<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 transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
[ ] Fee paid previously 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:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[STUART LOGO]
STUART ENTERTAINMENT, INC.
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
1998 Annual Meeting of Stockholders of Stuart Entertainment, Inc. (the
"Company") to be held at 10:00 a.m. local time on May 20, 1998 at the Hyatt
Regency O'Hare, 9300 West Bryn Mawr Avenue, Rosemont, Illinois.
At the Annual Meeting you are being asked (i) to elect directors and (ii)
to ratify the selection of Deloitte & Touche LLP to serve as the Company's
independent auditors for the year ending December 31, 1998.
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/ ALBERT F. BARBER
Albert F. Barber, Chairman of the Board and
Chief Executive Officer
April 17, 1998
<PAGE> 3
STUART ENTERTAINMENT, INC.
3211 NEBRASKA AVENUE
COUNCIL BLUFFS, IOWA 51501
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
---------------------
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 Bryn Mawr Avenue, Rosemont, Illinois on May 20,
1998 at 10:00 a.m. local time, for the following purposes:
1. To elect directors.
2. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending December 31, 1998.
3. 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 3, 1998 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 17, 1998
<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, 1998
---------------------
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
Bryn Mawr Avenue, Rosemont, Illinois, on May 20, 1998 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 20, 1998.
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 3, 1998
(the "Record Date") will be entitled to receive notice of and to vote at the
Meeting. On the Record Date there were 6,933,689 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 3,247,451
Shares (approximately 47% 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, Ronald G. Rudy, Richard D. Spizzirri, Ira Starr and Timothy R. Stuart for
election as directors, to serve until the 1999 Annual Meeting of Stockholders
and until their successors are elected and qualified. Proxies cannot be voted
for a greater number of persons than the number of nominees named. 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, RONALD G. RUDY, RICHARD
D. SPIZZIRRI, IRA STARR AND TIMOTHY R. STUART 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 DIRECTOR
NAME AND AGE THE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
- ------------ ----------------------------------------- --------
<S> <C> <C>
Sangwoo Ahn.............. 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. Ahn also serves as
a director of ITI Technologies, Inc., PAR Technology Corp.,
Kaneb Services, Inc., Kaneb PipeLine Partners, L.P., Gradall
Industries, Inc. and Quaker Fabric Corporation.
Albert F. Barber......... Chairman of the Board since March 1998; Vice Chairman of the 1994
(52) Board and Chief Executive Officer since December 1994;
Consultant to the Company from June 1994 to December 1994;
Consultant to CNBC, an NBC cable affiliate, from October
1993 to October 1994 and President from 1990 to October
1993; 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
(60) managing director of Morgan Lewis Githens & Ahn, Inc., an
investment banking firm, since 1982. Mr. Lewis also serves
as a director of ITI Technologies, Inc., Gradall Industries,
Inc., Aon Corporation and Chancellor Media Corporation.
Ronald G. Rudy........... Consultant to the Company since November 1997. Executive 1996
(49) Vice President from November 1996 to November 1997;
President of Trade Products, Inc. from 1980 to November
1996.
Richard D. Spizzirri..... Senior Counsel to the law firm of Davis Polk & Wardwell 1996
(64) 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.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
- ------------ ----------------------------------------- --------
<S> <C> <C>
Ira Starr................ Managing Director of Long Point Capital, Inc. since January 1994
(38) 1998; vice president of Morgan Lewis Githens & Ahn, Inc., an
investment banking firm, from 1988 to 1993 and a managing
director from 1994 to December 1997.
Timothy R. Stuart........ President since July 1992 and Chief Operating Officer since 1994
(44) December 1994; Executive Vice President from October 1991 to
July 1992; and Vice President Operations from March 1989 to
October 1991.
</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.
Messrs. Ahn, Lewis, Spizzirri and Starr were selected as directors pursuant
to the terms of a Securityholders' Agreement (the "Securityholders' Agreement")
dated as of October 3, 1994 by and among the Company, Bingo Holdings, Inc. and
Leonard A. Stuart. The Securityholders' Agreement was amended in connection with
the Acquisition and 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.
The MLGA Affiliate has designated as its nominees Messrs. Ahn, Lewis, Spizzirri
and Starr. 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. Mr. Rudy was
appointed to the Board in connection with the Company's acquisition (the
"Acquisition") of Trade Products, Inc. in November 1996.
BOARD MEETINGS
During 1997 the Board met four (4) times including the annual meeting of
directors following the 1997 Annual Meeting of Stockholders. During a director's
tenure, no director attended fewer than 75% of the aggregate of (i) the total
number of meetings of the Board during 1997; and (ii) the total number of
meetings held by all Committees of the Board on which he served during 1997.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Board has an Audit Committee and during 1997 its
members were Messrs. Ahn, Lewis, Starr and Stanley M. Taube (Mr. Taube is not
standing for re-election to the Board). 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 1997 with each director
serving on the Audit Committee in attendance.
COMPENSATION COMMITTEE. The Board has a Compensation Committee and during
1997 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 two (2) times in 1997.
STOCK OPTION COMMITTEE. The Board has a Stock Option Committee and during
1997 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
3
<PAGE> 7
under the stock option plans and the terms and conditions of the stock option
grants. The Stock Option Committee met one (1) time in 1997 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>
Albert F. Barber.................. Chairman of the Board since March 1998 and Chief 1994
(52) Executive Officer since December 1994; Consultant
to the Company from June 1994 to December 1994;
Consultant to CNBC, an NBC cable affiliate, from
October 1993 to October 1994; President of CNBC
from 1990 to 1993; Executive Vice President and
Chief Financial Officer of NBC from 1987 to 1990.
Timothy R. Stuart................. President since July 1992 and Chief Operating 1989
(44) Officer since December 1994; Executive Vice
President from October 1991 to July 1992; and Vice
President Operations from March 1989 to October
1991.
Clement F. Chantiam............... Executive Vice President since November 1992 and 1989
(38) Vice President -- Manufacturing from March 1989 to
November 1992.
Roy L. Lister..................... Executive Vice President since December 1994 and 1994
(40) 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
(50) 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
(39) 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.
4
<PAGE> 8
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 $100,000 for the last fiscal year (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
--------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) OPTIONS(#)(1) ($)(2)
- ---------------------------- ----- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Albert F. Barber,................... 1997 350,000 115,000 250,000 7,251(3)
Chairman of the Board and 1996 330,298 50,000 100,000 5,472(3)
Chief Executive Officer 1995 300,000 -- -- 5,472(3)
Timothy R. Stuart,.................. 1997 185,000 35,000 92,000 4,248
President and Chief 1996 172,862 20,000 27,000 3,865
Operating Officer 1995 170,000 -- 250,000 3,379
Clement F. Chantiam,................ 1997 150,000 20,000 68,500 3,408
Executive Vice President 1996 132,236 15,000 13,500 2,950
1995 130,000 -- 80,000 2,595
Roy L. Lister,...................... 1997 150,000 20,000 53,500 3,042
Executive Vice President 1996 132,500 8,000 13,500 2,500
1995 130,000 -- 80,000 1,858
Ronald G. Rudy(4)................... 1997 183,140 -- 50,000 2,375
1996 16,667 -- 250,000 225
1995 -- --
Paul C. Tunink,(5).................. 1997 120,000 10,000 22,800 2,680
Vice President -- Finance, 1996 111,852 10,000 7,800 2,400
Treasurer
and Chief Financial Officer 1995 89,000 -- 15,000 3,928(6)
</TABLE>
- ---------------
(1) On December 1, 1997, the Company instituted a cancellation/regrant program.
See "Report of the Board on Executive Compensation -- Repricing of Stock
Options."
(2) The stated amounts are Company contributions to a defined contribution
pension plan available to all Company employees, except as otherwise noted.
(3) Represents amounts paid for Mr. Barber by the Company for term life
insurance premiums.
(4) Mr. Rudy was an Executive Vice President of the Company from November 1996
to November 1997.
(5) Mr. Tunink has been Vice President -- Finance, Treasurer and Chief Financial
Officer of the Company since April 1995.
(6) 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.
5
<PAGE> 9
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, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL
PERCENT REALIZABLE VALUE AT
NUMBER OF OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(2)
GRANTED IN FISCAL OR BASE EXPIRATION -------------------
NAME (#)(1) YEAR PRICE($/SH) DATE 5% ($) 10% ($)
- ---- ---------- ---------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Barber........................ 100,000 10.4% $3.00 7/26/04 28,707 148,434
50,000 5.2% $3.00 12/13/04 17,410 82,332
100,000 10.4% $3.00 12/09/06 68,943 261,674
Timothy R. Stuart....................... 15,000 1.6% $3.00 12/01/03 2,750 18,156
50,000 5.2% $3.00 11/17/05 18,194 84,463
27,000 2.8% $3.00 12/09/06 18,615 70,616
Clement F. Chantiam..................... 15,000 1.6% $3.00 12/01/03 2,750 18,156
40,000 4.1% $3.00 1/17/05 14,555 67,570
13,500 1.4% $3.00 12/09/06 9,307 35,326
Roy L. Lister........................... 40,000 4.1% $3.00 1/17/05 14,555 67,570
13,500 1.4% $3.00 12/09/06 9,307 35,326
Ronald G. Rudy.......................... 50,000 5.2% $3.00 12/09/06 34,472 130,837
Paul C. Tunink.......................... 15,000 1.6% $3.00 4/19/05 6,092 27,103
7,800 0.8% $3.00 12/09/96 5,378 20,411
</TABLE>
- ---------------
(1) On December 1, 1997, the Company instituted a cancellation/regrant program.
See "Report of the Board on Executive Compensation -- Repricing of Stock
Options."
(2) Potential realizable value is based on the assumption that the stock price
of the common stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten-year option term.
The numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
6
<PAGE> 10
AGGREGATED OPTION EXERCISE AND FISCAL YEAR-END OPTION TABLE
The following table provides information relating to the exercise of stock
options during the year ended December 31, 1997 by the CEO and each of the Named
Executive Officers and the 1997 fiscal year end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND F-Y END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS FY-END FY-END
(#)(1) ($)(1)
SHARES -------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Albert F. Barber........................ -- -- 250,000/--(2) --/--
Timothy R. Stuart....................... -- -- 92,000/--(3) --/--
Clement F. Chantiam..................... -- -- 64,000/4,500(4) --/--
Roy L. Lister........................... -- -- 49,000/4,500(5) --/--
Ronald G. Rudy.......................... -- -- 50,000/--(6) --/--
Paul C. Tunink.......................... -- -- 20,200/2,600 --/--
</TABLE>
- ---------------
(1) The closing sale price of the Common Stock on December 31, 1997 ($1.6875)
was used to calculate option value.
(2) Effective December 1, 1997, Mr. Barber surrendered for cancellation options
to purchase 200,000 shares of Common Stock at an exercise price of $10 per
share and 250,000 shares at an exercise price of $15 per share, which had
been granted to him by the Company.
(3) Effective December 1, 1997, Mr. Stuart surrendered for cancellation options
to purchase 100,000 shares of Common Stock at an exercise price of $10 per
share and 100,000 shares of Common Stock at an exercise price of $15 per
share, which had been granted to him by the Company.
(4) Effective December 1, 1997, Mr. Chantiam surrendered for cancellation
options to purchase 40,000 shares of Common Stock at an exercise price of
$10 per share, which had been granted to him by the Company.
(5) Effective December 1, 1997, Mr. Lister surrendered for cancellation options
to purchase 40,000 shares of Common Stock at an exercise price of $10 per
share, which had been granted to him by the Company.
(6) Effective December 1, 1997, Mr. Rudy surrendered for cancellation options to
purchase 100,000 shares of Common Stock at an exercise price of $10 per
share and 100,000 shares of Common Stock at an exercise price of $15 per
share, which had been granted to him by the Company.
7
<PAGE> 11
EMPLOYMENT AGREEMENTS
The Company 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 the
greater of the period through December 31, 1996 or 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 an employment agreement with
Mr. Rudy (the "Rudy Agreement"), which had a term of three years and provided
for base salary of $200,000, $210,000 and $220,000, respectively. Mr. Rudy was
eligible for a performance based bonus of $50,000 and was issued shares under
the 1994 Performance Stock Option Plan. In November 1997, the Company and Mr.
Rudy entered into a Consulting Agreement and Termination of Employment Agreement
("Consulting and Termination Agreement"). Pursuant to this agreement, Mr. Rudy
was paid $334,000 in consideration for the termination of the Rudy Agreement. In
addition, Mr. Rudy agreed to serve as a consultant to the Company through
November 1999 for a fee of $2,500 per month and shall be reimbursed for
reasonable expenses incurred in the performance of his duties. The Consulting
and Termination Agreement may be terminated by the Company at any time for cause
at any time and all Mr. Rudy's right to compensation shall cease. If the Company
terminates Mr. Rudy other than for cause the Company is obligated the pay Mr.
Rudy his compensation through the end of the term.
The Company has entered into an agreement (the "Severance Agreement") with
Mr. Tunink which provides that in the event of termination without cause, Mr.
Tunink is entitled to receive a lump sum amount equal to one year's base salary.
In the event of termination by the Company within one year after a change in
control without cause or without good reason, the Company is obligated to pay
Mr. Tunink a lump sum equal to one year's base salary plus 50% of his target
bonus for the year in which the change in control takes place.
The Company has a severance policy which, in general, provides that its
officers, as designated by the Chief Executive Officer, are entitled to receive
payments equal to one year's base salary in the event of termination without
cause.
COMPENSATION PURSUANT TO PLANS
STOCK OPTION PLANS. The Company has three stock option plans under which
currently outstanding options have been granted: the 1985 Non-qualified Stock
Option Plan, the 1992 Non-qualified Stock Option
8
<PAGE> 12
Plan and the 1994 Performance Stock Option Plan. All future options will be
granted under the 1994 Performance Stock Option Plan. Options to purchase
804,650 Shares were granted to directors and officers under the 1994 Performance
Stock Option Plan in 1997.
EMPLOYEE STOCK PURCHASE PLAN. The Company maintains an employee stock
purchase plan (the "ESPP") which provides eligible employees the opportunity to
purchase shares of the Company's common stock through authorized payroll
deductions at 85% of the average market price on the last day of each quarter.
All employees who have completed six months of employment of 20 hours per week
or greater are eligible to participate in the ESPP. The ESPP qualifies as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The total number of shares available for purchase under the
ESPP is 298,774.
EMPLOYEE BENEFIT PLANS. The Company maintains a defined contribution
pension plan covering substantially all of its employees, including all
executive officers (the "US Plan"). 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 1997 the Company's contribution to the US
Plan was $174,432. During 1997, the employees of Trade Products were covered
under Trade Products defined contribution plan (the "Trade Plan") which matches
25% of the eligible employee's first 10% of the employee's elective
contribution. During 1997, the Company's contributions to the Trade Plan were
$63,179. Effective January 1, 1998, all U.S. employees are covered under the US
Plan and the Company matches 50% of the eligible employee's first 6% of the
employee's elective contribution.
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 1997, the Company's contribution to the
Canadian Plan was U.S. $139,650.
9
<PAGE> 13
REPORT OF THE BOARD ON EXECUTIVE COMPENSATION
During 1997, 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, 1997 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, 1997 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 1997, 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
On December 1, 1997, the Board implemented a cancellation/regrant program
for all options issued by the Company, except for options with an exercise price
of $10.00 or greater. Pursuant to the program options were surrendered for
cancellation and a replacement option was granted for the same number of
unexercised shares at an exercise price of $3.00. The market price of the Common
Stock on such date was $2.375 per share. The Board determined that because of
the decline in the market price of the Common Stock, the options were not
achieving the goal of providing an incentive to the optionees. In addition,
certain officers of the Company surrendered for cancellation a total of 930,000
options with exercise prices ranging from $10.00-$15.00.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK AT EXERCISE PRICE REMAINING AT
OPTIONS TIME OF AT TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT AMENDMENT PRICE ($) AMENDMENT
---- -------- ----------- ------------ -------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Barber................... 12/31/96 100,000 $ 4.50 $20.00 $5.25 8 years
12/01/97 100,000 2.375 5.00 3.00 6 years, 240 days
12/01/97 50,000 2.375 5.00 3.00 7 years, 15 days
12/01/97 100,000 2.375 5.25 3.00 9 years, 11 days
Timothy R. Stuart.................. 12/01/97 7,500 2.375 5.00 3.00 6 years, 1 day
12/01/97 7,500 2.375 6.25 3.00 6 years, 1 day
12/01/97 50,000 2.375 5.00 3.00 7 years, 50 days
12/01/97 27,000 2.375 5.25 3.00 9 years, 11 days
Clement F. Chantiam................ 12/01/97 7,500 2.375 5.00 3.00 6 years, 1 day
12/01/97 7,500 2.375 6.25 3.00 6 years, 1 day
12/01/97 40,000 2.375 5.00 3.00 7 years, 50 days
12/01/97 13,500 2.375 5.25 3.00 9 years, 11 days
Roy L. Lister...................... 12/01/97 40,000 2.375 5.00 3.00 7 years, 50 days
12/01/97 13,500 2.375 5.25 3.00 9 years, 11 days
Ronald G. Rudy..................... 12/01/97 50,000 2.375 5.25 3.00 9 years, 11 days
Paul C. Tunink..................... 12/01/97 15,000 2.375 5.00 3.00 7 years, 142 days
12/01/97 7,800 2.375 5.25 3.00 9 years, 11 days
</TABLE>
BOARD OF DIRECTORS
Sangwoo Ahn
Albert F. Barber
Perry J. Lewis
Ronald G. Rudy
Richard Spizzirri
Ira Starr
Timothy R. Stuart
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, 1992 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 COMPANY
(FISCAL YEAR COVERED) INDEX MARKET INDEX PEER INDEX
--------------------- ------- ------------ ----------
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 69.7 114.8 109.2
12/30/94 54.5 112.2 66.2
12/29/95 87.9 158.7 63.1
12/31/96 54.5 195.2 90.3
12/31/97 20.5 239.5 104.6
</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:
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, 1998. 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 II.
12
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of outstanding Shares as of April 3, 1998, 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 standing for re-election, 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........................................... 1,241,087 19.3%
c/o Stuart Entertainment, Inc.
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
MLGA Fund II, L.P........................................... 3,690,053 48.2%
Two Greenwich Plaza
Greenwich, Connecticut 06830
Wynnefield Partners SmallCap Value, L.P..................... 464,500 6.7%
One Penn Plaza -- Suite 4720
New York, New York 10019
Sangwoo Ahn(2)(3)........................................... 3,790,379 50.0%
Ira Starr................................................... 8,679 *
Perry Lewis(2).............................................. 3,805,659 49.7%
c/o MLGA Fund II, L.P.
Two Greenwich Plaza
Greenwich, Connecticut 06830
Albert F. Barber............................................ 250,000 2.8%
c/o Stuart Entertainment, Inc.
3211 Nebraska Avenue
Council Bluffs, Iowa 51501
Timothy R. Stuart........................................... 115,000 1.6%
Clement F. Chantiam......................................... 64,000 *
Roy Lister.................................................. 49,000 *
Ronald R. Rudy.............................................. 50,000 *
Richard D. Spizzirri........................................ 30,000 *
Paul C. Tunink.............................................. 20,200 *
All executive officers and directors as a group (11
persons).................................................. 4,576,026 55.26%
</TABLE>
- ---------------
* Less than one percent.
(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 April 3, 1998: Mr. Barber, 250,000 shares, Mr.
Leonard A. Stuart, 100,000 shares; Mr. Timothy R. Stuart, 92,000 shares; Mr.
Chantiam, 64,000 shares; Mr. Lister 49,000 shares; Mr. Lewis, 732,259
shares; Mr. Ahn, 744,226 shares; MLGA Fund II, L.P., 732,259 shares, Mr.
Rudy, 50,000 shares; and all executive officers and directors as a group,
590,400 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
13
<PAGE> 17
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 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.
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 that Mr. Ahn inadvertently reported
one transaction late on a Form 4.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE AGREEMENT
In connection with the acquisition of Trade Products, Inc. in November
1996, the Company entered into a Lease Agreement with Partnership Leasing,
L.L.C., a Washington limited liability company, of which Ronald G. Rudy, a
director of the Company, is a member. 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.
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 original
term of the Management Consulting Agreement was through December 12, 1999. Under
the terms of the Management Consulting Agreement, the Consultant was entitled to
receive an annual base fee of $200,000. During the term of the Management
Consulting Agreement, the Consultant was 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. In December 1997, the parties entered into an agreement to terminate
the Management Consulting Agreement (the "Termination Agreement"). Pursuant to
the Termination Agreement, the Company paid Mr. Stuart $55,101 upon execution
and is also required to pay Mr. Stuart $300,000, with interest, in eight
consecutive monthly payments commencing January 13, 1998. In addition, the
Consultant has agreed to act as an advisor to the Company until December 1999
for an annual retainer of $30,000 and reasonable expenses incurred in connection
with its duties. Leonard A. Stuart is President of Len Stuart & Associates, Ltd.
and was Chairman of the Board of the Company until August, 1997.
BAZAAR MANAGEMENT GROUP
Bingo Press & Specialty Limited ("Bazaar") is a party to a consulting
agreement (the "BMG Agreement") dated July 1, 1995 with Bazaar Management Group,
Inc. ("BMG"), of which Leonard A.
14
<PAGE> 18
Stuart, is the sole stockholder. Under the BMG Agreement, BMG provides
consulting services to Bazaar with respect to Bazaar's business (the "Division)
of placing pulltab tickets in convenience stores, retail locations and bingo
halls in Ontario, Canada. The net monthly income 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 Bazaar, and (c) 50% of the
remaining net income is paid to BMG. During 1997, Bazaar paid BMG $159,000.
Bazaar believes that the terms of the BMG Agreement are comparable to those
which would have been obtained from unaffiliated third parties.
KEN STUART CONSULTING AGREEMENT
In January 1995, the Company entered into a consulting agreement with Ken
Stuart, the brother of Timothy R. Stuart, President and a director of the
Company. Under the agreement, Ken Stuart provided consulting and advisory
services with respect to the manufacture, marketing, sale and distribution of
ink dabbers and was 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 provided that if
the Company exceeded its EBIT target, as set by the Board, the maximum of
$250,000 would be increased by the same percentage that the Company exceeded the
EBIT target. In 1997, Ken Stuart was paid approximately $189,000 under the
agreement. The Company terminated the agreement on October 31, 1997 and in
consideration paid $236,250 to Ken Stuart.
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 1997 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, 1997,
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.
15
<PAGE> 19
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 17, 1998
16
<PAGE> 20
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 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 3, 1998, 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, 1998 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:
NOMINEES: Sangwoo Ahn, Albert F. Barber,
Perry J. Lewis, Ronald G. Rudy,
Richard Spizzirri, Ira Starr and
Timothy R. Stuart
FOR WITHHOLD AUTHORITY
[ ] [ ]
[ ]
-------------------------------------------
For all nominees except as noted above.
2. Proposal to ratify the selection of Deloitte & Touche LLP as
independent auditors for the fiscal year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE> 21
3. In the discretion of such proxy holders, upon such other business as
may properly come before the Meeting and at any and all postponements,
continuations or adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders dated April 17, 1998 and the Proxy Statement furnished
therewith.
Please sign exactly as your name appears herein. 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.
Dated , 1998
--------------------
----------------------------------------
Authorized Signature
----------------------------------------
Title
----------------------------------------
Authorized Signature
----------------------------------------
Title
Please mark boxes /X/ in ink. Sign, date and return this Proxy Card promptly
using the enclosed envelope.
