SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Definitive Information Statement
THE ENCORE GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
Fred J. Kupel
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(Name of Person(s) Filing Information Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / $125 per Exchange Act Rules O-11(c)(1)ii), or 14c-5(g)
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE ENCORE GROUP, INC.
----------------------
INFORMATION STATEMENT
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held August 20, 1998
----------------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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To Our Shareholders:
The Encore Group, Inc. (the "Company") will hold a Special Meeting of
Shareholders (the "Meeting") at 10:00 a.m. local time on Thursday, August
20,1998 at The Riverside Inn, 50 SW Morrison Street, Portland, Oregon, for the
following purposes:
1. To elect six 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 ratify the appointment of Moss Adams LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998.
3. To ratify a quasi-reorganization of the Company's financial
statements.
4. To ratify the terms of Preferred Stock to be issued to creditors.
5. To consider and vote on a proposed amendment to the Company's
Restated Articles of Incorporation to increase the number of authorized
shares of Common Stock from 50,000 to 10,000,000 and the number of
shares of Preferred Srock from 5,000 to 500,000; to authorize the Board
of Directors to determine the preferences, limitations and relative
rights of any class of shares, and to issue 99 new shares of Common
Stock for each one share held by shareholders as of the record date.
6. To approve the company's 1998 Stock Option Plan.
7. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Only holders of common Stock of record at the close of business on July
24, 1998, (the "Record Date") will be entitled to notice of and to vote at the
Meeting or any adjournment thereof.
By Order of the Board of Directors
Fred J. Kupel
Assistant Secretary
Portland, Oregon
July 29, 1998
<PAGE>
THE ENCORE GROUP, INC.
7150 SW Hampton Street, Suite 202
Tigard, OR 97223
ELECTION OF DIRECTORS
---------------------
(Proposal No. 1)
Nominees for Director
- ---------------------
The nominees for director are listed below. Information about each
nominee is contained in the section entitled "Directors and Executive Officers."
Name Director Since
---- --------------
Bruce L. Engel 1988
Teri E. Engel 1989
Robert G. Fligg 1988
Robert J. Gardiner 1998
Fred J. Kupel 1995
Michael J. Rasmussen 1998
The Board of Directors recommends a vote FOR the election of all
nominees.
The Registrant's Restated Articles of Incorporation and Bylaws provide
for a Board of Directors consisting of not less than three nor more than seven
directors, with the exact number within this range to be determined from time to
time only by the Board of Directors. The current number of directors is six. It
is proposed to reserve one Director position for the future expansion of the
company.
All directors stand for election annually. Officers are elected to a
term of one year or less, serve at the pleasure of the Board of Directors, and
are entitled only to such compensation as is fixed by the Board.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and Executive Officers of the Registrant as of December
31, 1995, are as follows:
Director Officer Positions and/or
Name Since Since Offices Held Age
Bruce L. Engel 1988 1991 Director; President and 58
Chief Executive
Teri E. Engel 1989 1989 Director; Corporate Secretary 49
Robert G. Fligg 1988 - Director 49
Fred J. Kupel 1995 1998 Director; Vice President of 69
Finance and Chief Financial
Officer, Assistant Secretary
Robert J. Gardiner 1998 - Director 58
Michael J. Rasmussen 1998 - Director 37
The following family relationships exist among the directors or
executive officers: Bruce L. Engel and Teri E. Engel are husband and wife; Mr.
Fligg's spouse is a niece of Mr. Engel.
Mr. Engel was elected President and Chief Executive Officer on March
19, 1991. Mr. Engel's principal employment was as President and Chief Executive
Officer of WTD Industries, Inc., Portland, Oregon, from its inception in 1983
until his retirement in 1998.
Ms. Engel has been a director and Secretary of the Company since 1989.
Mr. Fligg was employed by Dee Forest Products, Inc. from March 1991 to
July 1997 as Chief Financial Officer. Subsequently, Mr. Fligg has served
Advanced Navigation & Positioning Corporation as Chief Financial Officer. Both
firms are in Hood River, Oregon. He was employed as an officer of Registrant
from 1988 to 1991.
Mr. Gardiner is the 1958 founder and subsequent President of MRK
Investments, which specializes in residential and commercial real estate and
property management. He was employed by WTD Industries, Inc. from 1985 to 1998
as Corporate Pilot. Mr. Gardiner is a licensed Commercial Pilot holding an
Airline Transport Pilot's rating in fixed wing and rotorcraft.
Mr. Kupel has been an independent management consultant for over ten
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.
Mr. Rasmussen is the President of Parsons Industries, Inc., a secondary
wood products company located in Ashland, Oregon. Parsons Industries, Inc. is a
wholy-owned subsidiary of Registrant. Prior to his position with Parsons
Industries, Inc. Mr. Rasmussen served for one year as a Business Development
Executive with GE Capital specializing in small business. For the 14 prior years
Mr. Rasmussen worked in lending and management positions with Bank of America
and U.S.National Bank of Oregon.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table shows the cash and non-cash compensation paid
during 1997 to the company's Chief Executive Officer. Directors received no
compensation for their services in 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation(1) --------------------
------------------------------ Number of Securities
Name and Principal Position Year Salary($) Bonus($) Underlying Options
------------------------------- ------ ---------- ---------- --------------------
<S> <C> <C> <C> <C>
Bruce L. Engel 1997 0 0 0
President and 1996 0 0 0
Chief Executive Officer 1995 0 0 0
</TABLE>
No executive officer received cash compensation in 1997 in excess of $100,00.
Option Grants in Last Fiscal Year
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a). No options were granted in 1997.
Options Percent of Exercise Expiration
Name Granted Total Options Price Date
----- ----------- ------------- -------- ----------
b.) Option Plan Grants in 1998 (remainder of grants under old Plan):
Bruce L. Engel 1,000 8.7 $10.00 4/20/2008
Teri E. Engel 80 .7 $10.00 4/20/2008
Robert G. Fligg 80 .7 $10.00 4/20/2008
Robert J.Gardiner 80 .7 $10.00 4/20/2008
Fred J. Kupel 80 .7 $10.00 4/20/2008
Michael J. Rasmussen 80 .7 $10.00 4/20/2008
c.) Options granted in connection with the March 31, 1988, acquisition of
Parsons Industries, Inc.:
Bruce L. Engel &
Teri E. Engel 500 4.4 $10.00 4/20/2008
Robert J.Gardiner &
Brenda J.Gardiner 4,750 41.7 $10.00 4/20/2008
Michael J. Rasmussen 4,750 41.7 $10.00 4/20/2008
----------- ------------- -------- ----------
11,400 100.0 $10.00
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership as of June 23, 1998 of
the Company's Common Stock by (i) each director, (ii) each beneficial owner of
more than 5 percent of the Common Stock, (iii) the Named Executive Officers and
(iv) all directors and officers as a group. Except as otherwise specifically
noted, each person noted below has sole investment and voting power with respect
to shares indicated.
Amount and Nature
Beneficial Owner of Beneficial Ownership(1) Percent of Class
- -------------------- -------------------------- ----------------
Bruce L.Engel 3,367 (2) 19.8%
Teri E.Engel 3,017 (2) 19.8
Robert G. Fligg 500 2.9
Robert J. Gardiner 762 4.5
Fred J. Kupel 640 3.8
Michael J. Rasmussen 750 4.4
All Directors and
officers as a group
(6 persons) 5,669 35.4
Union Bank of California 1,005 (3) 5.9%
(1) Beneficial Ownership includes sole voting and investment power as to the
shares.
(2) Includes shares held individually by Mr.Engel and shares held jointly with
spouse.
(3) As a consequence of the December 6, 1996, Settlement Agreement between the
Company, Bruce and Teri Engel, and the Union Bank of California, said Bank
received 1,005 shares of common stock previously held by the Engels. The said
Bank is using Cede and Co. as a nominee to hold these shares, to the best of
the company's knowledge. The Company is unaware of any reports of ownership
having been filed by the Union Bank of California.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fred J. Kupel served the Company as an outside consultant during 1997
and received compensation of $6,000 in the form of 600 shares of common stock.
This amount is less than the minimum required for disclosure purposes. The
shares were not issued until 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's officers, directors and persons who own more than 10
percent of the Common Stock file with the SEC initial reports of beneficial
ownership on Form 3 and reports of changes in beneficial ownership of Common
Stock and other equity securities of the Company on Forms 4 and 5. Officers,
directors, and greater than 10 percent shareholders of the Company are required
by SEC regulations to furnish to the Company copies of all Section 16(a) reports
that they file. To the Company's knowledge, based solely on reviews of such
reports furnished to the Company and written representations that no other
reports are required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10 percent beneficial owners were complied
with during the fiscal year ended December 31, 1997.
<PAGE>
INDEPENDENT AUDITORS
--------------------
(Proposal No. 2)
The Board of Directors will request that the shareholders ratify its
selection of Moss Adams as independent auditors to examine the financial
statements of the Company for the fiscal year ending April 30, 1998.
Moss Adams audited the Company's financial statements for the several
years prior to the temporary shutdown in February 1997. Representatives of Moss
Adams are expected to be present at the Annual Meeting, will have an opportunity
to make a statement if they so desire, and will be available to respond to
appropriate questions from shareholders.
Board Recommendation
The Board of Directors recommends a vote FOR the ratification of the
selection of Moss Adams as independent auditors of the Company.
QUASI-REORGANIZATION OF THE COMPANY
-----------------------------------
(Proposal No. 3)
For some time the company's balance sheet has carried a negative, or
deficit, value for shareholders' equity. This condition goes back in time
primarily to the ill-fated coal port investment of 1983. Subsequent events did
not cure the deficit. However, the results recent events (see the discussion of
creditor settlements below) permit the Company to meet the requirements of the
Financial Accounting Standards Board regarding restating shareholders' equity.
This is called a "quasi-reorganization" and requires shareholder approval. The
net effect of this quasi-reorganization is to eliminate retained losses from
discontinued operations.
Board Recommendation
The Board of Directors recommends a vote FOR the quasi-reorganization
of the Company.
<PAGE>
TERMS OF PREFERRED STOCK TO BE ISSUED TO CREDITORS
--------------------------------------------------
(Proposal No. 4)
In order to provide the Company with a clear credit record, the Company
voluntarily undertook to negotiate a settlement of the amounts owed to various
creditors of its former operating subsidiary, VDO-Pak, Inc. This settlement
required the payment of a small amount of cash and the tendering of Preferred
Stock for the balance of the amount. The total amount of indebtedness was
$182,174.85 and the cash portion was $18,217.48. The remaining amount of
$163,957.37 would represent the issuance of Preferred Stock, if all participants
accept. The terms of the Preferred Stock are shown in Exhibit A.
Board Recommendation
The Board of Directors recommends a vote FOR the ratification of the
terms of Preferred Shares.
AMENDMENT OF ARTICLES OF INCORPORATION
--------------------------------------
(Proposal No. 5)
The Company's Restated Articles of Incorporation need to be amended in
order to provide for the following:
1. To provide sufficient shares for a 100:1 stock split.
2. To provide an adequate trading volume of shares to support the
future growth of the Company.
3. To grant to the Board of Directors the authority to set the
preferences, limitations and relative rights of any class of shares before the
issuance of that class or one or more series within a class.
4. To remove outdated language from the existing Article V. Said
language was adopted April 23, 1996 to provide at that time for a reverse stock
split and is now redundant.
The specific language is contained in Exhibit B and you are encouraged
to read it.
Board Recommendation
The Board of Directors recommends a vote FOR the amendment of the
restated Articles of Incorporation.
<PAGE>
1998 STOCK OPTION PLAN
----------------------
(Proposal No. 6)
The Board of Directors has adopted a Stock Option Plan having the same
terms as the Plan which had been in effect for ten prior years. Said Plan
expired in 1998. The full text of the 1998 Plan is included as Exhibit C.
Board Recommendation
The Board of Directors recommends a vote FOR the adoption of the 1998
Stock Option Plan.
<PAGE>
OTHER MATTERS
-------------
While the Notice of Special Meeting of Shareholders provides for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than those referred to above.
SHAREHOLDER PROPOSALS
---------------------
Any shareholder proposals must be made in person at the meeting after
providing proper identification as a shareholder.
FINANCIAL AND OTHER INFORMATION
-------------------------------
Enclosed with this information statement is a copy of the Company's
annual report to the Securities and Exchange Commision on Form 10-K for the
fiscal year ended December 31, 1997.
By Order of the Board of Directors
Fred J. Kupel
Assistant Secretary
July 29, 1998
<PAGE>
EXHIBIT INDEX
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A. Terms of Preferred Shares to be issued to creditors.
B. Proposed Amendment to The Restated Articles of Incorporation.
C. 1998 Stock Option Plan.
D. Annual Report on Form 10-K for the year ended December 311, 1997.
<PAGE>
EXHIBIT A
TERMS OF PREFERRED STOXK
ENCORE GROUP, INC.
Series B Preferred Stock
Certificate of Designation
The relative rights, preferences, privileges, restrictions, and other
matters relating to the class of shares of capital stock of the Encore Group,
Inc. (the "Corporation") known as Series B Preferred Stock are as follows:
1. Voting Rights. Except as otherwise expressly provided or required by law,
Series B Preferred Stock shall have no power to vote on any question or in any
proceeding, or to be represented at or to receive notice of any meeting of the
stockholders of the Corporation.
2. Dividends.
(a) The holders of Series B Preferred Stock shall not be entitled to
receive any dividends.
(b) So long as any shares of Series B Preferred Stock are outstanding,
no dividend, whether in cash or property, shall be paid or declared, nor shall
any other distribution be made on the common stock of the Corporation. The
provisions of this paragraph 2(b) shall not apply to a dividend payable in
common stock or to the repurchase of any outstanding common stock by the
Corporation.
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, the holders of Series B Preferred
Stock shall be entitled to receive the amount of $100.00 per share for each
share of Series B Preferred Stock then held by them; thereafter, the remaining
assets of the Corporation shall be distributed in equal amounts per share to the
holders of common stock.
(b) If upon the occurrence of any such event the assets and funds thus
distributed among the holders of Series B Preferred Stock shall be insufficient
to permit the payment to such holders of the full preferential amounts
aforesaid, then the assets and funds of the Corporation legally available for
distribution shall first be distributed ratably among the holders of Series B
Preferred Stock.
(c) For purposes of this paragraph 3, a liquidation, dissolution, or
winding up of the Corporation shall be deemed to be occasioned by, or to
include, the Corporation's sale of all or substantially all of its assets or
acquisition of the Corporation by another
<PAGE>
entity by means of merger or consolidation resulting in the exchange of more
than fifty percent (50%) of the outstanding shares of the Corporation for
securities or consideration issued, or caused to be issued by the acquiring
entity within a twelve (12) month period.
4. Redemption.
(a) Pursuant to mutually acceptable conditions to be agreed upon
between the holders of Series B Preferred Stock and the Corporation, Series B
Preferred Stock shall be callable by the Corporation, at the sole discretion of
the Corporation's board of directors, in whole or in part (subject to statutory
restrictions on redemption rights under Oregon law) on and at any time after May
31, 1999. The redemption price shall be $100.00 for each share of Series B
Preferred Stock, as adjusted for stock splits, reclassifications and stock
dividends.
(b) In case of only a partial redemption of outstanding Series B
Preferred Stock, the Corporation shall effect such redemption pro rata among all
the then holders of Series B Preferred Stock.
(c) At least thirty (30) days prior to the date fixed for any
redemption of Series B Preferred Stock (the "Redemption Date"), a written notice
shall be mailed to each holder of record addressed to such holder at his post
office address as shown on the records of the Corporation, notifying such holder
of the redemption, stating the Redemption Date and requiring such holder to
surrender to the Corporation at the place designated his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
(d) Each holder of Series B Preferred Stock to be redeemed shall
present and surrender his certificate or certificates representing such Series B
Preferred Stock to the Corporation at the place designated in the Redemption
Notice, and thereupon the Redemption Price of such shares shall be payable to or
on the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
cancelled. From and after the Redemption Date, unless default is made in the
payment of the Redemption Price, all rights of the holders of the Series B
Preferred Stock so redeemed, as shareholders of the Corporation, except the
right to receive the Redemption Price, shall cease, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(e) Series B Preferred Stock may not be redeemed or repurchased except
as provided in this paragraph 4.
5. Transfer of Shares. Series B Preferred Stock is non-transferable.
6. Conversion of Series B Preferred. The holders of Series B Preferred Stock
shall have the following conversion rights:
<PAGE>
(a) Right to Convert. Each share of Series B Preferred Stock then
outstanding shall be convertible, after May 31, 2001, at the option of the
holder thereof, into fully paid and nonassessable shares of common stock.
(b) Conversion Ratio. One share of Series B Preferred Stock shall
initially be convertible into one share of common stock. Such initial conversion
ratio shall be subject to subsequent adjustment, as provided below in paragraph
6(d).
(c) Mechanics of Conversion. Each holder of Series B Preferred Stock
who desires to convert the same into shares of common stock shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein the number
of shares of Series B Preferred Stock being converted. Thereupon the Corporation
shall promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of common stock to which such holder is
entitled. If not all shares of Series B Preferred Stock are converted, the
Corporation shall issue a new certificate for any unconverted shares of Series B
Preferred Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the certificates
representing the shares of Series B Preferred Stock to be converted, and the
person entitled to receive the shares of common stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of common stock on such date.
(d) Adjustment for Stock Splits and Reclassifications. The number of
shares of common stock to be issued upon conversion of the Series B Preferred
Stock shall be adjusted for stock splits, reclassifications and stock dividends
occurring after April 30, 1998. The holders of Series B Preferred Stock shall
not, however, be entitled to adjust the number of shares of common stock
deliverable upon conversion for changes due to the issuance of common stock in
return for additional capital contributions or similar consideration.
(e) Notices of Record Date. Until May 31, 2001, in the event of: (i)
any taking by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof, or (ii) any
capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other Corporation, or any
transfer of all or substantially all of the assets of the Corporation to any
person or any voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, the holders of Series B Preferred Stock shall not be entitled
to notice. After May 31, 2001, the Corporation shall mail to each holder of
Series B Preferred Stock, at least thirty (30) days prior to the record date
specified therein, a notice of the above described events specifying: (A) the
date on which any such record is to be taken; (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective; and, (C) the date, if
any, that
<PAGE>
is to be fixed as to when the holders of record of common stock (or other
securities) shall be entitled to exchange their shares of common stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
(f) No Dilution or Impairment. The Corporation shall not amend the
Articles of Incorporation nor participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
carrying out all such actions as may reasonably be necessary or appropriate to
protect the conversion rights of the holders of the Series B Preferred Stock
against dilution (as contemplated herein) or impairment.
7. Registration of Common Stock. The Corporation shall take all reasonable steps
necessary to register and maintain registration of the common stock underlying
the conversion rights granted hereunder, under the Securities Act of 1933, as
amended, and similar provisions of applicable state securities or "Blue Sky"
laws.
<PAGE>
EXHIBIT B
PROPOSED AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
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 Ten Million Five Hundred Thousand (10,500,000) shares
divided into Ten Million (10,000,000) shares of common stock and Five Hundred
Thousand (500,000) shares of preferred stock.
(b) The Board of directors may determine the preferences, limitations
and relative rights of any class of shares before the issuance of any shares of
that class or one or more series within a class.
(c) Upon the filing of these restated Articles of Incorporation, the
Company shall promptly issue to common stock shareholders of record date as July
24, 1998, additional shares of common stock sufficient to aggregate the total
number of shares held by each such shareholder to 100 times the number of shares
held of record as of July 24, 1998. Such additional shares shall be issued on a
single certificate containing a total number of shares equal to 99 new shares
for each one share held as of thr record date."
<PAGE>
EXHIBIT C
The Encore Group, Inc.
1998 Stock Option Plan
1. Purpose of the Plan
The purpose of this 1998 Stock Option Plan ("Plan") is to establish and
further the long-term growth of The Encore Group, Inc. ("Company") by offering
stock options to purchase the Company's common stock ("Common Stock") to those
key employees and directors of the Company and its subsidiaries who are and will
be responsible for planning and directing such growth. The Plan is intended to
aid in attracting and retaining such key employees and directors of outstanding
abilities and specialized skills. "Subsidiary" means any corporation other than
the Company in an unbroken chain of corporations beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing more than 50 percent of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
2. Term of the Plan
Subject to ratification of the Plan by the shareholders, the Plan shall
become effective June 25, 1998, and option grants under the Plan may be made
from and after such effective date until such time as the Plan may be terminated
by the Company's Board of Directors ("Board") in their sole discretion or as
hereinafter provided.
3. Administration of the Plan
(a) Committee. The Plan shall be administered by a stock option
committee of three or more persons, all of who shall be disinterested, or by
such other committee as the board may designate ("Committee). If the Committee
so designated is not fully disinterested, then the Committee's stock option
recommendations for officers (who are not also directors) shall be ratified by
the full Board acting as a body, a majority of whom are disinterested. For
purposes of the Plan, a person is "disinterested" upon satisfying the
requirements of the applicable rules of the Securities and Exchange Commission
including, without limitation, Rule 16b-3 (or its successor) of such Commission.
(b) Powers. Subject to the provisions of the Plan, the Committee shall
have full and final authority in its discretion to determine the persons
eligible to participate in the Plan from the class of persons referred to in
Section 1, the number of shares to be optioned, the consideration for which
options shall be granted, the time or times when such options become
exercisable, the nature of such options, and the terms and conditions of the
options granted. The Committee shall also have the sole authority to interpret
the Plan to establish and revise rules and regulations relating to the Plan, to
delegate such responsibilities or duties as it deems desirable, and to make any
other determination which it believes necessary or advisable for the
administration of the Plan.
(c) Quorum. A majority of the Committee shall constitute a quorum. The
acts of the majority of the members of the Committee present at any meeting at
which a quorum is present (or acts approved in writing by a majority of the
Committee) shall be acts of the Committee.
(d) Types of Option. The Committee shall have the authority under this
Plan to grant options which are intended to qualify as incentive stock options,
under Section 422A of the Internal Revenue Code, or, in the alternative, stock
options which are not intended to qualify as incentive stock options. In the
latter case, the option grant and the underlying agreement shall specifically
state that the option is not intended to qualify as an incentive stock option.
Page 1
<PAGE>
4. Shares Available for Options
Subject to the provisions of Section 9 of the Plan, the aggregate
number of shares of Common Stock of the Company for which options may be granted
under this Plan shall be fifteen hundred (1,500) shares.
The shares to be delivered upon exercise of options under this Plan
shall be made available from the authorized but unissued shares of such Common
Stock. If an option granted under this Plan shall expire or terminate without
having been exercised in full, the shares subject to such option shall become
available for use under the Plan.
5. Terms and Conditions of Stock Options
Stock options granted under the Plan, including those qualified under
IRC ss. 422A as incentive stock options and nonqualified stock options, shall be
subject to the following terms and conditions:
(a) Allotment of Shares. The Committee may from time, in its sole
discretion and subject to the provisions of the Plan, grant to participants
options to purchase shares of the company's Common Stock. Options may be
allotted to participants in such amounts as the Committee in its sole
discretion, may from time to time determine. However, to the extent that any
option granted to a participant is intended to be an incentive stock option, the
aggregate fair market value (determined as of the time the option is granted) of
the Common Stock subject to such incentive stock option in any calendar year
under the Plan shall not exceed $100,000 plus any unused limit carryover to such
year. If $100,000 exceeds the aggregate fair market value (determined as of the
time the option is granted) of the Common Stock for which a participant was
granted incentive stock options in any calendar year under the Plan, one-half of
such excess shall be an unused limit carryover to each of the three succeeding
calendar years. The amount of the unused limit carryover from any calendar year
which may be taken into account in any succeeding calendar year shall be the
amount of such carryover reduced by the amount of such carryover which was used
in prior calendar years. The amount of incentive stock options granted during
any calendar year shall be treated as first using up the $100,000 limitation and
then shall be treated as using up any unused limit carryovers to such year in
the order of the calendar years in which the carryovers arose.
(b) Option Price. The option price per share of Common Stock with
respect to each option shall be determined and approved by the Committee, but
shall not be less than one hundred percent (100%) of the fair market value of
the Common Stock on the date the option is granted, such fair market value to be
determined by the Committee. Without limiting the foregoing, such value may be
the average of the bid and asked price of the Common Stock on the date of option
grant as reported in the NASDAQ System as long as such shares are traded in the
over-the-counter market. In the case of the grant of an incentive stock option
to an individual who, at the time of the grant, owns more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company, such
price per share shall not be less than 110 percent of the fair market value of
the Common Stock on the date of grant of the option.
(c) Option Period. The period during which an option may be exercised
shall be determined by the Committee, provided, however, that in no event shall
an incentive stock option be exercisable after the expiration of ten years from
the date such option was granted, and provided further that in the case of the
grant of an incentive stock option to an individual who, at the time of the
grant, owns more than ten percent of the total combined voting power of all
classes of stock of the Company, in no event shall such option be exercisable
more than five years from the date of the grant. Options may be made exercised
in part from time to time after they become exercisable. The maturity of any
installation or installment may be accelerated at the discretion of the
Committee.
Page 2
<PAGE>
(d) Termination of Employment. No option may be exercised after the
termination of employment of directorship of an optionee with the Company or a
parent or subsidiary of the Company, except that:
(i) in the case of options which are not incentive stock
options, if such termination of employment is:
(A) upon retirement at any age entitling the optionee to a
retirement benefit under the Company's retirement program; or
(B) due to disability; or
(C) otherwise with the approval of the Committee and set forth
in the Stock Option Agreement for such optionee, any such options
held by the optionee which are then exercisable, may be exercised
by him or her during the term of the option notwithstanding such
termination and, in all other events, may be exercised by him or
her within three months after such termination;
(ii)in the case of incentive stock options, if such termination is
due to disability, any options held by the optionee which are then
exercisable by him or her, or which by acceleration become exercisable,
may be exercised by him or her within one year after such termination
and in all other events the incentive stock option may be exercised by
him or her within three month after such termination; and
(iii) in the event of the death of an optionee (whether during or
after the termination of his of her employment) any options held by the
optionee, whether or not they are incentive stock options, which are
then exercisable, or which by acceleration become exercisable, may be
exercised within nine months after his or her death by the person or
persons entitled to exercise such options.
If, during an authorized leave of absence from employment, any
installment under any option becomes exercisable, it may not be exercised during
such period. After return to active employment, any unexpired options which have
become exercisable may be exercised. Termination of the leave of absence by
death or reasons other than return to active employment shall constitute
termination of employment for the purposes of clauses (i), (ii) and (iii) above.
(e) Other Terms and Conditions. Except as provided in this Section 5,
each option shall become exercisable in whole or in part only after six months
(or such longer period as determined by the Committee) of continuous employment
or directorship with the Company or a subsidiary immediately following the date
the option is granted. Optionees electing to exercise an option shall give
written notice to the Company of such election and shall tender the purchase
price for the number of shares to be purchased.
With respect to an incentive stock option, the Committee shall specify
such terms and conditions and other provisions as the Committee may determine to
be necessary or desirable in order to qualify such option as an "incentive stock
option" within the meaning of Section 422A of the Internal Revenue Code.
6. Surrender of Options
Optionees who are granted an option may, if provided by the Committee
at the time of grant, at any time such option is exercisable, surrender up to 50
percent of the shares subject to such option and receive, as full payment in
consideration therefor, an amount equal to the difference obtained by
subtracting the option price of the surrendered shares from the fair market
value of such shares on the date of surrender. Such payment shall be made in
shares of Company Common Stock, valued at fair market value on the date of
surrender. Any such surrender shall be subject to applicable rules of the
Securities and Exchange Commission.
Page 3
<PAGE>
7. Right to Continued Employment
Participation in the Plan shall not confer upon an optionee any right
to continue his or her directorship or employment or interfere in any way with
the right of the Company or its subsidiaries to terminate the employment of an
optionee at any time. The transfer of an optionee to or from a subsidiary of the
company shall not constitute a termination of employment for purposes of the
Plan and an optionee's approved leave of absence shall not be considered a
termination of employment. An optionee shall have not rights as a shareholder
with respect to the shares subject to this Plan until the option is exercised
(or surrendered) and the certificate or certificates for such shares have been
issued to the optionee.
8. Nonassignabilty
No option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution of the state or country of his
or her domicile at the time of death, and during his or her lifetime the option
shall be exercisable only by the optionee, except as otherwise provided below in
this Section 8.
9. Adjustment
In the event there is a change in the Common Stock of the Company
occasioned by the payment of stock dividends or by a split up or split down of
such stock, or by such other act designated by the Committee, then the number of
shares available for option, the shares subject to option, and the option
prices, shall be appropriately adjusted by the Committee.
10. Amendment of the Plan
The Board may at any time amend, suspend, or terminate the Plan, except
that no such action shall affect options already granted without the consent of
the optionee unless such actin is permitted in this Section 10 or in Section 12.
No amendment shall become effective without appropriate shareholder approval
which would increase the aggregate number of shares appropriated for the Plan.
The Board may amend the Plan or underlying options if such action is necessary
to maintain the intended compliance with the Internal Revenue Code and
applicable securities laws and all rules and regulations associated with either
such body of law.
11. Conditions Precedent to Option Grants
The obligations of the Company under this Plan shall be subject to the
approval of such state or federal authorities or agencies, if any, as any have
jurisdiction in the matter. The Company will use its best efforts to take such
steps as may be required by state or federal law or applicable regulations,
including rules and regulations of the Securities and Exchange Commission in
connection with the granting of any option hereunder or the issuance and sale of
any shares purchased upon the exercise of any option.
11. Effective Date of the Plan
The effective date of the Plan is June 25, 1998.
<PAGE>
Page 4
<PAGE>
EXHIBIT D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
--------------- --------------
Commission file Number: 0-4563
THE ENCORE GROUP, INC.
PO Box 69536
Portland, Oregon 97201
I.R.S. Employer Identification Number: 93-0580867
Incorporated in the State of Oregon
Telephone number: (503) 221-4255
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, without par value
(Title of class)
Indicate by check whether the Registrant: (1) filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [ ]
State issuer's revenues for its most recent fiscal year: $0
State the aggregate market value of the voting stock held by
nonaffiliates computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within 60
days prior to the date of filing: nil aggregate market value as of
December 31, 1996, based on the fact that no stock was traded.
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 17,011 shares of
Common Stock, without par value, on June 23, 1998
----------
The total number of pages contained in this Form 10-K is 29.
The Exhibit Index is located at sequentially numbered page 15.
<PAGE>
INDEX TO FORM 10-K
For the year ended December 31, 1996
PART I Page
----
Item 1. Business 3
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 7
PART III
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 9
Item 12. Security Ownership of Certain Beneficial Owners and
Management 10
Item 13. Certain Relationships and Related Transactions 10
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 11
Index to Exhibits 13
Financial Statements 14
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Company Overview
- ----------------
Registrant's only operating subsidiary, VDO-Pak, Inc., Port Orange,
Florida, ceased operations in August 1996. Registrant ceased operations in
November 1996. Subsequently, on February 28, 1997, Encore vacated its leased
premises at 4800 SW Macadam, Suite 100, Portland, Oregon. Encore currently
utilizes a post office box and a telephone voice messaging service for its
communications. Management currently is attempting to complete the resolution of
various creditor disputes in order to create a stable going-concern basis for
the Company. In March of 1998 the Company acquired an operating activity,
Parsons Industries, Inc. ("Parsons") of Ashland, Oregon. Parsons is a secondary
wood products manufacturer doing business under the trade style Parsons Pine.
Parsons is currently operating at a modest loss.
Encore is the successor corporation of American Guaranty Financial
corporation (formerly American Guaranty Life Insurance Company), which
originally experienced financial difficulties beginning in the late 1970's due
to extremely unprofitable investments in ill-chosen development projects.
Although the Registrant was once a company of sizable proportions, the
unprofitable investments were disastrous. In 1989 the net worth of the company
was essentially depleted. In addition to the losses, the company was also
involved in substantial litigation regarding failed operations.
In 1989 approximately one-third of Registrant's common stock was
acquired by Bruce L. Engel. New management was installed and efforts were set in
motion to resolve the litigation and rebuild the company. Registrant acquired
VDO-Pak, Inc., Port Orange, Florida, a supplier of power packs, rechargeable
batteries and accessories for cellular telephones. A bank loan of approximately
$1,200,000 was arranged, secured by VDO-Pak's assets, accounts receivable and
inventory. The loan, from the Bank of California, now known as the Union Bank of
California, was guaranteed by registrant's controlling shareholder.
Also in 1989, Registrant acquired Vidcom Manufacturing, Inc., Livonia,
Michigan, a fabricator of nickel-cadmium batteries for cellular phones. In 1991
Vidcom Manufacturing, Inc. was closed due to the lack of a customer base.
Registrant changed its name to The Encore Group, Inc. in 1990.
From 1992 through 1995 Registrant conducted a series of activities
devoted to clearing up unresolved legal matters and attempting to strengthen the
company. In 1995, Encore approached the bank and offered to satisfy the loan on
a reduced and modified basis. Throughout the calendar year 1996 the bank gave
continuing assurances that the settlement proposal would be accepted. Based upon
these statements, Encore continued operating VDO-Pak and prepared to attract new
capital by securing shareholder approval of a 1 for 500 reverse stock split. In
the second half of 1996 the bank reneged on its acceptance of the restructuring
proposal.
3
<PAGE>
On December 6, 1996, the bank reversed itself again and granted a
settlement. However, by this time both VDO-Pak, Inc. and Encore were shut down
and insolvent.
Efforts to Revive the Business.
- ------------------------------
Open claims with the Internal Revenue Service and the Pension Benefit
Guarantee Corporation have been resolved. Certain creditors of VDO-Pak, Inc,
have settled their claims against the Company. Discussions are continuing with
other creditors. Management is attempting at this time to secure sufficient
working capital to support the continuing activities of the Company.
The operation of Parsons is expected to provide some working capital at
such time that the subsidiary is profitable.
There is no assurance that adequate working capital will be available.
ITEM 2. DESCRIPTION OF PROPERTIES
The company has no facilities or premises.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently subject to any material litigation nor, to
the Company's knowledge, is any material litigation threatened against the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
4
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Price Range of Common Stock:
1997 1996
--------------- ---------------
High Low High Low
----- ----- ----- -----
First Quarter Not traded $0.05 $0.05
Second Quarter Not traded Not traded
Third Quarter Not traded Not traded
Fourth Quarter Not traded Not traded
No dividends have been paid since a 1983 stock dividend, and no cash or
other dividends are contemplated for the foreseeable future.
As of June 23, 1997, there were 211 record holders of the Registrant's
common stock holding 17,011 shares.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 0 $ 749 $ 2,015 $ 3,113 $ 2,919 $ 3,590
======== ======== ======== ======== ======== ========
Net income (loss) (50) $ 693 $ (384) $ 55 $ (193) $ 134 (1)
======== ======== ======== ======== ======== ========
Net income (loss) per
common share: (1) $ (5.09) $ 70.57 $(39.10) $ 5.60 $(19.65) $ 13.65
======== ======== ======== ======== ======== ========
Common shares(pro forma) 9,820 9,820 9,820 9,820 9,820 9,802
======== ======== ======== ======== ======== ========
Cash 2 $ 10 $ 8 $ 31 $ 30 $ 36
Fixed assets, net 0 15 8 19 42 59
Other assets 0 9 1,036 1,304 1,391 1,630
-------- -------- -------- -------- -------- --------
Total assets 2 $ 34 $ 1,052 $ 1,354 $ 1,463 $ 1,725
======== ======== ======== ======== ======== ========
Current liabilities 322 $ 294 $ 1,709 $ 1,645 $ 1,849 $ 1,918
Pension liability 0 267 248 176 105 105
-------- -------- -------- -------- -------- --------
Total liabilities 322 $ 561 $ 1,957 $ 1,821 $ 1,954 $ 2,023
======== ======== ======== ======== ======== ========
Total
stockholders deficit (320) $ (527) $ (905) $ (467) $ (491) $ (298)
======== ======== ======== ======== ======== ========
Cash dividends per common
share $ - $ - $ - $ - $ - $ -
======== ======== ======== ======== ======== ========
</TABLE>
- --------
(1) In 1991, the Company ceased operations and liquidated the remaining assets
of Vidcom Manufacturing, Inc. (Vidcom), a wholly owned subsidiary located in
Livonia, Michigan. Vidcom's liquidation resulted in a restructuring charge of
$323 in the year ended December 31, 1991. During 1992, Vidcom was dissolved and
its remaining obligations were discharged, resulting in a restructuring gain of
$217 in the year ended December 31, 1992.
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company has been inoperative since November 1996. To date the
Company's major shareholder has attempted to revive the Company by settling
outstanding claims and seeking opportunities for working capital and viable
business activities. Outstanding claims by the Internal Revenue Service and the
Pension Benefit Guarantee Corporation have been settled and creditor settlements
are in process. In March 1998 Parsons Industries, Inc. was aquired for common
stock of the Registrant and is expected to contribute cash flow to the parent
organization.
In June 1998 the Company leased a small office location in Tigard,
Oregon.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item
are included on pages F-1 to F-16 of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
7
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant's Restated Articles of Incorporation and Bylaws provide
for a Board of Directors consisting of not less than three nor more than seven
directors, with the exact number within this range to be determined from time to
time only by the Board of Directors. The current number of directors is six. All
directors stand for election annually. Officers are elected to a term of one
year or less, serve at the pleasure of the Board of Directors, and are entitled
only to such compensation as is fixed by the Board.
The Directors and Executive Officers of the Registrant as of December
31, 1995, are as follows:
Director Officer Positions and/or
Name Since Since Offices Held Age
Bruce L. Engel 1988 1991 Director; President and 58
Chief Executive
Teri E. Engel 1989 1989 Director; Corporate Secretary 49
Robert G. Fligg 1988 - Director 49
Fred J. Kupel 1995 1998 Director; Vice President of 69
Finance and Chief Financial
Officer, Assistant Secretary
Robert J. Gardiner 1998 - Director 58
Michael J. Rasmussen 1998 - Director 37
The following family relationships exist among the directors or
executive officers: Bruce L. Engel and Teri E. Engel are husband and wife; Mr.
Fligg's spouse is a niece of Mr. Engel.
Mr. Engel was elected President and Chief Executive Officer on March
19, 1991. Mr. Engel's principal employment was as President and Chief Executive
Officer of WTD Industries, Inc., Portland, Oregon, from its inception in 1983
until his retirement in 1998.
Ms. Engel has been a director and Secretary of the Company since 1989.
Mr. Fligg was employed by Dee Forest Products, Inc. from March 1991 to
July 1997 as Chief Financial Officer. Subsequently, Mr. Fligg has served
Advanced Navigation & Positioning Corporation as Chief Financial Officer. Both
firms are in Hood River, Oregon. He was employed as an officer of Registrant
from 1988 to 1991.
Mr. Gardiner is the 1958 founder and subsequent President of MRK
Investments, which specializes in residential and commercial real estate and
property management. He was employed by WTD Industries, Inc. from 1985 to 1998
as Corporate Pilot. Mr. Gardiner is a licensed Commercial Pilot holding an
Airline Transport Pilot's rating in fixed wing and rotorcraft.
Mr. Kupel has been an independent management consultant for over ten
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.
8
<PAGE>
Mr. Rasmussen is the President of Parsons Industries, Inc., a secondary
wood products company located in Ashland, Oregon. Parsons Industries, Inc. is a
wholy-owned subsidiary of Registrant. Prior to his position with Parsons
Industries, Inc. Mr. Rasmussen served for one year as a Business Development
Executive with GE Capital specializing in small business. For the 14 prior years
Mr. Rasmussen worked in lending and management positions with Bank of America
and U.S.National Bank of Oregon.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table shows the cash and non-cash compensation paid
during 1997 to the company's Chief Executive Officer. Directors received no
compensation for their services in 1997.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation(1) --------------------
------------------------------ Number of Securities
Name and Principal Position Year Salary($) Bonus($) Underlying Options
------------------------------- ------ ---------- ---------- --------------------
<S> <C> <C> <C> <C>
Bruce L. Engel 1997 0 0 0
President and 1996 0 0 0
Chief Executive Officer 1995 0 0 0
</TABLE>
No executive officer received cash compensation in 1997 in excess of $100,00.
Option Grants in Last Fiscal Year
- ---------------------------------
a). No options were granted in 1997.
Options Percent of Exercise Expiration
Name Granted Total Options Price Date
----- ----------- ------------- -------- ----------
b.) Option Plan Grants in 1998 (remainder of grants under old Plan):
Bruce L. Engel 1,000 8.7 $10.00 4/20/2008
Teri E. Engel 80 .7 $10.00 4/20/2008
Robert G. Fligg 80 .7 $10.00 4/20/2008
Robert J.Gardiner 80 .7 $10.00 4/20/2008
Fred J. Kupel 80 .7 $10.00 4/20/2008
Michael J. Rasmussen 80 .7 $10.00 4/20/2008
c.) Options granted in connection with the March 31, 1988, acquisition of
Parsons Industries, Inc.:
Bruce L. Engel &
Teri E. Engel 500 4.4 $10.00 4/20/2008
Robert J.Gardiner &
Brenda J.Gardiner 4,750 41.7 $10.00 4/20/2008
Michael J. Rasmussen 4,750 41.7 $10.00 4/20/2008
----------- ------------- -------- ----------
11,400 100.0 $10.00
9
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership as of June 23, 1998 of
the Company's Common Stock by (i) each director, (ii) each beneficial owner of
more than 5 percent of the Common Stock, (iii) the Named Executive Officers and
(iv) all directors and officers as a group. Except as otherwise specifically
noted, each person noted below has sole investment and voting power with respect
to shares indicated.
Amount and Nature
Beneficial Owner of Beneficial Ownership(1) Percent of Class
- -------------------- -------------------------- ----------------
Bruce L.Engel 3,367 (2) 19.8%
Teri E.Engel 3,017 (2) 19.8
Robert G. Fligg 500 2.9
Robert J. Gardiner 762 4.5
Fred J. Kupel 640 3.8
Michael J. Rasmussen 750 4.4
All Directors and
officers as a group
(6 persons) 5,669 35.4
Union Bank of California 1,005 (3) 5.9%
(1) Beneficial Ownership includes sole voting and investment power as to the
shares.
(2) Includes shares held individually by Mr.Engel and shares held jointly with
spouse.
(3) As a consequence of the December 6, 1996, Settlement Agreement between the
Company, Bruce and Teri Engel, and the Union Bank of California, said Bank
received 1,005 shares of common stock previously held by the Engels. The said
Bank is using Cede and Co. as a nominee to hold these shares, to the best of
the company's knowledge. The Company is unaware of any reports of ownership
having been filed by the Union Bank of California.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fred J. Kupel served the Company as an outside consultant during 1997
and received compensation of $6,000 in the form of 600 shares of common stock.
This amount is less than the minimum required for disclosure purposes. The
shares were not issued until 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's officers, directors and persons who own more than 10
percent of the Common Stock file with the SEC initial reports of beneficial
ownership on Form 3 and reports of changes in beneficial ownership of Common
Stock and other equity securities of the Company on Forms 4 and 5. Officers,
directors, and greater than 10 percent shareholders of the Company are required
by SEC regulations to furnish to the Company copies of all Section 16(a) reports
that they file. To the Company's knowledge, based solely on reviews of such
reports furnished to the Company and written representations that no other
reports are required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10 percent beneficial owners were complied
with during the fiscal year ended December 31, 1997.
10
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The following financial statements of the Registrant are contained in
this report:
INDEPENDENT AUDITOR'S REPORT 14
FINANCIAL STATEMENTS
Balance sheets 15
Statements of operations 16
Statements of retained deficit 17
Statements of cash flow 18
Notes to financial statements 19
(a)(2) Exhibits:
Exhibit Description
27 Financial Data Schedule(1)
(b) Reports on Form 8-K. A current report on Form 8-K, describing the
acquisition of Parsons Industries, Inc. and a Board Resolution
approving a quasi-reorganization of the Company was filed April 20,
1998.
- ----------
(1) This schedule has been submitted in the electronic form
prescribed by EDGAR and is included here by reference.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE ENCORE GROUP, INC.
Date: 7/17/98 /s/ Bruce L. Engel
Bruce L. Engel
President, Principal Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the followed persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: 7/17/98 Kenneth L. Wright
Executive Vice President and Chief Financial Officer
Mr. Wright resigned as an Officer and Director as
of December 15, 1997
Date: 7/17/98 /s/ Bruce L. Engel
--------------------
Bruce L. Engel
Director
Date: 7/17/98 /s/ Fred J. Kupel
--------------------
Fred J. Kupel
Director
Date: 7/17/98 /s/ Robert G. Fligg
--------------------
Robert G. Fligg
Director
Date: 7/17/98 /s/ Teri E. Engel
--------------------
Teri E. Engel
Secretary and Director
12
<PAGE>
THE ENCORE GROUP, INC.
INDEX TO EXHIBITS
27 Financial Data Schedule
This schedule has been submitted in the electronic form prescribed by EDGAR.
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
The Encore Group, Inc.
We have audited the accompanying balance sheet of The Encore Group, Inc. as of
December 31, 1997. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
Because we were not engaged to audit the statement of income and retained
earnings, and cash flows, we did not extend our auditing procedures to enable us
to express an opinion on results of operations and cash flows for the year ended
December 31, 1997. Accordingly, we express no opinion on them.
In our opinion, the combined balance sheet presents fairly, in all material
respects, the financial position of The Encore Group, Inc. as of December 31,
1997.
The accompanying balance sheet has been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
under existing circumstances, there is substantial doubt about the ability of
The Encore Group, Inc. to continue as a going concern at December 31, 1997.
Management's plans in regard to that matter are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Moss Adams LLP
-----------------
MOSS ADAMS
Beaverton, Oregon
February 19, 1998
14
<PAGE>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
DECEMBER 31,
1997 1996
----------- ----------
(Audited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 2 $ 10
Accounts receivable, net 0 (1)
Inventory 0 0
Prepaid expenses 0 10
----------- ----------
Total current assets 2 19
----------- ----------
NON-CURRENT ASSETS
Land held for sale 0 15
Fixed assets, net 0 0
Goodwill, net 0 0
----------- ----------
0 15
----------- ----------
Total assets $ 2 $ 34
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 269 $ 275
Accrued liabilities 41 19
Note payable 12 0
----------- ----------
Total current liabilities 322 294
PENSION LIABILITIES 0 267
----------- ----------
Total liabilities 322 561
----------- ----------
STOCKHOLDERS' DEFICIT
Common stock without par value,
50,000 authorized,
9,802 outstanding 6,113 6,113
Series B Preferred stock $100 par value
5,000 authorized, 1,000 outstanding 100
Additional paid-in capital 20,975 20,975
Retained deficit (27,508) (27,458)
Pension liability adjustment - (157)
----------- -----------
Total stockholders' deficit (320) (527)
----------- -----------
Total liabilities and
stockholders' deficit $ 2 $ 34
=========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
YEAR ENDED DECEMBER 31,
1997 1996 1995
(Audited) (Unaudited) (Audited)
<S> <C> <C> <C>
SALES $ - $ 749 $ 2,015
LESS COST OF SALES - 756 1,283
---------- ---------- ----------
GROSS PROFIT - (7) 732
---------- ---------- ----------
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 65 339 808
---------- ---------- ----------
Operating income (loss) (65) (346) (76)
---------- ---------- ----------
NON-OPERATING REVENUES & EXPENSES
Gain on pension settlement 12
Other income 3 - -
Write-down of real estate investment - - (45)
Settlement of note payable and adjustments 1,049
Other expense - - (112)
Interest expense - (10) (151)
---------- ---------- ----------
Total non-operating revenues & expenses 15 1,039 (308)
---------- ---------- ----------
NET INCOME (LOSS) $ (50) $ 693 $ (384
========== ========== ==========
PER SHARE
Net income (loss) per share $ (5.09) $ 70.57 $ (39.10)
========== ========== ==========
Average common shares outstanding 9,820 9,820 9,820 (1)
========== ========== ==========
</TABLE>
(1) Pro forma after 1:500 reverse stock split.
The accompanying notes are an integral part of these consolidated
financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except share amount)
COMMON STOCK PREFERRED STOCK ADDITIONAL PENSION
OUTSTANDING OUTSTANDING PAID-IN RETAINED LIABILITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 6,112,848 $ 6,113 - - 20,975 (27,507) (72) (491)
Net income for 1994 - - - - - 55 - 55
Pension liability adjustment - - - - - - (31) (31)
----------- --------- ---------- --------- ----------- ----------- ---------- ---------
Balance, December 31, 1994 6,112,848 $ 6,113 - - 20,975 (27,452) (103) (467)
Net loss for 1995 - - - - - (384) - (384)
Pension liability adjustment - - - - - - (54) (54)
----------- --------- ---------- --------- ----------- ----------- ---------- ---------
Balance, December 31, 1995 6,112,848 $ 6,113 - - $ 20,975 $ (27,836) $ (157) $ (905)
Net gain for 1996 - - - - - 378 - 378
----------- --------- ---------- --------- ----------- ----------- ---------- ---------
Balance, December 31, 1996 (1) 9,820 $ 6,113 - - $ 20,975 $ (27,458) $ (157) $ (527)
Net loss for 1997 - - 100,100 $ 100 - (50) 157 207
----------- --------- ---------- --------- ----------- ----------- ---------- ---------
Balance, December 31, 1997 (1) 9,820 $ 6,113 100,000 $ 100 $ 20,975 $ (27,508) $ - $ (320)
=========== ========= ========== ========= ========== =========== ========== =========
</TABLE>
- ----------
(1) Number of shares after reverse stock split.
The accompanying notes are an integral part of these consolidated
financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
THE ENCORE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEAR ENDED DECEMBER 31,
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net income (loss) $ (50) $ 693 $(384)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gain on settlement of pension liability (11)
Gain on disposal of land (3)
Depreciation 6 13
Allowance for stockholder receivable - 75
Amortization of goodwill - 25
Pension liability adjustment - (54)
Loss (gain) on disposal or writedown of assets - 45
Accounts receivable (1) 292 64
Inventory 200 105
Prepaid expenses and other 4 13 29
Accounts payable (6) (96) 97
Pension liability 19 72
Accrued liabilities 29 (81) (3)
------ ------ ------
Net cash provided by operating activities (38) 1,046 84
------ ------ ------
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Loan to stockholder - (75)
Proceeds from sale of fixed assets 18 (8) -
Purchases of fixed assets - (2)
Closure of facilities, net 202
------ ------ ------
Net cash provided by (used in) investing activities 18 194 (77)
------ ------ ------
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Settlement of note payable (1,238)
Principal payments on notes payable - (30)
Proceeds from short-term notes payable 12
------ ------ ------
Net cash used in financing activities 12 (1,238) (30)
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8) 2 (23)
CASH AND CASH EQUIVALENTS, beginning of year 10 8 31
CASH AND CASH EQUIVALENTS, end of year $ 2 $ 10 $ 8
====== ====== ======
INTEREST PAID $ - $ 10 $ 151
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
18
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and organization - The Company has not operated since August,
1996, at which time the Company ceased operations of its only wholly
owned subsidiary, VDO-Pak, Inc. Subsequent to the closure of VDO-Pak,
Inc., the Company has been involved in various creditor disputes, as
described below. As shown on the accompanying balance sheet the Company
has minimal assets and a net deficit in equity of $320,540. During the
year ended March 31, 1997 and subsequent to year-end, the Company's
management has developed a plan to improve the Company's financial
position. The plan includes efforts to resolve creditor issues
associated with the Company's pension plan and the creditors of
VDO-Pak. A discussion of the steps taken regarding the pension plan and
the VDO-Pak creditors is included in notes two and three, respectively.
Additionally, as described below in note three, the Company has
acquired Parsons Pine in March of 1998. Parsons Pine is a lumber
remanufacturing operation which is currently operating at a modest
loss.
The ability of the Company to continue as a going concern is dependent
upon the achievement of management's plan and an improvement in the
profitability of the Parsons Pine facility. No adjustments have been
made to the financial statements should the Company be unable to
continue as a going concern.
Cash and cash equivalents - The Company considers all highly liquid
investments with a maturity date of three months or less to be cash
equivalents. The Company maintains its cash and cash equivalents in
bank deposit accounts which, at times, may exceed federally insured
limits. The Company has not experienced any losses in such accounts.
The Company believes it is not exposed to any significant credit risk
associated with its cash and cash equivalents.
Use of estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results may differ from these estimates.
19
<PAGE>
NOTE 2 - RETIREMENT PLAN
The Company has a noncontributory defined benefit retirement plan
covering certain former corporate employees. During 1990, the Company
froze the participation in the plan with the intention of eventually
terminating the plan. As of December 31, 1997, the Company was unable
to meet its obligations under the retirement plan. Additionally, the
Company was unable to pay excise taxes imposed by the Internal Revenue
Service (IRS) which were based on the accumulated funding deficiency of
the plan. As such, the Company sought relief from the Pension Benefit
Guaranty Corporation (PBGC) and the IRS. Subsequent to year end a
settlement was reached with the PBGC, by which the plan was terminated
and the Company was relieved of its liability. The settlement required
the company to issue to the PBGC one thousand shares of the Company's
Series B preferred stock, with a $100 par value, options to acquire one
thousand shares of the Company's common stock at $10 per share and
warrants to acquire one thousand of the Company's stock at $100 per
share.
The Company also reached a settlement with the IRS which required the
Company to pay ten percent of the excise taxes assessed for the plan
years ended December 31, 1993, 1994, 1995 and 1996. The final amount to
be paid was $40,613. The settlements with the PBGC and IRS have been
treated as final as of December 31, 1997, and the related impact on
shareholders' equity, accrued liabilities and net income have been
reflected on the December 31, 1997, balance sheet.
NOTE 3 - SUBSEQUENT EVENTS
Subsequent to year end, the company entered into a settlement with
certain creditors of VDO-Pak, Inc., a Florida corporation. Those
creditors represent substantially all of the outstanding trade accounts
payable of the Company at December 31, 1997. The creditors were offered
a cash amount equaling ten percent of the balance due, before interest
and service charges, and Series B preferred shares, with a par value
$100 per share. The number of preferred shares issued was determined by
dividing the remaining debt, after the ten percent cash payment, by
$100. The estimated number of shares to be issued to all creditors is
estimated to be 1,640.
20
<PAGE>
NOTE 3 - SUBSEQUENT EVENTS (continued)
In April, 1998 the Company finalized a stock for stock acquisition of
all the outstanding shares of Parsons Industries, Inc. Parsons
Industries, Inc. operates a facility in Southern Oregon, which
remanufactures pine lumber. Parsons' primary assets consist of accounts
receivable, inventory and fixed assets. Based on unaudited internal
financial statements, assets and liabilities at March 31, 1998 were
approximately $2,864,000 and $2,728,000, respectively. Gross sales for
the year ended December 31, 1998 are estimated to approximate
$6,500,000. Management has estimated the results of Parsons' operations
for the year ended December 31, 1998 to be at break-even. The terms of
the acquisition agreement called for a one-for-one exchange of the
Company's common stock for 6,500 of Parsons 16,500 shares and the
issuance of options for 10,000 shares of the Company's common stock in
exchange for the remaining 10,000 shares of Parsons stock. The options
issued have an exercise price of $10 per share.
NOTE 4 - INCOME TAXES
Statement of Financial Accounting Standard (SFAS) Number 109,
"Accounting for Income Taxes," mandates the assets and liability
approach to determine the income tax provision or benefit. Deferred
income tax assets and liabilities are recognized for the tax
consequences of temporary differences in the carrying value of assets
and liabilities for financial reporting and income tax purposes. There
was no income tax benefit or provision recorded in the current period.
As of March 31, 1997, the Company had a remaining federal net operating
loss carryforward (NOL) of approximately 14,200,000 expiring in 1998
through 2011. Management has assessed the likelihood of utilizing the
NOL as low, and as such, has placed a valuation allowance of 100%
against the benefits associated with this NOL.
21
