<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Semele Group Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------------
(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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[ ] Fee paid previously with preliminary materials.
<PAGE>
[ ] 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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<PAGE>
[SEMELE GROUP, INC.]
DRAFT Cover Letter
May , 1998
Dear Shareholder:
Enclosed you will find Semele Group Inc.'s 1997 Annual Report and Proxy
Statement. We urge each of you to sign, date and mail the enclosed proxy card so
that your shares will be represented at the annual meeting of shareholders.
This past year marked an important change for Semele. At last year's annual
meeting held in October, 1997, the shareholders approved a set of proposals
designed to allow us to pursue a new growth oriented business plan. This is a
marked change from the early 1990's when the Company's business plan was
centered around the preservation of capital following the default of most of the
Company's real estate loans. As part of this new beginning, the Company changed
its name from Banyan Strategic Land Fund II to Semele Group Inc. and the Company
returned $2.4 million to shareholders through a one time dividend.
The net loss for 1997 was $3.1 million of which $1.17 million related to a
provision to write down the Company's investments in Northholme Partners.
Northholme was a venture formed in 1991 to hold a development agreement received
as part settlement for a loan that was in default. The development agreement
gives Northholme a profit participation in a land development owned by a third
party in exchange for securing certain entitlements on behalf of the owner. The
land contains hazardous waste. The cost and timing of the remediation is
uncertain, causing us to write down its carrying value. Excluding our investment
in Rancho Malibu, Northholme was the last asset with material carrying value
that arose from the workout problems of the early 1990's. Most of the other
charges during 1997 were related to the entitlement process for Rancho Malibu
and for one time events such as investment banking fees, severance costs and the
termination of the Banyan Management Corp. administrative agreement. We do not
expect to incur any such costs in 1998. We were successful in disposing of our
investment in the H-Street property which generated net cash proceeds of
approximately $4.7 million. After making the one time dividend, our December 31,
1997 cash balance stood at approximately $7.9 million.
The Company's immediate focus is to complete the entitlement process and
begin development of its Rancho Malibu project located in Malibu, California. As
described more fully in the notes to the financial statements, Rancho Malibu has
been the subject of a neighboring homeowner's lawsuit designed to stall the
development of our land. We believe the end of this lengthy process is near and
that pre-development can begin later this year. We believe the single family
home market in Los Angeles County has strengthened over the past 24 months and
Semele now has the funds to embark on this project. We are value driven, not
current income driven. Given the long-term nature of the Malibu project, we do
not expect to report positive net income until home lots begin selling. This
will take time.
We are also aggressively looking to make new investments that can build
shareholder value. We are long-term oriented and believe that Semele's sizable
net operating loss carryforward can make us a value added buyer. We are also
cautious. With many assets selling at historically high prices, the returns
generated by such assets are, by definition, low. We tend to believe that better
opportunities may be available in the future as opposed to today. With the
exception of purchasing our own stock and expenditures related to Rancho Malibu,
we are seeking to reduce spending and conserve cash.
<PAGE>
While all of the proposals are important, we ask that you pay particular
attention to proposal 2, which relates to the proposed stock splits. We believe
that the successful implementation of these splits (which are more fully
described in the Proxy Statement) may allow for the Company to meet Nasdaq's
newly enacted listing standards that are required to be met in order to maintain
our stock's quotation on the Nasdaq National Market system. If you have any
questions, you may call our information agent, Corporate Investor
Communications, Inc. at ( ).
Sincerely,
<TABLE>
<S> <C>
Gary D. Engle James A. Coyne
Chairman and Chief Executive Officer President
</TABLE>
Certain statements in this letter that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Without limiting the foregoing, words such as
"anticipates," "expects," "intends," "believes," "plans" and similar expressions
are intended to identify forward-looking statements. These statements are
subject to a number of risks and uncertainties including the Company's ability
to successfully implement a new growth-oriented business plan and favorably
resolve certain litigation. Actual results could differ materially from those
projected in the forward-looking statements.
<PAGE>
[SEMELE LETTERHEAD]
May , 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Semele Group Inc. (the "Company") to be held at the Holiday Inn Select, 700 Main
Street, Stamford, Connecticut, on June 30, 1998, at 10:00 a.m., local time.
At the Annual Meeting, stockholders of record as of May 28, 1998, will be
asked to consider and vote upon, among other things, proposals to elect one
individual to the Company's Board of Directors, to approve a 1-for-300 reverse
stock split followed by a 30-for-1 forward stock split of the Company's Common
Stock, to approve amendments to the Company's Stock Option Plan to permit the
grant of qualified stock options and to approve the terms of an Incentive
Compensation Plan for Mr. Gary D. Engle and Mr. James A. Coyne.
While all the issues to be considered are significant, the Board of
Directors considers its proposal to effect the reverse and forward stock splits
to be especially important. Details of this proposal as well as all other
proposals to be presented to the stockholders at the Annual Meeting, and certain
additional information regarding the Company, are contained in the attached
Proxy Statement, which you are encouraged to read carefully.
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date the accompanying proxy card and return it in the enclosed prepaid
envelope. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it has been voted at the Annual Meeting. If
you attend the Annual Meeting, you may vote in person, even if you have
previously returned your proxy card. Your prompt cooperation will be greatly
appreciated. This solicitation is authorized by and is made on behalf of the
Company's Board of Directors.
Sincerely,
SEMELE GROUP INC.
James A. Coyne
President and Chief Operating Officer
<PAGE>
SEMELE GROUP INC.
ONE CANTERBURY GREEN
201 BROAD STREET
STAMFORD, CONNECTICUT 06901
(203) 363-0853
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Semele Group Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting" or the "Annual Meeting") of Semele Group Inc., a Delaware corporation
(the "Company"), will be convened at the Holiday Inn Select, 700 Main Street,
Stamford, Connecticut, on June 30, 1998, at 10:00 a.m., local time. All
stockholders of the Company are entitled to attend the Meeting, which will be
held for the following purposes:
1. To elect one director to hold office until the 2001 Annual Meeting of
Stockholders, or otherwise as provided in the Company's By-Laws;
2. To consider and vote upon a proposal to approve of and adopt an amendment to
the Company's charter to effect a 1-for-300 reverse stock split followed by
a 30-to-1 forward stock split of the Company's Common Stock;
3. To consider and vote upon a proposal to approve amendments to the Company's
Stock Option Plan to permit the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code;
4. To consider and vote upon a proposal to approve the terms of an Incentive
Compensation Plan for Mr. Gary D. Engle and Mr. James A. Coyne whereby their
salaries and bonuses may be deferred and the deferred amounts held in the
form of Common Stock of the Company, in accordance with their Employment
Agreements with the Company;
5. To concur in the selection of Ernst & Young LLP as the Company's independent
auditor for the fiscal year ending December 31, 1998; and
6. To transact any other business as may properly come before the Meeting, or
any adjournment or postponement thereof.
Only stockholders of record at the close of business on May 28, 1998, are
entitled to receive notice of and to vote at the Meeting or any adjournment or
postponement thereof. A list of such stockholders will be available for
inspection at the Company's offices for at least ten days prior to the Meeting.
If the proposal to effect the reverse and forward stock splits is approved
at the Meeting and the transactions contemplated thereby consummated, holders of
record of less than 300 shares of Common Stock immediately prior to the reverse
stock split who do not vote in favor of the proposal and who otherwise comply
with the applicable provisions of Section 262 of the Delaware General
Corporation Law (the "DGCL") will be entitled to assert certain appraisal rights
and to obtain payment from the Company of the "fair value" of their shares in
accordance with Section 262 of the DGCL.
A Proxy Statement and form of proxy are enclosed. Whether or not you expect
to attend the Annual Meeting, it is important that you fill in, sign, date and
mail in the proxy in the enclosed envelope so that your shares may be voted for
you.
By order of the Board of Directors:
Craig D. Mills
Secretary
The Company's 1997 Annual Report is enclosed with this notice.
<PAGE>
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF
SEMELE GROUP INC.
JUNE 30, 1998
This Proxy Statement is furnished to the holders of shares of the Common
Stock, par value $.01, of Semele Group Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Company's
Board of Directors for use at the Annual Meeting of Stockholders. The Annual
Meeting will be convened on June 30, 1998, at approximately 10:00 a.m., local
time, and any adjournment or postponement thereof will be announced at the
Meeting. Copies of this Proxy Statement, and the enclosed form of proxy, were
first sent or given to stockholders on or about May 29, 1998. Stockholders who
wish to attend the Annual Meeting should contact the Company at (203) 363-0853
so that arrangements can be made.
The Company will bear all costs in connection with the solicitation of
proxies, including the cost of preparing, printing and mailing this Proxy
Statement. In addition to the use of the mails, proxies may be solicited by the
Company's directors and officers and by employees of Equis Financial Group
Limited Partnership or Banyan Management Corp., which provide administrative
services to the Company. None of these individuals will be additionally
compensated, but they may be reimbursed for out-of-pocket expenses in connection
with the solicitation. For further information regarding Equis Financial Group
Limited Partnership and Banyan Management Corp., see "Certain Relationships and
Related Transactions." Arrangements will also be made with brokerage houses,
banks and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of the Common Stock held of
record by those persons, and the Company may reimburse those custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses incurred in
connection therewith. Further, the Company has retained the services of
Corporate Investor Communications, Inc., to assist in the solicitation of
proxies for the Annual Meeting at a fee payable by the Company of $5,000, plus
out-of-pocket expenses.
Shares represented by properly executed proxies in the accompanying form
received by the Board of Directors prior to the Annual Meeting will be voted at
the Annual Meeting. Shares not represented by properly executed proxies will not
be voted. If a stockholder specifies a choice with respect to any matter to be
acted upon, the shares represented by that proxy will be voted as specified. If
a stockholder does not specify a choice, in an otherwise properly executed
proxy, with respect to any proposal referred to therein, the shares represented
by that proxy will be voted with respect to that proposal in accordance with the
recommendation of the Board of Directors described herein. A stockholder who
signs and returns a proxy in the accompanying form may revoke it by: (i) giving
written notice of revocation to the Company before the proxy is voted at the
Annual Meeting; (ii) executing and delivering a later-dated proxy before the
proxy is voted at the Annual Meeting; or (iii) attending the Annual Meeting and
voting the shares in person.
The close of business on May 28, 1998, has been fixed as the date for
determining those stockholders entitled to notice of and to vote at the Annual
Meeting (the "Record Date"). At the Record Date, the Company had 12,196,973
shares outstanding, each of which entitles the holder thereof to one vote at the
Annual Meeting. Only stockholders of record at the Record Date will be entitled
to vote at the Annual Meeting. The presence of a majority of the outstanding
shares of Common Stock, represented in person or by proxy at the Annual Meeting,
will constitute a quorum. For the proposal to elect directors, the nominee
receiving the greatest number of votes cast by holders of the Company's Common
Stock entitled to vote at the Meeting will be elected as a director of the
Company. Approval of the proposal to approve the reverse and forward stock
splits requires the affirmative vote of a majority of all outstanding shares of
Common Stock. The remaining proposals require the affirmative vote of a majority
of the shares present in person or by proxy at the Annual Meeting and entitled
to vote on the matter. Abstentions and broker non-votes (i.e., shares held by
brokers that are present but not voted because the brokers are prohibited from
exercising discretionary authority) will be counted in calculating the number of
shares present in person or by proxy at the Annual Meeting for purposes of
establishing a quorum for the transaction of business. Abstentions will be
counted in calculating the number of shares entitled to vote on a matter,
whereas broker non-votes will be excluded.
<PAGE>
The mailing address of the principal executive offices of the Company is One
Canterbury Green, 201 Broad Street, Stamford, Connecticut 06901.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
owners of Common Stock at the Record Date by: (i) each person or entity who is
known by the Company to own more than 5% of the Common Stock (together with such
person's address); (ii) each director and each executive officer of the Company
named in the executive compensation table; and (iii) all current directors and
officers as a group. Share amounts and percentages shown for each person or
entity are adjusted to give effect to shares of Common Stock that are not
outstanding but may be acquired by that person or entity upon exercise of all
options and warrants exercisable by that person or entity within 60 days of the
Record Date. However, those shares of Common Stock are not deemed to be
outstanding for the purpose of computing the percentage of outstanding shares
beneficially owned by any other person or entity.
<TABLE>
<CAPTION>
PERCENT OF
NAME OF PERSON OR ENTITY NUMBER OF SHARES TOTAL SHARES
- ------------------------------------------------------------------------------ ----------------- ---------------
<S> <C> <C>
AFG Hato Arrow Limited Partnership............................................ 1,987,000(1) 16.3%
AFG Dove Arrow Limited Partnership
AIP/Larkfield Limited Partnership
c/o Equis Corporation
88 Broad Street
Boston, Massachusetts 02110
Gabriel Capital, L.P.......................................................... 662,917(2) 5.4%
Ariel Fund Limited
c/o J. Ezra Merkin
Gabriel Capital, L.P.
450 Park Avenue, Ste. 3201
New York, New York 10022 662,917(2) 5.4%
Gary D. Engle, Chairman, Chief Executive Officer, Director.................... 2,134,776(3) 17.5%
James A. Coyne, President, Chief Operating Officer, Director.................. 176,776(4) 1.4%
Walter E. Auch, Sr., Director................................................. 66,000(5) Less than 1%
Joseph W. Bartlett, Director.................................................. 0 0
Gerald L. Nudo, Director...................................................... 55,000(5) Less than 1%
Robert M. Ungerleider, Director............................................... 56,000(5) Less than 1%
All Directors and Officers of the Company as a group (eight persons).......... 2,488,552 20.2%
</TABLE>
- ------------------------
(1) Based upon reports filed with the Securities and Exchange Commission (the
"SEC") by certain affiliates of Equis Financial Group Limited Partnership
("EFG") pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), indicating ownership of 5% or more of the
outstanding Common Stock. At the Record Date: (i) AFG Hato Arrow Limited
Partnership owns 635,437 shares, amounting to 5.2% of the outstanding Common
Stock; (ii) AFG Dove Arrow Limited Partnership owns 616,734 shares,
amounting to 5.1% of the outstanding Common Stock; and (iii) AIP/Larkfield
Limited Partnership owns 734,829 shares, amounting to 6.0% of the
outstanding Common Stock. Gary D. Engle, Chairman, Chief Executive Officer
and a director of the Company, has effective control over the operation of
each of these limited partnerships.
(2) Based upon reports filed with the SEC pursuant to Section 13(d) of the
Exchange Act indicating ownership of 5% of more of the outstanding Common
Stock. At the Record Date: (i) Gabriel Capital, L.P. owns 267,838 shares,
amounting to 2.2% of the outstanding Common Stock, and (ii) Ariel Fund
2
<PAGE>
Limited owns 395,079 shares, amounting to 3.2% of the outstanding Common
Stock. Ariel Management Corp., as investment advisor to Ariel Fund Limited
has voting and investment control of the shares owned by such fund. J. Ezra
Merkin, as the general partner of Gabriel Capital, L.P., has voting and
investment control of the shares owned by such limited partnership. In
addition, Mr. Merkin, as the sole shareholder and President of Ariel Fund
Limited, may be deemed to have voting and investment control of the shares
owned by such fund.
(3) Includes 11,000 shares owned directly and 136,776 shares owned by the
trustee of a "rabbi" trust for the benefit of Mr. Engle of which Mr. Engle
has voting control. The shares held by such trustee represent salary
deferred by Mr. Engle through the Record Date pursuant to the Company's
Incentive Compensation Plan, which the Company is presenting to the
stockholders for approval at the Annual Meeting. See "Proposal 4--To
Consider and Vote Upon a Proposal to Approve the Terms of an Incentive
Compensation Plan for Messrs. Engle and Coyne" and "Compensation of
Directors and Executive Officers--Executive Compensation" below. Because Mr.
Engle has effective control over AFG Hato Arrow Limited Partnership, AFG
Dove Arrow Limited Partnership and AIP Larkfield Limited Partnership, he is
also deemed to beneficially own the 1,987,000 shares owned by those
partnerships.
(4) Includes 40,000 shares owned directly and 136,776 shares owned by the
trustee of a "rabbi" trust for the benefit of Mr. Coyne of which Mr. Coyne
has voting control. The shares held by such trustee represent salary
deferred by Mr. Coyne through the Record Date pursuant to the Company's
Incentive Compensation Plan, which the Company is presenting to the
stockholders for approval at the Annual Meeting. See "Proposal 4--To
Consider and Vote Upon a Proposal to Approve the Terms of an Incentive
Compensation Plan for Messrs. Engle and Coyne" and "Compensation of
Directors and Executive Officers--Executive Compensation" below.
(5) Includes currently-exercisable options granted under the Company's 1994
Executive and Director Stock Option Plan to purchase 50,000 shares of Common
Stock.
The Company is not aware of any other person who, alone or as part of a
group, beneficially owns more than 5% of the outstanding shares of Common Stock
at the Record Date. The Company is not aware of any arrangements, the operation
of which may at a subsequent date result in a change of control of the Company.
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial statements of beneficial ownership
(Form 3), and statements of changes in beneficial ownership (Forms 4 or 5), of
Common Stock and other equity securities of the Company with the SEC and the
National Association of Securities Dealers, Inc. (the "NASD"). The SEC requires
officers, directors and greater than 10% stockholders to furnish the Company
with copies of all these forms filed with the SEC or the NASD.
To the Company's knowledge, based solely on its review of the copies of
these forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that all filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with during 1997, except that
the Forms 3 required to be filed by Messrs. Romano and Butterfield when they
became officers of the Company were inadvertently filed late by them.
3
<PAGE>
MATTERS TO BE CONSIDERED BY STOCKHOLDERS
PROPOSAL 1: ELECTION OF DIRECTOR
One individual will be elected at the Annual Meeting to serve as a director
of the Company for a three-year term expiring at the 2001 Annual Meeting. The
nominee for the class whose term will expire at the 2001 Annual Meeting is James
A. Coyne, who is being nominated for re-election. Gerald L. Nudo is not standing
for re-election to the Board, and the size of the Board is being reduced from
six to five. Unless instructions to the contrary are given, the persons named as
proxy voters in the accompanying proxy, or their substitutes, will vote for Mr.
Coyne for director with respect to all proxies received by the Company. If the
nominee should become unavailable for any reason, the votes will be cast for a
substitute nominee designated by the Board of Directors. The directors have no
reason to believe that Mr. Coyne will be unable to serve if elected.
NOMINEE.
The nominee for director is as follows:
<TABLE>
<CAPTION>
YEAR DURING
WHICH
INDIVIDUAL
FIRST BECAME A
NAME AGE DIRECTOR OTHER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---------------------------- --- --------------- ---------------------------------------------------------------
<S> <C> <C> <C>
James A. Coyne.............. 38 1997 Mr. Coyne has been President and Chief Operating Officer of the
Company since 1997. Mr. Coyne is Executive Vice
President/Capital Markets of Equis Corporation, the general
partner of EFG, and is also Vice President of AFG Realty Inc.,
an affiliate of EFG. He is responsible for EFG's real estate
activities in both the United States and Australia. Mr. Coyne
joined EFG in 1989, remained until May 1993, and rejoined EFG
in November 1994. From 1993 through November 1994 he was with
the Raymond Company, a private investment firm, where he was
responsible for obtaining financing for corporate and real
estate acquisitions.
CONTINUING DIRECTORS.
The continuing directors of the Company are as follows:
Walter E. Auch, Sr.......... 75 1987 Prior to retiring, Mr. Auch was the Chairman and Chief
Executive Officer of the Chicago Board Options Exchange. Prior
to that time, Mr. Auch was Executive Vice President, director
and a member of the executive committee of PaineWebber. Mr.
Auch is a director of Pimco Advisors L.P., Geotek
Communications, Inc., Smith Barney Concert Series Funds, Smith
Barney Trak Fund, The Brinson Partners Funds and Nicholas
Applegate Funds. He is also a trustee of Hillsdale College and
the Arizona Heart Institute. Mr. Auch is also a trustee of
Banyan Strategic Realty Trust and a director of Legend
Properties, Inc. (f/k/a Banyan Mortgage Investment Fund), and
Banyan Management Corp. Mr. Auch's term expires at the 2000
Annual Meeting.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR DURING
WHICH
INDIVIDUAL
FIRST BECAME A
NAME AGE DIRECTOR OTHER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---------------------------- --- --------------- ---------------------------------------------------------------
<S> <C> <C> <C>
Joseph W. Bartlett.......... 65 1997 Mr. Bartlett has been a partner in the law firm of Morrison &
Foerster LLP since March 1996. From July 1991 until March 1996
he was a partner in the law firm of Mayer, Brown & Platt. Mr.
Bartlett is also a director of Cyrk, Inc., which designs,
manufactures and distributes products for promotional programs
and custom-designed sports apparel and accessories. Mr.
Bartlett's term expires at the 1999 Annual Meeting.
Gary D. Engle............... 49 1997 Mr. Engle has been Chairman and Chief Executive Officer of the
Company since November 1997. Mr. Engle is President and Chief
Executive Officer of EFG, which he joined in 1990 as Executive
Vice President. Mr. Engle purchased a controlling interest in
EFG in December 1994. He is also President of AFG Realty, Inc.
From 1987 to 1990, Mr. Engle was a principal and co-founder of
Cobb Partners Development, Inc., a real estate and mortgage
banking company, with principal offices in Florida. From 1980
to 1987, Mr. Engle served in various capacities with Arvida
Disney Company, a large-scale community real estate development
company owned by the Walt Disney Company with real estate
development projects worldwide. Mr. Engle's term expires at the
2000 Annual Meeting.
Robert M. Ungerleider 56 1987 Mr. Ungerleider is President of Pilot Books, a book publisher
located in Greenport, New York, and of counsel to the law firm
of Lane Felcher Kurlander & Fox. Mr. Ungerleider has founded,
developed and sold a number of startup ventures including
Verifone Finance, an equipment leasing service, Smartpage, a
paging service company, and Financial Risk Underwriting Agency,
Inc., an insurance firm specializing in financial guarantee
transactions. Prior to that, Mr. Ungerleider practiced real
estate and corporate law in New York City for ten years. Mr.
Ungerleider is also a director of Legend Properties, Inc.
(f/k/a Banyan Mortgage Investment Fund), and Banyan Management
Corp. Mr. Ungerleider's term expires at the 1999 Annual
Meeting.
</TABLE>
The Board is required to meet at least four times each year either in person
or by telephonic conference. The Board met 12 times in 1997. The directors have
established a compensation committee, which is composed of Messrs. Bartlett and
Ungerleider and which met one time during 1997, and an audit committee, which is
comprised of Messrs. Nudo and Auch and which met two times during 1997. The
directors have not established a nominating committee or other committee
performing a similar function.
5
<PAGE>
RECOMMENDATION OF THE BOARD: The Board hereby recommends and nominates the
following nominee for election as a director of the Company by the stockholders
at the Annual Meeting to serve until the 2001 Annual Meeting of Stockholders:
Mr. James A. Coyne.
VOTE REQUIRED. The nominee receiving the highest vote total will be elected
as a director of the Company.
PROPOSAL 2: TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE A 1-FOR-300 REVERSE
STOCK SPLIT FOLLOWED BY A 30-FOR-1 FORWARD STOCK SPLIT.
INTRODUCTION.
The Board has unanimously adopted resolutions declaring the advisability of,
and submits to the stockholders for approval, an amendment (the "Amendment") to
the Company's Amended and Restated Certificate of Incorporation effecting (a) a
reverse stock split of the outstanding Common Stock as of 6:00 p.m. (Eastern
Time) on the date the Amendment is filed with the Secretary of State of the
State of Delaware (the "Effective Date") pursuant to which each 300 shares of
Common Stock then outstanding will be converted into one share of Common Stock
(the "Reverse Split") and (b) a forward split of the Common Stock as of 7:00
p.m. (Eastern Time) on the Effective Date pursuant to which each share (or
fraction thereof, excluding holdings of less than one share resulting from the
Reverse Split) of Common Stock then outstanding will be converted into a number
of shares of Common Stock at a rate of 30-for-1 (the "Forward Split"). In lieu
of issuing the fractional shares that will result from the Reverse Split to
stockholders of record of less than 300 shares immediately prior to the Reverse
Split, the Company will make a cash payment based on the average daily closing
price per share of the Common Stock on Nasdaq for the ten trading days
immediately preceding the Effective Date, as discussed below. The text of the
Amendment is attached as Exhibit A hereto. The filing of the Amendment and the
consummation of the Reverse Split and the Forward Split, including the making of
cash payments to stockholders whose shares of Common Stock are converted into
less than a whole share of Common Stock in the Reverse Split, are collectively
referred to herein as the "Transaction."
The effect of the Transaction on the holders of Common Stock will be as
follows:
(a) The shares of Common Stock of each holder of record of less than 300
shares of Common Stock immediately prior to the Reverse Split will be
converted in the Reverse Split into the right to receive cash according to
the formula set forth below. See "Cash Payment In Lieu Of Shares" below.
(b) The shares of Common Stock of each holder of record of 300 or more
shares of Common Stock immediately prior to the Reverse Split will first be
converted in the Reverse Split into a number of shares of Common Stock equal
to the number of shares held immediately prior to the Reverse Split divided
by 300. One hour after the Reverse Split, the number of shares of Common
Stock of each holder (other than the fractional shares held of record by
persons who held less than 300 shares immediately prior to the Reverse
Split) will be converted in the Forward Split into multiple shares of Common
Stock on the basis of 30 shares of Common Stock for each share or fraction
thereof then held. As a result, the number of shares held by each holder of
record of 300 or more shares immediately prior to the Reverse Split will be
reduced by % and the value of a share will be increased by %
upon completion of the Transaction.
ANY HOLDER OF RECORD OF LESS THAN 300 SHARES OF COMMON STOCK WHO DESIRES TO
RETAIN AN EQUITY INTEREST IN THE COMPANY AFTER THE EFFECTIVE DATE MAY DO SO BY
PURCHASING, PRIOR TO THE EFFECTIVE DATE, A SUFFICIENT NUMBER OF SHARES OF COMMON
STOCK IN THE OPEN MARKET SUCH THAT THE TOTAL NUMBER OF SHARES HELD OF RECORD IN
HIS NAME IMMEDIATELY PRIOR TO THE REVERSE SPLIT IS EQUAL TO AT LEAST 300. ANY
BENEFICIAL OWNER OF LESS THAN 300 SHARES WHO IS NOT A HOLDER OF RECORD AND WHO
DESIRES TO HAVE HIS SHARES
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EXCHANGED FOR CASH PURSUANT TO THE TRANSACTION SHOULD INSTRUCT HIS BROKER TO
TRANSFER HIS SHARES INTO HIS NAME IN A TIMELY MANNER SUCH THAT SUCH BENEFICIAL
OWNER WILL BE DEEMED A HOLDER OF RECORD IMMEDIATELY PRIOR TO THE REVERSE SPLIT.
As described in more detail below, Board of Directors is recommending the
Transaction to achieve two results. First, adoption of the proposal would have
the effect of redeeming, at the current market price, all outstanding shares of
Common Stock owned by stockholders holding less than 300 shares. At the Record
Date, holders of record of less than 300 shares comprised more than % of the
total number of record holders of Common Stock, even though such persons
collectively held only approximately % of the total number of shares
outstanding. Accordingly, management of the Company believes that, if approved
by the Company's stockholders, the proposal will result in savings to the
Company through the reduction of certain costs associated with maintaining and
administering such a large number of stockholder accounts. Adoption of the
proposal will also enable holders of record of less than 300 shares to dispose
of their investment at market value and, in effect, avoid brokerage fees on the
transaction. Second, adoption of this proposal would have the effect of
increasing the per share price of the Common Stock of the Company. As a result
of changes in Nasdaq's rules approved in August 1997, the Company's Common Stock
must have a minimum bid price of $1.00 in order to continue to be designated as
a Nasdaq National Market security. At the Record Date, the closing price of a
share of the Company's Common Stock was $ . The Company anticipates that
the proposal will enable the Common Stock to meet the minimum bid price
requirement and thus continue to be designated as a Nasdaq National Market
security.
PURPOSE OF THE PROPOSED STOCK SPLITS.
REDUCTION OF ADMINISTRATIVE COSTS. At the Record Date, each of
approximately record holders of Common Stock, or approximately % of the
total number of record holders, owned less than 300 shares of Common Stock. In
addition, such stockholders owning less than 300 shares own in the aggregate
approximately % of the outstanding shares of Common Stock. Based on the
average daily closing price per share of the Common Stock on the Nasdaq National
Market for the ten trading days immediately preceding the Record Date of
$ , ownership of 299 shares of Common Stock has a market value of
approximately $ .
The cost of administering each stockholder's account and the amount of time
spent by management of the Company in responding to stockholder requests is the
same regardless of the number of shares held in the account. Accordingly, the
cost to the Company of maintaining many small accounts is disproportionately
high when compared with the total number of shares involved. In view of the
disproportionate cost to the Company of maintaining small stockholder accounts,
management of the Company believes that it will be beneficial to the Company and
its stockholders as a whole to eliminate the administrative burden and cost
associated with the approximately accounts containing less than 300 shares
of Common Stock. It is expected that the direct cost of administering
stockholder accounts will be reduced by up to approximately $55,000 to $75,000
per year if the Transaction is consummated.
In addition, since the Company is unable to locate a significant number of
its stockholders with small holdings, the Company believes it would be unable to
acquire the shares of Common Stock of such stockholders, and realize the savings
described above, by making a tender offer to acquire such shares. Accordingly,
if the Company is to acquire these shares, the Company believes it must do so by
means of the Reverse Split. Funds otherwise payable pursuant to the Transaction
to a stockholder who cannot be located will be held until proper claim therefor
is made, subject to applicable escheat laws.
Further, the Reverse Split will enable holders of record of less than 300
shares to dispose of their investment at market value and, in effect, avoid
brokerage fees on the transaction. Stockholders owning a small number of shares
would, if they chose to sell their shares otherwise, likely incur brokerage fees
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disproportionately high relative to the market value of their shares. In some
cases, stockholders might encounter difficulty in finding a broker willing to
handle such small transactions.
INCREASE IN PER SHARE PRICE. The Common Stock of the Company is currently
designated as a Nasdaq National Market security, and as a result current stock
price information is widely available. In August 1997, Nasdaq received approval
from the SEC for changes to the criteria that a security must meet in order to
continue to be designated as a Nasdaq National Market security, and these new
maintenance requirements became effective in February 1998. New Maintenance
Standard 1 requires a minimum bid price per share of Common Stock of $1.00;
alternatively, among other requirements, new Maintenance Standard 2 requires a
minimum bid price per share of Common Stock of $5.00. The price per share of the
Common Stock of the Company is currently less than $1.00; at the Record Date,
the closing price was $ . Nasdaq has informed the Company that it will
not continue the Company's listing unless it achieves compliance with the new
standards. The Board of Directors believes that the continued designation of the
Company's Common Stock as a Nasdaq National System security is important for the
Company and its stockholders. The Board anticipates that the Forward Split will
result in a market price in excess of $6.00. Accordingly, if the Transaction is
consummated, the Company anticipates that its Common Stock will meet the
criteria under Maintenance Standard 1 and will continue to be listed on the
Nasdaq National Market.
CASH PAYMENT IN LIEU OF SHARES.
In lieu of issuing the fraction of a share of Common Stock that will result
from the Reverse Split to each holder of record of less than 300 shares, the
Company will value each outstanding share of Common Stock held at the close of
business on the Effective Date at the average daily closing price per share of
the Common Stock on the Nasdaq National Market for the ten trading days
immediately preceding the Effective Date. Such per share price is hereinafter
referred to as the "Purchase Price."
Each stockholder who holds less than 300 shares of record immediately prior
to the Reverse Split will be entitled to receive, in lieu of the fraction of a
share resulting from the Reverse Split, cash in the amount of the Purchase Price
multiplied by the number of shares of Common Stock held by such stockholder
immediately prior to the Reverse Split. All amounts payable to stockholders will
be subject to applicable state laws relating to abandoned property. No service
charges or brokerage commissions will be payable by stockholders in connection
with the Transaction. The Company will pay no interest on cash sums due any such
stockholder pursuant to the Transaction.
No fractional shares will be issued by the Company in the Forward Split.
Each stockholder who holds 300 or more shares of record immediately prior to the
Reverse Split who would otherwise be entitled to receive a fractional share in
the Forward Split will instead be entitled to receive one share for a fractional
share of 0.5 or greater. No fractional shares will be issued for fractional
shares of less than 0.5.
As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of shares of Common Stock
immediately prior to the Reverse Split. The letter of transmittal will contain
instructions for the surrender of such stockholder's certificate or certificates
to the Company's exchange agent in exchange for (i) in the case of those
stockholders who held less than 300 shares, a cash payment in lieu of the
fractional share into which each such holder's shares of Common Stock were
converted in the Reverse Split; and (ii) in the case of those stockholders who
held 300 or more shares, a certificate or certificates representing the number
of whole shares of Common Stock into which such shares were combined in the
Forward Split. No cash payment will be made to any stockholder until he has
surrendered his outstanding certificate(s), together with the letter of
transmittal, to the Company's exchange agent. See "Exchange of Stock
Certificates" below. The Company's exchange agent is
; Attention: Reorganization Department;
Telephone: .
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EFFECTS OF PROPOSED STOCK SPLITS.
Upon consummation of the Reverse Split at 6:00 p.m. (Eastern Time) on the
Effective Date, each stockholder who owned of record less than 300 shares of
Common Stock immediately prior to the Reverse Split will have only the right to
receive cash based upon the Purchase Price in lieu of receiving the fraction of
a share resulting from the Reverse Split. The interest of each such stockholder
in the Company will be terminated thereby, and each such stockholder will have
no right to vote as a stockholder or share in the Company's assets, earnings or
profits following the Reverse Split.
Upon consummation of the Reverse Split at 6:00 p.m. (Eastern Time) on the
Effective Date, each stockholder who owned of record 300 or more shares of
Common Stock immediately prior to the Reverse Split will continue as a
stockholder with respect to the share or shares of Common Stock resulting from
the Reverse Split. As of 7:00 p.m. (Eastern Time) on the Effective Date, each
such share, including any fraction thereof held by such record holder
immediately after the Reverse Split, will be converted into multiple shares of
Common Stock on the basis of 30 shares of Common Stock for each share or
fraction thereof then held. Each such stockholder will continue to share in the
Company's assets, earnings or profits, if any, to the extent of each such
stockholder's ownership of Common Stock following the Transaction. No fractional
shares of Common Stock of the Company will be issued to stockholders as part of
the Forward Split; instead, each stockholder who would otherwise be entitled to
receive a fractional share will have the right to receive one share for a
fractional share of 0.5 or greater. No fractional shares will be issued for
fractional shares of less than 0.5.
The Company's Amended and Restated Certificate of Incorporation currently
authorizes the issuance of 50,000,000 shares of Common Stock. The authorized
Common Stock will be reduced to 5,000,000 shares by reason of the Transaction.
At the Record Date, the number of outstanding shares of Common Stock was
12,196,973. Based upon the Company's best estimates, if the Transaction had been
consummated as of such date, the number of outstanding shares of Common Stock
would have been reduced from 12,196,973 to approximately or by
approximately shares, and the number of holders of record of Common Stock
would have been reduced from approximately to approximately or by
approximately stockholders.
The Common Stock is currently registered under Section 12(g) of the Exchange
Act and, as a result, the Company is subject to the periodic reporting and other
requirements of the Exchange Act. The Transaction will not affect the
registration of the Common Stock under the Exchange Act, and the Company has no
current intention of terminating its registration under the Exchange Act to
become a "private" company. Consummation of the Transaction is expected to
enable the Common Stock to continue to be traded on the Nasdaq National Market.
See "Purpose of the Proposed Stock Splits-- Increase in Per Share Price" above.
Based on the aggregate number of shares owned by holders of record of less
than 300 shares at the Record Date and the average daily closing price per share
of the Common Stock on the Nasdaq National Market for the ten trading days
immediately preceding such date, the Company estimates that payments of cash in
lieu of the issuance of fractional shares to persons who held less than 300
shares of Common Stock immediately prior to the Reverse Split will total
approximately $ in the aggregate ( shares multiplied by an assumed
Purchase Price of $ per share).
If the Transaction is consummated, the number of shares the Company is
authorized to issue will be reduced from 50,000,000 to 5,000,000, the par value
of the Common Stock will remain at $.01 per share and the number of shares of
Common Stock outstanding will be reduced from to . The relative
increase in the number of shares of Common Stock authorized but not outstanding
resulting from the Transaction could have an anti-takeover effect. Shares of
Common Stock could, within the limits imposed by applicable law, be issued by
the Company in one or more transactions that would make more difficult, and
therefore less likely, a takeover of the Company. Any such issuance of
additional shares of Common Stock could have the effect of diluting the earnings
per share and book value per share of
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outstanding shares of Common Stock, and such additional shares could be used to
dilute the stock ownership or voting rights of persons seeking to obtain control
of the Company. Because the number of shares subject to redemption pursuant to
the Transaction represents only approximately % of the total number of shares
outstanding at the Record Date, the dilutive effect of re-issuing any of such
redeemed shares could be expected to be correspondingly small.
While the Company has no current specific plans to issue Common Stock other
than pursuant to the Company's 1994 Executive and Director Stock Option Plan and
the Incentive Compensation Plan discussed elsewhere in this Proxy Statement, the
additional shares that will be available for issuance if the Transaction is
consummated would provide the Board with flexibility in the management of the
Company's capitalization and the provision of incentives to the Company's
officers and other employees. The additional Common Stock could be used by the
Company in connection with (i) the establishment of director or employee stock
compensation plans, (ii) the issuance of warrants in connection with the
refinancing of debt, (iii) future acquisitions by the Company, (iv) future
capital raising by the Company and (v) other corporate purposes. Unless required
by law or regulatory authorities, no further authorization by vote of the
stockholders will be sought for any future Common Stock issuances. No
stockholder will have any preemptive or other preferential right to purchase any
Common Stock that may be issued and sold by the Company in the future.
EXCHANGE OF STOCK CERTIFICATES.
As soon as practicable after the Effective Date, the Company will send
letters of transmittal, for use in transmitting stock certificates to the
Company's designated exchange agent, to all stockholders immediately prior to
the Reverse Split. Upon proper completion and execution of a letter of
transmittal and return thereof to the exchange agent, together with
certificate(s), each such stockholder who held less than 300 shares of Common
Stock of record immediately prior to the Reverse Split will receive cash in the
amount to which the holder is entitled, as described above, in lieu of the
fractional share into which such stockholder's shares were converted in the
Reverse Split. After the Reverse Split and until surrendered, each outstanding
certificate held by a stockholder of record who held less than 300 shares
immediately prior to the Reverse Split will be deemed for all purposes to
represent only the right to receive the amount of cash to which the holder is
entitled pursuant to the Transaction. Each stockholder who held 300 or more
shares immediately prior to the Reverse Split, upon proper completion and
execution of a letter of transmittal and return thereof to the exchange agent,
together with certificate(s), will receive certificate(s) representing the
number of shares of Common Stock into which such shares were combined. For the
purpose of determining the number of shares of new Common Stock to which a
person will be entitled, all certificates for shares of Common Stock surrendered
by such holder shall be aggregated. After the Forward Split and until
surrendered, the Company will be entitled to treat each outstanding certificate
held by a stockholder of record of 300 or more shares immediately prior to the
Reverse Split that has not yet been surrendered for exchange as evidencing the
ownership of the number of shares of Common Stock of the Company into which the
shares represented by such certificate has been combined, notwithstanding any
failure to surrender such certificate.
STOCKHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL
SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. All amounts payable to
stockholders will be subject to applicable state laws relating to abandoned
property. No service charges or brokerage commissions will be payable by
stockholders in connection with the Transaction. The Company will pay no
interest on cash sums due any such stockholder pursuant to the Transaction. See
"Cash Payment in Lieu of Shares" above. In connection with the Transaction, the
Common Stock will be identified by a new CUSIP number, which will appear on all
certificates representing shares of Common Stock issued after the Effective
Date.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain Federal income tax consequences to
stockholders who receive cash pursuant to the Transaction and/or continue to
hold Common Stock immediately after the consummation of the Transaction. This
summary is based on existing Federal income tax law, which is subject to change,
possibly retroactively. This summary does not discuss all aspects of Federal
income taxation which may be important to a particular stockholder in light of
his individual investment circumstances, such as a stockholder who is subject to
special tax rules (e.g., financial institutions, insurance companies, broker-
dealers, tax-exempt organizations and foreign persons), a stockholder who
received his Common Stock as compensation for services rendered or pursuant to
the exercise of an employee stock option or a stockholder who has held, or will
hold, his Common Stock as part of a straddle, hedging or conversion transaction
for Federal income tax purposes, all of whom may be subject to tax rules that
differ significantly from those discussed below. In addition, this summary does
not discuss any state, local, foreign or other tax considerations. This summary
assumes that stockholders have held, and will hold, their shares of Common Stock
as "capital assets" (generally, property held for investment) under the Internal
Revenue Code of 1986, as amended. Each stockholder is urged to consult his tax
advisor as to the particular Federal, state, local, foreign and other tax
consequences, in light of his specific tax circumstances, of receiving cash
pursuant to the Transaction and/or continuing to hold Common Stock immediately
after the consummation of the Transaction.
CONSEQUENCES TO STOCKHOLDERS WHO EXCHANGE ALL OF THEIR COMMON STOCK FOR CASH
PURSUANT TO THE TRANSACTION. A stockholder who receives cash in lieu of a
fractional share pursuant to the Reverse Split, and who does not continue to
hold any Common Stock immediately thereafter, will recognize capital gain or
loss in an amount equal to the difference between the cash received in the
Transaction and his aggregate adjusted tax basis in shares of Common Stock
disposed of, provided that the receipt of cash by the stockholder (i) results in
a "complete termination" of such stockholder's equity interest in the Company,
(ii) is "not essentially equivalent to a dividend" with respect to such
stockholder or (iii) is "substantially disproportionate" with respect to such
stockholder, each as discussed below. If such gain is not treated as capital
gain under any of these three tests, such gain will be treated as ordinary
dividend income to the extent of the stockholder's ratable share of the
Company's undistributed earnings and profits, then as a tax-free return of
capital to the extent of such stockholder's aggregate adjusted tax basis in his
shares which has the effect of reducing such basis, and thereafter as capital
gain. See "--Maximum Tax Rates Applicable to Capital Gain" below.
In applying these tests, a stockholder will be treated as owning shares
actually or constructively owned by certain individuals such as family members
and entities related to such stockholder.
A stockholder who disposes of all of his Common Stock in the Transaction,
and who is not related to any other person who continues to hold Common Stock
immediately after the consummation of the Transaction, will generally be treated
as having completely terminated his equity interest in the Company.
A stockholder will satisfy the "not essentially equivalent to a dividend"
test if the reduction in such stockholder's proportionate interest in the
Company, taking into account ownership of shares by attribution as described
above, resulting from the Transaction constitutes a "meaningful reduction" given
such stockholder's particular facts and circumstances.
The receipt of cash in the Transaction will be "substantially
disproportionate" for a stockholder if the percentage of the then outstanding
shares of Common Stock actually and constructively owned by such stockholder
immediately after the consummation of the Transaction is less than 80% of the
percentage of the shares of Common Stock actually and constructively owned by
such stockholder immediately before the consummation of the Transaction.
CONSEQUENCES TO STOCKHOLDERS WHO CONTINUE TO HOLD COMMON STOCK IMMEDIATELY
AFTER THE CONSUMMATION OF THE TRANSACTION. The Company believes that the
Transaction will be treated, for Federal income tax
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<PAGE>
purposes, as a "tax-free recapitalization." Accordingly, a stockholder who
continues to hold Common Stock immediately after the consummation of the
Transaction and who receives no cash pursuant to the Transaction will, for
Federal income tax purposes, (i) not recognize any gain or loss in the
Transaction and (ii) have the same adjusted tax basis and holding period in his
Common Stock as he had in such Common Stock immediately prior to the
Transaction.
SHARES HELD IN MULTIPLE ACCOUNTS. A stockholder who is the owner of record
of less than 300 shares of Common Stock in at least one account and is the
beneficial owner (but not a record holder) of shares of Common Stock in at least
one other account, for example, an account with a brokerage firm or other
fiduciary which is the owner of record of 300 or more shares, will both hold
Common Stock immediately after the consummation of the Transaction and will be
entitled to receive a cash payment pursuant to the Transaction. In these
circumstances, the stockholder will generally recognize taxable income with
respect to the cash received pursuant to the Transaction. Such payment will be
treated, for federal income tax purposes, as capital gain or loss, provided that
the receipt of cash by the stockholder (i) results in a "complete termination"
of such stockholder's equity interest in the Company, (ii) is "not essentially
equivalent to a dividend" with respect to such stockholder or (iii) is
"substantially disproportionate" with respect to such stockholder, each as
discussed above under the heading "--Consequences to Stockholders Who Exchange
All of Their Common Stock for Cash Pursuant to the Transaction." In applying
these three tests, a stockholder may possibly take into account sales of Common
Stock that occur substantially contemporaneously with the consummation of the
Transaction which is how such an event could result in a "complete termination"
of his equity interest. To the extent that the amount of cash received in the
Transaction is greater than the stockholder's basis in the shares of Common
Stock which are disposed of in the Transaction, such stockholder will recognize
a capital gain. To the extent that the amount of cash received in the
Transaction is less than the stockholder's basis in the shares of Common Stock
which are disposed of in the Transaction, such stockholder will recognize a
capital loss.
If a stockholder receives cash under the foregoing circumstances which is
not treated as capital gain or loss under any of the foregoing tests, the cash
will be treated as ordinary dividend income to the extent of the stockholder's
ratable share of the Company's undistributed earnings and profits and thereafter
as a return of capital to the extent of the stockholder's aggregate adjusted tax
basis in his shares and then as capital gain. In such event, the stockholder may
add the basis (as so adjusted) of his shares which have been converted to cash
to the basis of his remaining shares.
MAXIMUM TAX RATES APPLICABLE TO CAPITAL GAIN. Under the recently enacted
Taxpayer Relief Act of 1997, net capital gain (i.e., generally, capital gain in
excess of capital loss) recognized by an individual upon the sale of a capital
asset such as the shares of Common Stock that has been held for more than 18
months will generally be subject to tax at a rate not to exceed 20%. Net capital
gain recognized by an individual from the sale of a capital asset that has been
held for more than 12 months but not for more than 18 months will continue to be
subject to tax at a rate not to exceed 28%, and capital gain recognized from the
sale of a capital asset that has been held for 12 months or less will continue
to be subject to tax at ordinary income tax rates. In addition, capital gain
recognized by a corporate taxpayer will continue to be subject to tax at the
ordinary income tax rates applicable to corporations.
APPRAISAL RIGHTS.
Under the DGCL, holders of Common Stock would ordinarily not be entitled to
appraisal rights in connection with the Transaction. Pursuant to Section 262(c)
of the DGCL, however, the Board has included in the Amendment a provision
conferring appraisal rights upon certain holders of Common Stock in connection
with the Transaction.
If the Proposal is approved at the Meeting and the Transaction consummated,
holders of record of less than 300 shares of Common Stock immediately prior to
the Reverse Split who do not vote in favor of the Proposal and who otherwise
comply with the applicable statutory procedures summarized herein will
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be entitled to appraisal rights under Section 262 of the DGCL ("Section 262"). A
person having a beneficial interest in shares of Common Stock held of record in
the name of another person, such as a broker or nominee, must act promptly to
cause the record holder to follow the steps summarized below properly and in a
timely manner in order to perfect such appraisal rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
TEXT OF SECTION 262 WHICH IS REPRINTED IN ITS ENTIRETY AS EXHIBIT B. ALL
REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" OR "HOLDER" ARE
TO THE RECORD HOLDER OF THE SHARES OF COMMON STOCK AS TO WHICH APPRAISAL RIGHTS
ARE ASSERTED.
If the Proposal is approved at the Meeting and the Transaction consummated,
holders of record of less than 300 shares of Common Stock immediately prior to
the Reverse Split ("Appraisal Shares") who follow the procedures set forth in
Section 262 will be entitled to have their Appraisal Shares appraised by the
Delaware Chancery Court and to receive payment in cash of the "fair value" of
such Appraisal Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Transaction, together with a fair rate of
interest, if any, as determined by such court.
Under Section 262, where a proposal that (if approved) would give rise to
appraisal rights is to be submitted for approval at a meeting of stockholders,
the corporation, not less than 20 days prior to the meeting, must notify each of
its stockholders who was such on the record date for such meeting with respect
to shares for which appraisal rights are available, that appraisal rights are so
available, and must include in such notice a copy of Section 262.
This Proxy Statement constitutes such notice to the holders of Appraisal
Shares and the applicable statutory provisions of the DGCL are attached to this
Proxy Statement as Exhibit B. Any stockholder who wishes to exercise such
appraisal rights or who wishes to preserve his right to do so should review the
following discussion and Exhibit B carefully because failure to timely and
properly comply with the procedures specified will result in the loss of
appraisal rights under the DGCL.
A HOLDER OF APPRAISAL SHARES WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL
RIGHTS (A) MUST NOT VOTE IN FAVOR OF THE PROPOSAL AND (B) MUST DELIVER TO THE
COMPANY PRIOR TO THE VOTE ON THE PROPOSAL AT THE MEETING A WRITTEN DEMAND FOR
APPRAISAL OF SUCH HOLDER'S APPRAISAL SHARES. A HOLDER OF APPRAISAL SHARES
WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL RIGHTS MUST BE THE RECORD HOLDER OF
SUCH APPRAISAL SHARES ON THE DATE THE WRITTEN DEMAND FOR APPRAISAL IS MADE AND
MUST CONTINUE TO HOLD SUCH APPRAISAL SHARES OF RECORD UNTIL THE CONSUMMATION OF
THE TRANSACTION. ACCORDINGLY, A HOLDER OF APPRAISAL SHARES WHO IS THE RECORD
HOLDER OF APPRAISAL SHARES ON THE DATE THE WRITTEN DEMAND FOR APPRAISAL IS MADE,
BUT WHO THEREAFTER TRANSFERS SUCH APPRAISAL SHARES PRIOR TO THE CONSUMMATION OF
THE TRANSACTION, WILL LOSE ANY RIGHT TO APPRAISAL IN RESPECT OF SUCH APPRAISAL
SHARES.
Only a holder of record of Appraisal Shares is entitled to assert appraisal
rights for the Appraisal Shares registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on such holder's stock certificates. If
the Appraisal Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the Appraisal Shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including one
or more joint owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is agent
for
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such owner or owners. A record holder such as a broker who holds Appraisal
Shares as nominee for several beneficial owners may exercise appraisal rights
with respect to the Appraisal Shares held for one or more beneficial owners
while not exercising such rights with respect to the Appraisal Shares held for
other beneficial owners; in such case, the written demand should set forth the
number of Appraisal Shares as to which appraisal is sought. When no number of
Appraisal Shares is expressly mentioned, the demand will be presumed to cover
all Appraisal Shares held in the name of the record owner. Stockholders who hold
their Appraisal Shares in brokerage accounts or other nominee forms and who wish
to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such a nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO SEMELE
GROUP INC. AT ONE CANTERBURY GREEN, 201 BROAD STREET, STAMFORD, CONNECTICUT
06901 ATTENTION: PRESIDENT.
Within ten days after the consummation of the Transaction, the Company will
notify each stockholder who has properly asserted appraisal rights under Section
262 and has not voted in favor of the Proposal of the date the Transaction
became effective.
Within 120 days after the consummation of the Transaction, but not
thereafter, the Company or any stockholder who has complied with the statutory
requirements summarized above may file a petition in the Delaware Chancery Court
demanding a determination of the fair value of the Appraisal Shares. The Company
is under no obligation to, and has no present intention to, file a petition with
respect to the appraisal of the fair value of the Appraisal Shares. Accordingly,
it is the obligation of the holders of Appraisal Shares to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262.
Within 120 days after the consummation of the Transaction, any stockholder
who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of Appraisal Shares not voted in favor of adoption of
the Proposal and with respect to which demands for appraisal have been received
and the aggregate number of holders of such Appraisal Shares. Such statement
must be mailed within ten days after a written request therefor has been
received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their Appraisal
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Transaction, together with a fair rate of interest, if any,
to be paid upon the amount determined to be the fair value. Stockholders
considering seeking appraisal should be aware that the fair value of their
Appraisal Shares, as determined under Section 262, could be more than, the same
as or less than the value of the consideration they would otherwise receive for
their Appraisal Shares in the Transaction if they did not seek appraisal of
their Appraisal Shares. The Delaware Supreme Court has stated that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
in the appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if any,
to be paid upon the amounts to be received by persons whose Appraisal Shares
have been appraised. The costs of the action may be determined by the Delaware
Chancery Court and taxed upon the parties as the Delaware Chancery Court deems
equitable. The Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all of the Appraisal Shares entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the consummation of the Transaction,
be entitled to vote the Appraisal Shares subject to
14
<PAGE>
such demand for any purpose or be entitled to the payment of dividends or other
distributions on those Appraisal Shares, except for dividends or other
distributions payable to holders of record of Appraisal Shares as of a record
date prior to the consummation of the Transaction.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING APPRAISAL
RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS, IN WHICH EVENT A STOCKHOLDER WILL
BE ENTITLED TO RECEIVE THE CONSIDERATION RECEIVABLE WITH RESPECT TO SUCH
APPRAISAL SHARES IN THE TRANSACTION.
If any stockholder who properly demands appraisal of his Appraisal Shares
under Section 262 fails to perfect, or effectively withdraws or loses, his
rights to appraisal, as provided in the DGCL, the Appraisal Shares of such
stockholder will be converted into the right to receive the consideration
receivable with respect to such Appraisal Shares in the Transaction. A
stockholder will fail to perfect, or effectively lose or withdraw, his appraisal
rights if, among other things, no petition for appraisal is filed by the
stockholder within 120 days after the consummation of the Transaction, or if the
stockholder has delivered to the Company a written withdrawal of his demand for
appraisal. Any such attempt to withdraw an appraisal demand more than 60 days
after the consummation of the Transaction will require the written approval of
the Company.
The receipt of cash in exchange for all of a stockholder's shares of Common
Stock pursuant to the exercise of appraisal rights will generally be treated as
a taxable sale of such shares for Federal income tax purposes. See "Certain
Federal Income Tax Consequences--Consequences to Stockholders Who Exchange All
of Their Common Stock for Cash Pursuant to the Transaction" above.
RECOMMENDATION OF THE BOARD: The Board has unanimously approved the
Amendment and the Reverse and Forward Splits, and recommends that the
stockholders adopt the following resolution which will be presented for a vote
of the stockholders at the Annual Meeting:
RESOLVED, that the stockholders approve of and adopt an amendment to the
Amended and Restated Certificate of Incorporation of the Company deleting
Article 4 thereof in its entirety and inserting in place thereof the Article 4
set forth as Exhibit A to the Proxy Statement for the 1998 Annual Meeting of
Stockholders.
VOTE REQUIRED. Approval of the Amendment and the Reverse and Forward Splits
requires the affirmative vote of a majority of all outstanding shares of Common
Stock.
PROPOSAL 3: TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE AMENDMENTS TO THE
1994 EXECUTIVE AND DIRECTOR STOCK OPTION PLAN.
On December 30, 1997, the Board of Directors of the Company adopted, subject
to stockholder approval at the Annual Meeting, an amendment to the 1994
Executive and Director Stock Option Plan (the "Option Plan") to permit the grant
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code. Currently the Option Plan authorizes the grant of nonstatutory
stock options only. In addition, to put Mr. Joseph Bartlett in the same position
as the other outside directors of the Company, the Board adopted, subject to
stockholder approval, an amendment to the Option Plan granting Mr. Bartlett a
nonstatutory stock option to purchase 50,000 shares of the Company's Common
Stock. Other amendments approved by the Board and submitted to the stockholders
for approval principally relate to the elimination of certain restrictions in
the Option Plan that are no longer necessary or appropriate based upon changes
to the rules under Section 16 of the Exchange Act. The key terms of the Option
Plan, as proposed to be amended, are outlined below. A copy of the Option Plan,
marked to show the proposed changes, is attached to this Proxy Statement as
Exhibit C.
15
<PAGE>
DESCRIPTION OF THE OPTION PLAN.
The Option Plan authorizes the Board to grant options to purchase up to
1,000,000 shares of the Common Stock of the Company. Currently, the Option Plan
authorizes the grant of nonstatutory stock options. As amended, the Option Plan
will authorize the grant of either incentive stock options within the meaning of
Section 422 of the Internal Revenue Code or nonstatutory stock options. The
Board is not asking the stockholders to approve an increase in the number of
shares of Common Stock that can be issued under the Option Plan. Currently, all
1,000,000 shares that can be issued under the Option Plan are subject to
outstanding options granted under the Option Plan, including the options granted
on December 30, 1997, to Messrs. Bartlett, Engle and Coyne described below.
Accordingly, no further options can currently be granted under the Option Plan.
The Option Plan consists of a Director Option Grant Program and an Executive
Option Grant Program. Under the Director Option Grant Program, non-employee
directors are eligible to be granted nonstatutory options. The exercise price at
which shares may be acquired upon exercise of options granted under the Director
Option Grant Program cannot be less than 100 % of the fair market value of the
underlying shares on the date of grant. The length of each option granted under
the Director Option Grant Program cannot exceed ten years and one day. Each of
Gerald L. Nudo, Robert M. Ungerleider and Walter E. Auch, Sr., automatically
received one-time nonstatutory options to purchase 50,000 shares in connection
with the approval of the Option Plan by the stockholders in 1994. Under the
amended Option Plan, Joseph W. Bartlett on December 30, 1997, automatically
received a one-time nonstatutory option to purchase 50,000 shares at an exercise
price of $.925 per share, subject to the approval by the stockholders at the
Annual Meeting of the amendments to the Option Plan.
The Company's key management personnel, including employees of Banyan
Management Corp., are eligible to participate in the Executive Option Grant
Program, which as amended provides for the grant of either incentive stock
options or nonstatutory stock options. On December 30, 1997, the compensation
committee of the Board of Directors of the Company granted each of Messrs. Engle
and Coyne incentive stock options to purchase 400,000 shares at an exercise
price of $.925 per share, subject to the approval by the stockholders at the
Annual Meeting of the amendments to the Option Plan. If the amendments are not
approved, it is expected that the Board will convert the options granted to
Messrs. Engle and Coyne to nonstatutory stock options. The Board administers the
Executive Option Grant Program and has the authority to determine, among other
things, the individuals to be granted options, whether the option granted is an
incentive or a nonstatutory option, the exercise price at which shares may be
acquired, the number of shares subject to each option and the exercise period of
each option. The exercise price at which shares may be acquired upon exercise of
options granted under the Executive Stock Option Program cannot be less than
100% of the fair market value of the underlying shares on the date of grant
(110% in the case of an option which is an incentive stock option granted to an
employee who owns more than 10% of the total combined voting power of all
classes of stock of the Company or any subsidiary). The term of any incentive
stock option granted under the Executive Stock Option Program cannot exceed the
term prescribed by the Internal Revenue Code, which is currently five years in
the case of an employee who owns more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary and ten years in
the case of all other employees. The term of any nonstatutory option granted
under the Executive Stock Option Program cannot exceed ten years and one day.
All options granted under the Executive Option Grant Program vest and are
exercisable in installments as follows: (i) 33.3% of the number of shares
commencing on the first anniversary of the date of grant; (ii) an additional
33.3% of the shares commencing on the second anniversary of the date of the
grant; and (iii) an additional 33.4% of shares commencing on the third
anniversary of the date of grant. All options granted under the Director Option
Grant Program are exercisable in installments as follows: (i) 50% of the number
of shares commencing on the first anniversary of the date of grant; and (ii) an
additional 50% of the number of shares commencing on the second anniversary of
the date of grant.
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<PAGE>
Options granted under the Option Plan are performance incentives; as such, no
payment is made by grantees for their options. The Option Plan terminates in
2004.
The Board is authorized to construe and interpret the Option Plan and to
prescribe additional terms and conditions of exercise in option agreements and
provide the form of option agreement to be used. No non-employee director is
eligible to receive options under the Executive Option Grant Program. Options
are not transferable except by will or by the laws of descent and distribution,
and are exercisable during an optionee's lifetime only by the optionee or the
appointed guardian or legal representative of the optionee. Generally, options
may be exercised no later than 30 days after the optionee ceases to be an
employee or a director of the Company and may be exercised only to the extent
the option was exercisable on the termination date. Unless otherwise determined
by the Board at the time of grant, however, upon the: (a) death or permanent and
total disability of an optionee; or (b) retirement in accord with the Company's
retirement practices, any unexercised options become immediately exercisable
without regard to vesting and may be exercised at any time within one year in
the case of (a) and 90 days in the case of (b). In no case can an option be
exercised beyond the expiration date of the option. If, while unexercised
options remain outstanding under the Option Plan, the Company ceases to be a
publicly-traded company, or if the Company merges with another entity or a
similar event occurs, all options outstanding under the Option Plan immediately
become exercisable at that time.
The Option Plan requires the optionee to pay, at the time of exercise, for
all shares acquired on exercise in cash, shares or, in the case of the Executive
Option Grant Program, other forms of consideration acceptable to the Board.
If the Company declares a stock dividend, splits its stock, combines or
exchanges its shares or engages in any other transactions which results in a
change in capital structure such as a merger, consolidation, dissolution,
liquidation or similar transaction, the Board may adjust or substitute, as the
case may be, the number of shares available for options under the Plan, the
number of shares covered by outstanding options, the exercise price per share of
outstanding options, any target price levels for vesting of the options and any
other characteristics of the options as the Board deems necessary to equitably
reflect the effects of those changes on the option holders.
TAX CONSEQUENCES.
Certain options authorized to be granted under the Option Plan are intended
to qualify as incentive stock options for federal income tax purposes. Under
federal income tax law in effect as of the date of this Proxy Statement, an
optionee will recognize no income upon grant or exercise of an incentive stock
option. However, the excess of the fair market value of the stock acquired over
the option price is an item of tax preference used in computing alternative
minimum taxable income in the year of exercise. If an employee exercises an
incentive stock option and does not dispose of any of the shares thereby
acquired within two years following the date of grant and within one year
following the date of exercise, then any gain realized upon subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset. If any employee disposes of shares acquired upon exercise of an
incentive stock option before the expiration of either the one-year holding
period or the two-year holding period specified in the foregoing sentence (a
"disqualifying disposition"), the employee will realize ordinary income in an
amount equal to the lesser of (i) the excess of the fair market value of the
shares on the date of exercise over the option price or (ii) the excess of the
fair market value of the shares on the date of disposition over the adjusted
basis of the stock. Any additional gain realized upon the disqualifying
disposition will constitute capital gain. The Company will not be allowed any
deduction for federal income tax purposes at either the time of grant or the
time of exercise of an incentive stock option. Upon any disqualifying
disposition by an employee, the Company will generally be entitled to a
deduction to the extent the employee realizes ordinary income.
17
<PAGE>
Certain options authorized to be granted under the Option Plan will be
treated as nonstatutory stock options for federal income tax purposes. Under
federal income tax law in effect as of the date of this Proxy Statement, no
income is realized by the grantee of a nonstatutory stock option until the
option is exercised. At the time of exercise of a nonstatutory stock option, the
optionee will realize ordinary income, and the Company will generally be
entitled to a deduction, in the amount by which the fair market value of the
shares subject to the option at the time of exercise exceeds the exercise price.
The Company is required to report such income on the employee's Form W-2 for the
year. Upon the sale of shares acquired upon exercise of a nonstatutory stock
option, the employee will realize capital gain or loss equal to the difference
between the amount realized from the sale and the fair market value of the
shares on the date of exercise.
RECOMMENDATION OF THE BOARD: The Board has unanimously approved the
amendments to the 1994 Executive and Director Stock Option Plan, and recommends
that the stockholders adopt the following resolution which will be presented for
a vote of the stockholders at the Annual Meeting:
RESOLVED, that the stockholders approve of the amendments to the 1994
Executive and Director Stock Option Plan.
VOTE REQUIRED. The affirmative vote of a majority of the shares present in
person or by proxy at the Meeting is required for approval of the amendments to
the 1994 Executive and Director Stock Option Plan.
PROPOSAL 4: TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE THE TERMS OF AN
INCENTIVE COMPENSATION PLAN FOR MESSRS. ENGLE AND COYNE.
In connection with the engagement of Mr. Gary D. Engle as Chief Executive
Officer and Mr. James A. Coyne as President and Chief Operating Officer, the
Company entered into an Employment Agreement with each officer. See
"Compensation of Directors and Executive Officers--Executive Compensation. " The
terms of the Employment Agreements provide, among other things, for the
establishment by the Company of an Incentive Compensation Plan for Mr. Engle and
Mr. Coyne (the "Incentive Plan") whereby the executives' salaries and bonuses
are deferred and the deferred amounts are held in the form of Common Stock of
the Company. The key terms of the Incentive Plan are outlined below. A copy of
the Incentive Plan is attached to this Proxy Statement as Exhibit D.
DESCRIPTION OF THE INCENTIVE PLAN.
SALARY AND BONUS DEFERRAL. Each executive's salary under his Employment
Agreement with the Company is deferred under the Incentive Plan, except that the
executive may elect to have all or a portion of any salary not yet earned paid
to him directly in lieu of being deferred under the Incentive Plan. The
Incentive Plan also provides for the deferral of the incentive bonus amounts
payable to each executive under his Employment Agreement with the Company. With
respect to each fiscal year of the Company, the Company will contribute to the
Incentive Plan on account of each executive an incentive bonus amount equal to
6% of the Company's pre-tax profits for such fiscal year (excluding results
attributable to the Company's properties in Malibu, California). With respect to
the Malibu properties, the Company will contribute on account of each executive
an incentive bonus amount attributable to the financial results of those
properties, which has not yet been determined. Finally, the Company acting
through the compensation committee of the Board of Directors may defer from time
to time under the Incentive Plan additional discretionary bonuses for the
executives.
INCENTIVE PLAN OPERATION. All amounts deferred under the Incentive Plan are
held in the form of Common Stock of the Company, except that prior to the date
an amount of salary or bonus is earned the executive may elect that all or a
portion of such amount be held in a diversified investment portfolio. To date,
the executives have deferred all amounts of salary and bonus due them and all
such amounts are being held in the form of Common Stock of the Company. See
"Compensation of Directors and Executive
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<PAGE>
Officers--Executive Compensation." The number of shares of Common Stock
attributable to the amount of salary deferred by the executives under the
Incentive Plan in 1997 was determined by dividing the dollar amount of the
salary deferred by the closing price of a share of the Company's Common Stock on
December 30, 1997, the effective date of the Incentive Plan. The number of
shares of Common Stock attributable to the amount of salary and bonus deferred
by the executives after that date is determined by reference to the month in
which the amount is accrued by dividing the dollar amount of the salary or bonus
deferred by the average of the closing prices of a share of the Company's Common
Stock for the last ten trading days of such month. Amounts attributable to an
executive's salary deferred under the Incentive Plan are not subject to
forfeiture. Amounts attributable to an executive's bonuses deferred under the
Incentive Plan are forfeited upon the Company's termination of the executive for
cause under his Employment Agreement. All amounts forfeited are returned to the
Company.
Benefits under the Incentive Plan are payable in a lump sum upon the
termination of the executive's employment (including death), except, with
respect to any portion of the benefits consisting of Common Stock of the
Company, if such stock is not then readily tradable, the Company will redeem
such stock in installments within three years at fair market value.
An important asset of the Company consists of its substantial net operating
losses incurred in earlier years which, under current federal income tax law,
can be carried forward to offset taxable income earned in future taxable years.
The ability to use these net operating loss carryforwards will be very
substantially diminished if a more than 50% change in stock ownership of the
Company occurs among 5% or greater stockholders during any three-year period. If
Common Stock is held for the benefit of an executive under the Incentive Plan
which, when added to other shares of Common Stock of the executive, causes the
executive to be treated as a 5% of greater stockholder, a portion of the 50%
change in stock ownership has been used, which will limit the ability of the
Company to use its Common Stock in the future to compensate key employees or to
acquire other corporations or their assets without suffering a substantial
reduction in the use of its net operating loss carryforwards. The By-Laws of the
Company prohibit any stockholder from acquiring more than 4.9% of the Common
Stock of the Company without the consent of the Board of Directors which must
consider whether permitting such an acquisition is in the best interests of the
Company. The Board intends to consent to the acquisition by Mr. Engle of more
than 4.9% of the Common Stock of the Company pursuant to the Incentive Plan and
the Option Plan.
The holding of amounts deferred under the Incentive Plan in the form of
Common Stock of the Company is conditioned upon stockholder approval of the
Incentive Plan. If such stockholder approval is not obtained, the Incentive Plan
will be amended to provide that no amounts deferred under the Incentive Plan can
be held in the form of Common Stock of the Company, but otherwise will continue
in effect.
"RABBI" TRUST. The Company has established and is making contributions to a
"rabbi" trust as a funding vehicle for benefits under the Incentive Plan. The
trust is irrevocable, has an independent financial institution as trustee and is
treated as a grantor trust for federal tax purposes. Trust assets are held
separate from other funds of the Company, but remain subject to claims of the
Company's general creditors in the event of the Company's insolvency. The trust
is funded with shares of Common Stock (although Messrs. Engle and Coyne can
elect investment in a diversified portfolio for future contributions). Shares
held in the trust are voted by the trustee, provided that each participating
executive may instruct the trustee with respect to shares held on account of
such executive.
RECOMMENDATION OF THE BOARD: The Board has unanimously approved the
Incentive Plan, and recommends that the stockholders adopt the following
resolution which will be presented for a vote of the stockholders at the Annual
Meeting:
RESOLVED, that the stockholders approve of the Incentive Compensation Plan.
VOTE REQUIRED. The affirmative vote of a majority of the shares present in
person or by proxy at the Meeting is required for approval of the Incentive
Plan.
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<PAGE>
PROPOSAL 5: SELECTION OF INDEPENDENT AUDITOR
The Company's financial statements, including those for the fiscal year
ended December 31, 1997, are included in the Annual Report being furnished to
all stockholders with this Proxy Statement. The year-end statements have been
audited by the independent firm of Ernst & Young LLP, which has served as the
Company's independent auditor since the fiscal year ended December 31, 1989. The
total fees paid or accrued to Ernst & Young LLP in connection with the fiscal
year ended December 31, 1997, audit were approximately $55,000. The Board
believes that Ernst & Young LLP is knowledgeable about the Company's operations
and accounting practices and is well qualified to act in the capacity of
independent auditor. Therefore, the Board has selected Ernst & Young LLP as the
Company's independent auditor to examine its financial statements for the fiscal
year ended December 31, 1998. Although the selection of an auditor does not
require a stockholder vote, the Board believes it is desirable to obtain the
concurrence of the stockholders to this selection.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD: The Board considers Ernst & Young LLP to be
well-qualified, and recommends that the stockholders adopt the following
resolution which will be presented for a vote of the stockholders at the Annual
Meeting:
RESOLVED, that the stockholders concur in the appointment, by the Board, of
Ernst & Young LLP to serve as the Company's independent auditor for the fiscal
year ended December 31, 1998.
VOTE REQUIRED. The affirmative vote of a majority of the shares present in
person or by proxy at the Meeting is required for the adoption of the foregoing
resolution.
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EXECUTIVE OFFICERS
The following table sets forth information with respect to the Company's
executive officers. Each officer is elected annually by the directors and serves
until his successor is elected and qualified or until his death, resignation or
removal by the directors:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OFFICE AND YEAR FIRST
NAME AGE DURING PAST 5 YEARS ELECTED
- -------------------------- --- ----------------------------------------------------- ------------------------
<S> <C> <C> <C>
Gary D. Engle 49 See "Proposal 1--Election of Directors-- Chairman and Chief
Continuing Directors" above Executive Officer, 1997
James A. Coyne 38 See "Proposal 1--Election of Directors-- Nominees" President and Chief
above Operating Officer, 1997
Gary A. Romano 38 Mr. Romano has been Chief Financial of the Company Chief Financial Officer
since November 1997. Mr. Romano is Executive Vice Officer, 1997
President and Chief Operating Officer of EFG and
certain of its affiliates. Mr. Romano joined EFG in
November 1989 and was appointed Executive Vice
President and Chief Operating Officer in April 1996.
Prior to joining EFG, Mr. Romano was Assistant
Controller for a privately-held real estate company
which he joined in 1987. Mr. Romano held audit staff
and manager positions at Ernst & Whinney (now Ernst &
Young LLP) from 1982 to 1986.
Michael J. Butterfield 38 Mr. Butterfield has been Treasurer of the Company Treasurer, 1997
since November 1997. Mr. Butterfield is Vice
President, Finance, and Treasurer of EFG and certain
of its affiliates. Mr. Butterfield joined EFG in June
1992 and was appointed Vice President, Finance, and
Treasurer in April 1996. Prior to joining EFG, Mr.
Butterfield was an audit manager with Ernst & Young
LLP, which he joined in 1987. Mr. Butterfield was
employed in public accounting and industry positions
in New Zealand and London, England, prior to coming
to the United States in 1987. Mr. Butterfield
attained his Associate Chartered Accountant (A.C.A.)
professional qualification in New Zealand and has
completed his C.P.A. requirements in the United
States.
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
A. DIRECTOR COMPENSATION
The directors are paid an annual fee of $15,000, payable quarterly, plus
$875 for each Board meeting, including meetings of the compensation and audit
committees, attended in person and $250 an hour for
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<PAGE>
each Board meeting, including meetings of the compensation and audit committees,
attended via telephonic conference call. In addition, each director is
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board.
B. EXECUTIVE COMPENSATION
Compensation paid to Mr. Engle for the year ended December 31, 1997, and to
Mr. Leonard G. Levine, the former President and Chief Executive Officer of the
Company, for the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
AWARDS
----------- PAYOUTS
ANNUAL COMPENSATION (1) OTHER RESTRICTED ----------- ALL OTHER
------------------------------- ANNUAL STOCK OPTIONS LTIP COMPEN-
YEAR SALARY BONUS COMPEN- SATION AWARD(S) SARS (#) PAYOUTS SATION
--------- --------- --------- ------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary D. Engle, Chairman and
Chief Executive Officer 1997(2) $ 48,383 n/a n/a n/a 400,000 n/a n/a
Leonard G. Levine, former 1997(3) $ 111,926 $ 7,164 n/a n/a n/a n/a $ 400,000
President and Chief 1996(3) $ 108,141 $ 217,135 n/a n/a n/a n/a n/a
Executive Officer 1995(3) $ 105,606 $ 27,612 n/a ($ 19,606) n/a....... n/a n/a
</TABLE>
- ------------------------
(1) Total compensation for each of the next three highest paid executive
officers did not exceed $100,000 in 1997, 1996 or 1995.
(2) Mr. Engle became Chairman and Chief Executive Officer on November 10, 1997,
following Mr. Levine's resignation.
(3) Pursuant to Mr. Levine's employment agreement, incentive amounts which were
earned in 1996, 1995 and 1994 were paid or awarded to him in 1997, 1996 and
1995.
Mr. Engle serves as Chief Executive Officer of the Company pursuant to an
Executive Employment Agreement dated November 10, 1997, and Mr. Coyne serves as
Chief Operating Officer of the Company pursuant to an Executive Employment
Agreement dated May 1, 1997. The provisions of the two Agreements (the
"Agreements") are identical.
Pursuant to the Agreements, the Company paid each executive a base salary of
$48,383 for services rendered to the Company in 1997. For 1998 and thereafter,
the Agreements provide that the Company will pay each executive a base salary at
the rate of not less than $120,000 per year, subject to adjustment by the Board
of Directors based upon the performance by the executive of his duties and the
financial performance of the Company. Under the Agreements, each executive is
also entitled to receive such incentive or performance cash bonuses as the Board
may determine from time to time.
The Agreements provide that the executives' salary under the Agreements will
be deferred under an Incentive Compensation Plan that the Company will establish
for the executives, unless the executive for any prospective period elects to
have such salary paid to him directly. See "Proposal 4--To Consider and Vote
Upon a Proposal to Approve the Terms of an Incentive Compensation Plan for
Messrs. Engle and Coyne" above, for a full description of the Incentive Plan,
which the Company is presenting to the stockholders for approval at the Annual
Meeting. Pursuant to the Agreements and the Incentive Plan, each executive
deferred his $48,383 of base salary for 1997, which is being held for his
account in the form of 77,413 shares of Common Stock under the rabbi trust
established by the Company in connection with the Incentive Plan. Such number of
shares of Common Stock was determined under the Incentive Plan by dividing the
dollar amount of the salary deferred by $.625, the closing price of a share of
the Company's Common Stock on December 30, 1997, the effective date of the
Incentive Plan. In addition, each executive has deferred all amounts of base
salary otherwise payable to him to date in 1998, an aggregate of $40,000
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<PAGE>
for each executive at the Record Date, which is being held for his account in
the form of 59,363 shares of Common Stock under the rabbi trust. Such number of
shares of Common Stock was determined under the Incentive Plan by dividing the
dollar amount of the salary deferred each month by the average of the closing
prices of a share of the Company's Common Stock for the last ten trading days of
the month ($.538 for January, $.594 for February, $.860 for March and $.813 for
April 1998).
The Agreements also provide for the grant of 400,000 options to each
executive, subject to approval by the stockholders of certain amendments to the
Company's Option Plan. See "Proposal 3--To Consider and Vote Upon a Proposal to
Approve Amendments to the 1994 Executive and Director Stock Option Plan" above
for a full description of the amended Option Plan, which the Company is
presenting to the stockholders for approval at the Annual Meeting. Incentive
stock options to purchase 400,000 shares of Common Stock of the Company at an
exercise price of $.925 per share, subject to stockholder approval of the
amended Option Plan, were granted to each executive on December 30, 1997.
One-third of such options vest on each anniversary of the date of grant, subject
to acceleration in the event of a Change-in-Control, which is defined as an
occurrence whereby (i) any person, partnership, corporation, entity or group (as
such term is used in the Exchange Act), in a single transaction or series of
related transactions, directly or indirectly, acquires beneficial ownership of
more than 50 % of the Company's securities or substantially all of the Company's
assets, or (ii) individuals who were members of the Board immediately prior to a
meeting of stockholders involving a contest for directors do not constitute a
majority of the Board following such election or (iii) the executive fails to be
elected or re-elected to the Board, unless the executive was not nominated with
his consent.
The grant of stock options to an executive could, and the acquisition of
Common Stock by an executive upon the exercise of such an option, will result in
an increase in the Common Stock ownership of such executive. If, as a result of
either such event, an individual acquires 5% or more of the Common Stock of the
Company, the Company may be more limited in its ability to use its Common Stock
in the future to compensate other key employees or to acquire other corporations
or their assets without suffering a substantial reduction in the use of its net
operating loss carryforwards. See "Proposal 4: To Consider and Vote Upon a
Proposal to Approve the Terms of an Incentive Compensation Plan for Messrs.
Engle and Coyne--Description of the Incentive Plan."
Additional benefits to which the executives are entitled under the
Agreements include such amount of paid vacation per calendar year and such
health, life and disability insurance protection as the executive reasonably
requests.
Each Agreement extends until December 31, 2000, and thereafter is renewed
for additional one-year terms unless either party gives written notice to the
other not less than 30 days prior to the end of the original term or any renewal
term that the party does not wish to renew the Agreement. The Company may
terminate the Agreements for cause, and the executive may terminate his
Agreement at any time upon 60 days' prior written notice. In addition, the
executive may terminate his Agreement effective immediately within 60 days of a
Change-in-Control, and in that event the Company must continue the executive's
salary and fringe benefits under his Agreement and his incentive compensation
under the Incentive Plan for a period of 18 months. If the Company terminates an
executive or the Company elects not to renew an executive's Agreement within 24
months following a Change-in-Control, the Company must pay to the executive in a
lump sum an amount equal to the greater of (i) three times the base salary paid
to the executive in the 36 months preceding the Change-in-Control and (ii) the
base salary due to be paid the executive through the end of the term (or renewal
term) of his Agreement. If the Company terminates the employment of an executive
without cause, all payments under his Agreement continue through the end of the
then term. If the Company elects not to renew an executive's Agreement at the
end of the original term or any renewal term, the executive will receive a
termination settlement equal to 12 months' salary and will continue to receive
insurance benefits for 12 months, unless such non-renewal occurs within 24
months following a Change-in-Control, in which event the executive will receive
the benefits described above. Upon termination of an Agreement voluntarily by an
executive, upon the election by the executive not to
23
<PAGE>
renew his Agreement or by the Company for cause, all payments and benefits under
the Agreement cease on the date of termination.
Until November 10, 1997, Mr. Levine served as Chief Executive Officer of the
Company pursuant to an employment agreement dated January 1, 1990, which was
amended and restated effective May 1, 1997 (together, the "Levine Agreement").
Under the Levine Agreement, Mr. Levine was paid a salary for calendar year 1997
of $111,926.
Under the Levine Agreement, Mr. Levine received incentive compensation under
an incentive program included in the agreement, calculated as follows: (i) 1.00%
of the Company's collateralized claims which were converted into cash; (ii)
3.00% of the Company's unsecured claims which were converted into cash; (iii)
0.1% of all cash distributions of capital; and (iv) 0.14% of all distributions
of income to stockholders of the Company. Pursuant to the Original Agreement,
incentive compensation earned was paid 80% in cash on or before March 15th of
the following year and 20% in phantom stock rights (the "Phantom Stock").
The number of shares of Phantom Stock issued to Mr. Levine was equal to 20%
of the incentive compensation earned divided by the average closing price of a
share of Common Stock of the Company for the five business days ended on
December 31 of the calendar year for which the incentive compensation was
earned. Mr. Levine also received, in cash, distributions in respect of the
Phantom Stock at the same rate that distributions, if any, were paid on the
Common Stock. On the Vesting Date, as defined below, upon notice to Mr. Levine
the Company could elect to convert each share of Phantom Stock into one share of
Common Stock. If the Company did not elect to convert the Phantom Stock, on or
within 30 days of the Vesting Date the Company was to pay to Mr. Levine in cash
the value of the Phantom Stock on the Vesting Date, determined by multiplying
the number of Phantom Shares by the average closing price of a shares of the
Company's Common Stock for the five business days ended on the Vesting Date. The
Vesting Date was the earlier of (i) December 31, 1997; (ii) the termination of
Mr. Levine's employment by the Company without just cause; or (iii) the
permanent disability or death of Mr. Levine.
On April 1, 1997, March 1, 1996, and March 25, 1995, Mr. Levine: (i) was
paid $7,164, $217,135 and $27,612, respectively, in cash, representing 80% of
the incentive compensation earned for the fiscal years ended December 31, 1996,
1995 and 1994, respectively; and (ii) received 1,910 shares, 43,083 shares and
6,136 shares, respectively, of Phantom Stock, representing 20% of the incentive
compensation earned for those years. The value of the Phantom Stock on the date
of grant was $.9375 per share or $1,790 for shares issued in 1997, $1.26 per
share or $54,284 for shares issued in 1996 and $1.125 per share or $6,903 for
shares issued in 1994. In 1995, shares of Common Stock having a value of
$19,606, which had been issued to Mr. Levine in 1994 and represented 20% of his
incentive compensation for 1993, were returned to the Company and canceled in
connection with an amendment to the Levine Agreement which substituted the
issuance of Phantom Stock for the issuance of actual shares of Common Stock.
Under the Levine Agreement, Mr. Levine received a termination fee of
$400,000 in connection with the termination of his employment, and all of his
Phantom Shares were forfeited by him.
C. EXECUTIVE AND DIRECTORS STOCK OPTION PLAN
On June 30, 1994, the stockholders approved and adopted the Company's Option
Plan. On December 30, 1997, the Board of Directors approved amendments to the
Option Plan, which are being presented to the stockholders for approval at the
Annual Meeting. See "Proposal 3--To Consider and Vote Upon a Proposal to Approve
Amendments to the 1994 Executive and Director Stock Option Plan" above for a
full description of the amended Option Plan.
During 1997, all of the Company's executives who held unexercised options
issued under the Option Plan agreed to cancel and surrender their options in
consideration of the Company paying each holder $.20 in cash for each share of
Common Stock subject to such holder's options. The Company paid an aggregate
24
<PAGE>
of $13,700 in consideration of the cancellation of options to purchase 68,500
shares. 180,000 options held by Mr. Levine were cancelled and surrendered in
connection with his resignation.
Stock options granted or exercised under the Option Plan by executive
officers named in the executive compensation table for the year ended December
31, 1997, are as follows:
OPTION/SAR GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED FISCAL YEAR BASE PRICE DATE
- -------------------------------------------------------- ---------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Options Options
Gary D. Engle........................................... 400,000 shares 50% $ .925 12/30/07
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON OPTIONS/SARS AT DECEMBER 31 AT DECEMBER 31
NAME EXERCISE VALUES REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------- ------------- ------------------- --------------------------- --------------------------
<S> <C> <C> <C> <C>
Gary D. Engle............. None $ 0 None/400,000 n/a / n/a
</TABLE>
D. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to May 6, 1997, administrative costs, primarily salaries and general
and administrative expenses, were reimbursed by the Company to Banyan Management
Corp. ("BMC"), which prior to that date was owned by the Company, Banyan
Strategic Realty Trust and Legend Properties, Inc. (f/k/a Banyan Mortgage
Investment Fund). Mr. Levine was the president of BMC, but he received no
additional compensation for these services. Certain employees of the Company
were included in the administrative costs for which BMC was reimbursed by the
Company. All costs incurred on behalf of the Company by BMC were allocable to
the Company based on the ratio of the actual number of hours spent by BMC
personnel on the Company's matters compared to the total number of BMC personnel
hours. The Company's allocable share of costs for the years ended December 31,
1997, 1996 and 1995 aggregated $107,781, $269,508 and $557,899, respectively. As
one of its administrative services, BMC served as the paying agent for general
and administrative costs of the Company. As part of providing this payment
service, BMC maintained a bank account on behalf of the Company.
Effective May 6, 1997, EFG entered into an agreement to provide
administrative services to the Company, replacing BMC. Pursuant to the agreement
with EFG, the administrative services agreement between the Company and BMC was
amended to provide, among other things, for the immediate payment to BMC of the
termination fee required thereby in the amount of $251,823 and the transfer to
BMC's designee of the Company's ownership interest in BMC. During the year ended
December 31, 1997, the Company incurred $49,166 in administrative costs for
services provided by EFG personnel on Company-related matters. As part of
providing this payment service, EFG maintains a bank account on behalf of the
Company.
On April 30, 1997, the Company entered into an Exchange Agreement (as
amended August 7, 1997, the "Exchange Agreement") with Equis Exchange L.L.C.
("Equis"), EFG and three partnerships managed by EFG, AFG Hato Arrow Limited
Partnership, AFG Dove Arrow Limited Partnership and AIP/Larkfield Limited
Partnership (the "Partnerships"). Pursuant to the Agreement, on April 30, 1997,
the Company issued to the Partnerships 1,987,000 shares of the Company's Common
Stock at a price of $1.50 per share.
25
<PAGE>
The Company received cash proceeds of $2,480,500, net of related costs of
$500,000. In addition, the Partnerships made a three-year loan (the "Loan") to
the Company in the amount of $4,419,500.
The Loan was initially disbursed into a segregated account pending
stockholder approval of certain actions, including: (i) electing a new Board of
Directors nominated by EFG for terms of up to 3 years and increasing the size of
the Board to as many as nine members, a majority of which must consist of
members independent of the Company, EFG or any affiliate; (ii) approving an
amendment to the Company's charter extending the Company's life to perpetual and
changing its name; and (iii) approving an amendment to the Company's charter
designed to restrict or deter, to the extent legally permissible, the
acquisition of more than 4.9% of the Common Stock of the Company by any person
in such a manner as would cause such person to become 5% stockholder within the
meaning of Section 382(g) of the Internal Revenue Code. Stockholder approval was
obtained on October 21, 1997, and thereafter the Loan was disbursed to the
Company, the interest rate was fixed at 10% per annum and the term was fixed at
three years with mandatory principal reductions if and to the extent net
proceeds are received from the sale or refinancing of the Company's Rancho
Malibu property.
STOCKHOLDER PROPOSALS
Stockholder proposals for the 1999 Annual Meeting of Stockholders must be
received by the Company at its executive office in Stamford, Connecticut, on or
prior to March 3, 1999, for inclusion in the Company's Proxy Statement for that
meeting. Any stockholder proposal must also meet the other requirements for
stockholder proposals as set forth in the rules of the SEC relating to
stockholder proposals.
OTHER MATTERS
As of the date of this Proxy Statement, no business other than that
discussed above is to be acted upon at the Meeting. If other matters not known
to the Board should, however, properly come before the Meeting, the persons
appointed by the signed proxy intend to vote it in accordance with their best
judgment.
SEMELE GROUP INC.
By the Order of the Board of
Directors,
James A. Coyne
President and Chief Operating Officer
Stamford, Connecticut
May 29, 1998
A COPY OF THE SEMELE GROUP INC. 1997 ANNUAL REPORT ON FORM 10-K FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION WILL BE SUPPLIED TO STOCKHOLDERS WITHOUT
CHARGE. REQUESTS FOR THE REPORT SHOULD BE DIRECTED TO:
Semele Group Inc.
One Canterbury Green
210 Broad Street
Stamford, CT 06901 (203) 363-0853
YOUR VOTE IS IMPORTANT. THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. PLEASE PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
26
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLE 4
OF THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION TO EFFECT THE
PROPOSED REVERSE STOCK SPLIT AND FORWARD STOCK SPLIT
RESOLVED, that the stockholders approve of and adopt an amendment to the
Amended and Restated Certificate of Incorporation of the Company by deleting
Article 4 thereof in its entirety and inserting in place thereof:
4. (a) At 6:00 p.m. (Eastern Time) on the effective date of the amendment
inserting this new Article 4 (the "Effective Date"), each share of
Common Stock held of record as of 6:00 p.m. (Eastern Time) on the
Effective Date shall be automatically reclassified and converted,
without further action on the part of the holder thereof, into one-three
hundredth (1/300) of one share of Common Stock. No fractional share of
Common Stock shall be issued to any Fractional Holder (as defined below)
upon such reclassification and conversion. Except as set forth in the
immediately following sentence, from and after 6:00 p.m. on the
Effective Date, each Fractional Holder shall have no further interest as
a stockholder in respect of any such fractional share and, in lieu of
receiving such fractional share, shall be entitled to receive, upon
surrender of the certificate or certificates representing such
fractional share, the cash value of such fractional share based on the
average daily closing price per share of the Common Stock on the Nasdaq
National Market for the ten trading days immediately preceding the
Effective Date, without interest. Appraisal rights under Section 262 of
the GCL shall be available for each such fractional share of a
Fractional Holder who has complied with the provisions of said Section
262. As used herein, the term "Fractional Holder" shall mean a holder of
record of less than 300 shares of Common Stock as of 6:00 p.m. (Eastern
Time) on the Effective Date, who would be entitled to less than one
whole share of Common Stock in respect of such shares as a result of the
reclassification and conversion provided for herein.
(b) At 7:00 p.m. (Eastern Time) on the Effective Date, each share of Common
Stock and any fraction thereof (excluding any interest in the Company
held by a Fractional Holder converted into cash pursuant to the
immediately preceding paragraph) held by a holder of record of one or
more shares of Common Stock as of 7:00 p.m. (Eastern Time) on the
Effective Date shall be automatically reclassified and converted,
without further action on the part of the holder thereof, into multiple
shares of Common Stock on the basis of 30 shares of Common Stock for
each share of Common Stock then held. No fractional share of Common
Stock will be issued to any such holder upon such reclassification and
conversion. Instead, each such holder who would otherwise be entitled to
receive a fractional share shall have the right to receive one share for
a fractional share of 0.5 or greater; no fractional shares shall be
issued for fractional shares of less than 0.5. Appraisal rights under
Section 262 of the GCL shall not be available for any such holder.
(c) From and after 7:00 p.m. (Eastern Time) on the Effective Date, the
Corporation is authorized to issue 5,000,000 shares of Common Stock,
each share having a par value of $.01.
A-1
<PAGE>
EXHIBIT B
SECTION 262 OF THE
GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to SECTION 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest
of a member of a nonstock corporation; and the words "depository receipt"
mean a receipt or other instrument issued by a depository representing an
interest in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be
effected pursuant to SECTION 251 (other than a merger effected pursuant to
SECTION 251(g) of this title), SECTION 252, SECTION 254, SECTION 257,
SECTION 258, SECTION 263 or SECTION 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of SECTION 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to SECTIONS
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
B-1
<PAGE>
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under SECTION 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger
or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to SECTION 228 or
SECTION 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after
the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice
before the effective date of the
B-2
<PAGE>
merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20
days following the sending of the first notice, such second notice need
only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date,
the record date shall be the close of business on the day next preceding
the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after his written request for such
a statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall
be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
B-3
<PAGE>
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate
fully in all proceedings until it is finally determined that he is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 229,
L.'96, eff. 2-1-96 and Ch. 349, L. '96, eff. 7-1-96.)
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EXHIBIT C
SEMELE GROUP, INC.
AMENDED 1994 EXECUTIVE AND DIRECTOR
STOCK OPTION PLAN (THE "PLAN")
I. GENERAL.
A. PURPOSE.
The purpose of this Amended 1994 Executive and Director Stock Option Plan
(the "Plan") is to advance the interests of the stockholders of Semele Group,
Inc. (the "Company"), by providing the Company's directors, key employees and
certain employees of Banyan Management Corp. with an opportunity to acquire or
increase their proprietary interests in the Company by granting them options to
purchase shares of the Company's common stock (the "Shares" or "Common Stock").
By encouraging these individuals to become owners of Shares, the Company seeks
to motivate, retain and attract those highly competent individuals upon whose
judgment, initiative, and leadership the Company's success in large measure
depends. The options granted hereunder may be either "incentive stock options"
meeting the requirements of Section 422 of the Internal Revenue Code of 1986
(the "Code") or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code.
B. STRUCTURE OF THE PLAN.
The Plan shall consist of a "Director Option Grant Program," described in
Section II, and an "Executive Option Grant Program," described in Section III.
Under the Director Option Grant Program, the nonemployee directors will be
granted non-statutory options to purchase Shares and any other stock or security
resulting from the adjustment thereof or substitution therefor. Under the
Executive Option Grant Program, the Company's key management personnel,
including employees of Banyan Management Corp., may be granted incentive stock
options or non-statutory options to purchase Shares and any other stock or
security resulting from the adjustment thereof or substitution therefor.
Decisions concerning the grant of options under the Executive Option Grant
Program shall be determined in a manner that satisfies the requirements of Rule
16b-3 (or any successor rule) under the Securities Exchange Act of 1934 (the
"Exchange Act") and Section 162(m) of the Code. All references to the Board of
Directors of the Company (the "Board") in the Plan shall mean and relate to the
body appointed from time to time by the Board to administer the Plan unless the
context otherwise requires.
C. GENERAL GRANTS AND RIGHTS.
Unless stated otherwise, the provisions of Sections I and IV hereof shall
apply with equal force to both the Executive Option Grant Program and the
Director Option Grant Program. The right to acquire Shares pursuant to the
Director Option Grant Program and the Executive Option Grant Program shall be
referred to as a "Director Option" and an "Executive Option," respectively.
Options granted under either the Executive Option Grant Program or the Director
Option Grant Program shall be referred to herein as "Options." With respect to
persons subject to Section 16 of the Exchange Act, transactions under the Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its
successor under the Exchange Act. To the extent any provision of this Plan or
any action by the Board fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the Board.
II. DIRECTOR OPTION GRANT PROGRAM
A. ELIGIBILITY.
Each individual serving as a nonemployee director shall be eligible to
participate in the Director Option Grant Program and be granted Director
Options.
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B. GRANT.
Each of Messrs. Gerald L. Nudo, Robert M. Ungerleider and Walter E. Auch
(each of whom has served as a director since 1987), on the tenth business day
after adjournment of the Company's annual meeting convened on June 30, 1994,
shall automatically receive a Director Option to acquire 50,000 Shares. Each of
Messrs. David J. Brail and Alan S. Cooper (each of whom has served as a director
since 1993), on the tenth business day after adjournment of the Company's annual
meeting convened on June 30, 1994, shall automatically receive a Director Option
to acquire 10,000 Shares. Mr. Joseph W. Bartlett on December 30, 1997, shall
automatically receive a Director Option to acquire 50,000 Shares, subject to
approval by the stockholders of the corporation of this Plan as amended which
includes this grant to Mr. Bartlett.
C. OPTION PERIOD.
The length of each Director Option shall be ten years and one day from the
day of grant. Each Director Option not exercised shall terminate at the end of
its term, if not subject to earlier termination as herein provided or as
provided in the Option Agreement.
D. OPTION PRICE.
The price per share at which Shares may be acquired on exercise of a
Director Option shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.
III. THE EXECUTIVE OPTION PROGRAM
A. ADMINISTRATION.
The Board shall have plenary authority in its discretion, but subject to the
express provisions of the Plan, to: (i) determine in each instance whether to
grant an incentive or a non-statutory Executive Option; (ii) determine the
purchase price of the Common Stock covered by each Executive Option; (iii)
determine the key management personnel to whom Executive Options shall be
granted; (iv) determine the number of Shares subject to each Executive Option;
(v) determine the exercise period for each Executive Option; (vi) prescribe,
amend, and rescind rules and regulations relating to the Executive Option Grant
Program; (vii) determine the terms and provisions of the respective Option
Agreements (as defined in Section IV.F.(1)); and (viii) make all other
determinations deemed necessary or advisable for administrating the Executive
Option Grant Program. Each Executive Option granted hereunder shall be evidenced
by minutes of a meeting or the written consent of the Board. The Board may at
any time, and from time to time, amend or suspend the Executive Option Program.
Except as otherwise provided in the Plan, the Board may modify, extend, replace
or renew outstanding Options under the Plan, or accept the surrender of
outstanding Options (to the extent not yet otherwise exercised) and grant new
Options in substitution therefor. Notwithstanding the foregoing, no amendment or
suspension of the Plan without the written consent of an optionee shall alter or
impair the rights of the optionee under any Option previously granted to the
optionee. The Board's determination on the foregoing matters shall be
conclusive.
B. ELIGIBILITY.
Except as otherwise provided herein, the Board shall designate the key
management personnel eligible to participate in the Executive Option Grant
Program and shall prescribe the terms and conditions governing each Executive
Option. No nonemployee director shall be eligible to receive Executive Options
under the Executive Option Grant Program.
C. OPTION PERIOD.
The Board may determine the length of each Executive Option, but in no event
shall the term of any Executive Option which is an incentive stock option exceed
the term prescribed by the Code, which is currently five years in the case of
employees who own or are deemed to own more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any subsidiary
of the
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Company and ten years in the case of other employees, and in no event shall the
term of any Executive Option which is a non-statutory option exceed ten years
and one day from the date of grant. Each Option not exercised shall terminate at
the end of its term if not subject to earlier termination as herein provided or
as provided in the Option Agreement.
D. OPTION PRICE.
The price per share at which Shares may be acquired on exercise of an
Executive Option shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date the Executive Option is granted (one hundred
ten percent (110%) in the case of an Executive Option which is an incentive
stock option granted to an employee who owns or is deemed to own more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any subsidiary of the Company).
E. $100,000 LIMITATION.
No employee may be granted Executive Options that are incentive stock
options which would cause the limitation of $100,000 set forth in the Code on
the aggregate fair market value of Common Stock underlying incentive stock
options exercisable for the first time by an optionee in any calendar year (or
such other limitation as the Code may prescribe) to be exceeded.
IV. SHARES SUBJECT TO THE PLAN.
A. NUMBER OF SHARES.
The stock subject to the Options granted under the Plan shall be the
Company's Common Stock and any other stock or security resulting from the
adjustment thereof or substitution therefor as described in Section IV.G.(3).
There shall be 1,000,000 Shares, subject to adjustment under Section IV.G.(3),
reserved and available for purchase on exercise of Options granted under the
Plan. The Shares issued upon exercise of an Option may be authorized and
unissued Shares, or Shares issued and re-acquired by the Company.
B. RELEASE OF SHARES.
If any Option granted hereunder shall be canceled, expire or terminate for
any reason without having been exercised in full, the Shares subject to the
Option shall thereafter be available for grant under the Plan.
C. RESTRICTIONS ON SHARES.
All Shares issued on exercise of an Option shall be subject to the terms and
conditions specified herein and to those other terms, conditions and
restrictions contained in the Option Agreement, as well as applicable federal
and state laws, rules and regulations including, as may be required, approval by
any government or regulatory agency. The Company may issue or deliver
certificates for Shares prior to: (i) listing the Shares on any stock exchange
on which the Common Stock may then be listed; or (ii) registering or qualifying
the Shares under federal or state law; provided, however, the Company shall not
issue or deliver certificates for Shares prior to an optionee tendering to the
Company those documents or payments as the Board may deem necessary to satisfy
any applicable withholding obligation for the Company to obtain a deduction on
its federal, state or local tax return with respect to the exercise of an
Option. The Company may cause any certificate for Shares to be properly marked
with a legend or other notation reflecting the limitations on transfer provided
in the Plan, the Option Agreement or as the Board may otherwise reasonably
require to comply with law. Fractional Shares shall not be delivered, but shall
be rounded to the next lower whole number of Shares.
D. STOCKHOLDER RIGHTS.
An optionee shall not have any rights of a stockholder as to Shares subject
to an Option until, after properly exercising the Option, the Shares are
recorded on the Company's official stockholder records as
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issued or transferred to the party exercising the Option. No adjustment shall be
made for cash dividends or other rights if the record date for the cash dividend
or other right is prior to the date the Shares are recorded as issued or
transferred to the party exercising the Option, in the Company's official
stockholder records, except as provided in Section IV.G.(3). The Company shall
record the Shares as issued or transferred in an expeditious manner in
accordance with applicable laws and regulations.
E. STOCK VALUATION.
Any determination of the value or closing price of Common Stock required by
the Plan shall be determined in accordance with the following provisions, as
applicable (which value or closing price shall be referred to herein as the
"Fair Market Value per Share," or for a group of Shares a total "Fair Market
Value"):
(1) if, on the relevant date, the Common Stock is traded on a national or
regional securities exchange or on the NASDAQ National Market System, on
the basis of the closing sale price on the principal securities exchange
on which the Common Stock may then be traded or, if there is no sale on
the relevant date, then on the last previous date on which a sale was
reported;
(2) if, on the relevant date, the Common Stock is not listed on any
securities exchange or traded on the NASDAQ National Market System, but
otherwise is publicly-traded and reported on NASDAQ, on the basis of the
mean between the closing bid and asked quotations in the over-the-counter
market as reported by NASDAQ; but if there are no bid and asked
quotations in the over-the-counter market as reported by NASDAQ on that
date, then the mean between the closing bid and asked quotations in the
over-the-counter market as reported by NASDAQ on the last previous day
any bid and asked prices were quoted; and
(3) if, on the relevant date, the Common Stock is not publicly-traded as
described in (i) or (ii), in good faith by the Board.
F. OPTION PROVISIONS.
(1) OPTION AGREEMENT. Each Option granted hereunder shall be evidenced by a
written option agreement (an "Option Agreement") specifying, among other
things, the optionee, the period for which the Option thereunder is
granted, the number of Shares for which the Option is granted, the Option
price and the exercise schedule, and conforming, in the case of an Option
Agreement evidencing an incentive stock option, to the requirements for
an incentive stock option contained in the Code. The Board shall have
plenary authority in its discretion, but subject to the express
provisions of the Plan, to determine the terms and provisions (and
amendments thereof) of the respective Option Agreements (which need not
be identical), including the terms and provisions (and amendments) as
shall be required in the Board's judgment to conform to any change in law
or regulations applicable thereto. The grant and exercise of Options
hereunder are subject to all applicable federal, state and local laws,
rules and regulations and, if required, any approvals by any governmental
or regulatory agency.
(2) EXERCISE OF OPTIONS. Executive Options granted hereunder shall vest and
be exercisable in installments as follows: (i) to the extent of 33.3% of
the number of Shares commencing on the first anniversary of the date of
grant; (ii) to the extent of an additional 33.3% of Shares commencing on
the second anniversary of the date of grant; and (iii) to the extent of
an additional 33.4% of Shares commencing on the third anniversary of the
date of grant. Director Options granted hereunder shall vest and be
exercisable in installments as follows: (i) to the extent of 50.0% of the
number of Shares commencing on the first anniversary of the date of
grant; and (ii) to the extent of 50.0% of the number of Shares commencing
on the second anniversary of the date of grant. If the optionee does not
in any given period purchase all of the Shares subject to the Option, the
optionee's right to purchase any Shares not purchased in the period shall
continue until the expiration or sooner termination of the Option, except
to the
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extent provided otherwise in the Option Agreement. Except as otherwise
provided herein or in an Option Agreement, as a condition to the grant of
an Executive Option, an optionee shall remain in the continuous employ of
the Company, its subsidiaries or Banyan Management Corp. for the period
of time specified by the Board in the Option Agreement. To exercise an
Option, an optionee shall give written notice to the Company's Chief
Operating Officer at the Company's office at One Canterbury Green, 201
Broad Street, Stamford, Connecticut 06901 (or the office which is the
successor main office or which is otherwise designated as the office to
which notice is to be given) of the number of Shares to be acquired and
make any arrangements with the Chief Operating Officer as are acceptable
to the Chief Operating Officer to satisfy the optionee's federal, state
and local tax withholding obligations and satisfy the optionee's
obligation under the Plan and the Option Agreement.
(3) CANCELLATION OF OPTIONS. Except as otherwise provided, an Executive
Option is exercisable by an optionee only prior to "termination of
employment" as defined herein. For purposes of this Plan and any Option
Agreement, a person shall incur a "termination of employment" on the
latest date on which the person no longer is, for whatever reason, an
officer, director or employee of the Company, its subsidiaries or Banyan
Management Corp. ("Termination of Employment"). Notwithstanding anything
herein to the contrary, if an optionee incurs a Termination of Employment
due to death or permanent and total disability or retirement in
accordance with the Company's retirement practices, all Options granted
under the Plan and outstanding on the date of the Termination of
Employment shall be exercisable to the extent provided in the optionee's
Option Agreement. A Director Option is exercisable by an optionee only so
long as the director continues to hold office; provided, however, that if
the director ceases to hold office due to death, permanent and total
disability or expiration of the director's term of office after the
director attains his 75th birthday, all Options granted under the Plan
shall be exercisable.
(4) PAYMENT OF PURCHASE PRICE ON EXERCISE. Unless otherwise determined by
the Board in the case of an Executive Option, the purchase price of the
Shares acquired on exercise of an Option shall be paid to the Company at
the time of exercise in cash, Shares or any other form of payment
acceptable to the Board in the case of an Executive Option.
(5) NONASSIGNABILITY. Options are not transferable except by will or the
laws of descent and distribution, and are exercisable during an
optionee's lifetime only by the optionee, or the appointed guardian or
legal representative of the optionee.
G. PROVISIONS APPLICABLE TO THE PLAN.
(1) TERMINATION OF PLAN. This Plan shall terminate on July 15, 2004, or at
such earlier time as determined by the Board. No Options shall be granted
under the Plan after that date. Any Options outstanding under the Plan at
the time of its termination shall remain in effect until they shall have
been exercised, expired or otherwise canceled or terminated as provided
herein or in the Option Agreement. Termination of the Plan shall not
diminish the authority granted to the Board to administer the Plan.
(2) INVESTMENT REPRESENTATION. If the disposition of Common Stock acquired
on exercise of any Option is not covered by a then current registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), and is not otherwise exempt from registration, the acquired Shares
shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder. Each Option Agreement shall
contain a requirement that, on demand by the Board, the individual
exercising an Option shall state in writing, as a condition precedent to
each exercise, that the optionee is acquiring the Common Stock for
investment only and not for resale or with a view to distribution. The
Board may set forth in an Option Agreement other terms and conditions
relating to the registration or qualification of the Common Stock under
federal or state securities laws as it desires.
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(3) EFFECT OF CERTAIN CHANGES.
a. ADJUSTMENTS. If the Company declares a stock dividend, stock split,
combination or exchange of shares, recapitalization or other change
in the capital structure (including, but not limited to, a split-up,
spin-off, split-off or distribution to Company stockholders other
than a normal cash dividend), sells all or a substantial portion of
its assets (if measured on either a stand-alone or consolidated
basis), undertakes a reorganization, rights offering, share offering,
partial or complete liquidation, or any other corporate transaction
or event involving the Company and having an effect similar to any of
the foregoing, then the Board may adjust or substitute, as the case
may be, the number of Shares available for Options under the Plan,
the number of Shares covered by outstanding Options, the exercise
price per Share of outstanding Options, any target Fair Market Value
per Share that the Common Stock is required to reach for all or a
portion of any Options to vest, and any other characteristics or
terms of the Options as the Board deems necessary or appropriate to
equitably reflect the effects of those changes to the Option holders;
provided, however, that any fractional Shares resulting from the
adjustment shall be eliminated by rounding to the next lower whole
number of Shares with appropriate payment for the fractional Shares
as determined by the Board. The Board may waive any limitations set
forth in or imposed pursuant to the terms and conditions of the Plan
or an Option Agreement so that all Options, from and after a date
prior to the effective date of an event specified above or a Change
in Control (as defined in an Option Agreement), shall be exercisable
in full.
b. DISSOLUTION, LIQUIDATION, CORPORATE SEPARATION OR DIVISION. If the
Board proposes to dissolve or liquidate the Company or the Company is
involved in any other corporate transaction or event and having
effects on the Options similar to any of the foregoing, the Board
may, in addition to the provisions of this Section IV.G.(3),
terminate each outstanding Option granted under the Plan as of a date
fixed by the Board; provided, however, that not less than thirty (30)
days' prior written notice of the date so fixed shall be given to
each optionee (or beneficiary), who shall have the right, during the
thirty (30) days preceding such date, to exercise all Options,
whether or not otherwise exercisable, as to all or any part of the
Shares covered thereby.
c. MERGER, CONSOLIDATION, OR SALE OF ASSETS. If the Company is merged
into or consolidated with another corporation under circumstances
where the Company is not the surviving corporation, or the Company
sells or otherwise disposes of all or a substantial portion of its
assets or is involved in any other transaction or event which has an
effect on the Shares or Options similar to the foregoing, then in
addition to the provisions of this Section IV.G.(3), all Options
outstanding under the Plan shall become exercisable at that time and
the Board may cancel all outstanding Options as of the effective date
of any transaction or event; provided that not less than thirty (30)
days prior written notice of the date so fixed for cancellation shall
be given to each optionee (or beneficiary), who shall have the right,
during the thirty (30) days preceding the effective date of the
transaction or event, to exercise all Options, whether or not
otherwise exercisable, as to all or any part of the Shares covered
thereby.
d. CERTAIN MERGERS AND CONSOLIDATIONS. This Section IV.G.(3) shall not
apply to a merger or consolidation in which the Company is the
surviving corporation and Shares are not converted into or exchanged
for stock, securities of any other corporation, cash or any other
thing of value.
e. DEFINITION OF COMMON STOCK. In the event of a change in the Company's
Common Stock as presently constituted, the Shares resulting from any
change shall be deemed to be the Common Stock within the meaning of
the Plan.
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f. DETERMINATION OF THE BOARD. The Board shall make all adjustments
required under this Section IV.G.(3). All adjustments shall be final,
binding and conclusive.
g. LIMITATIONS UNDER THIS SECTION IV.G.(3). The grant of an Option
pursuant to the Plan shall not in any way effect the Company's right
or power to make adjustments, reclassifications, reorganizations or
changes to its capital or business structures or to merge or to
consolidate or to dissolve, liquidate, sell or transfer all or part
of its business or assets.
(4) WITHHOLDING OBLIGATIONS.
The optionee (or beneficiary) may satisfy any withholding obligation under
the Plan or an Option Agreement by requesting the Company to withhold and not
transfer or issue Shares with a fair market value equal to the withholding
obligation that are otherwise issuable or transferable to the optionee pursuant
to the exercise of an Option.
(5) RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT.
The Plan and any Option granted under the Plan shall not confer upon any
optionee any right to continued employment by the Company, its subsidiaries or
Banyan Management Corp., nor shall they interfere in any way with the right of
the Company, its subsidiaries or Banyan Management Corp. to, subject to other
agreements with the optionee, terminate an optionee's employment at any time.
(6) NOTICE TO THE COMPANY OF OPTIONEE'S ELECTION.
Any optionee exercising an election under Section 83 of the Code to have the
receipt of Shares hereunder taxed currently, without regard to the restrictions
imposed under the Plan or an Option Agreement or law, shall give notice to the
Company of the election immediately upon making the election.
H. INDEMNIFICATION OF THE BOARD.
In addition to such other rights of indemnification as they may have as
Board members, and to the extent permitted by law, the members of the Board
shall be indemnified and held harmless by the Company and each director or
indirect subsidiary of the Company against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
thereof, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided the settlement is approved by the Company's legal counsel) or paid by
them in satisfaction of a judgment in any action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in the action, suit or
proceeding that the Board member is liable for gross negligence or gross
misconduct in the performance of its duties; provided that within sixty (60)
days after institution of any action, suit or proceeding a Board member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the action.
I. PLAN BINDING ON SUCCESSORS.
Except as provided herein, the Plan shall be binding on the successors and
assigns of the Company.
J. INTERPRETATION AND GOVERNING LAW.
Whenever necessary or appropriate in this Plan and where the context admits,
the singular term and the related pronouns shall include the plural and the
masculine and feminine gender. The Plan shall be construed and enforced
according to the internal laws of the State of Delaware.
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EXHIBIT D
SEMELE GROUP, INC.
INCENTIVE COMPENSATION PLAN
1.01 SYNOPSIS. This document sets forth the Incentive Compensation Plan
(the "Plan"), established and maintained by Semele Group, Inc. (the "Company")
to benefit James A. Coyne and Gary D. Engle (the "Participants"). All or some of
the Participants' salary shall be deferred under this Plan. In addition, the
Company shall defer on account of the Participants (A) for each calendar year an
amount equal to six percent (6%) of the pre-tax profits of the Company
(excluding results attributable to the Company's properties in Malibu,
California); and (B) an amount attributable to the Company's properties in said
Malibu as mutually agreed upon by Company and the Participants. All such
deferred compensation shall be held subject to the claims of creditors of the
Company in a grantor or "rabbi" trust until paid to the Participants following
the Participants' termination of employment. The amounts deferred shall be
invested in stock of the Company, except that for any prospective period the
Participants may elect to have future deferred amounts invested in a diversified
portfolio. Plan amounts shall be non-forfeitable (subject to claims of any
creditors of the Company), except that amounts attributable to contributions
other than salary deferrals shall be forfeited if the Participant is terminated
for cause (as defined). The amounts under the Plan shall be payable in a lump
sum upon the Participants' termination of employment (including, without
limitation, death). If any portion of the Plan benefits are payable in stock and
such stock is not then readily tradable, the Company shall redeem such stock in
installments completed within three (3) years. The Compensation Committee of the
Board of Directors of the Company shall interpret and implement this Plan.
PARTICIPATION
2.01 PARTICIPATION. The Participants hereunder shall be James A. Coyne and
Gary D. Engle.
SALARY DEFERRAL AND BONUS CONTRIBUTIONS
3.01 SALARY DEFERRAL. As provided under Section 4 of the Participants'
1997 Employment Agreements with the Company, the Participants' salary shall be
deferred under this Plan, except that with respect to any salary not yet earned,
a Participant may elect to have all or a portion of such salary paid to him
directly in lieu of deferral hereunder.
3.02 DISCRETIONARY BONUSES. The Company acting through the Compensation
Committee may defer hereunder from time-to-time additional discretionary
bonuses. The Compensation Committee shall determine whether any such deferred
bonus shall be in the form of cash or of shares of common stock of the Company
("Company Stock").
CONTRIBUTIONS AND ACCOUNTS
4.01 INCENTIVE BONUS CONTRIBUTIONS. The Company shall contribute on
account of each Executive an amount equal to 6% of the Company's pre-tax profits
for each fiscal year of the Company (excluding results attributable to the
Company's properties in Malibu, CA).
4.02 MALIBU INCENTIVE BONUSES. The Company shall contribute on account of
each Participant an amount attributable to financial results of the Company's
properties in Malibu, California. Such amount shall be determined by a separate
written agreement between the Participants and the Company that explicitly
refers to this Plan and the Participants' Employment Agreements.
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4.03 TIMING OF CONTRIBUTIONS. Contributions of deferrals under Sections
3.01 and 3.02 after the Effective Date shall be made as soon as reasonably
practical following the end of the month in which the deferral is accrued.
Contributions of deferrals under Sections 4.01 and 4.02 above shall be made as
soon as reasonably practical following the end of the Company's fiscal year, and
not later than fifteen (15) days following the date of delivery to the Company
of audited financial statements for each such fiscal year.
4.04 SOURCE OF BENEFITS. The Company shall also establish a grantor trust
and make contributions to funding accounts thereunder for purposes of providing
benefits under this Plan. Any such trust will be subject to the claims of all
creditors of the Company, and no Participant or Beneficiary will have any
interest with respect to this Plan or such trust or have any claim against the
Company or such trust except as an unsecured general creditor.
4.05 PLAN INVESTMENTS. Amounts deferred under the Plan shall be held in
the form of Company Stock, except that prior to the date an amount is earned
under Sections 3.01, 3.02, 4.01 or 4.02, a Participant may elect that all or a
portion of such amount shall be held in a diversified investment portfolio. The
number of shares of Company Stock to be contributed under Section 3.01 as of the
Effective Date (December 30, 1997) shall be determined by dividing the dollar
amount of salary deferred by the closing share price on the Effective Date. The
number of shares of Company Stock to be contributed thereafter under Sections
3.01, 3.02, 4.01 and 4.02 shall be determined by dividing the dollar amount of
the contribution under such Section by the average of the closing share price on
the last ten trading days of the month in which the dollar amount contributed
under such Section is accrued on the books of the Company. If during any such
month the Company Stock is not readily tradable, the number of shares shall be
so determined using the fair market value, as reasonably determined by the
Compensation Committee, as of the last day of such month. Each Participant is
entitled to direct the trustee of the aforesaid grantor trust with respect to
the voting or tender of Company Stock held on the Participant's account.
4.06 ACCOUNTS. This Section 4.06 applies to amounts not held as Company
Stock. For the purposes of measuring and satisfying the obligation to provide
benefits under this Plan, the Employer shall cause the amounts to be invested in
funding accounts. The Employer will cause individual records to be maintained
with respect to each Participant reflecting the value of each Participant's
funding account. Each Participant will receive periodic reports, not less
frequently than annually, showing the then-current value of his individual
funding account. The benefits paid to a Participant or Beneficiary under this
Plan will be equal to the value from time-to-time of the funding account. In no
event will the Employer's or trust's liability to pay benefits exceed the value
of payments under the funding account.
FORFEITURES AND DISTRIBUTIONS
5.01 FORFEITURE. Amounts attributable to salary deferred under Section
3.01 are not subject to forfeiture (other than due to claims of general
creditors of the Company). Amounts attributable to deferral of discretionary
bonuses under Section 3.02 and of Incentive Bonuses under Sections 4.01 and 4.02
shall be forfeited upon the Company's termination of the Participant for cause
as defined in Section 7.03 of the Participants' Employment Agreements with the
Company. Any amounts forfeited shall be returned to the Company.
5.02 COMMENCEMENT OF BENEFITS. Benefits will be payable as of the first
day of the calendar month following the month in which the Participant separates
from service of the Employer for any reason, including voluntary or (except as
provided in Section 5.01) involuntary termination, disability, or death.
Benefits shall be paid in a lump sum, except that if Company Stock is not then
readily tradable, then any portion of the benefits consisting of Company Stock
shall be distributed as follows: The Company shall redeem such shares of Common
Stock in no less than four installments, each of an equal number of shares,
commencing as of the date of initial distribution and continuing no less
frequently than annually so as to end not later than three years after
commencement. The redemption of each installment shall be based
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upon the fair market value of the Company Stock, as reasonably determined by the
Compensation Committee, as of each installment distribution date.
5.03 DEATH BENEFICIARY. The Participant may designate a Beneficiary to
receive payments in the event of the Participant's death. The designation shall
be in writing and delivered to the Plan Administrator. The designated
beneficiary may include one or more persons, trusts or organizations. If no
effective written designation is made, the Participant's Beneficiary shall be
the Participant's spouse, if married on the date of death, and if not so
married, shall be the Participant's estate.
ADMINISTRATIVE PROVISIONS
6.01 COMPENSATION COMMITTEE. The Compensation Committee of the Company's
Board of Directors shall have discretion to operate, interpret, and implement
the Plan. The decisions and determinations (including determinations of the
meaning and reference of terms used in this Plan) of the Compensation Committee
shall be conclusive upon all persons. The Compensation Committee shall be the
Plan Administrator and Named Fiduciary for purposes of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
6.02 INTENT. This Plan is intended to be unfunded and maintained by the
Employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees within the meaning of
Section 201(2) of ERISA. Benefits are intended not to be taxable to Participants
under the Internal Revenue Code of 1986 as amended (the "Code") until paid. This
Plan shall be construed and interpreted in a manner consistent with the
foregoing intentions.
6.03 ALIENATION OF BENEFITS. Benefits are not subject to alienation,
anticipation or assignment by a Participant or beneficiary and are not subject
to being attached or reached and applied by any creditor of the Participant.
6.04 WITHHOLDING. The Company reserves the right to withhold from payment
of contributions or benefits such amount of income, payroll, and other taxes as
the Company determines is appropriate.
6.05 GOVERNING LAW. This Plan shall be governed by the law of the State of
Delaware to the extent that it is not preempted by federal law.
6.06 EFFECTIVE DATE. This Plan shall be effective as of December 30, 1997.
6.07 PLAN YEAR. The Plan Year shall be the Calendar Year.
6.08 AMENDMENT OR TERMINATION. The Company by action of the Compensation
Committee of the Board of Directors reserves the right to terminate or amend the
Plan, in whole or in part. However, during the term or renewal term of each
Participants' Employment Agreement with the Company, any such amendment or
termination shall only be effective with the consent of the affected
Participant.
CLAIMS PROCEDURE
7.01 CLAIMS AND REVIEW. All inquiries and claims respecting the Plan shall
be in writing and shall be directed to the Chair of the Compensation Committee
at such address as may be specified from time to time.
(a) CLAIMS. In the case of a claim respecting a benefit under the Plan, a
written determination allowing or denying the claim shall be furnished by the
Chair of the Compensation Committee to the claimant promptly upon receipt of the
claim. A denial or partial denial of a claim shall be dated and signed by the
Chair of the Compensation Committee and shall clearly set forth: (1) the
specific reason or reasons for the denial; (2) specific reference to pertinent
Plan provisions on which the denial is based; (3) a description of any
additional material or information necessary for the claimant to perfect the
claim and an
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explanation of why such material or information is necessary; and (4) an
explanation of the review procedure set forth below.
If no written determination is furnished to the claimant within thirty (30)
days after receipt of the claim, then the claim shall be deemed denied and the
thirtieth (30th) day after such receipt shall be the determination date.
(b) REVIEW. A claimant may obtain review of an adverse determination by
filing a written notice of appeal with the Chair of the Compensation Committee
within sixty (60) days after the determination date or, if later, within sixty
(60) days after the receipt of a written notice denying the claim. Thereupon the
full Compensation Committee shall appoint one or more persons who shall conduct
a full and fair review, which shall include the right: (1) to be represented by
a spokesman; (2) to present a written statement of facts and of the claimant's
interpretation of any pertinent document, statute or regulation; and (3) to
receive a prompt written decision clearly setting forth findings of fact and the
specific reasons for the decision written in a manner calculated to be
understood by the claimant and containing specific references to pertinent Plan
provisions on which the decision is based. A decision shall be rendered no more
than sixty (60) days after the request for review, except that such period may
be extended for an additional sixty (60) days if the person or persons reviewing
the claim determine that special circumstances, including the advisability of a
hearing, require such extension. The Compensation Committee may appoint itself,
one or more of its members (but excluding the Chair of the Committee), or any
other person or persons whether or not connected with the Employer to review a
claim.
All applicable governmental regulations regarding claims and review shall be
observed.
<TABLE>
<S> <C> <C>
SEMELE GROUP, INC.
By: /s/ JOSEPH W. BARTLETT
-----------------------------------------
Chairman, Compensation Committee
</TABLE>
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<PAGE>
SEMELE GROUP INC.
ONE CANTERBURY GREEN
201 BROAD STREET
STAMFORD, CONNECTICUT 06901
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Gary D. Engle and James A. Coyne, and each
of them, as Proxies, with the power to appoint their substitutes, and hereby
authorizes them to represent and vote, as designated below, all the shares of
Common Stock, par value $.01 per share ("Common Stock"), of Semele Group Inc.
(the "Company") held of record by the undersigned on May 28, 1998, at the Annual
Meeting of Stockholders when convened on June 30, 1998, and any adjournment
thereof.
THIS PROXY, IF PROPERLY EXECUTED AND RECEIVED IN TIME FOR VOTING, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY, IF PROPERLY EXECUTED AND RECEIVED IN TIME FOR
VOTING, WILL BE VOTED FOR PROPOSALS 1 THROUGH 5, AND IN ACCORDANCE WITH THE
JUDGMENT OF THE PERSONS ACTING UNDER THE PROXIES ON OTHER MATTERS PRESENTED FOR
A VOTE.
[x] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of
Director FOR AGAINST PROPOSAL to elect one director to hold
[ ] [ ] office until the 2001 Annual Meeting of
Stockholders, or otherwise as provided in the
Company's By-Laws (check one box).
NOMINEE: James A. Coyne
For, except vote withheld from the following nominee(s):
___________________________________________
2. Approval of FOR AGAINST ABSTAIN PROPOSAL to approve a 1-for-300
Reverse and [ ] [ ] [ ] reverse stock split followed by a
Forward Stock 30-for-1 forward stock split
Splits (check one box).
3. Approval of FOR AGAINST ABSTAIN PROPOSAL to approve amendments to
Amendments [ ] [ ] [ ] the Company's Stock Option Plan to
to Option Plan permit the grant of incentive stock
options (check one box).
4. Approval of FOR AGAINST ABSTAIN PROPOSAL to approve the terms of an
Incentive [ ] [ ] [ ] Incentive Compensation Plan for
Compensation Mr. Gary D. Engle and Mr. James A.
Plan Coyne (check one box).
5. Selection of FOR AGAINST ABSTAIN PROPOSAL to concur in the
Independent [ ] [ ] [ ] appointment of Ernst & Young LLP as
Auditor the Company's independent auditor
for the fiscal year ending December
31, 1998 (check one box).
<PAGE>
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
THIS CARD USING THE ENCLOSED ENVELOPE
SIGNATURE(S)___________________________________________
DATE_____________________
NOTE: Sign exactly as name appears above. If joint tenant, both should
sign. If attorney, executor, administrator, trustee or guardian, give full
title as such. If corporation, please sign in corporate name by
President or authorized officer. If partnership, sign in full
partnership name by authorized person.
