<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-11(c) or Section
240.14a-12
CST ENTERTAINMENT
- --------------------------------------------------------------------------------
(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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
------------------------------------------------------------------------
/X/ 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>
CST ENTERTAINMENT, INC.
5901 Green Valley Circle, Suite 400
Culver City, California 90230
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
(For Fiscal Year Ended June 30, 1995)
JANUARY 29, 1996
TO THE SHAREHOLDERS OF CST ENTERTAINMENT, INC.:
The Annual Meeting of the Shareholders of CST Entertainment, Inc. will be
held on Monday, January 29, 1996, at 10:00 a.m., local time, at the
Company's offices located at 5901 Green Valley Circle, Suite #400, Culver
City, California, 90230 for the following purposes:
(1) The Election of five (5) Directors to serve until the next annual
meeting and thereafter until their successors are elected and qualified.
(2) The approval of the appointment by the Board of Directors of BDO
Seidman as independent accountants for the fiscal year ending June 30, 1996.
(3) To consider and act upon a proposal to amend the 1990 Stock
Option Plan.
(4) The consideration of and action upon any other matters which may
properly come before the meeting or any adjournment(s) thereof.
The attached Amended and Restated Proxy Statement amends, restates and
supercedes the Proxy Statement filed with the Securities and Exchange
Commission (the "SEC") on October 30, 1995, but not distributed to the
shareholders.
Tours of the facility will begin at 8:30 am for all shareholders of
record at the close of business on December 1, 1995.
We sincerely hope you will be able to attend this year's Shareholders
Meeting. It is important that your shares be represented at the meeting whether
or not you plan to attend. If you do not plan on attending the meeting, please
sign the enclosed proxy card and promptly return it in the envelope provided.
If you later decide to attend the meeting, you may withdraw your proxy at that
time and vote your shares in person.
Only shareholders of record at the close of business on December 1, 1995,
will be entitled to vote at the meeting.
By Order of the Board of Directors
/s/ Stephen S. Strick
STEPHEN S. STRICK
Secretary
<PAGE>
CST ENTERTAINMENT, INC.
5901 Green Valley Circle, Suite 400
Culver City, California 90230
_______________________
AMENDED AND RESTATED PROXY STATEMENT
_______________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 29, 1996
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of CST Entertainment, Inc., a Delaware corporation
(the "Company"), for use at the Annual Meeting of Shareholders to be held on
Monday, January 29, 1996, at 10:00 a.m., local time, at the Company's
office located at 5901 Green Valley Circle, Suite 400, Culver City, California
90230. Shareholders of record at the close of business on December 1, 1995 will
be entitled to vote at the meeting.
PROXIES
PROXIES ARE BEING SOLICITED BY
THE BOARD OF DIRECTORS OF THE COMPANY
If the accompanying proxy is executed and returned, the shares represented
by the proxy will be voted as specified therein, but the shareholder may revoke
it at any time before the meeting by mailing to the Secretary of the Company a
signed notice of revocation or a duly executed proxy bearing a later date. A
shareholder may, if he or she desires, attend the meeting in person, withdraw
his or her proxy and vote in person. This Proxy Statement is being mailed to
shareholders on or about December 26, 1995.
VOTING SECURITIES
The Company at December 1, 1995 had issued and outstanding 27,118,340
shares of common stock, $0.15 par value per share (the "Common Stock"). All
holders of Common Stock are entitled to one vote per each share of stock held by
them on any matter voted on at any meeting of the shareholders.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Identification of Executive Officers and Directors. The executive officers
and directors of the Company are as follows:
Name Age Position with the Company
---- --- -------------------------
Gerald Shefsky 62 Chairman of the board (1)(2)
Jonathan D. (Jody) Shapiro 40 President, Chief Executive
Officer and Director
Abbey Butler 58 Director (1)
2
<PAGE>
Sumner Long 72 Director (1)(2)
Michael J. Solomon 57 Director (2)
Stanton Rutledge 40 Executive Vice President and
Chief Operating Officer
Stephen S. Strick 46 Senior Vice President,
Corporate and Business
Affairs and Secretary
William R. Kowalchuk 51 Vice President and
President, CST
Computoons, Inc.(3)
Jack Norton 36 Vice President of Engineering
and Development
Larry H. Wong 37 Vice President, Controller
and Acting Chief Financial
Officer(3)
Rob Word 48 Vice President and
President, CST
Featurizations, Inc.
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Stock Option/Remuneration Committee.
(3) Resigned from all positions during fiscal year ended 1995.
Directors are elected by the stockholders at each annual meeting or (in the
case of a vacancy) appointed by the directors until their successors are elected
and qualified.
Officers serve at the discretion of the Board of Directors.
GERALD SHEFSKY has been Chairman of the Board of the Company since December
1986. Mr. Shefsky was Vice Chairman of the Board from June 1983 to December
1986, Chairman of the Board of the Company from November 1981 to June 1983
and Treasurer of the Company from June 1983 until May 1985. He was Chief
Executive Officer of the Company from December 1991 until December, 1994.
Mr. Shefsky is also a Director of FoxMeyer Canada (formerly Evans Health
Group, Ltd.).
JONATHAN D. (JODY) SHAPIRO joined the Company as its President and Chief
Operating Officer in October of 1993, and became a Director in November 1993 and
Chief Executive Officer in December, 1994. Mr. Shapiro previously served in
various executive capacities including, RHI Entertainment, Inc. where he was
Executive Vice President U.S. Sales and President of RHI Television Sales
(formerly New Line Television Distribution). Prior to that he was Executive
Vice President Telecommunications Division at Quintex Entertainment, Inc. and
President of Hal Roach Studios Syndication. Mr. Shapiro served in numerous
positions at Telepictures Corporation in New York including, Senior Vice
President Domestic Division.
3
<PAGE>
ABBEY J. BUTLER became a Director of the Company June 1, 1993. Mr. Butler
has been a director of National Intergroup, Inc. since 1990. Mr. Butler is the
Co-Chairman of the Board and Co-Chief Executive Officer of National Intergroup,
Inc. and FoxMeyer Health Corporation since March 1991. Mr. Butler was appointed
Co-Chief Executive Officer of National Intergroup, Inc. in October 1991 and
became Co-Chief Executive Officer of FoxMeyer Health Corporation in May 1993.
Since November 1991, he also served as Co-Chairman of the Board of Ben Franklin
Retail Stores, Inc. Mr. Butler has also been the President and a director of
C.B. Equities Corp., a private investment company, since 1982. Mr. Butler
presently serves as a director and a member of the Executive Committee of FWB
Bancorporation, the holding company of FWB Bank of Maryland, a trustee of The
American University, a director of the Starlight Foundation, a charitable
organization, and is a member of the advisory boards of the Pediatric AIDS
Foundation and the National Center for Survivors of Child Abuse. Mr. Butler was
appointed by President Bush to serve on the President's Advisory Committee on
the Arts and he now serves as a member of the Executive Committee of the
National Committee for the Performing Arts, John. F. Kennedy Center, Washington,
D.C.
SUMNER ADAM LONG has been a director of the Company since June 1983. Mr.
Long has been the President of both L.Q.M. Associates Corp. and L.Q.M.
Associates, Inc., and their predecessor companies which are engaged in the ship
brokerage business for over 40 years and currently directs the tanker broker
activities of Shipping Financial Services Corp. He is a graduate of the United
States Merchant Marine Academy and the Massachusetts Institute of Technology.
MICHAEL JAY SOLOMON became a Director of the Company in March, 1994. Mr.
Solomon's diverse background in entertainment began with executive positions at
United Artists and MCA. In 1978, he founded Telepictures Corporation, which
under his leadership as Chairman and Chief Executive Officer became the largest
television syndication company in the United States. In 1985, Telepictures
merged with Lorimar and Mr. Solomon became the new company's President as well
as a member of its Board of Directors. From 1989 to 1994, Mr. Solomon served as
President of Warner Brothers International Television where he headed up the
company's sales and marketing to television cable and satellite companies
outside the U.S. Following his tenure at Warner Brothers, he launched Solomon
International Enterprises, his global entertainment, telecommunications company
focusing on emerging opportunities in Latin America, Europe, Asia and the Middle
East.
STANTON RUTLEDGE joined the Company in November 1992, as Vice President,
Executive Producer. He became an Executive Vice President in February 1994. He
comes to the Company from American Film Technologies, Inc. where he was employed
from 1986 as Vice President, Executive Producer. From 1981 to 1986 he was with
E.F. Hutton and Co.
STEPHEN S. STRICK joined the Company in August 1994, as its Senior Vice
President of Corporate and Business Affairs and Secretary. Prior to joining the
Company, Mr. Strick was an entertainment lawyer, motion picture and television
executive and film producer. From 1982 through 1989, Mr. Strick was a key
executive of Dino De Laurentis Corporation and De Laurentis Entertainment
Group where he was primarily involved in motion picture and television
production, financing and distribution. From 1977 to 1980, Mr. Strick
practiced law at the law firm Loeb and Loeb. He also held executive positions
at Home Box Office and United Artists Corporation. Mr. Strick is a member of
the Academy of Motion Picture Arts and Sciences and was appointed an American
Arbitration Association Arbitrator in 1984. He is a graduate of Stanford
University (AB 1971) and the University of California (Juris Doctor) in 1974.
4
<PAGE>
WILLIAM R. KOWALCHUK joined the Company in February 1994, as President of
Computoons, Inc. and Vice President of the Company. Prior to joining the
Company, Mr. Kowalchuk served as Executive Vice President and Chief Executive
Officer of Tundra Entertainment Limited, a company in British Columbia, which he
continues to control and serve as an officer and director. In 1991, Mr.
Kowalchuk was employed by Pixibox S.A. of Paris, France, one of the world's
leading computer animation companies, to handle their North American Business.
From 1989 to 1991, he was president of the U.S. division of the company that
introduced Smurfs to the United States. From 1986 to 1988 Mr. Kowalchuk
produced and directed the highly acclaimed PBS series "Travelin' Gourmet". He
also worked in various production capacities at Walt Disney Studios, Hanna
Barbera and Paramount Pictures. In March, 1995, Mr. Kowalchuk resigned from
all positions with the Company.
JACK NORTON joined the Company in 1991, as Director of Software
Development. He was instrumental in developing the digital colorization and
animation systems. Prior to January 1991, he worked as a consultant for
Showscan Corporation on development of their computer graphics based motion
control system. Mr. Norton has over 16 years experience managing numerous
product developments ranging from military to entertainment applications.
LARRY H. WONG joined the Company in February 1989, as its Finance Manager.
He became the Company's Controller in July 1990, and Acting Chief Financial
Officer in November 1991 and Vice President in October 1993. Prior to February
1989, he worked as a consultant for the Company. From 1984 through 1988 he was
an Assistant Vice President at Ticor Mortgage Insurance Company. In April,
1995, Mr. Wong resigned from all positions with the Company.
ROB WORD joined the Company in January 1994, as President of CST
Featurizations, Inc. and Vice President and subsequently, Senior Vice
President of the Company. Mr. Word's previous executive positions
include, Senior Vice President, Creative Development at I.T.C; Senior Vice
President Marketing at Quintex Entertainment, Inc. and Senior Vice President,
Production and Marketing at Hal Roach Studios: Director of Marketing at Orion
Entertainment. He received an Emmy nomination as writer/producer of "An Ozzie
and Harriet Christmas," produced and wrote the pilots to "Paradise Beach" for
New World Productions and "The Action Pack Network" for MCA. Other credits
include: "The Laurel and Hardy Show," "T and T," A & E's "Biography," "The
Adventures of William Tell" and "Outlaws of the Movies." Mr. Word is also the
producer and one of the founding fathers of the annual Golden Boot Awards,
which honors western film stars and benefits the Motion Picture and Television
Fund.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company
for services rendered during the year ended June 30, 1993, 1994, and 1995, to
the (i) Chief Executive Officer and (ii) the four most highly compensated
executive officers of the Company.
<TABLE>
<CAPTION>
Name and Long Term
Principal Compensation & All
Position Year(1) Salary Stock Options(2) Other
-------- ------- ------ ---------------- -----
<S> <C> <C> <C> <C>
Jonathan D. Shapiro 1995 $270,000 300,000(4) $6,000(6)
President and Chief 1994 $197,308 400,000(5) $6,000(6)
Executive Officer 1993 N/A N/A N/A
and Director(3)
Gerald Shefsky 1995 $0(7) 300,000(8) -0-
Chairman of the 1994 $0(7) 0 -0-
Board & Chief 1993 $ 34,904(7) 50,000(9) -0-
Executive Officer (3)
Stanton Rutledge 1995 $165,000 50,000(10) $6,400(6)
Executive 1994 $123,878 -0- $6,000(6)
Vice President 1993 62,278 150,000(11) $5,600(6)
5
<PAGE>
Rob Word 1995 $150,000 75,000(12) $6,000(6)
Senior Vice President 1994 $ 61,038 125,000(13) $3,000(6)
and President of CST 1993 N/A N/A N/A
Featurizaitons, Inc.
Stephen Strick 1995 $112,741 120,000(14) $5,500(6)
Senior Vice President 1994 N/A N/A N/A
1993 N/A N/A N/A
Jack Norton 1995 $102,981 40,000(15) $5,500(6)
Vice President of 1994 $ 85,711 600(16) -0-
Engineering and 1993 $ 85,000 50,000(17) -0-
Development
</TABLE>
All other executive officers of the company received less than $100,000 in
cash compensation for services rendered in the fiscal year ended June 30, 1995.
(1) No cash bonuses were paid in the years presented.
(2) The Long Term Compensation Plans operated by the Company are the
Company's Employee Stock Option Plans, its Warrant Plan for directors, and a
401(K) plan. The Company instituted the 401(K) Plan during fiscal year 1995,
covering substantially all eligible employees. The Company is not obligated
to contribute to the Plan, and did not make any contributions in the fiscal
year ended 1995.
(3) In December 1994, Gerald Shefsky relinquished his position as CEO
and Jonathan D. Shapiro was elected as CEO by the Board of Directors.
(4) These Options were granted to Mr. Shapiro December 12, 1994, at an
exercise price of $0.94 per share.
(5) These options were granted to Mr. Shapiro September 8, 1993 at an
exercise price of $2.00 per share.
(6) This amount reflects the officers' $500 monthly car allowance and/or
$200 monthly phone allowance.
(7) Mr. Shefsky was not directly employed by the Company during fiscal
1992. The Company contracted for Mr. Shefsky's full time services with
Canequity Investments, Inc., a Canadian corporation. This agreement was
terminated in September 1992. Since then, the Company and Mr. Shefsky have
not entered into an employment arrangement. Due to the Company's financial
performance, Mr. Shefsky has opted to waive his compensation. The Company
has provided Mr. Shefsky with an apartment and an automobile in Los Angeles
since 1991. The annual rent for the apartment is $38,400 while the annual
lease payments for the automobile total $7,156. In December, 1994, Mr. Shefsky
relinquished his position as CEO and relocated back to Canada.
(8) In December 1994, the Company granted warrants to purchase 300,000
shares of the Company's common stock at an exercise price of $0.94 per share.
(9) In May 1993, the Company granted warrants to purchase 50,000 shares
of the Company's common stock to each of its Directors at an exercise price
of $2.38 per share.
(10) These options were granted to Mr. Rutlege during fiscal 1995 at an
exercise price of $0.94 per share.
(11) These options were granted to Mr. Rutledge December 12, 1992 at an
exercise price of $2.00 per share.
(12) The options were granted to Mr. Word July 1, 1995 effective June 1,
1995, at an exercise price of $1.00 per share.
(13) These options were granted to Mr. Word January 3, 1994 at an
exercise price of $2.31 per share.
(14) 60,000 of these options were granted to Mr. Strick in August, 1994
at an exercise price of $1.00 per share and 60,000 options were granted July
1, 1995 effective June 1, 1995 at an exercise price of $1.00 per share.
(15) These options were granted to Mr. Norton December 12, 1994, at an
exercise price of $0.94 per share.
(16) These options were granted to Mr. Norton in December, 1993, at an
exercise price of $2.63 per share.
(17) These options were granted to Mr. Norton in January, 1993 at an
exercise price of $2.13 per share.
EMPLOYMENT AGREEMENTS:
In September 1993, the Company entered into a written employment agreement
with Mr. Jonathan D. Shapiro, which provides for annual salary compensation of
$150,000, annual guaranteed commissions of $120,000 and annual car allowance of
$6,000. Mr. Shapiro may earn additional commissions of 3% on sales of the
Company's library products and 1% of coloring service sales in excess of
$120,000. The employment agreement expires in September 1996. The Company and
Mr. Shapiro are currently negotiating a two-year extension.
6
<PAGE>
In December 1992, the Company entered into a written employment agreement
with Mr. Stanton Rutledge, which provides for annual salary compensation of
$100,000 (increased to $115,000 and $165,000 in February and December, 1994,
respectively) commission of 1% on gross receipts generated in excess of
10,000,000 and annual car allowance of $6,000. The employment agreement was
renewed in October 1995 for an additional two (2) year period.
In August 1994, the Company entered into a written employment agreement
with Mr. Stephen Strick, which provides for annual compensation of $125,000 and
an annual car allowance of $6,000. Mr. Strick's employment with the Company
expires in August, 1997.
In January 1994, the Company entered into a written employment agreement
with Mr. Robert Word, which provides for annual salary compensation of $90,000,
guaranteed annual commission of $60,000 and annual car allowance of $6,000. Mr.
Word may also earn commission of between 1% and 3% on productions developed for
the Company. The employment agreement expires in December 1996.
STOCK OPTIONS
The Company previously adopted, and the shareholders approved, three Stock
Option Plans which permit the Company to grant qualified and non-qualified stock
options to employees. The stock option plans cover up to 3,893,030 shares of
the Company's common stock. Each plan has a duration of 10 years. Accordingly,
the 1985 plan is scheduled to terminate in 1995, the 1986 plan is scheduled to
terminate in 1996 and the 1990 plan is scheduled to terminate in 2000. The
plans are administered by the Remuneration Committee, who are outside members of
the Company's Board of Directors. The exercise price in each instance is 100%
of the fair market value of the Company's common stock on the date of grant.
All outstanding options have ten-year terms, vest at rates and amounts as the
Remuneration Committee deems appropriate from time to time, are exercisable in
increments of 100 shares, once vested, and terminate 30 to 90 days following
termination of employment, or one year following the death of a grantee,
provided that he or she is employed by the Company at the time of death.
The shares of the Company's common stock to be purchased upon the exercise
of options have been registered with the Securities and Exchange Commission.
Options granted are personal in nature and cannot be sold or transferred,
except to spouses upon death of the grantee or valid marital dissolution orders
or decrees.
If any options were granted, these amounts would represent certain assumed
rates of appreciation only. Actual gains, if any, on stock options exercised
and common stock holdings are dependent on the future performance of their
common stock and overall stock market conditions.
STOCK WARRANTS
The Company previously adopted a warrant plan pursuant to which warrants to
purchase the Company's common stock may be granted to members of the Company's
Board of Directors. The warrant plan does not have a specific minimum or
maximum limitation. Warrants may be issued to the Board members at the
discretion of the Remuneration Committee and the Board.
7
<PAGE>
Generally, the warrants terminate upon the third anniversary of issuance. The
exercise price in each instance is 100% of the fair market value of the
Company's common stock on the date of grant. The warrants vest at rates and
amounts as the Remuneration Committee deems appropriate from time to time and
are exercisable in increments of 100 shares once vested.
The warrants do not terminate through a Director's failure to continue as a
member of the Board. Warrants granted are personal in nature and cannot be sold
or transferred, except to spouses upon death of the grantee or upon valid
marital dissolution orders or decrees.
STOCK OPTION AND/OR STOCK WARRANTS GRANTED DURING FISCAL 1995
The table below sets forth certain information regarding grants of options
and/or warrants during the fiscal year ended June 30, 1995, to the executive
officers named in the Summary Compensation Table above. No stock appreciation
rights were granted during fiscal 1995, 1994 or 1993.
<TABLE>
<CAPTION>
% of Potential Realizable
Total Options/ Value at Assumed
Warrants Annual Rates of
Options/ Granted to Exercise Stock Price
Warrants Employees in Price Expiration Appreciation
Name Granted Fiscal Year Per Share Date For Option Term(1)
- ---- ------- ----------- --------- ---- ---------------
5% 10%
--- ---
<S> <C> <C> <C> <C> <C> <C>
Jonathan D. Shapiro 300,000 25% $0.94 12/2004 $177,000 $449,000
Gerald Shefsky 300,000 25% $0.94 12/1997 $177,000 $449,000
Stanton Rutledge 50,000 4% $0.94 12/2004 $ 30,000 $ 75,000
Rob Word 75,000 6% $1.00 6/2005 $ 47,000 $120,000
Stephen Strick 120,000 10% $1.00 8/2004(2) $ 75,000 $191,000
6/2005(2)
Jack Norton 40,000 3% $0.94 12/2004 $ 25,000 $ 64,000
</TABLE>
(1) Potential realizable value is determined by taking the initial dollar
value per share and applying the stated annual appreciation rate compounded
annually for the term of the options (10 years), subtracting the applicable
exercise price per share at the end of the period and multiplying the
remaining number by the number of options or warrants granted. Actual gains, if
any, on stock option or transfer exercises and common stock holdings are
dependent on the future performance of the common stock and overall stock market
conditions. There can be no assurance that the amounts reflected in this table
will be achieved.
(2) 60,000 of these options were granted to Mr. Strick in August, 1994,
at an exercise price of $1.00 per share and 60,000 options were granted July 1,
1995, effective June 1, 1995 at an exercise price of $1.00 per share.
AGGREGATED OPTION AND/OR WARRANT EXERCISES IN FISCAL YEAR 1995 AND FISCAL YEAR
END OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held In-the-money Options
at FY End at FY End ($)(1)
Shares ---------------------------------------------------------------
Acquired on Value
Name Exercise(2) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan D. Shapiro -0- -0- 133,333 566,667 -0- -0-
Gerald Shefsky -0- -0- 1,150,000 -0- -0- -0-
Stanton Rutledge -0- -0- 100,000 100,000 -0- -0-
Rob Word -0- -0- 41,666 158,334 -0- -0-
Stephen Strick -0- -0- -0- 120,000 -0- -0-
Jack Norton -0- -0- 43,533 57,067 -0- -0-
</TABLE>
8
<PAGE>
(1) This value is the difference between the closing price of the
Company's common stock on June 30, 1995, and the exercise price of options
and/or warrants multiplied by the number of shares subject to the options or
warrants.
(2) During fiscal 1995, no executive officers named in the summary
compensation table above exercised any options or warrants.
COMPARATIVE PERFORMANCE
The comparative stock performance graph shown below compares the yearly
change in cumulative value of the Company's common stock with certain Index
values for the five year period ended June 30, 1995. The graph sets the
beginning value of the Company's common stock and the Indexes at $100. All
calculations assume reinvestment of dividends.
- ----------------------------------------------------------------------
Your Company Name: CST Entertainment, Inc.
-------------------------
Graph Plot Points:
1990 100 1993 123.53
1991 158.82 1994 64.71
1992 111.76 1995 50.00
- ----------------------------------------------------------------------
Stock Index: S & P 500
-------------------------------
Graph Plot Points:
1990 100 1993 138.40
1991 107.40 1994 140.35
1992 121.80 1995 176.84
- ----------------------------------------------------------------------
Peer Group Index: Entertainment
--------------------------
Graph Plot Points:
1990 100 1993 139.61
1991 97.01 1994 146.56
1992 119.96 1995 182.11
- ----------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
OFFICERS AND DIRECTORS AS OF DECEMBER 1, 1995
The following table sets forth as of December 1, 1995, certain information
regarding the beneficial ownership of Common Stock owned by (i) each stockholder
known to the Company to be the beneficial owner of more than 5% of the Common
Stock (ii) each director of the Company, (iii) each nominee director, (iv)
certain executive officers, and (v) all officers and directors of the Company as
a group. Unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to shares beneficially owned.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned(1) of Class
- ------------------- --------------------- --------
Merrill Lynch Phoenix Fund 2,525,000 (2) 9.3%
800 Scudders Mill Road
Plainsboro, NJ 08536
9
<PAGE>
M&A Investments, Inc. 1,787,670 (4) 6.6%
1220 Senlac Drive
Carrollton, Texas 75006
Gerald Shefsky 1,150,000 (3) 4.1%
5901 Green Valley Circle, Ste. 400
Culver City, California 90230
Abbey J. Butler 600,000 (4) 2.3%
207 Dune Road
West Hampton Beach, New York 11978
Jonathan D. (Jody) Shapiro 369,092 (4) 1.3%
5901 Green Valley Circle, Ste. 400
Culver City, CA 90230
Michael Jay Solomon 210,000 (4) *
440 N. Rodeo Drive
Penthouse Suite
Beverly Hills, CA 90210
Stanton Rutledge 166,967 (4) *
5901 Green Valley Circle, Ste. 400
Culver City, CA 90230
Sumner Adam Long 125,000 (3) *
3 Park Avenue, 38th Floor
New York, New York 10016
Rob Word 84,132 (4) *
5901 Green Valley Circle, Ste. 400
Culver City, CA 90230
Jack Norton 75,018 (4) *
5901 Green Valley Circle , Ste. 400
Culver City, CA 90230
Stephen Strick 20,000 (3) *
5901 Green Valley Circle Ste. 400
Culver City, CA 90230
Directors and Officers 2,800,209 (5) 9.5%
as a group (9 persons)
* signifies less than one percent (1%)
(1) As used in this table, "beneficial ownership" means the sole or
shared power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to dispose
of, or to direct the disposition of, a security). In addition, for purposes of
this table, a person is deemed, as of any date, to have "beneficial ownership"
of any security that such persons have the right to acquire within 60 days after
such date.
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(2) Consists entirely of shares owned.
(3) Consists entirely of options or warrants to purchase shares.
(4) Consists of both shares owned and options and/or warrants to
purchase shares.
(5) Includes an aggregate 2,385,399 shares that such officers and
directors have the right to acquire pursuant to stock options and warrants
granted by the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 28, 1993, the Company issued a loan to the President, Mr.
Jonathan D. (Jody) Shapiro in the amount of $50,000 at an interest rate of 4%.
Principal and interest was due April 30, 1994. $35,000 of the loan was paid
down. Payoff of the $15,000 balance and interest was extended to December 31,
1995.
On February 18, 1994, the Company issued a loan to the President, Mr.
Jonathan D. (Jody) Shapiro in the amount of $100,000 at an interest rate of
5.3%. Principal and interest is due the earlier of : (i) February 18, 1997,
(ii) within 10 days from the date Mr. Shapiro exercises options granted him, or
(iii) six months after the date Mr. Shapiro is no longer employed by the
Company. The loan is secured by a second trust deed on Mr. Shapiro's residence.
On June 30, 1994, the Company issued a loan to the Chairman, Mr. Gerald
Shefsky in the amount of $67,263 at an interest rate of 5.3%. Principal and
interest is due the earlier of: (i) June 30, 1997, (ii) within 10 days from the
date Mr. Shefsky exercises options granted him or, (iii) six months after the
date Mr. Shefsky is no longer employed by the Company.
In July, 1995, Mr. Jonathan D. (Jody) Shapiro issued a short-term loan
to the Company for $100,000 at an interest rate of 10.25%. Principal and
interest is due on demand, subject to certain terms and conditions. The loan
is secured by certain fixed assets of the Company. In November, 1995, the
Company repaid the principal and accrued interest due to Mr. Shapiro.
In July 1995, the Company obtained short-term financing from M&A
Investments, Inc. of $500,000 and issued to M&A a note bearing interest at
12.50% and the principal and accrued interest are due November 1, 1995. The
note is convertible at the option of the creditor into shares of the
Company's common stock. The Company also issued 750,000 warrants to the
creditor. The warrants are exercisable at $0.65 per share. The exercise
price will be reduced to $0.50 per share if the note payable is not repaid in
full by November 1, 1995. The note is secured by certain fixed assets of the
Company. In November 1995, $250,000 of the note was converted into 500,000
shares of the Company's common stock. The maturity date of the remaining
$250,000 of the note and applicable accrued interest was extended to February
1, 1996. If the note is not repaid in full by February 1, 1996, the options
are convertible at $0.50 per share.
ITEM 1
ELECTION OF BOARD OF DIRECTORS
The Company's Board of Directors is composed of an uneven number of members
not to be less than five (5) nor more than nine (9). The Board has nominated
five (5) persons to be elected as directors to serve until the next annual
meeting of shareholders and until their successors are elected and qualified or
until their earlier resignation or removal. The proxy holders intend to vote the
proxy shares in favor of the election to the Board of Directors of each of the
five (5) nominees listed below, unless authority to vote for any or all of the
nominees is withheld. Each director will be elected to hold office until the
next annual meeting of shareholders and until a successor shall be duly elected
and shall qualify. In the event that any of the nominees is unable to serve
(which is not anticipated), the proxy holders will cast votes for the remaining
nominees and for such other persons as they may select.
NOMINEES
The following table provides certain information as of December 1, 1995,
for each person nominated for election as a director of the Company.
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Director Principal Occupation
Name Age and Directorships Since
- ---- --- ----------------- -----
Gerald Shefsky 62 Chairman of the Board 1981
Director, FoxMeyer Canada
Abbey J. Butler 58 Director of the Company 1993
Co-Chairman and Co-Chief
Executive Officer of National
Intergroup, Corp., FoxMeyer Corp.
and Ben Franklin Retail Stores
President and Director, C.B. Equities
Capital Corp;
Director, FWB Bancorporation;
Director, Starlight Foundation;
Trustee, The American University;
Member of the advisory boards of the
Pediatric AIDS Foundation and the
National Center for Survivors of Child
Abuse
Sumner A. Long 74 Director of the Company; 1983
President of L.Q.M.
Associates Corp and
L.Q.M. Associates, Inc.;
Managing Director,
Shipping Financial Services Corp.
Jonathan D. Shapiro 40 Director, President and 1993
Chief Executive Officer
of the Company
Michael J. Solomon 57 Director of the Company 1994
Chairman and Chief Executive Officer,
Solomon International Enterprises;
Director, Cinar Films;
Director, International Counsel of the
National Association of Television Arts
and Sciences;
Director, New York University College of
Business and Public Administration
(Stern School of Business)
DIRECTORS' MEETINGS AND COMPENSATION
The Board of Directors met or acted by unanimous written consent seven
times during fiscal 1995. The work of the Company's Board is not performed only
at meetings of the Board or its committees, but also in consideration of Company
matters and documents, and in numerous communications among Board and Committee
members and others wholly apart from meetings. The Board of Directors has
assigned certain responsibilities to committees. The Board has a standing Audit
Committee and Stock Option/Remuneration Committee.
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AUDIT COMMITTEE. The Audit Committee recommends the appointment of the
independent public accountants, reviews the scope of the audits recommended by
the independent public accountants, reviews internal audit reports on various
aspects of corporate operations, and consults with the independent public
accountants on a periodic basis on matters relating to internal financial
controls and procedures. The current members of the Audit Committee are Mr.
Shefsky, Mr. Butler and Mr. Long. The Audit Committee consulted with the
Board and each other several times during fiscal 1995.
STOCK OPTION/REMUNERATION COMMITTEE. The Stock Option/Remuneration
Committee reviews and approves the compensation of employees, reviews management
proposals relating to incentive compensation plans, and administers compensation
plans presently in effect. The Stock Option/Remuneration Committee is currently
composed of Mr. Long, Mr. Butler and Mr. Solomon. The Stock Option/Remuneration
Committee consulted with the Board and each other various times during fiscal
1995.
FEES FOR BOARD AND COMMITTEE SERVICE.
Directors who are compensated as full-time employees of the Company receive
no additional cash compensation for service on the Board of Directors or its
committees. Directors who are not full time employees of the Company do not
receive any cash compensation for such service. However, such outside directors
are reimbursed for reasonable expenses associated with attendance of Board or
Committee meetings and are eligible to receive warrants to purchase common stock
in the Company under the Warrant Plan described below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE ABOVE LISTED NOMINEES TO THE
COMPANY'S BOARD OF DIRECTORS
ITEM 2
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of BDO Seidman as independent auditors to examine the records
of the Company for the fiscal year ending June 30, 1996. BDO Seidman has been
the Company's independent auditors since 1991. Representatives from BDO Seidman
will be present at the Annual Shareholders' Meeting. The representatives will
have the opportunity to make a statement if they so desire, and
will also be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS.
ITEM 3
AMENDMENT TO 1990 STOCK OPTION PLAN
PROPOSED AMENDMENT TO THE PLAN
The Board of Directors has authorized an amendment to the Company's 1990
Stock Option Plan (the "Plan") by increasing the maximum aggregate gate
number of shares of Common Stock which may be optioned and sold under the
Plan from 2,400,000 to 4,400,000 shares of Common Stock. The proposed
amendment does not amend the provision in the Plan that limits the maximum
aggregate number of shares of Common Stock which may be optioned and sold
under the Plan to 20% of all of the issued and outstanding shares of Common
Stock.
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DESCRIPTION OF THE PLAN
The Plan was adopted by the stockholders of the Company effective as of
December 15, 1989. The Plan provides for the granting of incentive stock
options ("Incentive Stock Options") designed to qualify under Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, and non-incentive stock options ("Non-Incentive Stock
Options") which do not qualify for such favorable tax treatment under the
code, as more fully described below. Under the Plan, the maximum aggregate
number of shares of Common Stock which may be optioned and sold shall be the
lesser of 2,400,000 shares of Common Stock or 20% of all of the issued and
outstanding shares of Common Stock, including the shares of Common Stock
involved in the exercised portion of options and excluding the shares of
Common Stock involved in any canceled, terminated or expired options.
The Plan is administered by the Remuneration Committee, which consists
of at least three disinterested directors appointed by the Board of Directors
of the Company. Subject to the provisions of the Plan, the Board of Directors
or the Remuneration Committee shall have sole authority to determine the fair
market value of the shares covered by each option, to determine the employees
to whom and at what time options shall be granted and the number of shares to
be represented by each option, to interpret the Plan, to prescribe rules and
regulations relating to the Plan, to determine the terms and provisions of
each option granted under the Plan, and to accelerate any exercise date of
any option.
No member of the Board of Directors or the Remuneration Committee shall
be liable for any action or determination made with respect to the Plan or
any option granted under it, except for willful bad faith or deliberate fraud
resulting in direct financial benefit to such Board or Remuneration Committee
member, and any liability shall be limited to the amount of such benefit.
All employees and directors of the Company are eligible to receive
options under the Plan. Options are granted to employees and directors as the
Remuneration Committee may determine from time to time, except that no option
may be granted under the Plan after December 15, 1999. The term of each
option granted under the Plan is specified in each option agreement between
the Company and the employee or director, but in no event will such term be
greater than 10 years from the date of the grant thereof.
The exercise price of each share of Common Stock is to be issued
pursuant to any Incentive Stock Option granted under the Plan is determined
by the Board of Directors of the Company or the Remuneration Committee, and
in each instance shall not be less than the fair market value of a share of
Common Stock at the time the option is granted. The reported closing price of
the Common Stock on December 1, 1995 was $0.75 per share.
In the case of any Incentive Stock Options, the aggregate fair market
value (determined as of the time the option is granted) of the shares of
Common Stock for which any employee of the Company may be granted Incentive
Stock Options in any calendar year (under all option plans of the Company and
its subsidiary corporations which are includable within the limit provided at
Section 422A(d) of the Code) and which are exercisable for the first time in
any one calendar year shall not exceed $100,000. No employee of the Company
is eligible to receive any options which, if exercised, would result in his
or her holding beneficial or of record ownership of more than 10% of the
outstanding voting stock of the Company.
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<PAGE>
Unless otherwise provided in the terms of an option agreement, an option
may be exercised by an employee only while he or she is an employee of the
Company or within three months thereafter and he or she has maintained
continuous status as an employee since the date of the grant of the option to
a date within three months of the date of exercise; except that if the
employee's continuous employment is terminated by reason of his or her death
or disability, then to the extent that the employee would have been entitled
to exercise the option immediately prior to his or her death or disability,
such option of the deceased or disabled employee may be exercised within one
year from the date of the death or disability of the employee, unless such
option would sooner expire.
An option may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or by the laws of descent or
distribution. An option may be exercised during the lifetime of the optionee
only by such optionee.
The Company is not obligated to file any registration statement, or to
cause any registration statement once filed to become or to remain effective,
as to the shares subject to the options granted under the Plan.
If the shares of Common Stock as a whole are increased, decreased or
changed into, or exchanged for, a different number or kind of shares or
securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment will be
made in the number and kinds of shares subject to the Plan, and in the
number, kinds, and per share exercise price of shares subject to the Plan,
and in the number, kinds, and per share exercise price of shares subject to
unexercised options or portions thereof granted prior to any change. Any such
adjustment in an outstanding option, however, shall be made without a change
in the total price applicable to the unexercised portion of the option but
with a corresponding adjustment in the price for each share covered by the
option.
Upon a reorganization, merger or consolidation in which the Company is
not the surviving corporation, or upon the sale of all or substantially all
of the property of the Company to another corporation, the Plan shall
terminate unless provision is made in connection with such transaction for
the assumption of the Plan. Options theretofore granted shall be assumed by
the successor corporation, with substitution for such options of new options
of the successor employer corporation, with appropriate adjustment of the
number and kind of shares and the per share exercise prices.
Upon the dissolution or liquidation of the Company, the Plan and the
options issued thereunder shall terminate.
The Board of Directors, without further approval of the stockholders of
the Company, may amend the Plan at any time, except that no amendment shall
be effective without the approval of a majority of the outstanding shares of
Common Stock where such amendment (i) increases the maximum number of shares
for which options may be granted under the Plan (except with respect to
adjustments upon changes in capitalization), (ii) changes the administration
of the Plan or the standards of eligibility prescribed by the Plan, (iii)
changes the minimum option price, or (iv) increases the maximum term of an
option granted pursuant to the Plan.
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<PAGE>
The Board of Directors, without further approval of the stockholders of
the Company, may at any time terminate or suspend the Plan. Any such
termination or suspension of the Plan shall not affect options already
granted and such options shall remain in full force and effect. An option may
also be terminated by agreement between an optionee and the Company and, in
lieu of the terminated option, a new option may be granted with an exercise
price which may be higher or lower than the exercise price of the terminated
option.
FEDERAL INCOME TAX CONSEQUENCES OF ISSUANCE
AND EXERCISE OF OPTIONS
The following discussion and the Federal Income tax consequences of the
granting and exercise of options under the Plan and the sale of Common Stock
acquired as a result thereof, is based on an analysis of the Code, as
currently in effect, existing laws, judicial decisions and administrative
rulings and regulations, all of which are subject to change. In addition to
Federal income tax consequences described below, an optionee may also be
subject to state and/or local income tax consequences depending upon the
jurisdiction in which he or she works and/or resides.
Ordinary income will be recognized by an optionee at the time a
Non-Incentive Stock Option, is exercised, and the amount of such income will
be equal to the excess of the fair market value on the exercise date of the
shares issued to the optionee over the exercise price. This ordinary income
will also constitute wages subject to the withholding of income tax and the
Company will be required to make appropriate arrangements to insure that the
amount of the tax required to be withheld is available for payment.
Capital gain or loss on a subsequent sale or other disposition of the
shares of Common Stock acquired upon exercise of an Non-Incentive Stock
Option will be measured by the difference between the amount realized on the
disposition and the tax basis of such shares. The tax basis of the shares
acquired upon the exercise of the option will be equal to the sum of the
exercise price of an option and the amount included in income with respect to
the option.
The Company will be entitled to a deduction for Federal income tax
purposes at such time and in the same amount as the amount included in
ordinary income by the optionee upon exercise of his or her Non-Incentive
Stock Option, subject to the usual rules as to reasonableness of compensation
and provided that suitable arrangements are made to collect and pay applicable
withholding tax from the optionee.
In general, neither the grant nor the exercise of an Incentive Stock
Option will result in taxable income to an optionee or a deduction to the
Company.
The sale of the shares of Common Stock received pursuant to the exercise
of an Incentive Stock Option, which satisfies the holding period rules, will
result in capital gain to an optionee and will not result in a tax deduction
to the Company. To receive incentive stock option treatment as to the shares
acquired upon the exercise of an Incentive Stock Option, an optionee must
neither dispose of the shares within two years after the option is granted
nor within one year of the exercise of the option. In addition, an optionee
generally must be an employee of the Company at all times between the date of
grant and the date three months before exercise of the option.
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If the holding period rules are not satisfied, the portion of any gain
recognized on the disposition of the shares acquired upon the exercise of an
Incentive Stock Option that is equal to the lesser of (i) the fair market
value of the Common Stock on the date of exercise minus the exercise price or
(ii) the amount realized on the disposition minus the exercise price, will be
treated as ordinary income, with any remaining gain being treated as capital
gain. The Company will be entitled to a deduction equal to the amount of such
ordinary income.
An Incentive Stock Option is treated as a Non-Incentive Stock Option for
purposes of the alternative minimum tax.
OPTIONS RECEIVED OR TO BE RECEIVED
UNDER THE PLAN
The following persons have received or are to receive options under the
Plan to purchase the number of shares of Common Stock listed below:
NAME AND PRINCIPAL POSITION STOCK OPTIONS
--------------------------- -------------
Jonathan D. Shapiro, President and 700,000
Chief Executive Officer
Stanton Rutledge, Executive Vice President 200,000
and Chief Operating Officer
Rob Word, Senior Vice President 200,000
Stephen Strick, Senior Vice President 120,000
Jack Norton, Vice President of Engineering 40,600
and Development
Executive Officer Group 1,260,000
Non-Executive Officer Group 500,000
Gerald Shefksy 500,000
Abbey J. Butler -0-
Sumner A. Long -0-
Michael J. Solomon -0-
Non-Executive Officer Employee Group 357,300
A majority of the votes properly cast at the meeting is required for
adoption of the amendment to the Plan described above.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ADOPTION OF THE PROPOSED AMENDMENT TO
THE COMPANY'S 1990 STOCK OPTION PLAN
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the following year's
annual meeting must be received by the Company at its principal executive
offices no later than June 15, 1996.
ANNUAL REPORT ON FORM 10-K
Upon the written request of any shareholder, the Company will provide,
without charge, a copy of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the year ended June 30, 1995. This
request should be directed to Investor Relations, CST Entertainment, Inc.,
5901 Green Valley Circle, Suite 400 Culver City, California 90230.
OTHER MATTERS
The entire cost of soliciting proxies for the Annual Meeting of
Shareholders will be borne by the Company. Solicitations of proxies may be
made through personal calls upon, or telephonic or telegraphic communications
with shareholders or their representatives by officers and other employees of
the Company, none of whom will receive any additional compensation for such
efforts. The Board of Directors does not know of any matter, other than those
mentioned above, that may be presented for action at the Annual Meeting of
Shareholders.
If any other matters or any proposals should be presented and should
properly come before the meeting for action, the persons named in the
accompanying proxy will vote upon such matters and upon such proposals in
accordance with their best judgment, if the accompanying proxy so directs or
if no withholding of authority is indicated.
A list of such shareholders will be available for examination at the
offices of the Company located at 5901 Green Valley Circle, Suite 400, Culver
City, California 90230, on and after December 22, 1995.
The annual report to shareholders for fiscal year ended June 30, 1995,
is being mailed with this Proxy Statement to shareholders of record for the
meeting.
By Order of The Board of Directors
STEPHEN S. STRICK,
Secretary
Culver City, California
December 8, 1995
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