ENCORE MARKETING INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of
Shareholders of Encore Marketing International, Inc., a Delaware
corporation (the "Company"), will be held at the Greenbelt
Marriott, 6400 Ivy Lane, Greenbelt, Maryland 20770, on Thursday,
November 21, 1996 at 10:00 a.m., Eastern Standard Time, for the
following purposes as set forth in the accompanying Proxy
Statement:
1. To elect five directors to serve for a term of one
year.
2. To ratify the selection and appointment by the
Company's Board of Directors of Arthur Andersen LLP,
independent certified public accountants, as auditors
for the Company for the year ending May 31, 1997.
3. To approve an amendment to the Company's Director's
Stock Option Plan to increase the number of
authorized shares reserved for issuance from 45,000
shares of common stock to 90,000 shares of common
stock.
4. To transact such other business as may properly come
before the meeting or any adjournments thereof.
Holders of record of the Company's common stock at the
close of business on October 11, 1996 will be entitled to vote at
the meeting and any adjournments thereof.
Stephen Klein, Secretary
Dated: September 27, 1996
Please date and sign the enclosed proxy and return it in
the envelope provided.
<PAGE>
ENCORE MARKETING INTERNATIONAL, INC.
4501 Forbes Boulevard
Lanham, Maryland 20706
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of proxies to be voted at
the Annual Meeting of Shareholders of Encore Marketing
International, Inc., a Delaware corporation (the "Company"), to
be held at the Greenbelt Marriott, 6400 Ivy Lane, Greenbelt,
Maryland 20770, on Thursday, November 21, 1996 at 10:00 a.m.,
Eastern Standard Time, and any adjournments thereof for the
purposes set forth in the foregoing Notice of Annual Meeting of
Shareholders. The shares represented by proxies that are
received in the enclosed form and properly filled out will be
voted in accordance with the specifications made thereon. In the
absence of specific instructions, proxies will be voted in
accordance with the recommendations made herein with respect to
the proposals described in the Proxy Statement. The execution of
a Proxy will in no way affect a shareholder's right to attend the
Annual Meeting and vote in person. Any Proxies executed and
returned by a shareholder may be revoked at any time thereafter
if written notice of revocation is given to the Secretary of the
Company prior to the vote to be taken at the Annual Meeting, or
by execution of a subsequent Proxy which is presented to the
Annual Meeting; or if the shareholder attends the Annual Meeting
and votes by ballot, except as to any matter or matters upon
which a vote shall have been cast pursuant to the authority
conferred by such Proxy prior to such revocation. Broker "non-
votes" and the shares as to which a shareholder abstains are
included for purposes of determining whether a quorum of shares
is present at a meeting. A broker "non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Broker "non-
votes" are not included in the tabulation of the voting results
on the election of directors or issues requiring approval of a
majority of the votes cast and, therefore, do not have the effect
of votes in opposition in such tabulations. Proxies marked as
abstaining with respect to the election of directors will have
the effect of a vote against such proposal. Shareholders of
record at the close of business on October 11, 1996 are entitled
to notice of and to vote at the Annual Meeting or any
adjournments thereof. As of September 27, 1996, the Company had
outstanding 3,231,000 shares of its $.01 par value common stock,
each of which is entitled to one vote. The cost of soliciting
proxies, which also includes the preparation, printing and
mailing of this Proxy Statement, will be borne by the Company.
This Proxy Statement and the enclosed proxy are being mailed on
or about September 27, 1996.
Security Ownership
The only voting security of the Company is its $.01 par
value common stock. The following table sets forth information
as of August 31, 1996 with respect to equity ownership of (i)
each person known by the Company to own beneficially more than
five percent (5%) of the Company's common stock; (ii) each
director, the Chief Executive Officer and the one other most
highly compensated executive officer of the Company and (iii) all
executive officers and directors of the Company as a group.
Number of Shares
Name and Address and Nature of
Percent
of Beneficial Owner Beneficial Ownership (1)
of Class
Patrick Gorman 911,910 (2)(3)(6)
23.9%
4501 Forbes Boulevard
Lanham, Maryland 20706
Martin Gorman 912,805 (2)(3)(6)
23.9%
4501 Forbes Boulevard
Lanham, Maryland 20706
Stanley Plotnick 1,217,840 (2)(3)(4)
31.9%
4501 Forbes Boulevard (6)
Lanham, Maryland 20706
Stephen Klein 487,935 (3)(5)(6)
12.8%
4501 Forbes Boulevard
Lanham, Maryland 20706
Alan Miller --
(7) *
891 Green Place
Woodmere, New York 11598
Stanley Klein --
(7) *
61 Broadway, 18th Floor
New York, New York 10006
Harold O'Keefe --
*
86 Trinity Place
New York, New York 10006
All Executive Officers and Directors
as a Group (6 persons) 3,547,159 (3)(8)
92.8%
* Less than 1%.
Notes:
(1) Except as noted, shares are owned individually and of
record.
(2) Pursuant to a Voting Trust Agreement dated as of April 26,
1990, as amended (the "Voting Trust"), among Patrick J. Gorman,
Martin D. Gorman and Stanley D. Plotnick (collectively, the
"Trustees"), the Trustees have the exclusive right to vote the
shares of common stock held by the Voting Trust for the benefit
of Messrs. Gorman, Plotnick and Stephen Klein, for a term of ten
years. By amendment to the Voting Trust, Messrs. Plotnick and
Klein have the right to vote all shares of Messrs. Patrick and
Martin Gorman to elect all outside directors to the Board as
nominated by Messrs. Plotnick and Klein, and Messrs. Gorman no
longer serve as members of the Board. Any vote that involves the
employment of the Gormans or their service as officers of the
Company, the Trustees or the directors (other than the Gormans)
will be voted as determined by the Gormans. A similar provision
exists with respect to Mr. Plotnick and Mr. Klein. The Trustees
cannot take any action that would diminish or dilute the
interests of the Trustees or Stephen Klein, unless the interests
are diminished or diluted in equal proportions. Shares indicated
as owned by Messrs. Gorman include shares owned of record by
family members and trusts for family members, however, such
shares may be deemed to be beneficially owned by Messrs. Gorman.
(3) Patrick Gorman and Martin Gorman appointed Stanley Plotnick
and Stephen Klein as their proxy, effective January 20, 1994, to
vote all shares of the Company's stock owned by Messrs. Gorman
for a period of ten (10) years upon any matter concerning the
election of nominees to the Board of Directors of the Company.
Therefore, all shares indicated as owned by Messrs. Gorman may be
deemed to be beneficially owned by Messrs. Plotnick and Klein
with respect to the election of nominees to the Board of
Directors.
(4) Includes presently exercisable options to acquire 107,575
shares pursuant to the Company's Incentive Stock Option Plan.
(5) Includes 157,142 shares held by the Voting Trust for Mr.
Klein's benefit. Also includes presently exercisable options to
acquire 40,569 shares pursuant to the Company's 1987 Stock Option
Plan and 106,666 shares pursuant to the Company's Incentive Stock
Option Plan.
(6) As of August 31, 1995, Messrs. Patrick Gorman, Martin
Gorman, Plotnick, and Klein owned 10,500, 15,000, 220,950 and
101,032 shares respectively, of the Company's 4% Series A
Convertible Participating Preferred Stock (the "Preferred
Stock"), representing approximately .6%, .8%, 12.1% and 5.5%,
respectively of the Preferred Stock outstanding. After May 31,
1995 each share of Preferred Stock is convertible into .9166
shares of common stock. Number of shares in table include 9,624,
13,749, 202,523 and 92,606 common shares, respectively, assuming
conversion of the Preferred Stock by Messrs. Patrick Gorman,
Martin Gorman, Plotnick and Klein. Messrs. Patrick Gorman,
Martin Gorman, Plotnick and Klein individually purchased the
Preferred Stock on the open market, and may from time to time
continue to purchase shares of the Preferred Stock on the open
market.
(7) Messrs. Stanley Klein, Alan Miller and Harold O'Keefe, each
has presently exercisable options to acquire 10,001 shares, 5,001
shares and 1,667 shares, respectively, pursuant to the 1992
Director's Stock Option Plan.
(8) Includes presently exercisable options to purchase 271,479
shares and 318,502 convertible shares, held by officers and
directors of the Company as a group.
<PAGE>
ITEM I. ELECTION OF DIRECTORS
A Board consisting of five directors is to be elected at
the
Annual Meeting. Directors will hold office until the next Annual
Meeting of Shareholders or until their respective successor shall
have been duly elected and qualified. The Company has no reason
to believe that any of the nominees will become unavailable to
serve as directors for any reason before the Annual Meeting.
However, in the event that any of them shall become unavailable,
the persons designated as proxy intend to vote for the balance of
those named and reserve the right to substitute another person of
their choice when voting at the Annual Meeting. All of the
nominees are currently serving as directors of the Company and
were elected at the last Annual Meeting of Shareholders or as
otherwise indicated below.
The nominees for election as directors, their ages and
their
present positions are as follows:
Name and Age Principal Occupation
Director Since
Stanley Plotnick (62) Chief Executive Officer, President, 1987
and Chairman of the Board of Directors (1)
Stephen Klein (50) Executive Vice President, General 1990
Counsel and Director (2)
Stanley Klein (62) Director and Attorney (3)
1993
Alan Miller (34) Director and Certified Public
Accountant (4)
1994
Harold O'Keefe (52) Director, Certified Public
Accountant, and Member of
American Stock Exchange (5)
1995
(1) Stanley Plotnick has been with the Company since 1979 and
has been the Company's Chief Financial Officer since 1987. In
January 1994 he became Chairman of the Board, Chief Executive
Officer and President of the Company.
(2) Stephen Klein has been Senior Vice President and General
Counsel of the Company since 1987. In January 1994 he became
Executive Vice President of the Company. He is related to
Stanley Klein as a brother.
(3) Stanley Klein is a partner in the New York City based
general practice law firm of Brauner Baron Rosenzweig & Klein
where he has practiced since 1974. His specialty is taxation.
He is related to Stephen Klein as a brother.
(4) Alan Miller is a Certified Public Accountant. From March
1994 to September 1995 he was Chief Financial Officer of Creative
Technologies Corp., a New York City public company in the
consumer products field. He currently is an independent
consultant.
(5) Harold O'Keefe has been a member of the American Stock
Exchange since 1994. He was with Price Waterhouse from 1969
until 1982, where he was a partner. From 1982 to 1991 he was
Chief Financial Officer, and then Chairman and CEO of Czarnikow-
Rionda Company, Inc., a privately held commodities merchant
company. From 1991 to 1993 he was Chief Operating Officer of
Syratech Corp., currently a publicly held company which
manufactures houseware products. From 1993 to 1994 he was an
independent consultant.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION
OF EACH OF THE NOMINEES.
Information Concerning the Board of Directors.
During the last fiscal year, the Board held two meetings,
of
which one was a regularly scheduled meeting. There is an Audit
Committee, a Compensation Committee and a Stock Option Committee
of the Board of Directors. The Company does not have a standing
nominating committee or a committee which serves nominating
functions. The Audit Committee consists of Harry O'Keefe, Alan
Miller and Stanley Plotnick. It met once during fiscal year
1996. The Compensation Committee consists of Harry O'Keefe, Alan
Miller and Stanley Plotnick, and it met twice during fiscal 1996.
The Stock Option Committee consists of Harry O'Keefe and Alan
Miller. It met twice during fiscal 1996. Each director serving
in fiscal 1996 attended 75% or more of the combined total
meetings of the Board of Directors and the Committees on which he
served. Stephen Klein and Stanley Klein are related as brothers.
The Company retained the law firm of Brauner Baron Rosenzweig &
Klein during fiscal year 1996, and continues to retain it.
Stanley Klein is a partner with that firm. During fiscal year
1996, Alan Miller also served as an independent consultant to the
Company. The Audit Committee is charged with recommending to the
Board independent public accountants as auditors of the Company's
books, records and accounts, reviewing the scope of the audits
performed by such auditors and reviewing and monitoring the
Company's internal accounting procedures. The Compensation
Committee determines any changes in salary and other compensation
for the Company's executive officers and other key employees.
The Stock Option Committee administers the Company's 1992 Non-
Director Employee Stock Option Plan and Incentive Stock Option
Plan.
Executive Compensation
The following table sets forth, for the fiscal years
indicated, all compensation awarded to, earned by or paid to the
chief executive officer ("CEO") and the other two (2) mostly
highly compensated executive officers of the Company other than
the CEO who were executive officers of the Company at the end of
the fiscal year ended May 31, 1996 whose salary and bonus
exceeded $100,000 with respect to the fiscal year ended May 31,
1996.
Summary Compensation Table
Annual Long-Term
Compensation
Compensation
Awards
Securities
Name and Principal Underlying
Position Year Salary Options (#)
Stanley Plotnick
Chief Executive Officer 1996 $320,000 --
1995 320,000 150,000
1994 320,000 --
Stephen Klein
General Counsel 1996 $315,000 __
1995 315,000 150,000
1994 315,000 --
Carl Kampel
Chief Financial Officer (1) 1996 $154,808 --
1995 14,584 (1) --
(1) Mr. Kampel served as the Chief Financial Officer of the
Company from May 1, 1995 to April 22, 1996, at a base
annual
salary of $175,000.
Directors who also serve as an officer or employee of the
Company do not receive compensation for serving on the Board.
Outside directors, who are neither officers nor employees of the
Company, receive a director's fee of $6,000 per year plus $1,000
per meeting attended in compensation for serving on the Board.
In addition, they are eligible to receive stock options pursuant
to the Directors' Stock Option Plan adopted by the Board in
December 1992. Each outside director receives a grant of an
option to purchase 5,000 shares of common stock upon his election
to the Board and an option to purchase 5,000 additional shares
annually thereafter so long as he continues to serve. Each
option vests ratably over a three year period. To date, options
to purchase 45,000 shares have been granted under the Directors'
Plan, with 10,001 of those options having vested by May 31, 1996.
Option Grants During 1996 Fiscal Year
None.
Fiscal Year End Option Values
The following table sets forth certain information
regarding
the options held by executive officers during the last fiscal
year by each of the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of (1)
Value of
Unexercised
Unexercised
Shares Options at
In-the-Money
Acquired May 31, 1996
Options at
on Value Exercisable/ May
31, 1996
Exercise Realized Unexercisable
Exercisable/
Name (#) ($) (#)
Unexercisable
Stanley -- -- 107,575/
$12,102.19/
Plotnick 33,334 $
3,750.08 (2)
Stephen -- -- 147,235/
$47,891.07/
Klein ----33,334
$6,250.13 (3)
(1) Based on the closing price of a share of common stock
($.9375 as reported by the American Stock Exchange on May 31,
1996).
(2) Mr. Plotnick has options to acquire 107,575 shares at $.825
per share. The value of Mr. Plotnick's unexercised in-the-money
options at July 31, 1996 was $12,102.91. However, any shares
which would be acquired on exercise are restricted shares in that
he and other shareholders have agreed that they may sell only
limited amounts of their shares of Company common stock after
May 31, 1995.
(3) Mr. Klein has options to acquire 40,569 shares at $.25 per
share and options to acquire 106,666 shares at $.75 per share.
The value of Mr. Klein's unexercised in-the-money options at
July 31, 1996 was $47,891.07. However, any shares which would be
acquired on exercise are restricted shares in that he and other
shareholders have agreed that they may sell only limited amounts
of their shares of Company common stock after May 31, 1995.
Employment Agreements
The Company has employment agreements with Messrs. Stanley
Plotnick and Stephen Klein, pursuant to which they are employed
as Chief Executive Officer and General Counsel, respectively,
through August 31, 1997 (the "Agreements"). The Compensation
Committee of the Board of Directors determines any changes in
salary levels based upon the officers' merit, performance and
accomplishments. The base salary, as the same may be increased
from time to time, pursuant to the Agreements, cannot be reduced
during the term of the Agreements, except upon the written
agreement of both the officer and the Company. Each Agreement
also provides that in the event the officer's employment is
terminated by the company or by the officer in connection with a
change in control of the Company, the officer will be entitled to
compensation equal to his then current base salary, plus health
and insurance benefits, for the unexpired portion of the term
then in effect under the Agreement, and, for an additional year
thereafter, an amount equal to the officer's then current annual
base salary, plus health and insurance benefits, payable in a
lump sum within fifteen (15) days after the date of termination.
Following the officer's termination of employment for cause or
the officer's voluntary termination, each officer has agreed not
to compete with the Company for a period of one year or so long
as the Company remains a going concern, whichever period is
shorter.
401(k) Plan
The Company maintains a 401(k) retirement plan administered
by a committee of officers appointed by the Board of Directors.
Under this plan, employees employed for at least 1,000 hours in
any plan year may request deferral of income of up to the maximum
permitted by the Employee Retirement Income Security Act for 1994
of up to $9,500 per year. The Company matches employee
contributions after employment for one year at the 50% level up
to a maximum of 3% of the employee's salary. Contributions are
invested in certain mutual funds for the benefit of the plan
participant. Amounts so deferred are exempt from federal income
taxes until subsequently paid. The plan was implemented by the
Company as of September 1, 1987.
Compensation Committee Report on Executive Compensation
General
The Compensation Committee determines the cash and other
incentive compensation, if any, excluding stock options, to be
paid to the Company's executive officers and key employees. The
Compensation Committee currently consists of Messrs. Plotnick,
Miller and O'Keefe. In addition, the 1992 Non-Director Employee
Stock Option Plan is administered by a committee (the "Stock
Option Committee") appointed by the Board of Directors. The
Stock Option Committee currently consists of Messrs. O'Keefe and
Miller, each of whom is a non-employee director of the Company
and "disinterested director" (within the meaning of Rule 16b-3
under the Exchange Act). There is an Audit Committee which is
charged with recommending to the Board independent public
accountants as auditors of the Company's books, records and
accounts, reviewing the scope of the audits performed by such
auditors and reviewing and monitoring the Company's internal
accounting procedures. Mr. Plotnick, Mr. O'Keefe and Mr. Miller
are members of the Audit Committee.
Compensation Philosophy
The Compensation Committee's executive compensation
philosophy is to base management's pay, in part, on the
achievement of the Company's annual and long-term performance
goals, to provide competitive levels of compensation consistent
with levels of responsibility, to recognize individual
initiative, achievement and length of service to the Company, and
to assist the Company in attracting and retaining qualified
management. The Compensation Committee and the Stock Option
Committee also believe that the potential for equity ownership by
management is beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value.
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the"Code"), prohibits a publicly held corporation, such
as the Company, from claiming a deduction on its federal income
tax return for compensation in excess of $1 million paid for a
given fiscal year to the chief executive officer (or person
acting in that capacity) or to the four most highly compensated
officers of the corporation, other than the chief executive
officer, at the end of the corporation's fiscal year. The $1
million compensation deduction limitation does not apply to
"performance-based compensation." The Company believes that,
subject to shareholder approval of the amendment providing that
no recipient of options may be granted options in excess of fifty
percent (50%) of the maximum number of shares intended to be
issued under the Incentive Stock Option Plan, any compensation
received by executive officers in connection with the exercise of
options granted under the Plan will qualify as "performance-based
compensation." The Company has not established a policy with
respect to Section 162(m) of the Code because the Company has not
and does not currently anticipate paying compensation in excess
of $1 million per annum to any employee.
Salaries
Base salaries for the Company's officers, other than as
they
may be determined by the terms of the existing employment
agreements, as described in the "Employment Agreements" paragraph
above, are determined initially by evaluating the
responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for
management talent. Annual salary adjustments are determined by
evaluating the competitive marketplace, the performance of the
Company, the performance of the executive particularly with
respect to the ability to manage growth of the Company, the
length of the executive's service to the Company and any
increased responsibilities assumed by the executive.
Annual Bonuses and Incentive Compensation
The Company from time to time considers the payment of
bonuses and incentive compensation to its executive officers,
although no formal bonus or incentive compensation plan currently
exists. Bonuses would be determined based, first, upon the level
of achievement by the Company of its strategic and operating
goals and, second, upon the level of personal achievement by
participants. The achievement of personal goals includes the
actual performance of the Company for which the executive officer
has responsibility as compared to the planned performance
thereof, the level of cost savings achieved by such executive
officer, other individual contributions, the ability to manage
and motivate reporting employees and the achievement of assigned
projects. Bonuses are determined annually after the close of
each fiscal year. The Company did not award any bonuses to
executive officers in fiscal 1996.
Compensation of Chief Executive Officer
Mr. Stanley Plotnick's base salary of $320,000 is based
upon
the terms of his employment agreement and the factors described
in the "Salaries" paragraph above. Mr. Plotnick will receive the
same base salary in 1997. Mr. Plotnick did not receive a bonus
for fiscal 1996. Bonuses to Mr. Plotnick will be based upon the
factors described in "Annual Bonuses."
Compensation Committee Interlocks and Insider Participation
Stanley Plotnick is the Company's Chief Executive Officer.
He also is a shareholder of Advisory Communications Systems, Inc.
("Lawphone"). During the year ended May 31, 1996, the Company
charged approximately $92,000 and Lawphone paid the same for
office space and data processing services.
In fiscal year 1996, the Company shared warehouse and
office
space and provided telephone and data processing support to
Credit Card Protection Agency, Inc. ("CCPA"), of which Mr.
Plotnick is a shareholder. During the year ended May 31, 1996,
the Company charged and CCPA paid $120,000 for these services.
All related party transactions now must be approved by a
majority of the outside directors. Stanley Klein is an outside
director and he and Stephen Klein are related as brothers.
Stanley Klein is a partner in the law firm of Brauner Baron
Rosenzweig & Klein. The Company has retained that law firm and
paid fees to it of approximately $97,000 during fiscal 1996.
During fiscal year 1996, Alan Miller, an outside director,
was used as an independent consultant by the Company received
monthly compensation of $3,000 for these services. He was paid a
total of $27,000 in fiscal year 1996.
Compensation Committee:
Stanley Plotnick
Alan Miller
Harold O'Keefe
Stock Option Plans
General. In 1987, the Company adopted the 1987 Stock
Option
Plan, which plan has subsequently been terminated except for
options currently existing under the 1987 Stock Option Plan. No
further options will be granted under the 1987 Stock Option Plan.
Options are outstanding to purchase 44,824 shares of common stock
at a price range of $.25 to $10.59 per share.
Non-Director, Employee 1992 Stock Option Plan
On December 18, 1992, the Company adopted the 1992 Stock
Option Plan. The 1992 Stock Option Plan is intended to assist
the Company in securing and retaining key employees by allowing
them to participate in the ownership and growth of the Company
through the grant of incentive and non-qualified options
(collectively the "Options") to full-time employees of the
Company and its subsidiaries. Neither Patrick Gorman, Martin
Gorman, Stanley Plotnick nor Stephen Klein are eligible to
participate in the 1992 Stock Option Plan. Incentive stock
options granted under the 1992 Stock Option Plan are intended to
be "Incentive Stock Options" as defined by Section 422 of the
Code.
An aggregate of 150,000 shares of common stock have been
reserved for issuance upon exercise of the Options to be granted
under the 1992 Stock Option Plan. The 1992 Stock Option Plan
will be administered by a Board of Director's stock option
committee composed of two independent directors (the
"Committee"). The Committee determines who shall receive
Options, the number of shares of common stock that may be
purchased under Options, the time and manner of exercise of
Options and Option prices. The term of Options granted under the
1992 Stock Option Plan may not exceed 10 years (five years in the
case of an incentive stock option granted to an optionee owning
more than 10% of the voting stock of the Company (a "10%
Holder")). The Option price for incentive stock options shall
not be less than 100% of the "fair market value" of the shares of
common stock at the time the Option is granted; provided,
however, that with respect to an incentive stock option, in the
case of a 10% Holder, the purchase price per share shall be at
least 110% of such fair market value. The Option price for non-
qualified options shall not be less than 100% of the "fair market
value" of the shares of common stock at the time the Option is
granted. The aggregate fair market value of the shares of common
stock as to which an optionee may exercise incentive stock
options may not exceed $100,000 in any calendar year. Payment
for shares purchased upon exercise of Options is to be made in
cash, check or other instrument.
Under certain circumstances involving a change in the
number
of outstanding shares of common stock without the receipt by the
Company of any consideration therefor, such as a stock split,
stock consolidation or payment of a stock divided, the class and
aggregate number of shares of common stock in respect of which
Options may be granted under 1992 Stock Option Plan, the class
and number of shares subject to each outstanding Option and the
Option price per share will be proportionately adjusted. In
addition, if the Company is involved in a merger or
consolidation, the Options granted under the 1992 Stock Option
Plan will be adjusted equitably.
An Option may not be transferred other than by will or by
the laws of descent and distribution or pursuant to a qualified
domestic relations order, and during the lifetime of the Option
holder may be exercised only by such holder.
The 1992 Stock Option Plan will terminate on December 17,
2002 and may be terminated at any time by the Board of Directors
prior to that date. As of May 31, 1996, no options were granted
under this Plan.
Directors' Stock Option Plan
The Directors' Plan provides for the issuance of up to
45,000 shares of common stock. All members of the Board of
Directors who are not employees of the Company ("Eligible
Directors") are eligible to receive grants of options. Each
Eligible Director receives automatic, nondiscretionary grants of
options based upon specific criteria set forth in the Directors'
Plan. Each Eligible Director receives a grant of an option to
purchase 5,000 shares of common stock on the date the Eligible
Director is elected to the Board of Directors, and is granted
another option to purchase 5,000 shares of common stock annually
thereafter so long as he remains an Eligible Director. Each
option vests ratably over a three-year period provided such
individual continues to serve as a Director of the Company unless
such individual ceases to serve as a result of his death or
disability, in which case the option immediately vests. To date,
options to purchase 45,000 shares have been granted under the
Directors' Plan, with 10,001 of those options having vested by
May 31, 1996.
Incentive Stock Option Plan
On January 20, 1994, the Company adopted an Incentive Stock
Option Plan for the purpose of recognizing the efforts and
results achieved for the benefit of the Company by Messrs.
Stanley Plotnick and Stephen Klein in connection with the
Company's restructuring of its debt and settlement of related
class action litigation. Incentive stock options granted under
this Plan are intended to be "incentive stock options" as defined
by Section 422 of the Code.
An aggregate of 450,000 shares of common stock have been
reserved for issuance upon exercise of options granted under this
Plan. Administration of the Plan will be conducted by the Board
of Directors Stock Option Committee, composed of two independent
directors. The terms of the options granted under this Plan may
not exceed ten (10) years (five (5) years in the case of an
incentive stock option granted to an optionee owning more than
ten percent (10%) of the voting stock of the Company). The
option price for incentive stock options shall not be less than
one hundred percent (100%) of the "fair market value" of the
shares of common stock on January 20, 1994, the date the options
were granted; provided, however, that with respect to an
incentive stock option in the case of Mr. Plotnick, since he did
own more than ten percent (10%) of the voting stock of the
Company as of said date, the purchase price per share shall be at
least one hundred ten percent (110%) of the "fair market value."
The "fair market value" of the shares of common stock on the date
of grant was $.75 per share. The aggregate fair market value of
common stock as to which either optionee may exercise incentive
stock options may not exceed one hundred thousand dollars
($100,000) in any calendar year. Payment for shares purchased
upon exercise of the options is to be made with cash or with
previously owned common stock. In addition the Plan provides
that no recipient of options may be granted options in excess of
50% of the maximum number of shares reserved for issuance under
the Plan. Under certain circumstances involving a change in the
number of outstanding shares of common stock by reason of a stock
dividend or distribution, recapitalization, merger,
consolidation, split-up, consolidation, exchange of shares, or
the like, the Stock Option Committee may appropriately adjust the
number of shares of common stock subject to the options granted
under this Plan as well as the option price of the options
theretofore granted under this Plan.
No award of options under this Plan may be assigned or
transferred by the recipient except by will or the laws of
descent and distribution. During the lifetime of the option
holder, such award may be exercised only by such person or by
such person's guardian or representative.
This Incentive Stock Option Plan will terminate on
January 20, 2004 and may be terminated at any time by the Board
of Directors prior to that date. On January 20, 1994, the
Company granted options under this Plan to Messrs. Stanley
Plotnick and Stephen Klein to acquire 150,000 shares each under
this Plan. Each individual may exercise options for up to 50,000
of the option shares as of the date of grant, and up to one-third
of the balance of the granted options on each of the three
anniversary dates following the date of grant. See Item III
below.
Common Stock Performance
The Company's common stock was listed on the American Stock
Exchange on April 29, 1993. The following graph compares the
total return on the Company's common stock from the commencement
of trading on April 29, 1993 through the fiscal year ended
May 31, 1996 with the total returns of the American Stock
Exchange Index and a Peer Group selected by the Company
consisting of publicly traded companies on an industry or line of
business basis corresponding to the Company's. The Peer Group
consists of the Company, CUC International, Inc. and Ideon Group,
Inc. (formerly Safecard Services, Inc.). On April 22, 1996, CUC
International, Inc. announced that it had reached an agreement to
acquire Ideon Group, Inc. Effective on July 26, 1996, the
Company's shares no longer traded on the American Stock Exchange
and on July 29, 1996, they commenced trading on the NASD Bulletin
Board.
The stock performance graph shows that the Company's stock
fell dramatically during the first four months of trading, then
levelled off, remaining fairly consistent until late 1995, when
the value increased four-fold for a one month period before
dropping down to its previous level. The Peer Group's
performance reflects a series of peaks and valleys with very
little appreciation. The American Stock Exchange performance
shows gradual and steady appreciation over the term of the graph.
Certain Related Transactions
The following sets forth the transactions of the Company,
its subsidiary and affiliated companies, and its executive
officers and/or directors during the fiscal year ended May 31,
1996.
Stanley Plotnick is the Company's Chief Executive Officer.
He also is a shareholder of Advisory Communications Systems, Inc.
("Lawphone"). During the year ended May 31, 1996, the Company
charged approximately $92,000 and Lawphone paid the same for
office space and data processing services.
In fiscal year 1996, the Company shared warehouse and
office
space and provided telephone and data processing support to
Credit Card Protection Agency, Inc. ("CCPA"), of which Mr.
Plotnick is a shareholder. During the year ended May 31, 1996,
the Company charged and CCPA paid $120,000 for these services.
All related party transactions now must be approved by a
majority of the outside directors. Stanley Klein is an outside
director and he and Stephen Klein are related as brothers.
Stanley Klein is a partner in the law firm of Brauner Baron
Rosenzweig & Klein. The Company has retained that law firm and
paid fees to it of approximately $97,000 during fiscal 1996.
Alan Miller is an outside director and during fiscal year 1996 he
acted as an independent consultant to the Company. For these
services he received monthly compensation of $3,000, for a total
of $27,000 during the fiscal year.
ITEM II. RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS
Subject to the approval by the shareholders, on the
recommendation of the Audit Committee, the Board has appointed
Arthur Andersen LLP as the independent public accountants to
audit the financial statements of the Company for the fiscal year
ending May 31, 1997. Arthur Andersen LLP has served as the
Company's auditors since 1991. A representative of Arthur
Andersen LLP will be present at the Annual Meeting and will have
an opportunity to make a statement if he desires to do so. He
also will respond to any appropriate questions. Although the
appointment of independent auditors does not require shareholder
ratification, the Board of Directors deems it desirable to submit
this matter for ratification due to the significance of their
appointment to the Company. If shareholders do not ratify the
appointment of Arthur Andersen LLP, the Board of Directors will
consider the appointment of other certified public accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT ACCOUNTANTS.
ITEM III. APPROVAL OF AMENDMENT TO THE
DIRECTORS' STOCK OPTION PLAN
The Board of Directors proposes that the shareholders
approve an amendment to the Directors' Stock Option Plan (the
"Plan") to approve an increase in the number of authorized shares
reserved for issuance pursuant to the Plan from 45,000 shares of
common stock to 90,000 shares of common stock.
As of the record date, options to purchase 20,000 shares of
common stock were outstanding under the Plan to Stanley Klein,
options to purchase 15,000 shares of common stock were
outstanding to Alan Miller and options to purchase 10,000 shares
of common stock were outstanding to Harold O'Keefe, and no
options had been exercised.
The Board of Directors believes it is in the Company's and
its shareholders' best interests to approve the amendment because
it would allow the Company to continue to grant options under the
Plan.
The proposed amendment is as follows:
Article IV of the Company's Directors' Stock Option Plan is
hereby amended to read in its entirety as follows:
"Shares Subject to Plan.
Subject to adjustment in accordance with Article
IX an aggregate of 90,000 shares is reserved for
issuance under this Plan. Shares sold under this Plan
may be either authorized, but unissued Shares or
reacquired Shares. If an Option, or any portion
thereof, shall expire or terminate for any reason
without having been exercised in full, the unpurchased
Shares covered by such Option shall be available for
future grants of Options."
Description of the Plan
The Plan was adopted by the Board of Directors in 1992.
For a full description of the administration of the Plan,
the common stock subject to the Plan, transferability,
termination and amendment of the Plan see the "Stock Option
Plans" section above.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE AMENDMENT TO THE DIRECTORS STOCK OPTION PLAN.
ITEM IV. OTHER MATTERS
The Board of Directors knows of no matters that are
expected
to be presented for consideration at the Annual Meeting which are
not described herein. However, if other matters properly come
before the meeting, it is intended that the persons named in the
accompanying proxy will vote thereon in accordance with their
best judgment.
All shareholders of record as of the Record Date, have been
sent, or are currently herewith being sent, a copy of the
Company's 1996 Annual Report for the year ended May 31, 1996,
which contains certified consolidated financial statements of the
Company and its subsidiaries for the year ended May 31, 1996.
Any shareholder of the company may obtain without charge a
copy of the company's annual report on Form 10-K for the year
ended May 31, 1996 (without exhibits), as filed with the
Securities and Exchange Commission, by writing to Stanley D.
Plotnick, President, at Encore Marketing International, Inc.,
4501 Forbes Boulevard, Lanham, Maryland 20706.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast at the
Annual Meeting is required to approve the appointment of
accountants and to amend the Incentive Stock Option Plan, and the
affirmative vote of a plurality of the votes cast at the Annual
Meeting is required to elect directors.
PROPOSALS OF SHAREHOLDERS
Shareholders of the Company who intend to present a
proposal
for action at the 1997 Annual Meeting of Shareholders of the
Company must notify the Company's management of such intention by
notice received at the Company's principal executive offices by
not later than May 30, 1997, for such proposal to be included in
the Company's proxy statement and form of proxy relating to such
meeting.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR
EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. A PROMPT RETURN OF YOUR
PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF
FURTHER MAILINGS.
Dated: Lanham, Maryland
September 27, 1996
For the Board of Directors
Stephen Klein
Secretary
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