<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
The Encore Group, Inc.
----------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 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 No.:
------------------------------------
3) Filing Party:
------------------------------------
4) Date Filed:
------------------------------------
<PAGE>
THE ENCORE GROUP, INC.
4800 SW Macadam Avenue, Suite 100
Portland, OR 97201
------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD April 23,1996
------------------------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of The Encore Group, Inc. (the "Company") will be held at 2:00 p.m.
on April 23, 1996 at The Riverside Inn, 50 SW Morrison, Portland, Oregon for the
following purposes, each of which is more fully described in the accompanying
proxy statement:
1. To elect Directors of the Company for the ensuing year and until the
next annual meeting of shareholders or until their successors are duly elected
and qualified;
2. To consider and vote on a proposed amendment to the Company's Restated
Articles of Incorporation to effect a 1-for-500 reverse split of the Common
Stock and to reduce the number of authorized shares of Common Stock from
10,000,000 to 50,000 and the number of shares of Preferred Stock from 500,000 to
5,000. Under Oregon law (ORS 60.551 - 60.594, a copy of which is attached to
this Notice), certain shareholders may be entitled to assert dissenters' rights
in connection with the proposed amendment;
THE PROPOSED AMENDMENT PROVIDES FOR CASH PAYMENTS TO CERTAIN SHAREHOLDERS WHO
TENDER THEIR CERTIFICATES WITHIN 90 DAYS FOLLOWING THE EFFECTIVE DATE OF THE
AMENDMENT. FAILURE TO TENDER CERTIFICATES WITHIN THE 90-DAY PERIOD IN
ACCORDANCE WITH THE TERMS OF THE AMENDMENT MAY RESULT IN THE LOSS OF RIGHTS TO
SUCH CASH PAYMENT.
3. To consider and act upon such other matters as may properly come
before the Meeting and any adjournments thereof.
Only holders of Common Stock of record at the close of business on March
27, 1996 (the "Record Date") will be entitled to notice of and to vote at the
Meeting or any adjournment thereof.
You are cordially invited to attend the Meeting. If you are unable to
attend and wish your stock to be voted, it is important to complete, sign, date
and promptly return the accompanying Proxy in the enclosed return envelope. You
may revoke a proxy by submitting, at or prior to the Meeting, a proxy with a
later date, or other written instrument formally revoking the proxy, or by
notice at the Meeting.
Shareholders planning to attend the Meeting in person are encouraged to
arrive shortly after 1:30 p.m. to allow sufficient time for registration and
admittance prior to the Meeting which will begin promptly at 2:00 p.m.
By Order of the Board of Directors
Teri E. Engel, Secretary
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE MARK, DATE, SIGN AND
RETURN YOUR PROXY PROMPTLY TO ENSURE THAT YOUR VOTE IS COUNTED.
<PAGE>
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
of
THE ENCORE GROUP, INC.
1800 SW Macadam Avenue, Suite 100
Portland, OR 97201
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Encore Group, Inc. (the "Company"), an
Oregon corporation, for use at the Special Meeting of Shareholders (the
"Meeting") to be held at 2:00 p.m. on April 23, 1996, at The Riverside Inn, 50
SW Morrison, Portland, Oregon, and any adjournment or postponement thereof, for
the purposes set forth in the accompanying Notice of Special Meeting of
Shareholders. The approximate date of mailing of this Proxy Statement is March
29, 1996.
Only holders of shares of the Company's Common Stock as shown on the
Company's records as of the close of business on March 27, 1996 (the "Record
Date"), are entitled to notice of, and to vote at, the Meeting. A quorum for
the purpose of transacting business requires the presence, in person or by
proxy, of the holders of a majority of the outstanding shares. As of the Record
Date, there were 6,112,848 shares of common stock outstanding, of which
6,052,848 shares are entitled to vote at the Meeting.
The Board of Directors is soliciting proxies for use at the Meeting. If a
proxy in the enclosed form is executed and returned, the shares represented will
be voted according to your instructions at the Meeting. If no instructions are
given, the proxy will be voted FOR the election of the nominees for Directors,
FOR the adoption of the amendment to the Restated Articles of Incorporation to
effect the reverse stock split and reduce the authorized capital, and in the
proxy holder's discretion on any other matters that may properly come before the
shareholders at the Meeting.
Any proxy may be revoked at any time prior to its exercise by presentation
of a proxy bearing a later date, by filing a written instrument of revocation
(personally or by mail) with the Secretary of the Company prior to the meeting,
or by oral request if the shareholder is present at the Meeting. Attendance at
the Meeting will not, of itself, revoke a proxy previously submitted.
Mr. Wright and Mr. Kupel, the named proxies, are Directors of the Company.
If a shareholder wishes to designate a person or persons other than the officers
named on the proxy to vote the shareholder's shares, the shareholder may do so
by striking out the names appearing on the enclosed proxy and inserting the name
of another person or persons. The properly signed proxy in such instances must
be presented at the Meeting by the person or persons designated by the
shareholder in order for the shares to be voted.
Solicitation of proxies will be primarily by mail. Directors, officers and
employees of the Company, without compensation, may also solicit proxies by
telephone, telex, mail, and in person. The expense of such solicitation,
including the cost of preparing and mailing this Proxy Statement and enclosures,
will be paid by the Company. Such cost will include reimbursement to brokerage
firms and others for their reasonable expenses in forwarding material to
beneficial owners of stock.
1
<PAGE>
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide for a Board of
Directors consisting of not less than three nor more than seven persons, with
the exact number within this range to be determined from time to time by the
Board of Directors. The current number of Directors is set at five.
The Board of Directors is proposing a slate of five nominees for election
at the Meeting, each to hold office until the 1996 Annual Meeting of
Shareholders and until their successors are duly elected and qualified. If any
of the nominees are unavailable for election, votes may be cast, pursuant to the
authority granted by the enclosed proxy, for such other persons as may be
designated by the Board of Directors. The Board is not aware of any reason why
the nominees would be unavailable for election.
The table below sets forth the names of, and certain information with
respect to, the persons nominated by the Board of Directors for election as
Directors:
Director Principal Occupation
Name and Position with Company Age Since for past five years
- ----------------------------- --- ----- --------------------
Bruce L. Engel, President, Chief 54 1988 President and
Executive Officer and Chairman Chief Executive
of the Board (1) Officer of WTD
Industries
Teri E. Engel, Director and 45 1989 Officer and
Secretary (1) Director,
WTD Industries
until 1994.
Robert G. Fligg, Director (2) 46 1988 Chief Financial
Officer, Dee
Forest Products,
Inc.
Fred J. Kupel, Director 66 1995 Management
Consultant
Kenneth L. Wright, Director 46 1995 Director and
and Executive Vice President Officer of
the Company
- -----------------------
(1) Bruce L. Engel and Teri E. Engel are husband and wife.
(2) Mr. Fligg's spouse is a niece of Bruce L. Engel.
The Board of Directors recommends that the Board, as presently constituted,
remain the same. All of the nominees are current members of the Board of
Directors whose terms of office will expire at the Meeting, and who have each
consented to serve as a Director if re-elected.
MANAGEMENT
BRUCE L. ENGEL, 54, is President and Chief Executive Officer of the Company
and Chairman of the Board of Directors. He also has served more than five years
as President and Chief Executive Officer of WTD Industries, Inc., Portland,
Oregon, a manufacturer of lumber whose common stock is traded on the NASDAQ
National Market System. Mr. Engel is also a Director of WTD. On January 30,
1991, WTD Industries filed a voluntary petition in the United States Bankruptcy
court seeking to reorganize under Chapter 11 of the Federal Bankruptcy Code. On
November 23, 1992, a plan of reorganization was confirmed. Mr. Engel is the
husband of Teri Engel, who is a Director and the Company's secretary.
2
<PAGE>
TERI E. ENGEL, 45, has been a Director and Secretary of the Company since
1989. She also served as an officer and a Director of WTD Industries, Inc. from
1989 to 1994. From September 1993 to March 1995 Ms. Engel was owner and general
manager of the Eastmoreland Racquet Club, Portland, Oregon. Subsequently Ms.
Engel has been an owner/operator of Independent Baseball, Inc. Ms. Engel is the
wife of Bruce L. Engel who is a Director and the Company's President and Chief
Executive Officer. On January 30, 1991, WTD Industries filed a voluntary
petition in the United States Bankruptcy court seeking to reorganize under
Chapter 11 of the Federal Bankruptcy Code. On November 23, 1992, a plan of
reorganization was confirmed.
ROBERT G. FLIGG, 46, has been employed since March of 1991 as Chief
Financial Officer of Dee Forest Products, Inc., a Hood River, Oregon
manufacturer of hardboard. Prior to that time, he served as Vice President and
Treasurer of the Company until his resignation on March 22, 1991,
FRED J. KUPEL, 66, has been an independent management consultant for over
five years. Prior to 1989 he served as Chief Financial Officer and Corporate
Development Officer for various public and private corporations. He has served
the Company as a consultant since 1993.
KENNETH L. WRIGHT, 46, has served as the Company's Executive Vice President
since March, 1991. Prior to that date he was an independent management
consultant. From 1982 to 1987, he served as Chief Operating Officer for
Industrial Leasing Corporation, Portland, Oregon, a lessor of industrial
equipment.
PHILLIP MCREYNOLDS, 48, has served since 1985 as Vice President and General
Manager of VDO-Pak, Inc., the Company's only operating subsidiary.
Executive Compensation
The following table sets forth all remuneration paid during 1994 to the
Company's Chief Executive Officer. Directors received no compensation for their
services during 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payout
------------------- ------ -------
Name and Principal Other Annual Restricted Option LTIP All Other
Position Year Salary Bonus Compensation Stock /SAR Payout Compensation
- ------------------- ---- ------ ------ ------------- ----------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bruce R. Engel, 1994 $ 0 N/A N/A N/A N/A N/A N/A
Chairman and Chief 1993 $ 0 N/A N/A N/A N/A N/A N/A
Executive Officer 1992 $ 0 N/A N/A N/A N/A N/A N/A
</TABLE>
No executive officer received cash compensation in 1994 in excess of
$100,000.
The Company has a cash bonus plan for officers and other key employees and
for managers and employees of its subsidiaries. Under the terms of the plan,
the President is eligible receive a quarterly bonus of 5% of pre-tax profits
earned by the Company and/or each of its subsidiaries; other officers and key
employees share ratably on the basis of their base pay in a quarterly bonus of
15% of consolidated pre-tax profits of the Company. Payments under this plan
made to officers or other key employees of the Company totaled $24,000 in 1994.
Cash bonuses to subsidiary managers and employees is based on a percentage of
subsidiary pre-tax profits and is distributed ratably each month. Payments under
this plan made to subsidiary managers and employees totaled $33,000 in 1994.
3
<PAGE>
Securities Ownership of Officers, Directors and Principal Shareholders
The following table sets forth the number of shares of Common Stock
beneficially owned on the record date by (i) persons known to the Company to own
more than five percent (5%) of the Company's Common Stock, (ii) each of the
Directors and nominees, and (iii) all Directors and officers as a group. Except
as otherwise indicated by footnote, the owner has sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
Pro Forma
Percent of Pro Forma Number Percent of
Amount and Nature of Shares of Shares Shares
Beneficial Owner Beneficial Ownership(1) Outstanding After Proposed Split(4) Outstanding(4)
- ---------------- -------------------- ----------- -------------------- -----------
<S> <C> <C> <C> <C>
Bruce L. Engel 2,139,938(2) 35.00% 4,980 40.73%
Teri E. Engel 2,139,938(2) 35.00 4,980 40.73
Robert G. Fligg 1,000 0.02 2 0.02
Fred J. Kupel 20,000 0.33 40 0.33
Kenneth L. Wright 280,655(3) 4.59 562 4.59
All Directors and
officers as a group
(5 persons) 2,441,593 39.94 5,584 45.67
</TABLE>
1. Beneficial Ownership includes sole voting and investment power as to the
shares unless otherwise indicated.
2. Includes shares held individually by Mr. Engel and shares held jointly with
spouse. Includes 60,000 shares which are not entitled to be voted at the
Meeting.
3. Includes shares held jointly with spouse.
4. Assuming that Mr. Engel purchases all of the 349,690 Old Shares held in
accounts smaller than 500 shares. Read the discussion below under
"AMENDMENT TO RESTATED ARTICLES OF INCORPORATION - Interest of certain
Officers and directors in the Transaction."
OTHER INFORMATION AS TO DIRECTORS AND OFFICERS
Officers are elected annually by the Board of Directors and serve at the
pleasure of the Board until their successors have been elected. During 1994
there was one meeting of the Board of Directors. All members were present at
the meeting. The Board of Directors does not presently have standing audit,
nominating and compensation committees or separate committees performing similar
functions; the full Board performs these functions.
LIMITATIONS OF LIABILITY OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Company provide, among other things,
for the elimination of liability of Directors for monetary damages arising out
of the Director's breach of his or her fiduciary duty of care, except to the
extent that Oregon law does not permit exemption from such liabilities.
A Director remains potentially liable for monetary damages for (a) any
breach of the Director's duty of loyalty to the corporation or its shareholders,
(b) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) an improper distribution under Oregon law, or
(d) any transaction from which the Director derived an improper personal
benefit.
The Articles of Incorporation of the Company also provide that the
corporation will indemnify such Directors or officers if the Director or officer
has been successful on the merits, or otherwise, in the defense of any action,
suit or proceeding to which he or she is a party by reason of the fact that he
or she was a Director or officer of the Company.
4
<PAGE>
AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
Background
The Board of Directors, at its meeting on February 27, 1996, adopted a
resolution to amend Article V of the Company's Restated Articles of
Incorporation (the "Articles") to effect a 1-for-500 reverse split of the
Company's common stock (the "Reverse Split"), subject to approval by the
shareholders (the "Amendment"). The Amendment would also reduce the Company's
authorized shares of common stock from 10,000,000 to 50,000, and the authorized
shares of preferred stock from 500,000 to 5,000. A copy of the proposed
Amendment is attached as EXHIBIT A to this Proxy Statement. The shareholders
are being asked to approve Amendment to effect the Reverse Split, as more fully
described below.
The Articles currently authorize 10 million (10,000,000) shares of common
stock, of which 6,112,848 shares are issued and outstanding. The Company
currently has approximately 3,607 shareholders. Based upon recent market prices
of the stock of approximately $0.05 per share, the entire market value of the
Company is just over $300,000. The Company's market value is a reflection of
the Company's history of losses as shown in the following table:
<TABLE>
<CAPTION>
<S> Income/ Shareholders Stock Prices
Year Revenues (Loss) Equity Hi Low
- ---- -------- ------ ----------- ------ --------
<S> <C> <C> <C> <C> <C>
1980 4,982 3,562 25,662 13.50 7.13
1981 3,815 2,423 27,133 16.75 7.00
1982 3,459 120 26,155 7.25 4.00
1983 3,367 (26,188) 1,195 5.88 3.13
1984 569 6,724 7,919 3.75 0.75
1985 693 (3,068) 4,851 1.19 0.50
1986 588 (1,060) 3,791 1.13 0.56
1987 0 (571) 3,079 1.06 0.63
1988 0 (2,383) 825 1.44 0.50
1989 3,625 (34) 1,599 1.97 0.38
1990 5,767 (1,317) 282 1.31 0.13
1991 4,213 (642) (432) 0.12 0.03
1992 3,590 134 (298) 0.03 0.03
1993 2,919 (193) (491) 0.03 0.03
1994 3,113 55 (467) 0.06 0.03
Nine Months Ended 9/30/95:
1,335 (196) (663) 0.10 0.03
(Dollars in thousands, except for share prices.)
</TABLE>
Due to the high cost of materials, preparation, postage, and meeting
facilities relative to the Company's total market capitalization, the Company
has not held an Annual Meeting of shareholders since July 16, 1990. The
requisite Securities and Exchange Commission reports have been filed. However,
these reports have not been sent to shareholders. The Board of Directors has
determined that it is in the best interests of the Company and its shareholders
to reduce the costs involved in shareholder communications by reducing the
number of shareholders commensurate with the size of the Company's operations.
The adoption of this proposal is expected to permit the avoidance of $15
per year in shareholder communication costs while still providing for the
issuance of annual and quarterly reports to the shareholders. It is also the
Company's intention to hold regular annual shareholders meetings following the
adoption of this proposal.
5
<PAGE>
The Board of Directors designated the 1:500 ratio after considering a
number of factors, including the Company's asset base, revenues and net income,
the current market price of the stock, the number of shareholders holding small
numbers of shares, and the overall cost of the transaction. Not counting small
holdings that might be included in nominee accounts registered by brokers and
others, there are 351,154 shares held in individual accounts ranging in size
from one to 499 shares. The total market value of these holdings, at $0.10 per
share, is $35,115. The number of shareholders owning these shares is 2,995.
The Company does not anticipate that the reverse split will have the effect of
causing the New Shares to be held by less than 300 shareholders of record or
otherwise cause the Company to cease to be subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended. This transaction would have
the effect of reducing the number of shareholders of record from the current
3,676 to approximately 781. The Reverse Split is not one of a series of planned
transactions that would have the effect of causing the Common Stock to be held
of record by less than 300 persons.
There has been very little trading activity in the Common Stock during 1994
and 1995. The range of bid and ask prices is $0.03 to $0.10. Accordingly, the
Company retained Columbia Financial Advisors, Inc. ("CFAI"), an independent
financial consultant, to conduct an evaluation of the fair value of the Company
in view of its current financial condition and future prospects. Columbia
Financial Advisors, Inc. has concluded that the fair market value of the Company
is approximately $0.10 per share.
CFAI is a Portland, Oregon based firm specializing in financial advisory
services, especially the valuation of businesses and business interests, which
conducts valuation studies of both publicly traded and privately held business
enterprises for a variety of purposes. CFAI examined three approaches to arrive
at a valuation, a market approach, an income approach, and a cost approach.
They considered the value of the Company's net operating loss carry forward in
reaching their opinion of the fair market value of the Company.
In the MARKET APPROACH the stock value is estimated based upon an
comparative analysis of the market prices of the stock of more actively traded
public companies that are in the same industry. The industry category chosen by
CFAI was SIC No. 3691, Storage Batteries. In making a comparison, CFAI reviewed
some 16 companies. Of these companies, twelve were eliminated because major
differences from Encore did not permit a direct comparison. These differences
included the fact that several companies were research or developmental
companies only, one had revenues of $1.9 billion, several were involved in
alternative technologies, such as solar panels and fuel cells, some had no
earnings for the last five years, and one produced lead acid car batteries. The
remaining companies were considered "guideline" companies. These guideline
companies were Charter Power Systems, Inc. and TNR Technical, Inc.
The following table compares the guideline companies with Encore for
Earnings Before Interest and Taxes ("EBIT"), Average Revenues, and Last Twelve
Months ("LTM") Earnings per Share.
<TABLE>
<CAPTION>
<S> 5-Year 5-Year LTM
Average Average Earnings
Ebit Revenues Per Share
-------- --------- ----------
<C> <C> <C>
Charter Power Systems, Inc. $11,512 $162,475 $1.50
TNR Technical, Inc. 128 2,883 0.57
Encore (253) 3,333 -
(Dollars in thousands except earnings per share)
</TABLE>
To possibly arrive at a market value for Encore stock, CFAI used the
invested capital method. According to CFAI, "This method is often used when the
subject company is highly leveraged and/or when the degree of leverage differs
among the subject company and the guideline companies." Encore has a high
degree of leverage and a high level of interest expense. The invested capital
method yielded a value for Encore stock of $0.02 per share.
6
<PAGE>
Based upon the actual trading values for Encore, there has been market
price range of $0.03 to $0.10 per share. The Company's stock has traded very
infrequently in the past few years with a majority of the transactions involving
Company insiders.
The INCOME APPROACH says that the market value of the stock is determined
by capitalizing the company's income. Encore was slightly profitable in 1994.
CFAI concludes, "Given Encore's substantial business and financial risk and lack
of expected growth potential, a capitalization rate of at least 10% is
appropriate for Encore, which does not produce a positive indication of value
from this approach." If Encore's 1994 earnings were capitalized at a 25% rate
there would be an estimated market value of $0.03 per share.
In the COST APPROACH the estimated market value of the company's assets
less the market value of the liabilities provides an estimate of the fair market
value of the Company. This approach gives a negative result in the case of
Encore.
According to CFAI, "The market approach produced an indicated value for
Encore of $0.06 to $0.10 per share based on the trading prices of Encore, and a
value of $0.02 per share based on the market multiples of publicly traded
guideline companies. The trading prices reflect the existence and potential
value of the NOL (at least as it existed at the time of the trades), while the
public company analysis may have only partially included the potential value of
the NOL. The cost approach did not produce a positive equity value for the
company, but did not consider the potential value of the NOL. The income
approach produced an indicated value of $0.03 per share." The term "NOL" refers
to the company's net operating loss carry forward.
The Company's determination of the $0.10 per share price to be offered in
lieu of fractional shares was determined by the Company's Board of directors
based upon the opinion expressed by CFAI. A copy of CFAI's opinion is attached
as EXHIBIT B.
THE REVERSE SPLIT
Adoption of the proposed amendment would effect a 1-for-500 reverse split
of the common stock whereby shareholders would receive one share of new common
stock ("New Shares") for each 500 shares of existing stock ("Old Shares"). Cash
would be paid at the rate of $0.10 per Old Share in lieu of issuing fractional
New Shares to shareholders holding less than 500 Old Shares as of March 27,
1996, the Record Date.
Shareholders holding 500 Old Shares or more as of the Record Date would
tender their shares to the Company for cancellation and receive one New Share
for each 500 Old Shares held of record as of the Record Date, with any resulting
fractional New Share being rounded up to the next whole share. Shareholders may
combine or aggregate Old Shares, for a period of 90 days (which may be extended
by the Board of Directors in its discretion) following the effective date of the
Reverse Split such that the total is sufficient to be exchanged for whole New
Shares (i.e. at least 500 Old Shares). After the Record Date, shareholders may
not divide their share holdings so as to avail themselves of the cash offer.
Where shares are held of record by a brokerage firm or other nominee, the true
beneficial owners of such shares shall, for purposes of this transaction, be
deemed to be the record owners.
As of the effective date of the Reverse Split, all outstanding Old Shares
will be canceled. To be entitled to cash payments under the proposed plan,
certificates representing Old Shares held of record as of the Record Date by or
in the name of any shareholder in amounts up to, but not exceeding, 499 shares,
must be surrendered within 60 days (which may be extended by the Board of
Directors in its discretion) following the effective date of the Reverse Split.
As the cash payment is only available to holders of fewer than 500 Old Shares,
only such holders need tender their certificates within the 60-day period
following the effective date of the Reverse Split. Shareholders intending to
exercise dissenter's rights, as described below, must
7
<PAGE>
follow the statutory procedures and observe the time limitations established by
Oregon law. Holders of more than 500 shares are not entitled to cash payment
for their shares under the proposed transaction, and are not required to
surrender their certificates within the 60-day period following the effective
date. Certificates representing Old Shares held by any two or more
shareholders, each of which held their respective shares as of the Record Date
in an amount up to, but not exceeding, 499 shares, which have been combined or
aggregated so as to exceed 500 shares, must be tendered for cancellation and
exchange for New Shares within 90 days following the effective date of the
Reverse Split, which time may be extended by the Board of Directors in its
discretion. After 90 days following the effective date of the Reverse Split,
subject to any extension by the Board of Directors, shareholders holding fewer
than 500 shares as of the Record Date will no longer have any rights whatsoever
as to those shares, including rights as to voting, dividends or assets of the
Company upon liquidation, or any right of exchange under the terms of the
Reverse Split.
After 90 days following the effective date of the Reverse Split, only
shareholders holding 500 or more shares as of the Record Date will be entitled
to exchange such shares for the applicable number of New Shares, with any
resulting fractional New Shares being rounded up to the nearest whole share.
Until certificates representing such Old Shares are surrendered for exchange for
certificates representing the applicable number of New Shares, no dividends
which are declared and become payable with respect to such New Shares will be
paid. Upon exchange, any dividends which were declared and became payable with
respect to such New Shares will be paid to the holder, without interest.
If the proposed Amendment is approved and adopted, shareholders holding up
to 499 shares as of the Record Date would receive cash of $0.10 per Old Share,
and shareholders holding 500 shares or more would receive one full New Share for
each 500 Old Shares, rounded up to the nearest full New Share. The following
examples illustrate the effect of the Reverse Split:
If you owned 398 Old Shares, you would receive $39.80 (398 x $0.10) in
cash, if tendered for exchange within 60 days following the effective date of
the Reverse Split.
If you owned 12,500 Old Shares, you would receive 25 New Shares (12,500
DIVIDED BY 500).
If you owned 7,216 Old Shares you would receive 15 New Shares (7,000
DIVIDED BY 500 = 14, plus 1 New Share for the remaining 216 shares which would
otherwise be a fractional New Share if so issued).
ACCOUNTING TREATMENT OF THE REVERSE SPLIT
The effective date of the Reverse Split is expected to be in the first
quarter of 1996. A restatement of the Company's common stock and additional
paid-in capital accounts will occur because the number of shares issued and
outstanding will change as a result of the Reverse Split. The restatement of
capital accounts will have no effect on stockholders' equity.
The restatement is necessary because the number of shares outstanding will
change significantly. the stated par value is unchanged.
The following table displays a proforma stockholders' equity section as if
the Reverse Split had occurred on September 30, 1995, the date of the latest
quarterly document filed with the SEC. The proforma was calculated based upon
the assumptions that 1) there are 6,112,848 shares of $1 stated value common
shares outstanding before the Reverse Split, and 2) there are approximately
12,000 shares of $1 stated value common shares outstanding after the Reverse
Split.
8
<PAGE>
<TABLE>
<CAPTION>
Estimated
September 30, 1995 Proforma September 30, 1995
(Unaudited) Adjustments Adjusted
------------------- ------------ --------------------
<S> <C> <C> <C>
Common stock 6,113 (6,101) 12
Additional paid-in capital 20,975 6,101 27,076
Retained deficit (27,648) (27,648)
Pension liability adjustment (103) (103)
---------- ----------- ------------
(663) 0 (663)
---------- ----------- ------------ (Dollars in thousands)
</TABLE>
Dissenters' Rights
Under Oregon law, any shareholder who dissents from the adoption of an
amendment to the articles of incorporation which has the effect of reducing the
shareholder's shares to a fraction of a share, which fraction is to be purchased
for cash, is entitled to be paid the fair value of the shareholder's shares in
cash ("Dissenter's Rights"). Accordingly, only those shareholders holding no
more than 499 Old Shares of record as of the Record Date would be entitled to
exercise Dissenters' Rights. Shareholders are urged to review the requirements
for perfecting Dissenters' Rights as set forth in the statutes attached as
EXHIBIT C, and to read the discussion below under "VOTING AT THE MEETING -
Rights of Dissenting Shareholders." IF THE PROCEDURES ESTABLISHED BY OREGON LAW
ARE NOT PRECISELY FOLLOWED, A SHAREHOLDER MAY LOSE THE RIGHT TO DISSENT.
It should be noted that voting against the adoption of the amendment at the
Special Shareholders' Meeting will not, of itself, entitle a shareholder to
demand payment for his or her shares. Shareholders are urged to review the
requirements for perfecting Dissenters' Rights as set forth in the statutes
attached as EXHIBIT C, and to read the discussion below under "VOTING AT THE
MEETING - Rights of Dissenting Shareholders."
IT IS NOT NECESSARY FOR SHAREHOLDERS HOLDING UP TO 499 OLD SHARES TO
DISSENT FROM THE PROPOSED AMENDMENT IN ORDER TO RECEIVE $0.10 PER OLD SHARE IN
CASH. To receive the cash payment of $0.10 per Old Share, shareholders with up
to 499 shares must simply follow the instructions on the notice which will be
sent by the Company following adoption of the Amendment.
INTEREST OF CERTAIN OFFICERS AND DIRECTORS IN THE TRANSACTION
Oregon law prohibits a corporation from making any cash distribution to its
shareholders if the corporation's liabilities exceed its assets. As of
September 30, 1995, the Company's total liabilities exceeded its total assets by
$663,000. Accordingly, in order to provide for cash payments to shareholders
holding fewer than 500 Old Shares as of the Record Date, the Company has entered
into an agreement with Bruce Engel, President of the Company, pursuant to which
Mr. Engel has agreed to purchase, for cash at $0.10 per Old Share, all Old
Shares held in amounts less than 500 shares which are tendered to him during the
60 days following the effective date of the Reverse Split. A copy of that
agreement is attached to this Proxy Statement as EXHIBIT D.
The statutory prohibition on cash distributions when the Company's
liabilities exceed its assets also applies to payments made to dissenting
shareholders in accordance with the provisions of the Dissenters' Rights
statutes. Therefore, to fulfill the Company's obligation to pay cash pursuant
to statutory Dissenters' Rights, the agreement with Mr. Engel also provides that
Mr. Engel will assume the Company's obligation to
9
<PAGE>
pay the fair value in cash for shares of shareholders who have properly
perfected their rights to dissent. As noted above, cash payments for dissenting
shares will be at the price determined by the Company to be the fair value of
the shares. In view of the current market price of the shares, the Company's
determination, or the fair value as determined by the statutory appraisal
process may be less favorable than that of Columbia Financial Advisors, Inc.
Moreover, Dissenters' Rights apply only to those shareholders holding up to 499
Old Shares as of the Record Date who are otherwise being offered $0.10 per Old
Share in cash.
Mr. Engel intends to combine or aggregate shares purchased pursuant to the
agreement and tender such shares, together with shares which he currently owns
or controls, to be exchanged for whole New Shares on the same terms as
applicable to all other shareholders. Old Shares, the certificates of which
have been surrendered by those shareholders properly asserting Dissenters'
Rights, and which shares are to be purchased by Mr. Engel for their fair value,
which value has not been determined by the 90th day following the effective date
of the split, may be aggregated by Mr. Engel and submitted to the Company for
exchange for the applicable number of New Shares, notwithstanding the expiration
of the 90-day period for such aggregation and exchange. However, certificates
representing such New Shares will not be issued, and voting and all other rights
shall not attach to such New Shares, until the fair value of the dissenting
shares has been paid in full to those dissenting shareholders in accordance with
their rights under Oregon law.
Mr. Engel currently owns or controls 2,139,938 shares, or 35.0% of the
outstanding shares of common stock. Assuming that, pursuant to the agreement
with the Company, Mr. Engel purchased all 349,690 shares held as of the Record
Date in accounts smaller than 500 shares (which does not include additional
small accounts which may be held by nominees such as broker/dealer firms), Mr.
Engel would own or control 2,489,628 shares or 40.73% of the outstanding Old
Shares. Upon tendering those shares to the Company for exchange pursuant to the
Reverse Split, he would receive 4,980 New Shares.
INSTRUCTIONS FOR TENDERING SHARES FOR EXCHANGE OR PAYMENT
Following approval of the proposed amendment by the shareholders, and the
filing of the amendment with the Oregon Secretary of State, which filing date
will be the effective date of the Reverse Split, the Company will provide each
shareholder with instructions for tendering certificates representing Old Shares
in exchange for certificates representing New Shares, or cash payment, as the
case may be. To be entitled to receive cash payment for Old Shares held as of
the Record Date by any shareholder in amounts less than 500 shares, certificates
representing such shares must be tendered within 60 days (which may be extended
by the Board of Directors) following the effective date of the Reverse Split.
If such certificates are tendered within 90 days thereof (also subject to
extension by the Board of Directors), the shares may be aggregated and tendered
for exchange for New Shares. Holders of less than 500 Old Shares who do not
tender them for cash payment and who seek to combine or aggregate shares cannot
be assured of an odd-lot market to supply such shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has carefully considered the strategic alternatives
for the Company with respect to its future viability as a going concern, and has
determined that approval of the Reverse Split and the adoption of the proposed
amendment are necessary to reduce administrative costs and further the Company's
efforts to return to profitability. The Board therefore recommends a vote FOR
approval of the proposed Reverse Split and the adoption of the amendment to the
Restated Articles of Incorporation.
10
<PAGE>
INDEPENDENT ACCOUNTANTS
Moss Adams has audited the Company's annual financial statements for fiscal
years 1994 and 1995, and has served as the Company's independent public
accountant for the past seven years.
It is expected that the Board of Directors will select Moss Adams to
continue to serve as the Company's independent public accountants for fiscal
year 1996.
There have been no changes in or disagreements with the Company's
independent public accountants during the two fiscal years ended December 31,
1994, nor during the subsequent period. It is expected that representatives of
the Company's independent public accountants for 1996 and 1995 will be present
at the shareholders meeting. Such representatives will have the opportunity to
make a statement if they desire to do so, and will be available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors of the Company knows of no other matter to be
brought before the Meeting other than as set forth in the accompanying Notice of
Special Meeting of Shareholders and in this Proxy Statement. If any other
matters requiring a vote of the shareholders is presented, the persons named in
the enclosed proxy, or their substitutes, will, to the extent permitted by law,
vote the shares they represent in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for consideration at the
Company's 1997 annual meeting of shareholders must be the beneficial owner of at
least 1% or $1,000 in market value of common stock, and have held the stock for
at least one year, and must submit the proposal by November 15, 1996. A
shareholder submitting a proposal for consideration must provide the Company
with his or her name, address and the number of shares held of record or
beneficially, the dates upon which such shares were acquired and documentary
evidence of such ownership. The shareholder, or a representative of the
shareholder, must present the proposal for action at the meeting. At the
shareholder's request, the Company will include with the proposal in the proxy
statement mailed to shareholders in connection with the meeting, a statement of
the shareholder in support of the proposal, which together with the proposal
does not exceed 500 words. The Proxy Statement shall include the name, address
and number of shares held of record or beneficially by the shareholder making
the proposal. The Company may, under certain circumstances, omit from the proxy
statement proposals and supporting statements.
VOTING AT THE MEETING
GENERAL
Each copy of this Proxy Statement sent to the Company's shareholders is
accompanied by a proxy solicited by the Board of Directors of the Company for
use at the Special Meeting of Shareholders and any adjournments thereof. Only
holders of record of Company common stock at the close of business on March 27,
1996, are entitled to notice of, and to vote at, the Meeting. At the Meeting,
the Company's shareholders will vote on the election of Directors; on a proposed
1-for-500 reverse split of the Company's common stock,
11
<PAGE>
and in connection therewith, the adoption of an amendment to the Company's
Restated Articles of Incorporation; and on such other matters as may properly
come before the Meeting.
A proxy may be revoked prior to its exercise at the Meeting by presentation
of a proxy bearing a later date, by filing an instrument of revocation
(personally or by mail) with the Secretary of the Company prior to the meeting,
or by oral request if the shareholder is present at the meeting. Attendance at
the meeting will not, of itself, revoke a proxy.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE ACCOMPANYING
PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE, EVEN IF THEY ARE PLANNING TO ATTEND THE COMPANY'S MEETING.
VOTE REQUIRED
The authorized capital stock of the Company consists of ten million
(10,000,000) shares of Common Stock and five hundred thousand (500,000) shares
of Preferred Stock. As of March 27, 1996, the Record Date, there were 6,112,848
shares of Common Stock issued and outstanding, of which 6,052,848 shares are
entitled to vote. As of the Record Date, there were no shares of Preferred
Stock outstanding.
A majority of the outstanding shares of Common Stock must be represented at
the Meeting, in person or by proxy, to constitute a quorum for the transaction
of business. The affirmative vote of the holders of a majority of the
outstanding shares of Company common stock is required for approval of the
amendment to the Articles. Directors are elected by a plurality of the votes;
Directors receiving the most votes will be elected. Each such share is entitled
to one vote. Shareholders do not have the right to accumulate votes for
Directors. As of the Record Date, there were 3607 shareholders of record. As
of the Record Date, officers, Directors, and principal shareholders of the
Company, together with their affiliates, had beneficial ownership of 2,441,593
shares, of which 2,381,593 shares are entitled to vote. The shares held by
officers, Directors and principal shareholders, which are entitled to be voted
at the Meeting constitute 38.96 percent of the total outstanding shares, and
39.35% of the shares entitled to be voted at the Meeting.
METHOD OF COUNTING VOTES
For purposes of determining a quorum, shares represented in person or by
properly executed proxy, will be counted. An abstention from a given matter
will not affect the presence of that shareholder as to determination of a
quorum. Shares represented by properly executed proxy will be voted in
accordance with the instructions on the proxy.
An abstention with respect to a matter submitted to a vote of shareholders
will not be counted for or against the matter. However, an abstention from
approval of any matter requiring the affirmative vote of a majority of
outstanding shares eligible to be voted would have the effect of a vote against
the matter. consequently, an abstention from the proposed amendment will not be
counted as a vote in favor thereof, and will have the effect of a vote against
the proposal. An abstention with respect to the election of directors will have
no effect as a vote for or against any nominee, because directors are elected by
a plurality of the votes cast.
If a proxy is submitted in which no instructions are given the shares
represented thereby will be voted in the discretion of the proxy holders, except
that the lack of instructions will be treated as, and have the effect of, a vote
in favor of the persons nominated by the Board of Directors to serve as
Directors, and a vote in favor of the proposed reverse split and adoption of the
amendment to the Articles. A broker non-vote, which occurs when a proxy
submitted by a nominee which directs the voting of less than all of the shares
which it represents and does not direct the voting of the remaining shares as to
a specific proposal, operates
12
<PAGE>
as an abstention. A broker non-vote will have no effect in the election of
directors, and will have the effect of a vote against the proposed Amendment to
the Articles of Incorporation.
RIGHTS OF DISSENTING SHAREHOLDERS
As provided by Oregon Revised Statutes, Sections 60.551 through 60.594, a
copy of which is attached as EXHIBIT C, certain shareholders of the Company have
the right to dissent from the adoption of the proposed amendment to the Restated
Articles of Incorporation and receive the fair value of their shares in lieu of
the consideration otherwise issuable to them pursuant to the proposed Reverse
Split, which value may be more or less than, or equal to, that received by
non-dissenting shareholders. Any shareholder intending to exercise dissenters'
rights is urged to review these provisions carefully so as to be in strict
compliance with the requirements of state law. Only shareholders holding fewer
than 500 shares as of the Record Date are entitled to dissent.
EACH OF THE STEPS PRESCRIBED BY OREGON LAW MUST BE TAKEN AS SPECIFIED OR
DISSENTERS' RIGHTS MAY BE LOST. FAILURE TO CONFORM EXPRESSLY TO ALL CONDITIONS
MAY RESULT IN LOSS OF RIGHTS.
The following is only a summary of dissenting shareholders' rights:
Any of the Company's shareholders desiring to dissent and receive payment
for shares must: (i) deliver to the Company, prior to or at the Meeting before
the vote is taken, written notice of intent to demand payment for shares if the
transaction is consummated; (ii) not vote in favor of the resolution approving
the Reverse Split and adoption of the Amendment to the Articles; and (iii) make
proper written demand to the Company for payment within the time specified by
the Company in its Notice to Dissenters following the vote on the proposed
amendment to the Articles. The demand must be accompanied by the tender of
share certificates properly endorsed. MERELY VOTING AGAINST THE RESOLUTION
APPROVING THE REVERSE SPLIT AND ADOPTING THE RELATED AMENDMENT OF THE COMPANY'S
RESTATED ARTICLES OF INCORPORATION IS NOT SUFFICIENT STATUTORY NOTICE OF A
SHAREHOLDER'S DESIRE TO DISSENT TO MEET THIS DEMAND REQUIREMENT.
A shareholder who returns an executed but unmarked proxy will be deemed
to have voted in favor of the proposal and will therefore not be entitled to
exercise Dissenters' Rights. A shareholder who abstains either by not returning
a proxy or by marking "Abstain" on the proxy will preserve his or her
Dissenters' Rights, if the other statutory procedures are followed.
Following the effective date of the Reverse Split, or upon the making of a
proper payment demand in accordance with the instructions in the Dissenters'
Notice, dissenting shareholders who have complied with the conditions and
procedures for dissenting from the proposed amendment to the Articles will
receive in cash an amount equal to the Company's estimate of the fair value of
each such dissenting shareholder's shares, plus any applicable accrued interest
from the effective date of the Reverse Split. That amount may be more than,
equal to, or less than the amount of consideration received by other
shareholders in accordance with the proposed Reverse Split. Within 30 days of
that payment or payment offer, a dissenting shareholder may notify the Company
in writing of that shareholder's estimate of the fair value of that
shareholder's shares and interest due, and demand payment of that amount less
any previous payment by the Company, if (i) the shareholder believes that the
Company's payment offer is less than the fair market value of shares or that the
interest is not properly calculated; (ii) the Company has not made payment
within 60 days of the date set for demanding payment; or (iii) the Company has
failed to complete the transaction and has not returned the dissenting
shareholder's stock certificates within 60 days of the date set for demanding
payment.
13
<PAGE>
If the Company and a dissenting shareholder do not agree on the amount to
be paid for that shareholder's shares, the Company will, within 60 days of that
shareholder's most recent demand described above, file a petition in Multnomah
County, Oregon, Circuit Court, requesting the court to determine the fair value
of the shares plus accrued interest thereon. The court may appoint one or more
appraisers to recommend a decision. All dissenting shareholders whose demands
for payment remain unsettled shall be made parties to this proceeding. The
court will assess costs of the proceeding against the Company except for costs
that may be assessed against dissenting shareholders who acted arbitrarily or
not in good faith. The court may also award attorneys' and experts' fees in a
manner it finds equitable. If the Company fails to initiate the above procedure
within 60 days of the shareholder's demand, the Company is required by law to
pay the amount set forth in the shareholder's demand.
A shareholder may not dissent as to less than all of the shares registered
in the shareholder's name; except a shareholder holding as a fiduciary shares
registered in his or her name for the benefit of more than one beneficiary may
dissent as to less than all of the shares registered in his or her name,
provided that any dissent made as to a particular beneficiary is as to all of
the shares held for that beneficiary by the fiduciary.
Receipt of cash by dissenting shareholders for their shares will be
treated, for federal income tax purposes, as a redemption of shares under
Section 302 of the Internal Revenue Code, and may be a taxable transaction. Any
shareholder contemplating a demand for payment pursuant to statutory dissenters'
rights is urged to consult with a competent tax advisor.
FINANCIAL AND OTHER INFORMATION
Enclosed with this Proxy Statement are copies of the Company's annual
report to the Securities and Exchange Commission on Form 10-K, as amended, for
the fiscal year ended December 31, 1994, and the quarterly report on Form 10-Q,
as amended, for the nine months ended September 30, 1995. Additional copies of
these reports can be obtained upon request to Teri E. Engel, Secretary, The
Encore Group, Inc., 4800 SW Macadam Avenue, Suite 100, Portland, OR 97201.
The following portions of the 1994 Annual Report on Form 10-K, as amended,
are incorporated herein by reference: Consolidated Financial Statements for the
fiscal years ended 1994, 1993, and 1992, including the notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Also incorporated herein by reference from the report on Form 10-Q,
as amended, for the nine months ended September 30, 1995, are the Consolidated
Financial Statements, including the notes thereto, and Management's discussion
and Analysis of Financial Condition and Results of Operations for the nine
months ended September 30, 1995 and 1994.
Portland, Oregon
February 28, 1996 By Order of the Board of Directors
Teri E. Engel, Corporate Secretary
14
<PAGE>
EXHIBIT INDEX
EXHIBIT
A Proposed Amendment to the Restated Articles of Incorporation.
B Opinion of Columbia Financial Advisors, Inc.
C Oregon Revised Statutes 60.551 - 60.594
D Agreement between Encore Group, Inc. and Bruce L. Engel.
15
<PAGE>
PROPOSED AMENDMENT Exhibit A
As proposed, Article V, Section (a) of the Company's Restated Articles
would be amended to read in its entirety as follows:
"(a) The aggregate number of shares which the corporation shall
have the authority to issue is Fifty Five Thousand (55,000) shares
divided into Fifty Thousand (50,000) shares of common stock and Five
Thousand (5,000) shares of preferred stock.
Except as provided herein, upon the filing of these Articles of
Amendment, shares of common stock of the corporation then outstanding
shall be canceled and converted into the right to receive in exchange
therefor cash or new shares of common stock of the corporation as
follows:
(i) In the case of shares held of record as of March 27, 1996,
by any shareholder of record in an amount equal to or exceeding 500
shares, such shares shall be converted into the right to receive that
number of new shares of common stock calculated by dividing the number
of shares tendered for exchange by 500, with any fractional result
rounded up to the next whole number.
(ii) In the case of shares held of record as of March 27, 1996,
by any shareholder of record in an amount up to but not exceeding 499
shares, such shares shall be converted into and exchanged for the
right to receive in exchange therefor, for a period not exceeding 60
days following the date of the filing of these Articles of Amendment
(or such later date as determined by the Board of Directors at its
sole discretion), cash in the amount of $0.10 per Old Share.
(iii) Notwithstanding the right to receive cash is provided by
subsection (a) (ii) above, in the case of shares held of record as of
March 27, 1996, by any shareholder of record in an amount up to but
not exceeding 499 shares, such shares may be aggregated or combined
with other shares to create a number of shares equal to or exceeding
500, and be tendered for exchange, for a period not exceeding 90 days
following the date of the filing of these Articles of Amendment (or
such later date as determined by the Board of Directors at its sole
discretion), for such number of new shares of common stock calculated
by dividing the number of shares tendered for exchange by 500, with
any fractional result rounded up to the nearest whole number.
For purposes of this exchange, shares held of record as of March
27, 1996, in the name of a broker/dealer or other nominee, shall be
deemed to be held of record by the true beneficial owners of such
shares.
As of the date of the filing of these Articles of Amendment,
unless and until tendered in exchange for new shares of common stock
or cash, as the case may be, in accordance with this section (a),
previously outstanding shares of common stock of the corporation shall
have only the rights of exchange as set forth herein, and shall have
no voting or other rights for any corporate purpose whatsoever.
Unless and until certificates representing ownership of shares
entitled to be exchanged for new shares of common stock in accordance
with this section (a) are surrendered, no dividends or other
distributions shall be paid with respect to such new shares. Upon
exchange for certificates representing new shares, any dividends or
other distributions which are declared and became payable with respect
to such new shares shall be paid to the holder, without interest."
<PAGE>
OPINION OF COLUMBIA FINANCIAL ADVISORS, INC. Exhibit B
Columbia Financial Advisors, Inc. (CFAI) was retained by The
Encore Group, Inc. (Encore) to appraise the fair market value of the
common stock of Encore for the purpose of Encore repurchasing its
common stock as a result of a reverse stock split. CFAI is an
independent business valuation and advisory firm. Its principal
business is the valuation of businesses and business interests,
including both privately held and publicly traded companies, for many
different purposes, including mergers and acquisitions, gift and
estate taxes, employee stock ownership plans, issuance of stock
options, going public or private, corporate and partnership
dissolutions, and other objectives. In arriving at its opinion, CFAI
took into consideration the nature of the business and history of
Encore, the economic outlook in general, the outlook for the battery
and accessories industry in particular, Encore's earnings and cash
flow for the past five years, the outlook for future earnings, the
book value of the company, the company's financial condition, its
dividend paying capacity, the existence of Encore's net operating loss
carry forward, the historical trading prices of encore's stock, and
prices at which public companies in related lines of business are
selling. It is CFAI's opinion, that the fair market value of the
common stock of Encore as of May 1995, was $.10 per share.
/S/ Mary McCarter, ASA,CFA
Principal
<PAGE>
DISSENTERS' RIGHTS Exhibit C
(Right to Dissent and Obtain Payment for Shares)
60.551 DEFINITIONS FOR 60.551 TO 60.594. AS USED IN ORS 60.551 TO 60.59
4:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under ORS 60.554 and who exercises that right when and in the
manner required by ORS 60.561 to 60.587.
(4) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in anticipa
tion of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans, or if none, at the rate that is fair
and equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Shareholder" means the record shareholder or the beneficial share
holder. [1987 c.52 Section 124; 1989 c.1040 Section 30]
60.554 RIGHT TO DISSENT. (1) Subject to subsection (2) of this section,
a shareholder is entitled to dissent from, and obtain payment of the fair value
of the shareholder's shares in the event of, any of the following corporate
acts:
(a) Consummation of a plan of merger to which the corporation is a party
if shareholder approval is required for the merger by ORS 60.487 or the articles
of incorporation and the shareholder is entitled to vote on the merger or if the
corporation is a subsidiary that is merged with its parent under ORS 60.491;
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(c) Consummation of a sale or exchange of all or substantially all of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities; or
(B) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
ORS 60.141; or
<PAGE>
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the board of
Directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under ORS 60.551 to 60.594 may not challenge the corporate
action creating the shareholder's entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(3) Dissenters' rights shall not apply to the holders of shares of any
class or series if the shares of the class or series were registered on a
national securities exchange or quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System as a National Market
System issue on the record date for the meeting of share holders at which
the corporate action described in subsection (1) of this section is to be
approved or on the date a copy or summary of the plan of merger is mailed
to shareholders under ORS 60.491, unless the articles of incorporation
otherwise provide. [1987 c.52 Section 125; 1989 C.1040 Section 31; 1993 c.403
Section 91]
60.557 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the shareholder's name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares regarding which the
shareholder dissents and the shareholder's other shares were registered in the
names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote. [1987 c.52 Section 126]
(Procedure for Exercise of Rights)
60.561 NOTICE OF DISSENTERS' RIGHTS. (1) If proposed corporate action
creating dissenters' rights under ORS 60.554 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under ORS 60.551 to 60.594 and be
accompanied by a copy of ORS 60.551 to 60.594.
(2) If corporate action creating dissenters' rights under ORS 60.554 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send the shareholders entitled to assert dissenters' rights the dissenters'
notice described in ORS 60.567. [1987 c.52 Section 127]
60.564 NOTICE OF INTENT TO DEMAND PAYMENT. (1) If proposed corporate
action creating dissenters' rights under ORS 60.554 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert dissenters' rights
shall deliver to the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated and shall not vote such shares in favor of the
proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter. [1987 c.52 Section 128]
60.567 DISSENTERS' NOTICE. (1) If proposed corporate action creating
dissenters' rights under ORS 60.554 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of ORS 60.564.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action was taken, and shall:
<PAGE>
(a) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement of the terms of the proposed corporate action to news media
or to shareholders and requires that the person asserting dissenters' rights
certify whether or not the person acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the corporation must receive the payment demand.
This date may not be fewer than 30 nor more than 60 days after the date the
subsection (1) of this section notice is delivered; and
(e) Be accompanied by a copy of ORS 60.551 to 60.594. [1987 c.52 Section
129]
60.571 DUTY TO DEMAND PAYMENT. (1) A shareholder sent a dissenters'
notice described in ORS 60.567 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant to ORS 60.567
(2)(c), and deposit the shareholder's certificates in accordance with the
terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
shares under subsection (1) of this section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter. [1987 c.52 Section 130]
60.574 SHARE RESTRICTIONS. (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under ORS 60.581.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate
action. [1987 c.52 Section 131]
60.577 PAYMENT. (1) Except as provided in ORS 60.584, as soon as the
proposed corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with ORS 60.571, the amount
the corporation estimates to be the fair value of the shareholder's shares, plus
accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year and the latest available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under ORS
60.587; and
(e) A copy of ORS 60.551 to 60.594. [1987 c.52 Section 132; 1987 c.579
Section 4]
<PAGE>
60.581 FAILURE TO TAKE ACTION. (1) If the corporation does not take the
proposed action within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under ORS 60.567 and repeat the payment demand procedure.
[1987 c.52 Section 133]
60.584 AFTER-ACQUIRED SHARES. (1) A corporation may elect to withhold
payment required by ORS 60.577 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares plus accrued interest and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
such demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under ORS
60.587. [1987 c.52 Section 134]
60.587 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER. (1)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest due,
and demand payment of the dissenter's estimate, less any payment under ORS
60.577 or reject the corporation's offer under ORS 60.584 and demand payment of
the dissenter's estimate of the fair value of the dissenter's shares and
interest due, if.
(a) The dissenter believes that the amount paid under ORS 60.577 or
offered under ORS 60.584 is less than the fair value of the dissenter's shares
or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under ORS 60.577 within 60 days
after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within 30 days after the
corporation made or offered payment for the dissenter's shares. [1987 c.52
Section 135]
(Judicial Appraisal of Shares)
60.591 COURT ACTION. (1) If a demand for payment under ORS 60.587 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand under ORS 60.587 and petition the court under
subsection (2) of this section to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the count where a corporation's Principal office is located, or if the
principal office is not in this state, where the corporation's registered
office is located. If the corporation is a foreign corporation without a
registered office in this state, it shall commence the proceeding in the
county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
<PAGE>
(4) The jurisdiction of the circuit court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
powers described in the court order appointing them, or in any amendment to the
order. The dissenters are entitled to the same discovery rights as parties in
other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment
for:
(a) The amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the corporation;
or
(b) The fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under ORS 60.584. [1987 c.52 Section 136]
60.594 COURT COSTS AND COUNSEL FEES. (1) The court in an appraisal
proceeding commenced under ORS 60.591 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under ORS 60.587.
(2) The court may also assess the fees and expenses of counsel and
experts of the respective parties in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of ORS 60.561 to 60.587; or
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith with respect to the
rights provided by this chapter.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to counsel reasonable fees to be paid out of the amount awarded the
dissenters who were benefitted. [1987 c.52 Section 137]
<PAGE>
STOCK PURCHASE AGREEMENT Exhibit D
This agreement (the "Agreement") is entered into as of February 27, 1996,
by and between The Encore Group, Inc. (the "Company") and Bruce L. Engel
("Engel").
WHEREAS, the Company desires to effect a 1-for-500 reverse split of its
common stock (the "Reverse Split") for the purpose of reducing the
administrative costs related to shareholder matters;
WHEREAS, the Company has proposed, as part of the Reverse Split, to pay
shareholders holding up to 499 shares of record as of March 27, 1996, (the
"Record Date") cash for their shares at the rate of $0.10 per share;
WHEREAS, under Oregon law, the Reverse Split and resulting cash purchase of
shares from shareholders holding fewer than 499 shares as of the record date
gives rise to dissenters' rights under ORS 60.551 - 60.594 ("Dissenters'
Rights"), pursuant to which the Company may be obligated to pay the fair value
in cash to certain shareholders who perfect such Dissenters' Rights;
WHEREAS, the Company's financial statements reflect total liabilities
exceeding total assets, under which circumstance the distribution of cash to
shareholders, either in accordance with the proposed Reverse Split or pursuant
to Dissenters' Rights would be unlawful; and
WHEREAS, Engel desires to accommodate the Company in completing the Reverse
Split, and is willing to increase his share ownership of the Company.
NOW THEREFORE, for good and valuable consideration, the adequacy of which
is hereby acknowledged, and in consideration of the mutual covenants set forth
herein, the parties agree as follows:
AGREEMENT
1. PURCHASE OF SHARES. Engel agrees to purchase from each shareholder of
the Company who, as of the Record Date is the owner of less than 500 shares, all
shares of the Company's common stock held by such shareholder as of the Record
Date which are tendered in accordance with the terms of the Reverse Split within
60 days (or such longer period as may be permitted by the Board of Directors of
the Company) following the date on which the Articles of Amendment setting forth
the terms of the Reverse Split are filed in the office of the Oregon Secretary
of State (the "Effective Date"). Such shares shall be purchased at a price of
$0.10 per share, payable within 90 days following the Effective Date.
2. OBLIGATION TO DISSENTING SHAREHOLDERS. The Company hereby assigns,
and Engel hereby assumes, the Company's rights and obligations to pay in cash
the fair value of shares of the Company's common stock held of record as of the
Record Date by shareholders who dissent from the adoption of the Articles of
Amendment to effect the Reverse Split, who have properly perfected their right
to such payment for their shares in accordance with ORS 60.551 - 60.594
("Dissenters"), and who have surrendered certificates representing such shares
("Dissenting Shares") in accordance with ORS 60.571 and the instructions given
in the notice to Dissenters pursuant to ORS 60.567. "Fair Value" as used herein
is the value of the Dissenting Shares as determined by the Company, or by
judicial appraisal, as the case may be, in accordance with ORS 60.551 - 60.594.
The Company's obligation assigned and assumed under this Section 2, to pay the
Fair Value of dissenting shares, is exclusive; the Company does not assign, and
Engel does not assume, any other liability or obligation of the Company which
may arise in connection with the effectuation of the Reverse Split or the
exercise of Dissenters' Rights related thereto.
3. EXCHANGE OF PURCHASED SHARES. All shares purchased or deemed
purchased by Engel pursuant to Sections 1 and 2 may be aggregated and combined
by Engel, together or with such other shares as Engel may own as of the Record
Date, and be tendered to the Company for exchange for new shares of common
stock in accordance with the terms of the Reverse Split, provided that in the
event more than 90 days has elapsed following the Effective Date, the Company
shall grant Engel such additional time as is reasonably necessary to aggregate
and combine shares acquired or deemed acquired in accordance with Section 2 and
to tender such shares to the Company in exchange for new shares.
<PAGE>
4. INDEMNIFICATION. Except as provided in Sections 1 and 2, the Company
shall indemnify and hold Engel harmless for any liability arising from this
Agreement and the effectuation of the Reverse Split, including, without
limitation, costs and expenses in connection with the exercise of Dissenters'
Rights, notices to shareholders, appraisal expenses, and legal fees.
5. GENERAL PROVISIONS.
a. ASSIGNMENT. This Agreement may not be assigned by either party
without the prior written consent of the other party. Subject to the
foregoing, this Agreement will bind and inure to the benefit of and be
enforceable by the parties hereto, their respective successors and assigns.
b. CAPTIONS. The headings to the various divisions of this
Agreement are for reference purposes only and shall not be construed
as affecting the meaning or interpretation of this Agreement.
c. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon applicable to contracts
made and to be performed in Oregon, without regard to conflicts of law
principles thereunder.
d. FINAL AND COMPLETE EXPRESSION. This Agreement and the various
other documents executed in connection with it constitute the final and
complete expression of the parties with respect to the transactions
contemplated herein and replaces and supersedes any prior agreements,
representations or understandings, whether written or oral. This Agreement
may not be modified, altered, amended or superseded except by an agreement
in writing signed by the party against whom such change is to be enforced.
e. WAIVER. No waiver of any of the terms of this Agreement shall be
effective unless acknowledged in writing by the party granting such waiver.
No waiver of any of the provisions of this Agreement shall be deemed to be
or shall constitute a waiver of any other provision hereof, whether or not
similar, nor shall any such waiver constitute a continuing waiver.
THE ENCORE GROUP
By:
------------------------------- -------------------------
------------------------------ Bruce L. Engel
<PAGE>
REVOCABLE PROXY
ENCORE GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
APRIL 23 , 1996
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth L. Wright and Fred J. Kupel, and
each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares of common stock of Encore Group, Inc. (the "Company") at
the Special Meeting of shareholders to be held on March 27, 1996, and any
adjournments thereof, with all powers the undersigned would possess if
personally present, with respect to the following:
1. ELECTION OF DIRECTORS. [ ] FOR all nominees [ ]WITHHOLD
listed below (except as marked AUTHORITY
to the contrary below) to vote for all
nominees listed
below
(INSTRUCTION: To withhold authority to vote for any individual, strike a line
through the nominee's name below.)
Bruce L. Engel, Teri E. Engel, Robert G. Fligg, Fred J. Kupel, Kenneth L.
Wright
2. AMENDMENT OF RESTATED ARTICLES OF INCORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER MATTERS. At the discretion of the proxy holders on such other
business as may properly come before the meeting and any adjournments thereof.
A majority of the proxy holders present at the Annual Meeting may exercise all
powers granted hereby.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE, BUT IF
NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES AND FOR ALL PROPOSALS LISTED ABOVE. The proxy holders may vote in
their discretion as to other matters which may come before the meeting.
Dated: , 1996
-----------------------
[Attach Label Here] ---------------------------------------
PLEASE DATE AND SIGN EXACTLY AS NAME IS
IMPRINTED HEREON, INCLUDING DESIGNATION
AS EXECUTOR, TRUSTEE, ETC., IF
APPLICABLE. A CORPORATION MUST SIGN ITS
NAME BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. ALL CO-OWNERS
MUST SIGN.
