of the Option Period as the
Eligible Employee may elect to participate).
(b) ELECTION TO PARTICIPATE. Each Eligible Employee who elects to
participate in the Plan shall communicate to the Company, in accordance
with procedures established by the Committee, an election to participate in
the Plan whereby the Eligible Employee designates a stated whole percentage
equaling at least 1%, but no more than 10%, of his or her Eligible
Compensation during the Option Period to be deposited periodically in his
or her Periodic Deposit Account under subparagraph (c). The cumulative
amount deposited in the Periodic Deposit Account during a Plan Year with
respect to any Eligible Employee may not exceed the limitation stated in
subparagraph (d). A Participant's election to participate in the Plan shall
continue in effect during the current and subsequent Option Periods until
changed pursuant to subparagraph 3(c).
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(c) PERIODIC DEPOSIT ACCOUNTS. The Company shall maintain a Periodic
Deposit Account for each Participant and shall credit to that account in
U.S. dollars all amounts received under the Plan from the Participant. No
interest will be paid to any Participant or credited to his or her Periodic
Deposit Account under the Plan with respect to such funds. All amounts
credited to a Participant's Periodic Deposit Account shall be used to
purchase Stock under subparagraph 4(c) and no portion of a Participant's
Periodic Deposit Account shall be refunded to him or her.
Credits to an Eligible Employee's Periodic Deposit Account shall be
made by payroll deduction or by other alternate payment arrangements, in
accordance with rules and procedures established by the Committee. An
Eligible Employee may increase, decrease or eliminate the periodic credits
to his or her Periodic Deposit Account for future periods by filing a new
election amount at any time during an Option Period. The change shall
become effective in accordance with the Committee's rules and procedures as
soon as practicable after the Company receives the election, but the change
will not affect the amounts deposited with respect to Eligible Compensation
sooner than the Eligible Compensation payable with respect to the next pay
period after the Company receives the authorization.
(d) $25,000 LIMITATION. No Eligible Employee shall be permitted to
purchase Stock under the Plan or under any other employee stock purchase
plan of the Company or of any Subsidiary which is intended to qualify under
Section 423 of the Code, at a rate which exceeds $25,000 in fair market
value of Stock (determined at the time the Option is granted) for each
calendar year in which any such Option granted to such Participant is
outstanding at any time.
4. EXERCISE OF OPTIONS.
(a) GENERAL STATEMENT. On each Date of Exercise, the entire Periodic
Deposit Account of each Participant shall be used to purchase at the Option
Price whole and/or fractional shares of Stock subject to the Option. Each
Participant automatically and without any act on his or her part will be
deemed to have exercised his or her Option on each such Date of Exercise to
the extent that the amounts then credited to the Participant's Periodic
Deposit Account under the Plan are used to purchase Stock.
(b) OPTION PRICE DEFINED. The Option Price per share of Stock to be
paid by each Participant on each exercise of his or her Option shall be an
amount in U.S. dollars equal to 85% of the fair market value of a share of
Stock as of the applicable Date of Exercise. The fair market value of a
share of Stock as of an applicable Date of Exercise shall be the average of
the high and low price of a share of Stock on the Nasdaq National Market,
or such other exchange on which the Stock is traded, on such date.
(c) STOCK PURCHASE ACCOUNTS; STOCK CERTIFICATES. The Company shall
maintain a Stock Purchase Account for each Participant to reflect the Stock
purchased under the Plan by the Participant. Upon exercise of an Option by
a Participant pursuant to subparagraph 4(a), the Company shall credit to
the Participant's Stock Purchase Account the whole or fractional shares of
Stock purchased at that time.
Except as provided in paragraph 5, certificates with respect to Stock
credited to a Participant's Stock Purchase Account shall be issued only on
request by the Participant for a distribution of whole shares or when
necessary to comply with the transaction requirements outside the United
States. Upon issuance of such a Stock certificate to a Participant, the
Participant's Stock Purchase Account shall be adjusted to reflect the
number of shares of Stock distributed to the Participant.
5. RIGHTS ON RETIREMENT, DEATH, TERMINATION OF EMPLOYMENT.
If a Participant retires, dies, or otherwise terminates employment, or if
the corporation that employs a participant ceases to be a Participating
Subsidiary, then to the extent practicable, no further amounts shall be credited
to the Participant's Periodic Deposit Account from any pay due and owing with
respect to the Participant after such retirement, death, or other termination of
employment. All amounts credited to such a Participant's Periodic Deposit
Account shall be used on the next Date of Exercise in that Option Period to
purchase Stock under paragraph 4. Such a Participant's Stock Purchase Account
shall be terminated, and
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Stock certificates with respect to whole shares of Stock and cash with respect
to fractional shares of Stock shall be distributed as soon as practicable after
such Date of Exercise.
Notwithstanding anything in this Plan to the contrary and except to the
extent permitted under Section 423(a) of the Code, a Participant's Option shall
not be exercisable more than three months after the Participant retires or
otherwise ceases to be employed by the Company or a Participating Subsidiary,
including as a result of the corporation ceasing to be a Participating
Subsidiary.
6. RESTRICTION UPON ASSIGNMENT.
An Option granted under the Plan shall not be transferable otherwise than
by will or the laws of descent and distribution, and is exercisable during the
Participant's lifetime only by the Participant. The Company will not recognize
and shall be under no duty to recognize any assignment or purported assignment
by a Participant, other than by will or the laws of descent and distribution, of
the Participant's interest in the Plan or of his or her Option or of any rights
under his or her Option.
7. NO RIGHTS OF STOCKHOLDER UNTIL EXERCISE OF OPTION.
A Participant shall not be deemed to be a stockholder of the Company, nor
have any rights or privileges of a stockholder, with respect to the number of
shares of Stock subject to an Option. A Participant shall have the rights and
privileges of a stockholder of the Company when, but not until, the
Participant's Option is exercised pursuant to paragraph 4(a) and the Stock
purchased by the Participant at that time has been credited to the Participant's
Stock Purchase Account.
8. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION.
If, while any Options are outstanding, the outstanding shares of Stock have
increased, decreased, changed into, or been exchanged for a different number or
kind of shares or securities of the Company, or there has been any other change
in the capitalization of the Company, through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split, spinoff or
similar transaction, appropriate and proportionate adjustments may be made by
the Committee in the number and/or kind of shares which are subject to purchase
under outstanding Options and to the Option Exercise Price or prices applicable
to such outstanding Options, including, if the Committee deems appropriate, the
substitution of similar options to purchase shares of another company (with such
other company's consent). In addition, in any such event, the number and/or kind
of shares which may be offered in the Options shall also be proportionately
adjusted. No adjustments to outstanding Options shall be made for dividends paid
in the form of stock.
9. USE OF FUNDS; REPURCHASE OF STOCK.
All funds received or held by the Company under the Plan will be included
in the general funds of the Company free of any trust or other restriction and
may be used for any corporate purpose. The Company shall not be required to
repurchase from any Eligible Employee shares of Stock which such Eligible
Employee acquires under the Plan.
10. ADMINISTRATION BY COMMITTEE.
(a) APPOINTMENT OF COMMITTEE. The board of directors of the Company,
or its delegate, shall appoint a Committee, which shall be composed of one
or more members, to administer the Plan on behalf of the Company. Each
member of the Committee shall serve for a term commencing on the date
specified by the board of directors of the Company, or its delegate, and
continuing until he or she dies or resigns or is removed from office by
such board of directors, or its delegate.
(b) DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to:
(1) determine when the initial and subsequent Option Periods will
commence;
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(2) interpret the Plan and the Options;
(3) adopt such rules for the administration, interpretation, and
application of the Plan as are consistent with the Plan and Section 423
of the Code; and
(4) interpret, amend, or revoke any such rules.
In its absolute discretion, the Board of Directors of the Company may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Plan. The Committee may delegate any of its responsibilities
under the Plan by designating in writing other persons who carry out any or all
of such responsibilities.
(c) MAJORITY RULE. The Committee shall act by a majority of its
members in office. The Committee may act either by vote at a meeting or by
a memorandum or other written instrument signed by a majority of the
Committee.
(d) COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. Each
member of the Committee who is an employee of the Company or a Subsidiary
shall receive no additional compensation for his or her services under the
Plan. Each Committee member who is not an employee of the Company or a
Subsidiary shall receive such compensation for his or her services under
the Plan as may be determined by the Board of Directors of the Company, or
its delegate. All expenses and liabilities incurred by members of the
Committee in connection with the administration of the Plan shall be borne
by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The Committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions, or valuations of any such persons. All actions taken and
all interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Participants, the Company and all other
interested persons. No member of the Committee shall be personally liable
for any action, determination or interpretation made in good faith with
respect to the Plan or the Options, and all members of the Committee shall
be fully protected by the Company in respect to any such action,
determination or interpretation.
11. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan nor any Option shall be construed to give any person
(including any Eligible Employee or Participant) the right to remain in the
employ of the Company or a Subsidiary or to affect the right of the Company and
Subsidiaries to terminate the employment of any person (including any Eligible
Employee or Participant) at any time with or without cause, to the extent
otherwise permitted under law.
12. TERM OF PLAN.
No Option may be granted during any period of suspension of the Plan or
after termination of the Plan, and in no event may any Option be granted under
the Plan after five years from the commencement of the initial Option Period.
13. AMENDMENT OF THE PLAN.
The Board of Directors of the Company, or its delegate, may amend, suspend,
or terminate the Plan at any time; provided that approval by the vote of the
holders of more than 50% of the outstanding shares of the Stock entitled to vote
shall be required to amend the Plan to reduce the Exercise Price or increase the
number of shares of Stock reserved for the Options under the Plan.
14. EFFECT UPON OTHER PLANS.
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary, except to the
extent required by law. Nothing in this Plan shall be construed to limit the
right of the Company or any Subsidiary (a) to establish any other forms of
incentives or compensation for employees of the Company or any Subsidiary or (b)
to grant or assume options otherwise
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than under this Plan in connection with any proper corporate purpose, including,
but not by way of limitation, the grant or assumption of options in connection
with the acquisition, by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, firm or association.
15. NOTICES.
Any notice to be given under the terms of the Plan to the Company shall be
addressed to the Company in care of the Committee and any notice to be given to
the Eligible Employee shall be addressed to the Eligible Employee at his or her
last address as reflected in the Company's records. By a notice given pursuant
to this paragraph, either party may hereafter designate a different address for
notices to be given to it or the Eligible Employee. Any notice which is required
to be given to the Eligible Employee shall, if the Eligible Employee is then
deceased, be given to the Eligible Employee's personal representative if such
representative has previously informed the Company of his or her status and
address by written notice under this paragraph. Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office,
branch post office, or other depository regularly maintained by the United
States Postal Services.
16. TITLES.
Titles are provided herein for convenience only and are not no serve as a
basis for interpretation or construction of the Plan.
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PROXY STUART ENTERTAINMENT, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
STUART ENTERTAINMENT, INC.
The undersigned stockholder of Stuart Entertainment, Inc., a Delaware
corporation (the "Company") hereby constitutes and appoints Paul C. Tunink and
Michael A. Schalk, and each of them, proxies, with full power of substitution,
for and on behalf of the undersigned to vote, as designated below, according to
the number of shares of the Company's $.01 par value common stock held of record
by the undersigned on April 16, 1997, and as fully as the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held at The Hyatt Regency O'Hare, 9300 West Bryn Mawr Avenue,
Rosemont, Illinois on May 20, 1997 at 10:00 a.m. local time, and at any and all
postponements, continuations and adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF PROPERLY EXECUTED AND NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED NOMINEES TO THE BOARD OF
DIRECTORS OF THE COMPANY AND FOR EACH OTHER PROPOSAL.
1. Proposal to elect the following nominees to the Board of Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote all nominees
listed below
Sangwoo Ahn, Albert F. Barber, Perry J. Lewis, Harry Poll, Ronald G. Rudy,
Richard Spizzirri, Ira Starr, Leonard A. Stuart, Timothy R. Stuart and Stanley
M. Taube
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
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2. Proposal to approve the Company's 1997 Employee Stock Purchase Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending December 31, 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON OTHER SIDE)
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(Continued from First Page)
4. In the discretion of such proxies, upon such other business as may properly
come before the Meeting or at any and all postponements, continuations or
adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders dated April 18, 1997 and the Proxy Statement furnished
therewith.
Note please sign exactly as your name appears hereon. When shares are held
by joint tenants, both should sign. Executors, administrators, trustees and
other fiduciaries, and persons signing on behalf of corporations or
partnerships, should so indicate.
--------------------------------
Signature
--------------------------------
Date
--------------------------------
Signature
--------------------------------
Date
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