<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number 0-16886
SEMELE GROUP INC.
-----------------
(Name of Small Business Issuer in its charter)
Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Canterbury Green, Stamford, Connecticut 06901
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (203) 363-0849
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Shares of Common Stock
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X . NO .
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Issuer's revenues for the fiscal year ended December 31, 1997 were $229,841.
Shares of common stock outstanding as of March 2, 1998: 11,923,421. The
aggregate market value of the Issuer's shares of common stock held by
non-affiliates on such date was approximately $6,674,602.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for the year
ended December 31, 1997 (Part I and II)
Transitional Small Business Disclosure Format: YES . NO X .
--- ---
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PART I
<S> <C> <C>
ITEM 1 DESCRIPTION OF BUSINESS 1
ITEM 2 DESCRIPTION OF PROPERTY 2
ITEM 3 LEGAL PROCEEDINGS 2
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 2
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 3
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
OR PLAN OF OPERATION 3
ITEM 7 FINANCIAL STATEMENTS 3
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 4
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 5
ITEM 10 EXECUTIVE COMPENSATION 6
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 11
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
ITEM 13 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 14
SIGNATURES 16
</TABLE>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS OPERATION
The Issuer, Semele Group Inc. (the "Company"), formerly known as Banyan
Strategic Land Fund II, is a Delaware corporation, organized pursuant to a
Certificate of Incorporation filed on April 14, 1987 under the name VMS
Strategic Land Fund II.
The Company was originally established to invest primarily in short-term,
junior, pre-development and construction mortgage loans. The borrowers
subsequently defaulted on these mortgage loan obligations, adversely affecting
the Company. As a result of these defaults, the Company suspended the making of
new loans, except for advances of additional funds under circumstances in which
it was deemed necessary to preserve the value of existing collateral, including
instances where it had foreclosed upon or taken title, directly or indirectly,
to the collateral. In 1990, the Company implemented a plan designed to preserve
its assets and manage its properties acquired through foreclosure or otherwise
until they would be disposed of in an orderly manner. On February 25, 1997, the
Directors of the Company authorized management to engage an investment banking
firm for purposes of evaluating strategic alternatives for maximizing
stockholder value. The Company executed and delivered an Exchange Agreement
dated April 30, 1997 (as amended as of August 7, 1997, the "Agreement") among
the Company, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships affiliated with EFG ("the Partnerships"). Pursuant to the
Agreement, the Company issued to the Partnerships 1,987,000 shares of the
Company's common stock at the price of $1.50 per share. Cash proceeds received
by the Company, $2,480,500, were net of related costs of $500,000. In addition,
the Partnerships made a three-year loan to the Company in the amount of
$4,419,500. These transactions are intended to provide capital to assist the
Company in a new growth-oriented business plan, which includes the development
of the Company's property known as Rancho Malibu.
The Loan was initially disbursed into a segregated account, the proceeds
of which were not available to the Company until stockholder consent to certain
proposals ("the Consent") was obtained. The transaction also called for a one
time $0.20 per share cash dividend to be paid in the event the stockholder
proposals were approved. The Company solicited its stockholders for proxies in
connection with proposed changes in the Company's Certificate of Incorporation
and By-laws. Among the principal changes requested were: (i) the election of new
Directors nominated by EFG for terms of up to 3 years and an increase in size of
the Board of Directors (the "Board") to as many as nine members, provided a
majority of the Board shall consist of members independent of the Company, EFG
or any affiliate; (ii) an amendment extending the Company's life to perpetual
and changing its name and (iii) an amendment 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 a 5% stockholder within the meaning of Section 382 (g) of the Internal
Revenue Code. The Consent of the stockholders was obtained and proposals
including the changes described in (i) through (iii) above were adopted on
October 21, 1997.
The Company's business plan contemplates making acquisitions or other
investments where its sizable net operating loss carryforward can make it a
value added buyer.
Certain statements in this annual report 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", "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 (see Notes 3 and 11 to the Consolidated Financial
Statements). Actual results could differ materially from those projected in the
forward-looking statements.
1
<PAGE>
The Company currently holds an ownership interest in a 274 acre land
parcel in Southern California known as the Rancho Malibu property. The Company's
investment in the Rancho Malibu property is not subject to any competition. The
Company also holds a 0.3% beneficial interest in a liquidating trust,
established for the benefit of a group of unsecured creditors of a previous
borrower of the Company, which holds interests in various assets. In addition,
the Company has two loans referred to as Hemet IV and Lindfield Tract A (See
Note 2 to the Consolidated Financial Statements).
OTHER INFORMATION
The Company has two employees who serve as directors and executive
officers.
On February 23, 1998, new requirements for continued inclusion on the
NASDAQ National Market became effective. The Company has not consistently met
the new bid price criteria for continued listing based on the Company's stock
price. The minimum bid price for a security on the NASDAQ National Market is
$1.00 (See Item 5). The Company has until May 23, 1998 (unless otherwise
extended) to comply with this standard. If the security does not comply within
such period, the Company could be delisted from the NASDAQ National Market. The
Company is considering various changes in its capital structure to permit
continued listing. There is no assurance that the Company will be able to
maintain its listing or be re-listed on the NASDAQ National Market.
The Company reviews and monitors compliance with federal, state and local
provisions that have been enacted or adopted regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment. For the year ended December 31, 1997, the Company did not incur any
material environmental expenditures nor does it anticipate that such
expenditures will be significant for the year ended December 31, 1998.
On March 20, 1996, the Company notified the Internal Revenue Service of
its intent to revoke its tax election to be treated as a real estate investment
trust ("REIT") under section 856(c) (1) of the Internal Revenue Code of 1986, as
amended, in order to avoid the adverse tax effects associated with the potential
disposition or development of its real estate assets for which a REIT structure
is not intended. Pursuant to the revocation of tax election 856(c) (1),
effective January 1, 1996, the Company became taxable as a "C" corporation and
therefore is no longer required to meet certain pre-determined distribution,
asset and income requirements. As of December 31, 1997, the Company had net
operating loss carry forwards of approximately $83,995,000.
ITEM 2. DESCRIPTION OF PROPERTY
Incorporated herein by reference to Note 3 to the Consolidated Financial
Statements in the 1997 annual report.
ITEM 3. LEGAL PROCEEDINGS
Incorporated herein by reference to Notes 3 and 11 to the Consolidated
Financial Statements in the 1997 annual report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Incorporated herein by reference to Item 4 of the Company's Quarterly Report
on Form 10-QSB for the period ended September 30, 1997.
2
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's shares are included for quotation on the NASDAQ National
Market (symbol - VSLF). The table below shows the quarterly high and low bid
prices as reported by NASDAQ National Market for the years ended December 31,
1997 and 1996:
<TABLE>
<CAPTION>
Quarter Share Price
------------------------
<S> <C> <C> <C>
Ended 1997 1996
3/31 High $1.125 $ 1.406
Low $0.906 $ 1.250
6/30 High $1.000 $ 1.350
Low $0.813 $ 1.234
9/30 High $1.250 $ 1.375
Low $0.688 $ 1.234
12/31 High $1.250 $ 1.250
Low $0.406 $ 0.813
</TABLE>
In connection with the Consent of the stockholders (described in Item 1),
the Company declared a one-time cash dividend to its stockholders of $0.20 per
share during the fourth quarter of 1997. The Company had not paid a dividend to
its stockholders since 1990 as a result of the defaults by borrowers on the
Company's mortgage loans, the resultant interruption in the Company's cash flow,
the uncertainties regarding its assets and the Company's future cash
requirements. The Company will continue to periodically evaluate its
distribution policy as cash proceeds are recovered from the disposition of its
assets, however, the Company's management currently does not anticipate
additional dividends in the foreseeable future.
The Company's ability to pay future dividends to its stockholders is
dependent upon, among other things: (i) the level of liquidity required to
successfully implement a new growth oriented business plan; (ii) the Company's
ability to favorably resolve the La Chusa litigation (See Note 3 to the
Consolidated Financial Statements) which impacts the Rancho Malibu property; and
(iii) the Company's ability to control its property level and Company level
operating expenses.
At March 2, 1998, there were 6,222 record holders of the Company's shares
of common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition or Plan of Operation" in the 1997
annual report.
ITEM 7. FINANCIAL STATEMENTS
Incorporated herein by reference to the Company's Consolidated Financial
Statements included in the 1997 annual report.
3
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, the accountants on
any matter of accounting principles, practices or financial statement
disclosure.
4
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers of the Company are:
Walter E. Auch, Sr. Director
Gerald L. Nudo Director
Robert M. Ungerleider Director
Joseph W. Bartlett Director
Gary D. Engle Chairman, Chief Executive Officer and Director
James A. Coyne President, Chief Operating Officer and Director
Gary M. Romano Chief Financial Officer
Michael J. Butterfield Treasurer
WALTER E. AUCH, SR., age 75, 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
Paine Webber. 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 has been a
Director of the Company since 1987. 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.
GERALD L. NUDO, age 48, has been a Vice President at Draper & Kramer,
Inc., a Chicago-based real estate management and development company, since
1997. From 1990 to 1997, Mr. Nudo was a Senior Vice President of Mesirow Realty
Finance, Inc., a subsidiary of Mesirow Financial Corp. Mr. Nudo received his
Bachelor of Science Degree from Northwestern University and his Masters Degree
in Business Administration from the University of Chicago Graduate School of
Business. Mr. Nudo is also a Certified Public Accountant and a licensed real
estate broker in Illinois. Mr. Nudo has been a Director of the Company since
1987.
ROBERT M. UNGERLEIDER, age 56, is presently the President of Pilot Books,
a book publisher located in Greenport, New York. Mr. Ungerleider has founded,
developed and sold a number of start-up 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 these endeavors, Mr. Ungerleider practiced real
estate and corporate law in New York City for ten years. Mr. Ungerleider
received his B. A. Degree from Colgate University and his Law Degree from
Columbia University Law School. Mr. Ungerleider has been a Director of the
Company since 1987. Mr. Ungerleider is also a Director of Legend Properties,
Inc. (f/k/a Banyan Mortgage Investment Fund) and Banyan Management Corp. and is
counsel to the law firm of Lane Felcher Kurlander & Fox.
JOSEPH W. BARTLETT, age 64, is a partner in the law firm of Morrison &
Foerster LLP, which he joined in 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 became a Director of the Company in October 1997.
GARY D. ENGLE, age 49, is 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 became a Director of the Company in
May 1997.
5
<PAGE>
JAMES A. COYNE, age 37, is President and Chief Operating Officer of the
Company since 1997. Mr. Coyne is Senior Vice President/Capital Markets 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 immediately prior to the change in control. From May 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. Mr. Coyne became a Director of the Company in October 1997.
GARY M. ROMANO, 38, is Chief Financial Officer of the Company since
November 1997. Mr. Romano is Executive Vice 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. Mr. Romano is a C.P.A. and holds a B.S. degree from Boston
College.
MICHAEL J. BUTTERFIELD, 38, is Treasurer of the Company 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 (U.K.) 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. He holds a Bachelor of Commerce degree from
the University of Otago, Dunedin, New Zealand.
ITEM 10. EXECUTIVE COMPENSATION
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 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. Levine, the former President and Chief Executive Officer of the Company,
for the years ended December 31, 1997, 1996 and 1995 is as follows:
6
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation(1)
<S> <C> <C> <C> <C>
Other Annual
Year Salary Bonus (3) Compensation
----------- ------------- -------------
Gary D. Engle, (2) 1997 48,383 n/a n/a
Chairman and
Chief Executive
Officer
Leonard G. Levine, 1997 111,926 $ 7,164 n/a
Former President and Chief 1996 108,141 $ 217,135 n/a
Executive Officer 1995 105,605 $ 27,612 n/a
</TABLE>
Long-Term Compensation (1)
<TABLE>
<CAPTION>
Awards Payouts
--------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Restricted
Stock Options/ LTIP All Other
Year Awards SARSs (#) Payouts Compensation
---- ------ --------- ------- ------------
Gary D. Engle, (2) 1997 n/a n/a n/a n/a
Chairman and
Chief Executive
Officer
Leonard G. Levine, 1997 n/a n/a n/a $ 400,000
Former President and Chief 1996 n/a n/a n/a n/a
Executive Officer 1995 (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 the incentive amounts which
were earned in 1996, 1995 and 1994 were paid or awarded to him by the
Company in 1997, 1996 and 1995, respectively.
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 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 in any prospective period
elects to have such salary paid to him directly. Pursuant to the Agreements and
the Incentive Plan, each executive deferred $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 a 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 $0.625, the closing
price of a share of the Company's Common Stock on December 30, 1997, the
effective date of the Incentive Plan. For 1998 and thereafter, such shares of
Common Stock will be determined under the Incentive Plan by
7
<PAGE>
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.
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. Incentive stock options to purchase 400,000 shares of
Common Stock of the Company at an exercise price of $0.925 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 percent 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.
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 he would have received if he had terminated the Agreement following
a Change-in-Control. Upon termination of an Agreement voluntarily by an
executive, upon the election by the executive not to 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 entered into on 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 the
calendar year 1997 equal to $111,926 per year.
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 Levine
Agreement, incentive 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 dividends, 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 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
8
<PAGE>
share 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 24, 1995, Mr. Levine was paid
(i) $7,164, $217,135 and $27,612, respectively, in cash, representing 80% of his
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 $0.9375 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 1995. 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 1994 Executive
and Directors Stock Option Plan (the "Plan"). As originally adopted, the Plan
authorized the grant of non-statutory stock options only. On December 30, 1997,
the Board of Directors of the Company adopted, subject to stockholder approval
at the 1998 Annual Meeting of Stockholders, an amendment to the Plan to permit
the grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code. The Plan granted the Board of Directors the authority to
issue up to 1,000,000 shares of the Company's common stock for stock option
awards. The Plan consists of an Executive Option Grant Program and a Director
Option Grant Program. Under the Director Option Grant Program, each of Gerald L.
Nudo, Robert M. Ungerleider, and Walter E. Auch, Sr., in consideration of their
length of service on the Board, received an option to acquire 50,000 shares. The
exercise price of the options initially granted to the Board of Directors on
July 15, 1994 under the Director Option Grant Program was $1.125. The exercise
price was reduced to $0.925 by a vote of the Board of Directors on December 30,
1997. No executive is eligible to receive options under the Director Option
Grant Program.
The Board administers the Executive Option Grant Program and has the
authority to determine, among other things, the individuals to be granted
Executive Options, 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 Board is also authorized to construe and interpret the Executive Option
Grant Program and to prescribe additional terms and conditions of exercise in
option agreements and provide the form of option agreement to be utilized with
the Executive Option Grant Program. No 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. 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 will be exercisable at any time within one year in the case of (a) and
ninety days in the case of (b) (but in no case beyond the expiration date
specified in the Option Agreement). If, while unexercised options remain
outstanding under the 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 Plan shall immediately become exercisable at that
time.
The 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 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.
9
<PAGE>
The Board granted 90,000 options on each of April 16, 1996, July 11, 1995 and
January 18, 1994 (270,000 options in total) to management under the Plan, at a
price equal to the closing price of the Company's stock as reported by NASDAQ on
the day of the grant of options ($1.25 per share at April 16, 1996, $1.50 per
share at July 11, 1995 and $1.125 per share at January 18, 1994).
Pursuant to the terms of the grants, options for all shares granted under the
Executive Option Grant Program are exercisable and vested 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. Options for all
shares as granted under the Director Option Grant Program are exercisable in
installments as follows: (i) 50.0% of the number of shares commencing on the
first anniversary of the date of grant; and (ii) an additional 50.0% of the
number of shares commencing on the second anniversary of the date of grant. The
Board is granted discretion to determine the term of each option granted under
the Executive Option Grant Program, but in no event will the term exceed ten
years and one day from the date of grant.
During 1997, the Company's executives who held unexercised options issued
under the Executive Plan agreed to cancel and surrender these options in
consideration of the Company paying each holder $0.20 in cash for each share of
Common Stock subject to such holder's options. The Company retired 68,500
options to purchase shares of the Company's common stock at a price of $0.20 per
share or $13,700. The options held by Mr. Levine (180,000 options), were
canceled and surrendered in connection with his resignation. Options granted
pursuant to the Director Option Grant Program (150,000 options in total) were
outstanding and exercisable at December 31, 1997.
On December 30, 1997, the Board voted to grant nonstatutory stock options for
50,000 shares at an exercise price of $0.925 per share to Joseph W. Bartlett
under the Director Option Grant Program and incentive stock options for 400,000
shares at an exercise price of $0.925 per share to each of Gary D. Engle and
James A. Coyne under the Executive Option Grant Program. These grants are
subject to approval by the stockholders at the 1998 Annual Meeting. On December
30, 1997, the effective date of the grant of the options (subject to stockholder
approval), the closing price for a share of the Company's Common Stock as
reported by NASDAQ was $0.625.
Stock Options granted (subject to stockholder approval) 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:
STOCK OPTION GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
Number of Securities % of Total Options
Underlying Granted to Employees Exercise or Expiration
Name Options Granted in Fiscal Year Base Price Date
- ---- --------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Gary D. Engle 400,000 50% $0.925 Dec. 30, 2007
</TABLE>
10
<PAGE>
AGGREGATED STOCK OPTION EXERCISES DURING 1997
AND DECEMBER 1997 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
at December 31 at December 31
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Gary D. Engle None $0 None/400,000 n/a / n/a
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
owners of Common Stock as of March 2, 1998 by: (i) each person or entity who is
known by the Company to own more than five percent 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.
However, such 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. Messrs. Bartlett, Romano and Butterfield do not own
any shares of Common Stock of the Company.
<TABLE>
<CAPTION>
Name of Person or Entity Number of Shares Percent of Total Shares
- ------------------------ ---------------- -----------------------
<S> <C> <C>
AFG Hato Arrow Limited Partnership 1,987,000 (1) 16.7%
AFG Dove Arrow Limited Partnership
AIP/Larkfield Limited Partnership
c/o Equis Corporation
88 Broad Street
Boston, Massachusetts 02110
Mr. J. Ezra Merkin 662,917 5.6%
Gabriel Capital, L.P.
450 Park Avenue, Suite 3201
New York, New York 10022
Gary D. Engle, Chairman, Chief Executive 123,843 (2) (3) Less than 1%
Officer and Director
James A. Coyne, President, Chief Operating 142,842 (4) Less than 1%
Officer and Director
Gerald L. Nudo, Director 55,000 (5) Less than 1%
Robert M. Ungerleider, Director 56,000 (5) Less than 1%
Walter E. Auch, Sr., Director 66,000 (5) Less than 1%
All Directors and Officers of the Company, 218,000 Less than 1%
as a group (8 persons)
</TABLE>
(1) Certain affiliates of EFG have filed reports with the Securities and
Exchange Commission (the "SEC") pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
indicating ownership of five percent or more of the outstanding Common
Stock. At March 2, 1998:(i) AFG Hato Arrow Limited
11
<PAGE>
Partnership owns 635,437 shares, amounting to 5.3% of the outstanding
Common Stock; (ii) AFG Dove Arrow Limited Partnership owns 616,734 shares,
amounting to 5.2% of the outstanding Common Stock and (iii) AIP/Larkfield
Limited Partnership owns 734,829 shares, amounting to 6.2% 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) 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 1,987,000 shares owned
by those partnerships.
(3) Includes 112,843 shares held by a rabbi trust for the benefit of Mr. Engle
representing salary deferred by the officer through March 2, 1998 pursuant
to the Company's Incentive Compensation Plan, which the Company is
presenting to the stockholders for approval at the Annual Meeting.
(4) Includes 112,842 shares held by a rabbi trust for the benefit of Mr. Coyne
representing salary deferred by the officer through March 2, 1998 pursuant
to the Company's Incentive Compensation Plan, which the Company is
presenting to the stockholders for approval at the Annual Meeting.
(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 five percent of the outstanding shares of
Common Stock at March 2, 1998. The Company is not aware of any arrangement, 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 ten percent 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
and 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 ten percent stockholders to
furnish the Company with copies of all these forms filed with the SEC and 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 ten percent 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 (neither of whom own any Company stock)
were inadvertently filed late.
See Item 10, Executive Compensation, for information on Stock Options of
the Company held by officers and directors pursuant to the 1994 Executive and
Directors Stock Option Plan and for information on shares held by a rabbi trust
for the benefit of certain officers pursuant to the Company's Incentive
Compensation Plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative costs, primarily salaries and general and administrative
expenses, were incurred on the Company's behalf by Banyan Management Corp.
("BMC") and were reimbursed at cost by the Company. These costs were allocated
to the Company and other entities to which BMC provided administrative services
based upon the actual number of hours spent by BMC personnel on matters related
to that particular entity in relation to total BMC personnel hours. The
Company's allocable share of costs for the years ended December 31, 1997 and
1996 aggregated $107,781 and $269,508, 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 Administrative Services Agreement to provide administrative
services to the Company, replacing BMC. During the year ended December 31, 1997,
the Company incurred $49,166 in administrative costs for services provided by
EFG personnel for Company related matters. This amount is reflected as Accrued
Expenses-Affiliate on the Consolidated Balance Sheet at December 31, 1997.
12
<PAGE>
As described in Item 1, The Company executed and delivered an Exchange
Agreement dated April 30, 1997 (amended as of August 7, 1997) among the Company,
Equis, EFG and certain partnerships managed by EFG. 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 the price of $1.50 per share. Cash proceeds
received by the Company, $2,480,500, were net of related costs of $500,000. In
addition, the Partnerships made a three-year loan to the Company in the amount
of $4,419,500. These transactions are intended to provide capital to assist the
Company in a new growth-oriented business plan, which includes the development
of the Company's Rancho Malibu property.
The Loan was initially disbursed into a segregated account, the proceeds
of which were not available to the Company until the stockholder consent to
certain proposals was obtained. The Consent of the stockholders was obtained and
all proposals were adopted on October 21, 1997. 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 Rancho Malibu property
(See Note 7 to the Consolidated Financial Statements).
13
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of Semele Group Inc. included
in its Annual Report for the year ended December 31, 1997 are incorporated by
reference in Item 7 hereof:
Report of Independent Auditors
Consolidated Balance sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations For the Years Ended
December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity For the Years Ended
December 31, 1997 and 1996
Consolidated Statements of Cash Flows For the Years Ended December
31, 1997 and 1996
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
None required.
(3) Exhibits
A list of exhibits filed or incorporated by reference is as follows:
<TABLE>
<CAPTION>
<S> <C>
3.1 Restated Certificate of Incorporation (filed with the Securities and
Exchange Commission as Exhibit (3)(i) to the Registrant's Report on Form
8-K dated October 21, 1997 and incorporated by reference)
3.2 Amended and Restated By-Laws (filed with the Securities and Exchange
Commission as Exhibit (3)(ii) to the Registrant's Report on Form 8-K
dated October 21, 1997 and incorporated by reference)
4 Form of new stock certificate (filed with the Securities and Exchange
Commission as Exhibit (4) to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1997 and incorporated by
reference)
10.1 Executive Employment Agreement for Gary D. Engle (filed herewith)
10.2 Executive Employment Agreement for James A. Coyne (filed herewith)
10.3 Amended 1994 Executive and Director Stock Option Plan (filed herewith)
10.4 Incentive Compensation Plan (filed herewith)
10.5 Trust under Semele Group Inc. Incentive Compensation Plan (filed
herewith)
10.6 Qualified Stock Option Agreement Executive Option Grant Program dated
December 30, 1997 between Semele Group Inc. and Gary D. Engle (filed
herewith)
10.7 Qualified Stock Option Agreement Executive Option Grant Program dated
December 30, 1997 between Semele Group Inc. and James A. Coyne (filed
herewith)
10.8 Director Stock Option Agreement Director Option Grant Program (filed
herewith)
10.9 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Gerald L.
Nudo (filed herewith)
10.10 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Robert M.
Ungerleider (filed herewith)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.11 Amendment to Director Stock Option Agreement Director Option Grant
Program dated December 30, 1997 between Semele Group Inc. and Walter E.
Auch (filed herewith)
10.12 Third Amended and Restated Employment Agreement for Leonard G. Levine
dated May 1, 1997 (filed with the Securities and Exchange Commission as
Exhibit (10)(i) to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1997 and incorporated by reference)
10.13 Amendment No. 1 to Exchange Agreement dated August 7, 1997 (filed with
the Securities and Exchange Commission as Exhibit (10)(ii) to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended June
30, 1997 and incorporated by reference)
10.14 Exchange Agreement dated April 30, 1997 by and among AFG Hato Arrow
Limited Partnership, AFG Dove Arrow Limited Partnership, AIP/Larkfield
Limited Partnership, Equis Exchange LLC, Equis Financial Group Limited
Partnership and the Registrant and related exhibits (filed with the
Securities and Exchange Commission as Exhibit (10)(i) to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended March
31, 1997 and incorporated by reference)
10.15 Directors Stock Option Agreement dated July 15, 1994
10.16 Executive Stock Option Agreements dated July 1, 1994, July 11, 1995 and
April 16, 1996.
13 The Company's Annual Report to Stockholders for the year ended December
31, 1997
21 Subsidiaries of the Company
23 Consent of Independent Auditors
27 Financial Data Schedule (such schedule is not deemed filed as part of
this report)
99.1 Press Release dated October 21, 1997 (filed with the Securities and
Exchange Commission as Exhibit (99)(i) to the Registrant's Report on
Form 8-K dated October 21, 1997 and incorporated by reference)
(b) A report on Form 8-K, dated October 21, 1997, was filed by the
Registrant on October 29, 1997 with the Securities and Exchange
Commission.
(c) See Item 13(a)(3) above.
(d) None.
</TABLE>
An annual report will be sent to the stockholders subsequent to this filing
and the Company will furnish copies of such report to the Commission at that
time.
15
<PAGE>
SIGNATURES
IN ACCORDANCE WITH Section 13 or 15(d) of the Exchange Act, the Issuer has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SEMELE GROUP INC.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/Gary D. Engle Date: March 26, 1998
Gary D. Engle, Chairman, Chief Executive
Officer and Director
</TABLE>
IN ACCORDANCE WITH the Exchange Act, this Annual Report has been signed
below by the following persons on behalf of the Issuer and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/Gary D. Engle Date: March 26, 1998
Gary D. Engle, Chairman, Chief Executive
Officer and Director
By: /s/James A. Coyne Date: March 26, 1998
James A. Coyne, President, Chief
Operating Officer and Director
By: /s/Gary M. Romano Date: March 26, 1998
Gary M. Romano, Vice President and
Chief Financial Officer
By: /s/Gerald L. Nudo Date: March 26, 1998
Gerald L. Nudo, Director
By: /s/Walter E. Auch Date: March 26, 1998
Walter E. Auch, Sr., Director
By: /s/Robert M. Ungerleider Date: March 26, 1998
Robert M. Ungerleider, Director
By: /s/Joseph W. Bartlett Date: March 26, 1998
Joseph W. Bartlett, Director
</TABLE>
16
<PAGE>
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
Gary D. Engle
AGREEMENT, dated and entered into as of the 10th day of November, 1997 by
and between Semele Group, Inc. a Delaware corporation (the "Company"), and Gary
D. Engle, a resident of Connecticut (the "Executive").
WHEREAS, the Company desires to engage the time services of the Executive;
and
WHEREAS, the Executive desires to be so employed by the Company.
NOW, THEREFORE, in consideration of such employment and the mutual
covenants and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
Section 1. Employment. The Company hereby employs the Executive as its
Chief Executive Officer and the Executive hereby accepts such employment under
the subject to the terms and conditions hereinafter set forth. The Executive
further agrees to serve as a member of the Board of Directors (the "Board") of
the Company if elected or appointed to such office in accordance with the
Company's By-Laws.
Section 2. Term. Unless sooner terminated as provided in Section 7, the
term of employment under this Agreement shall be deemed to have commenced as of
November 10, 1997 and shall conclude on December 31, 2000 (the "Term"). At any
time during the six (6) months prior to the end of the Term, the Company agrees
to advise the Executive, upon inquiry by the Executive, whether the Term of this
Agreement shall be renewed, extended or allowed to expire. This Agreement shall
be renewed for additional consecutive one year terms ("Renewal Terms") unless
either party shall give to the other written notice not less than thirty (30)
days prior to the end of the Term or any Renewal Term that it or he does not
wish to renew this Agreement.
Section 3. Duties. The Executive shall serve as Chief Executive Officer of
the Company. The Executive hereby agrees to devote such of his business time as
is reasonably necessary to promote and forward the business and affairs of the
Company for the Term or any Renewal Term. The Company acknowledges and
recognizes that the Executive is not required to devote full-time service to the
Company and will perform service for other businesses.
Section 4. Salary Compensation. In consideration of the services rendered
by the Executive under this Agreement, the Executive shall have a base salary
(the "Base Salary") for 1997 of $48,420.00. The Base Salary thereafter shall be
at the an initial rate of One Hundred Twenty Thousand Dollars ($120,000) per
calendar year. The Base Salary shall be payable in monthly installments. The
Company shall defer payment of such salary under the Incentive Compensation Plan
described below, except that for any prospective period the Executive may
<PAGE>
elect to have such salary paid to him directly. The Base Salary will be subject
to adjustment by the Board, in its sole discretion, based upon the performance
by the Executive of his duties hereunder and the financial performance of the
Company; provided, however, that in no event shall the Base Salary for any
calendar year be less than the Base Salary in effect for the immediately prior
calendar year. The Executive shall also be entitled to receive such incentive or
performance cash bonuses as the Board may determine from time to time.
Section 5. Incentive Compensation Plan. The Company shall establish an
Incentive Compensation Plan for the Executive. All or some of the Executive's
salary shall be deferred under such Plan as provided in Section 4, above. In
addition, the Company shall defer on account of the Executive (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 Executive. All such deferred
compensation shall be held subject to the claims of creditors of the Company as
a grantor or "rabbi" trust until paid to the Executive following the Executive's
termination of employment. The amounts deferred shall be invested in stock of
the Company, except that for any prospective period the Executive 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
under Section 4 shall be forfeited if the Executive is terminated for Cause (as
defined below). The amounts under the Deferred Compensation Plan shall be
payable in a lump sum upon the Executive's 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.
Section 6. Benefits. In addition to the compensation detailed in Section 4
and 5 of this Agreement, the Executive shall be entitled to the following
additional benefits:
Section 6.01. Paid Vacation. The Executive shall be entitled to such
amount of paid vacation per calendar year as the Executive reasonably requests,
such vacation to extend for such periods and to be taken at such intervals as
shall be appropriate and consistent with the proper performance of the
Executive's duties hereunder.
Section 6.02. Insurance Coverage. The Company shall provide the
Executive with such health, life and disability insurance protection as the
Executive reasonably requests.
Section 6.03. Stock Options. Subject to approval of the Compensation
Committee of the Board of Directors, the Company shall issue to Executive
options to purchase 400,000 shares of stock of the Company. The right to
exercise such options shall vest over the term of this Agreement, including upon
a Change-in-Control (defined below).
Section 6.04. Reimbursement of Expenses. The Company shall reimburse
the Executive for all reasonable expenses actually incurred by the Executive in
connection with the business affairs of the Company and the performance of his
duties hereunder. The Executive shall comply with such reasonable limitations
and reporting requirements with respect to such expenses as the Board may
establish from time to time.
<PAGE>
Section 7. Termination. This Agreement shall be terminated at the end of
the Term or any Renewal Term, or earlier as follows:
Section 7.01. Death. This Agreement shall terminate upon the death
of the Executive, except that the Base Salary provided in Section 4 shall
continue through the end of the term (or Renewal Term) in which the Executive's
death occurs, reduced by the amount of any insurance covering the Executive's
life obtained by the Company pursuant to Section 6.02.
Section 7.02. Disability and Other Benefits. If the Executive
suffers any illness, disability or incapacity which prevents the Executive from
performing the Executive's duties hereunder, the Company shall continue the
Executive's Base Salary, fringe benefits and Incentive Compensation until the
later of the end of the Term (or any Renewal Term) of this Agreement or the
commencement of salary continuation benefits under a policy of long-term
disability insurance obtained by the Company pursuant to Section 6.02, whereupon
the Agreement shall terminate.
Section 7.03. By The Company for Cause. The employment of the
Executive may be terminated by the Company for Cause (as defined below) at any
time effective upon written notice to the Executive. The Company shall provide
the Executive with at least ten (10) business days prior written notice of a
Board meeting at which a termination for Cause will be considered and the
Executive will have an opportunity to attend and participate in that meeting.
For purposes of this Agreement, the term "Cause" shall mean that the Board has
determined that any one or more of the following has occurred:
(a) The Executive shall have repeatedly failed or refused to
perform his duties hereunder and such failure or refusal shall have continued
for a period of thirty (30) days following written notice from the Board, it
being understood that the Company's failure to achieve its business plan or
projections shall not itself be considered a failure or refusal to perform
duties;
(b) the Executive shall have breached any provision of Section
10 or 11 hereof; or
(c) the Executive shall have committed any fraud,
embezzlement, misappropriation of funds, malfeasance or other act of dishonesty
against the Company which has a material adverse effect on the Company.
Section 7.04. By The Executive and Rights Upon A Change In Control.
(a) Subject to the following provisions of this Section 7.04,
the Executive may terminate this Agreement at any time effective upon at least
sixty (60) days' prior written notice to the Company. Upon any such termination,
all payments, salary and other benefits hereunder shall cease at the effective
date of termination.
(b) Notwithstanding the foregoing, the Executive may terminate
this Agreement effective immediately upon written notice to the Company given
within sixty (60)
<PAGE>
days of the completion of a Change-in-Control (as defined below). In the event
of any termination pursuant to this Section 7.04(b), the Company shall continue
salary, fringe benefits, and Incentive Compensation for eighteen (18) months.
(c) If within twenty-four (24) months following a Change in
Control the Company terminates the Executive or the Company elects not to renew
this Agreement, the Company shall 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 thirty-six (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 this Agreement, and all other payments due and benefits to be provided
hereunder shall cease. Upon any such termination, the Executive shall continue
to be bound by the provisions of Section 10 (but not Section 11) hereof in
accordance with its terms.
(d) For purposes of this Agreement, a "Change-in-Control"
shall mean an occurrence whereby (i) any person, partnership, corporation,
entity or group (as that term is used in the Securities Exchange Act of 1934)
shall, in any single transaction or series of related transactions, directly or
indirectly acquire beneficial ownership of more than fifty percent (50%) of the
Company's voting 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 the election of 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.
Section 8. Termination Payments and Benefits.
Section 8.01. Voluntary Termination, Election Not To Renew,
Termination For Cause. Upon any termination of this Agreement: (1) voluntarily
by the Executive, (2) upon the election by the Executive not to renew this
Agreement at the end of the Term or any Renewal Term, or (3) by the Company for
Cause as provided in Section 7.03, all payments, salary and other benefits
hereunder shall cease at the effective date of termination except as
specifically provided in this Section 8.
Section 8.02. Termination Without Cause. If the Company terminates
the Executive without Cause (other than due to death or disability), then all
payments and benefits hereunder shall be continued for the Executive through the
end of the Term or Renewal Term of this Agreement.
Section 8.03. Company Election Not To Renew. In the event that the
Company elects not to renew this Agreement at the end of the Term or any Renewal
Term, the Executive shall receive as a termination settlement an amount equal to
twelve (12) months' salary as is in effect at the effective date of termination
(the "Termination Payment"); provided, however, that if such non-renewal occurs
within twenty-four (24) months following a Change-in-Control, then the
provisions of Section 7.04(c) shall govern instead. The Termination Payment
shall be paid in twelve (12) monthly installments on the first business day of
each month following the effective date of termination. In addition to the
Termination Payment, the Executive shall continue to receive the insurance
benefits described in Section 6.02 for a period of twelve (12) months following
the effective date of termination.
<PAGE>
Section 8.04. Outplacement Assistance. In the event the Executive's
employment terminates for any reason, other than for Cause, the Company shall
provide outplacement assistance to the Executive as is then reasonable and
customary for similarly situated businesses up to a $15,000 maximum expenditure
by the Company.
Section 8.05. Public Statement of Termination. In the event the
Executive's Employee's employment terminates for any reason, the Company and the
Executive shall agree upon a public statement pertaining to the Executive's
termination of employment, and the terms of said statement shall not be subject
to subsequent modification by either party unless required by law; provided,
however, that in the event the Company and the Executive are unable in good
faith to agree upon such a statement, the Company may make public statements as
are necessary to comply with the law.
Section 9. Merger Clause. The Company shall not consolidate, merge or
transfer all or a substantial portion of its assets without requiring the
transferee to assume this Agreement and the obligations hereunder.
Section 10.01 Proprietary Information. In the course of his service to the
Company, the Executive will have access to information which may be the
confidential or be proprietary and is owned or used by the Company, or any of
its subsidiaries or affiliates. Such information shall hereinafter be called
"Proprietary Information" and shall include any and all items enumerated in the
preceding sentence and coming within the scope of the business of the Company or
any of its subsidiaries or affiliates as to which the Executive may have access,
whether conceived or developed by others or by the Executive alone or with
others during the period of his service to the Company, whether or not conceived
or developed during regular working hours. Proprietary Information shall not
include any records, data or information which are in the public domain during
the period of service of the Executive, provided the same are not in the public
domain as a consequence of disclosure directly or indirectly by the Executive in
violation of this Agreement.
Section 10.02. Non-Use and Non-Disclosure. The Executive shall not
during the Term, any Renewal Term or at any time thereafter (a) disclose,
directly or indirectly, any Proprietary Information to any person other than the
Company or authorized employees thereof at the time of such disclosure, or such
other persons to whom the Executive has been specifically instructed to make
disclosure by the Board and in all such cases only to the extend required in the
course of the Executive's service to the Company or (b) use any Proprietary
Information, directly or indirectly, for his own benefit or for the benefit of
any other person or entity. At the termination of his employment, the Executive
shall deliver to the Company all notes, letters, documents and records which may
contain Proprietary Information which are then in his possession or control and
shall destroy any and all copies and summaries thereof.
Section 11.01. Employee Non-Solicitation.
(a) During the Term, any Renewal Term and the Non-Solicitation
Period (as defined below), the Executive will not solicit, or attempt to
solicit, any officer, director, consultant, executive or employee of the Company
or any of its subsidiaries or affiliates to leave his or her engagement with the
Company or such subsidiary or affiliate.
<PAGE>
(b) For purposes of this Agreement, the "Non-Solicitation Period"
shall mean the period of twelve (12) consecutive months after Executive's
employment terminates due to a voluntary termination by the Executive or his
election not to renew this Agreement or termination for Cause by the Company.
Section 12. Remedies. It is specifically understood and agreed that any
breach of the provisions of Section 10 or 11 of this Agreement is likely to
result in irreparable injury to the Company and that the remedy at law alone
will be an inadequate remedy for such breach, and that in addition to any other
remedy it may have, the Company shall be entitled to enforce the specific
performance of this Agreement by the Executive and to seek both temporary and
permanent injunctive relief (to the extent permitted by law) without the
necessity of proving actual damages.
Section 13. Severable Provisions. The provisions of this Agreement are
severable and the invalidity of any one or more provisions shall not affect the
validity of any other provision. In the vent that a court of competent
jurisdiction shall determine that any provision of this Agreement or the
application thereof is unenforceable in whole or in part because of the duration
or scope thereof, the parties hereto agree that said court in making such
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the full extent permitted
by law.
Section 14. Notices. All notices hereunder, to be effective, shall be
in writing and shall be delivered by hand or mailed by certified mail,
postage and fees prepaid, as follows:
If to the Company: Semele Group, Inc.
One Canterbury Green
Stamford, CT 06901
Attn: President
Copy to: Craig D. Mills, Esq.
Peabody & Brown
101 Federal Street
Boston, MA 02110
If to the Executive:
Gary D. Engle
10 Stonypoint West
Westport, CT 06880
or to such other address as a party may notify the other pursuant to a notice
given in accordance with this Section 14.
<PAGE>
Section 15. Miscellaneous.
Section 15.01. Modification. This Agreement constitutes the entire
Agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral.
This Agreement may not be amended or revised except by a writing signed by the
parties.
Section 15.02. Assignment and Transfer. This Agreement shall not be
terminated by the merger or consolidation of the Company with any corporate or
other entity or by the transfer of all or substantially all of the assets of the
Company to any other person, corporation, firm or entity. The provisions of this
Agreement shall be binding on and shall inure to the benefit of any such
successor in interest to the Company. Neither this Agreement nor any of the
rights, duties or obligations of the Executive shall be assignable by the
Executive, nor shall any of the payments required or permitted to e made to the
Executive by this Agreement be encumbered, transferred or in any way
anticipated.
Section 15.03. Captions. Captions herein have been inserted solely
for the convenience of reference and in no way define, limit or describe the
scope or substance of any provision of this Agreement.
Section 15.04. Governing Law. This Agreement shall be construed
under and enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as a sealed instrument as of the day and year first above written.
By: /s/ Joseph W. Bartlett
----------------------
Joseph W. Bartlett
------------------
Chair, Compensation Committee
/s/ Gary D. Engle
-------------
Gary D. Engle,
Executive
<PAGE>
EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
James A. Coyne
AGREEMENT, dated and entered into as of the 1st day of May, 1997 by and
between Semele Group, Inc. a Delaware corporation (the "Company"), and James A.
Coyne, a resident of Connecticut (the "Executive").
WHEREAS, the Company desires to engage the time services of the Executive;
and
WHEREAS, the Executive desires to be so employed by the Company.
NOW, THEREFORE, in consideration of such employment and the mutual
covenants and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
Section 1. Employment. The Company hereby employs the Executive as its
Chief Operating Officer and the Executive hereby accepts such employment under
the subject to the terms and conditions hereinafter set forth. The Executive
further agrees to serve as a member of the Board of Directors (the "Board") of
the Company if elected or appointed to such office in accordance with the
Company's By-Laws.
Section 2. Term. Unless sooner terminated as provided in Section 7, the
term of employment under this Agreement shall be deemed to have commenced as of
May 1, 1997 and shall conclude on December 31, 2000 (the "Term"). At any time
during the six (6) months prior to the end of the Term, the Company agrees to
advise the Executive, upon inquiry by the Executive, whether the Term of this
Agreement shall be renewed, extended or allowed to expire. This Agreement shall
be renewed for additional consecutive one year terms ("Renewal Terms") unless
either party shall give to the other written notice not less than thirty (30)
days prior to the end of the Term or any Renewal Term that it or he does not
wish to renew this Agreement.
Section 3. Duties. The Executive shall serve as Chief Operating Officer of
the Company. The Executive hereby agrees to devote such of his business time as
is reasonably necessary to promote and forward the business and affairs of the
Company for the Term or any Renewal Term. The Company acknowledges and
recognizes that the Executive is not required to devote full-time service to the
Company and will perform service for other businesses.
Section 4. Salary Compensation. In consideration of the services rendered
by the Executive under this Agreement, the Executive shall have a base salary
(the "Base Salary") for 1997 of $48,420.00. The Base Salary thereafter shall be
at the an initial rate of One Hundred Twenty Thousand Dollars ($120,000) per
calendar year. The Base Salary shall be payable in monthly installments. The
Company shall defer payment of such salary under the Incentive Compensation Plan
described below, except that for any prospective period the Executive may
<PAGE>
elect to have such salary paid to him directly. The Base Salary will be subject
to adjustment by the Board, in its sole discretion, based upon the performance
by the Executive of his duties hereunder and the financial performance of the
Company; provided, however, that in no event shall the Base Salary for any
calendar year be less than the Base Salary in effect for the immediately prior
calendar year. The Executive shall also be entitled to receive such incentive or
performance cash bonuses as the Board may determine from time to time.
Section 5. Incentive Compensation Plan. The Company shall establish an
Incentive Compensation Plan for the Executive. All or some of the Executive's
salary shall be deferred under such Plan as provided in Section 4, above. In
addition, the Company shall defer on account of the Executive (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 Executive. All such deferred
compensation shall be held subject to the claims of creditors of the Company as
a grantor or "rabbi" trust until paid to the Executive following the Executive's
termination of employment. The amounts deferred shall be invested in stock of
the Company, except that for any prospective period the Executive 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
under Section 4 shall be forfeited if the Executive is terminated for Cause (as
defined below). The amounts under the Deferred Compensation Plan shall be
payable in a lump sum upon the Executive's 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.
Section 6. Benefits. In addition to the compensation detailed in Section 4
and 5 of this Agreement, the Executive shall be entitled to the following
additional benefits:
Section 6.01. Paid Vacation. The Executive shall be entitled to such
amount of paid vacation per calendar year as the Executive reasonably requests,
such vacation to extend for such periods and to be taken at such intervals as
shall be appropriate and consistent with the proper performance of the
Executive's duties hereunder.
Section 6.02. Insurance Coverage. The Company shall provide the
Executive with such health, life and disability insurance protection as the
Executive reasonably requests.
Section 6.03. Stock Options. Subject to approval of the Compensation
Committee of the Board of Directors, the Company shall issue to Executive
options to purchase 400,000 shares of stock of the Company. The right to
exercise such options shall vest over the term of this Agreement, including upon
a Change-in-Control (defined below).
Section 6.04. Reimbursement of Expenses. The Company shall reimburse
the Executive for all reasonable expenses actually incurred by the Executive in
connection with the business affairs of the Company and the performance of his
duties hereunder. The Executive shall comply with such reasonable limitations
and reporting requirements with respect to such expenses as the Board may
establish from time to time.
<PAGE>
Section 7. Termination. This Agreement shall be terminated at the end of
the Term or any Renewal Term, or earlier as follows:
Section 7.01. Death. This Agreement shall terminate upon the death
of the Executive, except that the Base Salary provided in Section 4 shall
continue through the end of the term (or Renewal Term) in which the Executive's
death occurs, reduced by the amount of any insurance covering the Executive's
life obtained by the Company pursuant to Section 6.02.
Section 7.02. Disability and Other Benefits. If the Executive
suffers any illness, disability or incapacity which prevents the Executive from
performing the Executive's duties hereunder, the Company shall continue the
Executive's Base Salary, fringe benefits and Incentive Compensation until the
later of the end of the Term (or any Renewal Term) of this Agreement or the
commencement of salary continuation benefits under a policy of long-term
disability insurance obtained by the Company pursuant to Section 6.02, whereupon
the Agreement shall terminate.
Section 7.03. By The Company for Cause. The employment of the
Executive may be terminated by the Company for Cause (as defined below) at any
time effective upon written notice to the Executive. The Company shall provide
the Executive with at least ten (10) business days prior written notice of a
Board meeting at which a termination for Cause will be considered and the
Executive will have an opportunity to attend and participate in that meeting.
For purposes of this Agreement, the term "Cause" shall mean that the Board has
determined that any one or more of the following has occurred:
(a) The Executive shall have repeatedly failed or refused to
perform his duties hereunder and such failure or refusal shall have continued
for a period of thirty (30) days following written notice from the Board, it
being understood that the Company's failure to achieve its business plan or
projections shall not itself be considered a failure or refusal to perform
duties;
(b) the Executive shall have breached any provision of Section
10 or 11 hereof; or
(c) the Executive shall have committed any fraud,
embezzlement, misappropriation of funds, malfeasance or other act of dishonesty
against the Company which has a material adverse effect on the Company.
Section 7.04. By The Executive and Rights Upon A Change In Control.
(a) Subject to the following provisions of this Section 7.04,
the Executive may terminate this Agreement at any time effective upon at least
sixty (60) days' prior written notice to the Company. Upon any such termination,
all payments, salary and other benefits hereunder shall cease at the effective
date of termination.
(b) Notwithstanding the foregoing, the Executive may terminate
this Agreement effective immediately upon written notice to the Company given
within sixty (60)
<PAGE>
days of the completion of a Change-in-Control (as defined below). In the event
of any termination pursuant to this Section 7.04(b), the Company shall continue
salary, fringe benefits, and Incentive Compensation for eighteen (18) months.
(c) If within twenty-four (24) months following a Change in
Control the Company terminates the Executive or the Company elects not to renew
this Agreement, the Company shall 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 thirty-six (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 this Agreement, and all other payments due and benefits to be provided
hereunder shall cease. Upon any such termination, the Executive shall continue
to be bound by the provisions of Section 10 (but not Section 11) hereof in
accordance with its terms.
(d) For purposes of this Agreement, a "Change-in-Control"
shall mean an occurrence whereby (i) any person, partnership, corporation,
entity or group (as that term is used in the Securities Exchange Act of 1934)
shall, in any single transaction or series of related transactions, directly or
indirectly acquire beneficial ownership of more than fifty percent (50%) of the
Company's voting 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 the election of 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.
Section 8. Termination Payments and Benefits.
Section 8.01. Voluntary Termination, Election Not To Renew,
Termination For Cause. Upon any termination of this Agreement: (1) voluntarily
by the Executive, (2) upon the election by the Executive not to renew this
Agreement at the end of the Term or any Renewal Term, or (3) by the Company for
Cause as provided in Section 7.03, all payments, salary and other benefits
hereunder shall cease at the effective date of termination except as
specifically provided in this Section 8.
Section 8.02. Termination Without Cause. If the Company terminates
the Executive without Cause (other than due to death or disability), then all
payments and benefits hereunder shall be continued for the Executive through the
end of the Term or Renewal Term of this Agreement.
Section 8.03. Company Election Not To Renew. In the event that the
Company elects not to renew this Agreement at the end of the Term or any Renewal
Term, the Executive shall receive as a termination settlement an amount equal to
twelve (12) months' salary as is in effect at the effective date of termination
(the "Termination Payment"); provided, however, that if such non-renewal occurs
within twenty-four (24) months following a Change-in-Control, then the
provisions of Section 7.04(c) shall govern instead. The Termination Payment
shall be paid in twelve (12) monthly installments on the first business day of
each month following the effective date of termination. In addition to the
Termination Payment, the Executive shall continue to receive the insurance
benefits described in Section 6.02 for a period of twelve (12) months following
the effective date of termination.
<PAGE>
Section 8.04. Outplacement Assistance. In the event the Executive's
employment terminates for any reason, other than for Cause, the Company shall
provide outplacement assistance to the Executive as is then reasonable and
customary for similarly situated businesses up to a $15,000 maximum expenditure
by the Company.
Section 8.05. Public Statement of Termination. In the event the
Executive's Employee's employment terminates for any reason, the Company and the
Executive shall agree upon a public statement pertaining to the Executive's
termination of employment, and the terms of said statement shall not be subject
to subsequent modification by either party unless required by law; provided,
however, that in the event the Company and the Executive are unable in good
faith to agree upon such a statement, the Company may make public statements as
are necessary to comply with the law.
Section 9. Merger Clause. The Company shall not consolidate, merge or
transfer all or a substantial portion of its assets without requiring the
transferee to assume this Agreement and the obligations hereunder.
Section 10.01 Proprietary Information. In the course of his service to the
Company, the Executive will have access to information which may be the
confidential or be proprietary and is owned or used by the Company, or any of
its subsidiaries or affiliates. Such information shall hereinafter be called
"Proprietary Information" and shall include any and all items enumerated in the
preceding sentence and coming within the scope of the business of the Company or
any of its subsidiaries or affiliates as to which the Executive may have access,
whether conceived or developed by others or by the Executive alone or with
others during the period of his service to the Company, whether or not conceived
or developed during regular working hours. Proprietary Information shall not
include any records, data or information which are in the public domain during
the period of service of the Executive, provided the same are not in the public
domain as a consequence of disclosure directly or indirectly by the Executive in
violation of this Agreement.
Section 10.02. Non-Use and Non-Disclosure. The Executive shall not
during the Term, any Renewal Term or at any time thereafter (a) disclose,
directly or indirectly, any Proprietary Information to any person other than the
Company or authorized employees thereof at the time of such disclosure, or such
other persons to whom the Executive has been specifically instructed to make
disclosure by the Board and in all such cases only to the extend required in the
course of the Executive's service to the Company or (b) use any Proprietary
Information, directly or indirectly, for his own benefit or for the benefit of
any other person or entity. At the termination of his employment, the Executive
shall deliver to the Company all notes, letters, documents and records which may
contain Proprietary Information which are then in his possession or control and
shall destroy any and all copies and summaries thereof.
Section 11.01. Employee Non-Solicitation.
(a) During the Term, any Renewal Term and the Non-Solicitation
Period (as defined below), the Executive will not solicit, or attempt to
solicit, any officer, director, consultant, executive or employee of the Company
or any of its subsidiaries or affiliates to leave his or her engagement with the
Company or such subsidiary or affiliate.
<PAGE>
(b) For purposes of this Agreement, the "Non-Solicitation Period"
shall mean the period of twelve (12) consecutive months after Executive's
employment terminates due to a voluntary termination by the Executive or his
election not to renew this Agreement or termination for Cause by the Company.
Section 12. Remedies. It is specifically understood and agreed that any
breach of the provisions of Section 10 or 11 of this Agreement is likely to
result in irreparable injury to the Company and that the remedy at law alone
will be an inadequate remedy for such breach, and that in addition to any other
remedy it may have, the Company shall be entitled to enforce the specific
performance of this Agreement by the Executive and to seek both temporary and
permanent injunctive relief (to the extent permitted by law) without the
necessity of proving actual damages.
Section 13. Severable Provisions. The provisions of this Agreement are
severable and the invalidity of any one or more provisions shall not affect the
validity of any other provision. In the vent that a court of competent
jurisdiction shall determine that any provision of this Agreement or the
application thereof is unenforceable in whole or in part because of the duration
or scope thereof, the parties hereto agree that said court in making such
determination shall have the power to reduce the duration and scope of such
provision to the extent necessary to make it enforceable, and that the Agreement
in its reduced form shall be valid and enforceable to the full extent permitted
by law.
Section 14. Notices. All notices hereunder, to be effective, shall be in
writing and shall be delivered by hand or mailed by certified mail, postage and
fees prepaid, as follows:
If to the Company: Semele Group, Inc.
One Canterbury Green
Stamford, CT 06901
Attn: President
Copy to: Craig D. Mills, Esq.
Peabody & Brown
101 Federal Street
Boston, MA 02110
If to the Executive:
James A. Coyne
63 Old Hill Road
Westport, CT 06880
or to such other address as a party may notify the other pursuant to a notice
given in accordance with this Section 14.
<PAGE>
Section 15. Miscellaneous.
Section 15.01. Modification. This Agreement constitutes the entire
Agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral.
This Agreement may not be amended or revised except by a writing signed by the
parties.
Section 15.02. Assignment and Transfer. This Agreement shall not be
terminated by the merger or consolidation of the Company with any corporate or
other entity or by the transfer of all or substantially all of the assets of the
Company to any other person, corporation, firm or entity. The provisions of this
Agreement shall be binding on and shall inure to the benefit of any such
successor in interest to the Company. Neither this Agreement nor any of the
rights, duties or obligations of the Executive shall be assignable by the
Executive, nor shall any of the payments required or permitted to e made to the
Executive by this Agreement be encumbered, transferred or in any way
anticipated.
Section 15.03. Captions. Captions herein have been inserted solely
for the convenience of reference and in no way define, limit or describe the
scope or substance of any provision of this Agreement.
Section 15.04. Governing Law. This Agreement shall be construed
under and enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as a sealed instrument as of the day and year first above written.
By:/s/ Joseph W. Bartlett
----------------------
Joseph W. Bartlett
------------------
Chair, Compensation Committee
/s/ James A. Coyne
------------------
James A. Coyne, Executive
<PAGE>
EXHIBIT 10.3
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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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.
<PAGE>
(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 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
<PAGE>
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.
(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
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
EXHIBIT 10.4
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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
(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 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)
<PAGE>
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.
SEMELE GROUP, INC.
By: /s/ Joseph W. Bartlett
----------------------
Chairman, Compensation Committee
<PAGE>
EXHIBIT 10.5
TRUST UNDER SEMELE GROUP, INC.
INCENTIVE COMPENSATION PLAN
This Agreement is by and between Semele Group, Inc. ("Semele") and
Boston Private Bank and Trust Company as Trustee ("Trustee");
WHEREAS, Semele has adopted a certain Incentive Compensation Plan
containing provisions for payment of deferred compensation (the "Plan");
WHEREAS, Semele has incurred or expects to incur liability under the terms
of the Plan with respect to certain individuals as participants (together with
their designated beneficiaries, the "Participants") in such Plan;
WHEREAS, Semele wishes to establish a trust (hereinafter called "Trust")
and to contribute to the Trust assets that shall be held therein, subject to the
claims of Semele's creditors in the event of Semele's Insolvency, as herein
defined, until paid to the Participants in such manner and at such times as
specified in the Plans;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Semele to contribute to the Trust to
provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
I. Establishment of Trust
A. Semele hereby deposits with Trustee in trust 154,826 shares of common
stock of Semele Group, Inc. ("Shares"), which shall become the principal of the
Trust to be held, invested, administered and disposed of by Trustee as provided
in this Trust Agreement.
B. The Trust hereby established shall be irrevocable.
C. The Trust is intended to be a grantor trust, of which Semele is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
D. The initial principal of the Trust, and any gains, losses, or earnings
thereon, shall be held separate and apart from other funds of Semele and shall
be used exclusively for the uses and purposes of the Plan Participants and
Semele's general creditors as herein set forth. The Plan Participants shall have
no preferred claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plans and this Trust Agreement shall be
mere
<PAGE>
unsecured contractual rights of Plan Participants against Semele. Any assets
held by the Trust will be subject to the claims of Semele's general creditors
under federal and state law in the event of Insolvency, as defined in Section
3(a) herein.
E. To meet its continuing obligations to Participants under the Plan, it
is the intention of Semele, from time to time, to make additional deposits of
Shares, cash or other property in trust with Trustee to augment the principal to
be held, administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor the Plan Participants shall have any rights under
this Trust to compel such additional deposits.
II. Payments to Plan Participants and Their Beneficiaries.
A. Semele shall deliver to Trustee a copy of the Plan that indicates the
amounts payable in respect of the Plan Participants (and their beneficiaries),
and the time of commencement for payment of such amounts under the Plans. Except
as otherwise provided herein, Trustee shall make payments to each Plan
Participant and his beneficiaries (or, in the event of forfeiture of a
Participant's benefit, to Semele) in accordance with the Plan. Semele shall
provide the Trustee with all information necessary to make such distribution and
the Trustee will be entitled to rely on such information.
B. The Trustee shall make provision for the reporting and withholding of
any federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plans and shall
pay amounts withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by Semele. Semele shall
provide the Trustee with all information necessary to make such tax withholding
provision and the Trustee shall be entitled to rely on such information.
C. The entitlement of the Plan Participant or his beneficiaries to
benefits under the Plans shall be determined by Semele or such party as it shall
designate under the Plans, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plans.
D. In addition, if the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in accordance with the terms of
the Plan, Semele shall make the balance of each such payment as it falls due.
E. Once all assets of the Trust have been expended in Plan payments in
accordance with Section 2, to or for the benefit of general creditors of Semele
in accordance with Section 3(b), or for Trust expenses in accordance with
Section 8 or 9, the Trust shall terminate and the Trustee shall have no further
responsibility to make payments to Participant or his beneficiaries. Upon
termination of the Trust, Trustee shall make payment as set forth in Section
12(b).
<PAGE>
III. Trustee Responsibility Regarding Payments to Trust
Beneficiary When Semele Is Insolvent.
A. Trustee shall cease payment of benefits to Plan Participants if Semele
is Insolvent. Semele shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Semele is unable to pay its debts as they become due, or (ii)
Semele is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
B. At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Semele under federal and state law as set forth
below.
1. The Board of Directors and the President of Semele shall have
the duty to inform Trustee in writing of Semele's Insolvency. If a person
claiming to be a creditor of Semele alleges in writing to Trustee that
Semele has become Insolvent, Trustee shall determine whether Semele is
Insolvent and, pending such determination, Trustee shall discontinue
payment of benefits to the Plan Participants or their beneficiaries.
2. Unless Trustee has actual knowledge of Semele's Insolvency, or
has received notice from Semele or a person claiming to be a creditor
alleging that Semele is Insolvent, Trustee shall have no duty to inquire
whether Semele is Insolvent. Trustee may in all events rely on such
evidence concerning Semele's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning Semele's solvency.
3. If at any time Trustee has determined that Semele is Insolvent,
Trustee shall discontinue payments to the Plan Participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Semele's general creditors. While so holding such assets, Trustee shall
make payments to such creditors if Semele shall so direct or, if Semele is
subject to a pending proceeding as a debtor under the United States
Bankruptcy Code, as a court of competent jurisdiction shall direct.
Nothing in this Trust Agreement shall in any way diminish any rights of
the Plan Participants or their beneficiaries to pursue their rights as
general creditors of Semele with respect to benefits due under the Plans
or otherwise.
4. Trustee shall resume the payment of benefits to the Plan
Participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after Trustee has determined that Semele is not
Insolvent (or is no longer Insolvent).
C. Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Plan Participants or their beneficiaries under the Payment Schedule for the
period of such discontinuance, less the aggregate amount of payments, if any,
made to the Plan Participants or their beneficiaries by Semele in lieu of the
payments provided for hereunder during any such period of discontinuance.
<PAGE>
IV. Payments to Semele.
Except as provided in Section 2(a) and Section 3 and Section 6 and
Section 12(b) hereof, Semele shall have no right or power to direct Trustee to
return to Semele or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants pursuant to the terms of
the Plans.
V. Investment Authority and Trustee Powers.
A. The Trustee shall retain any contributions of Shares in the form of
Shares. If the Trustee receives contributions in the form of cash or other
property, the Trustee shall invest such cash or other property in a diversified
portfolio as the Trustee determines in its discretion.
B. The Trustee may hold property in the name of a nominee without
disclosure of its trust. No transfer agent, broker, bank or other person dealing
with the Trustee need inquire into the Trustee's authority to make transfers or
need see to the application of property received by the Trustee. To the extent
permitted by law, the requirement of giving bond by the Trustee or of giving
surety on any bond shall be dispensed with.
C. Subject to the foregoing, the Trustee shall have the following powers
exercisable without leave of court and without limiting any power otherwise
given to the Trustee:
1. Transfers. The Trustee may buy, sell or otherwise deal with
securities (including without limitation stocks, bonds, mutual funds, and
government securities) on such terms as the Trustee deems proper; the
Trustee may take any action which it deems proper regarding the sale or
exchange of securities in connection with any merger or other
reorganization; and the Trustee may execute instruments of conveyance in
such form as the Trustee deems proper.
2. Contracts. The Trustee may make contracts binding upon the Trust
estate without assuming personal liability therefor.
3. Claims. The Trustee may pay a claim on such proof as the Trustee
deems sufficient and may compromise disputed claims of or against the
Trustee on such terms as the Trustee deems adequate.
4. Banking and Brokerage Transactions. The Trustee may deposit funds
with a bank, broker or other custodian. The Trustee may sign checks and
other commercial paper and engage in banking and brokerage transactions on
behalf of the Trust.
VI. Disposition of Income and Taxes Attributable Thereto.
During the term of this Trust, all income received by the Trust shall be
accumulated and reinvested. Semele shall be responsible for payment of all taxes
payable on such net income, but shall be entitled to reimbursement from the
Trust for any such taxes so paid.
<PAGE>
VII. Accounting by Trustee.
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made.
VIII. Responsibility of Trustee.
A. The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no (and Semele indemnifies Trustee for any) liability to any
person for any action taken pursuant to a direction, request or approval given
by Semele which is contemplated by the terms of the Plans or this Trust and is
given in writing by Semele. In the event of a dispute between Semele and a
party, the Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
B. If the Trustee undertakes or defends any litigation arising in
connection with this Trust, Semele agrees to indemnify Trustee against Trustee'
costs, expenses and liabilities (including, without limitation, attorneys' fees
and expenses) relating thereto and to be liable for such payments. If Semele
does not pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust.
C. Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.
D. Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
IX. Compensation and Expenses of Trustee.
Semele shall pay all administrative and Trustee's fees and expenses. Trustee
shall provide Semele with at least thirty (30) days advance notice of all such
fees and expenses. If Semele does not pay such fees and expenses in a reasonably
timely manner, Trustee may obtain payment from the Trust.
X. Resignation of Trustee.
A. Trustee may resign at any time by written notice to Semele, which
shall be effective 30 days after receipt of such notice unless Semele and
Trustee agree otherwise.
B. Upon appointment of a successor Trustee as provided in Section 11
herein, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within 60 days after receipt of notice of
acceptance of the successor Trustee, unless Semele extends the time limit.
<PAGE>
C. If Trustee ceases to serve hereunder, a successor shall be appointed,
in accordance with Section 11 hereof, within 60 days after the vacancy occurs.
If no such appointment has been made, one or more of the Participants or their
beneficiaries may apply to a court of competent jurisdiction for appointment of
a successor. All expenses of or the Participants or their beneficiaries in
connection with the proceeding shall be paid by Semele.
XI. Appointment of Successor.
A. Any needed Trustee shall be appointed by Semele. Any such successor
Trustee shall be a financial institution having corporate trustee powers under
state law. Any successor Trustee shall become Trustee upon the written
acceptance of the new Trustee, who shall have all of the rights and powers of
the former Trustee, including ownership rights in the Trust assets. The former
Trustee shall execute any instrument necessary or reasonably requested by the
successor Trustee to evidence the transfer.
B. The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for, and
Semele shall indemnify and defend the successor Trustee from, any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
XII. Amendment and Termination.
A. This Trust Agreement may be amended by a written instrument executed
by Trustee and Semele. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plans or shall make the Trust revocable after it
has become irrevocable in accordance with Section 1(b) hereof.
B. The Trust shall terminate when all benefit payments under the Plan
have been made. Upon termination of the Trust as provided in Section 2(f), the
Trustee shall pay any remaining Trust assets to Semele.
XIII. Miscellaneous.
A. Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
B. Benefits payable to the Plan Participants and his beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
C. This Trust Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
(d) The obligations of Semele hereunder may not be assigned, provided that such
obligations shall be binding on any successor-in-interest of Semele.
<PAGE>
XIV. Effective Date
This Trust shall be effective upon execution by the Trustee.
Semele Group, Inc.
Date: 2/19/98 By: /s/ Joseph W. Bartlett
----------------------
Chairman, Compensation Committee
Boston Private Bank and Trust
Company, Trustee
Date: 2/24/98 By: /s/ Timothy Lenicheck
---------------------
Vice President
<PAGE>
EXHIBIT 10.6
SEMELE GROUP, INC.
QUALIFIED STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 30th day of December, 1997 by and
between SEMELE GROUP, INC. (the "Company"), and Gary D. Engle (the "Optionee").
All definitions contained in the Semele Group, Inc. Amended 1994 Executive and
Director Stock Option Plan (the "Plan") are hereby incorporated by reference and
shall have the same meanings in this Agreement as are contained in the Plan.
WHEREAS, the Optionee is employed by the Company, its subsidiaries or
Banyan Management Corp. and in the course of this employment provides services
to the Company, its subsidiaries or Banyan Management Corp., and
WHEREAS, by affording an opportunity to purchase Shares (as defined
below), the Company desires to provide additional motivation to the Optionee to
achieve long-term growth in stockholder equity,
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth and other good and valuable consideration, the Company and
the Optionee agree as follows:
I. Grant of Option. Subject to the terms and conditions of the Plan and
this Option Agreement, the Company hereby grants to the Optionee the option to
purchase an aggregate of 400,000 shares of the Company's Common Stock (the
"Shares"). The Options granted hereunder are designated as incentive stock
options as described in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
II. Purchase Price. The price per share at which Shares may be acquired on
exercise shall be $0.925, which is not less than 100% of the Fair Market Value
of a share of the Company's Common Stock on the date hereof.
III. Exercise Schedule. Subject to becoming exercisable earlier as
provided in the Plan, and subject to the provisions of Section 4 of this
Agreement, the 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; provided, however, that if the
Optionee shall die or become permanently or totally disabled or retire in
accordance with the Company's retirement procedures, then all options granted
hereunder shall become immediately exercisable.
IV. Period and Cancellation. The exercise period of each Option shall
terminate ten years from the date of grant, unless sooner terminated as provided
in this Option Agreement or under
<PAGE>
the Plan. The exercise period of each Option shall also terminate on the
Optionee's Termination of Employment except if:
1. the Termination of Employment is due to: (a) the death or
permanent and total disability of the Optionee; or (b) the retirement in
accordance with the Company's or Banyan Management Corp.'s retirement
practices; then any unexercised Options to acquire Shares will become
immediately exercisable (without regard to meeting or complying with the
other vesting provisions of this Option Agreement or the Plan) as of the
date of death, disability or retirement and may be exercised by the
Optionee, the Optionee's legal representative or the Optionee's
beneficiary(ies), as the case may be, at any time within one year in the
case of (a) and 90 days in the case of (b);
2. the Termination of Employment is due to any reason other than as
described in subsection (i) above, any unexercised Options which have
vested pursuant to the terms of this Option Agreement and the Plan on or
before the Termination of Employment must be exercised by the Optionee,
his legal representative or his beneficiary(ies) within 30 days after the
date of Termination of Employment; or
3. the Termination of Employment is due to a reason described in
subsection (i) above (other than death) and the Optionee dies prior to the
expiration of the applicable exercise period set forth therein, the
Options may be exercised by his legal representative or his
beneficiary(ies) within the remainder of the period that would have been
applicable to the Optionee prior to the Optionee's death.
Termination of the exercise period shall result in termination and
cancellation of the Options. For purposes of this Option Agreement, "disability"
of the Optionee shall be deemed to have occurred if the Optionee has suffered
permanent and total physical or mental illness, injury or infirmity of such a
nature, degree or effect as to render the Optionee substantially unable to
perform his or her duties at the same level as previously performed for the
Company, one of its subsidiaries or Banyan Management Corp. The Board shall
determine, according to the facts then available to it, whether and when
disability has occurred, and the date of disability shall be the date of any
such determination.
V. Method of Option Exercise. The Optionee shall exercise Options by
delivering written notice of intent to exercise to the Company's Chief Operating
Officer at the Company's principal office located at Suite 2900, 150 South
Wacker Drive, Chicago, Illinois 60606 (or the office which is the successor main
office or which is otherwise designated as the office to which notice is to be
given as the Board may direct). Each notice shall: (i) state the Optionee's
election to exercise the Option and the number of Shares in respect of which the
Option is being exercised; (ii) be signed by the person or persons exercising
the Option; (iii) be accompanied by proof, reasonably satisfactory to the
Company's Chief Operating Officer, of the right of that person or persons to
exercise the Option if the Option is being exercised by any person or persons
other than the Optionee; and (iv) be accompanied by payment, in cash, Shares or
any other form of payment acceptable to the Board. An Option shall not have been
exercised unless all the preceding provisions of this paragraph shall have been
complied with and, for all purposes of this Option Agreement, the date of the
exercise of the Option with respect to any particular Shares shall be the date
on which the notice, proof (if required) and payment shall all have been
<PAGE>
received by the Chief Operating Officer. The certificate or certificates for the
Shares as to which the Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option and shall be
delivered to or upon the written order of the person or persons exercising the
Option as soon as practicable after receipt by the Chief Operating Officer of
the notice, proof (if required) and payment. Delivery of the certificate shall
be made at the place designated by the Optionee in the written notice of intent
to exercise.
VI. Change in Control. Notwithstanding the provisions of Section 3 of this
Agreement, if while unexercised Options remain outstanding under the Option
Agreement the Termination of Employment of the Optionee shall occur due to a
Change in Control (as defined below), all outstanding Options evidenced hereby
shall become exercisable from and after the date of Termination of Employment.
For the purposes of this Section 6, the term "Change in Control" shall
mean an occurrence whereby (i) any person, partnership, corporation, entity or
group (as that term is used in the Securities Exchange Act of 1934) shall, in
any single transaction or series of related transactions, directly or indirectly
acquire beneficial ownership of more than 50% of the Company's voting 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 the election of directors do not constitute a majority of the Board
following such election or (iii) the Optionee fails to be reelected a director
of the Company, unless the Optionee was not nominated for reelection with his
consent.
VII. No Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for the Shares; no adjustment for cash
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of exercise of the Option.
VIII. Requirements of Law. The Company may issue or deliver certificates
for Shares prior to: (i) listing of the Shares on any stock exchange on which
the Shares 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 the 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. If
the disposition of Shares 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, (i) the
acquired Shares shall be restricted against transfer to the extent required by
the Securities Act or regulations thereunder;(ii) 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 Shares for investment only
and not for resale or with a view to distribution; and (iii) any certificates
for Shares issued pursuant to the terms of this Option Agreement or the Plan
shall bear the following or similar legend:
The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or under the
securities laws of any state and may not be sold or transferred except
upon
<PAGE>
registration or receipt by the Company of an opinion of counsel
satisfactory to the Company, in form and substance satisfactory to the
Company, that registration is not required for sale or transfer.
IX. Cause to be Registered Under the Act. The Board may, in its
discretion, register the Shares acquired by the Optionee under the Securities
Act. Further, if at any time the Company proposes to register any of its equity
securities under the Securities Act, whether or not for its own account, and
there exist Shares which cannot be sold under an existing registration statement
or Rule 144(k) (or any similar provision then enforced), then the Company shall
give written notice of the proposed filing to the holder of the Shares at least
20 days before the anticipated filing date. This notice shall offer the holder
the opportunity to register the Shares. The Company shall register all Shares
with respect to which the Company has received a written request for inclusion
therein within 15 business days after notice has been duly given to the
applicable holder. The holder of restricted Shares shall be permitted to
withdraw all or any part of the restricted Shares from this registration at any
time prior to the effective date of the registration.
X. Non-transferability. The Option shall not be assigned, transferred
(except as herein provided), pledged, or hypothecated in any way (whether by
operation of law or otherwise), other than by will or the laws of descent and
distribution. The Option is exercisable during an Optionee's lifetime only by
the Optionee or the appointed guardian or legal representative of the Optionee,
and no Option shall be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition
contrary to the provisions hereof, and the levy of any attachment or similar
process upon the Option shall be null and void and without effect. The Company
shall have the right to terminate the Option upon any assignment, transfer,
pledge, hypothecation, other disposition of the Option, or levy of attachment or
similar process, by notice to that effect to the person then entitled to
exercise the Option; provided, however, that termination of the Option hereunder
shall not prejudice any rights or remedies which the Optionee, the Company or
any subsidiary of the Company may have under this Option Agreement or otherwise.
XI. Changes in Company's Capital Structure. The existence of the Option
shall not affect in any way the right or authority of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
XII. Board Action Final. Any dispute or disagreement which shall arise
under, as a result of, or in any way relate to the interpretation or
construction of this Option Agreement or the Plan shall be determined by the
Board. Any such determination made hereunder shall be final, binding, and
conclusive for all purposes.
XIII. Withholding. The Optionee and Company agree that the Company shall
have no obligation to issue or transfer Shares upon the exercise of the Option,
unless and until the
<PAGE>
Optionee or beneficiary shall have reasonably satisfied the obligation of the
Company and any of its subsidiaries or Banyan Management Corp. with respect to
the withholding of federal, state or local taxes, or in order to reasonably
sustain a right of the Company to a tax deduction under federal, state or local
law with respect to the exercise of an Option. At the election of the Optionee
or the beneficiary, as the case may be, the Company's or Banyan Management
Corp.'s withholding obligation may be satisfied by the Optionee or beneficiary
tendering cash, or Shares previously owned by the Optionee or directing that a
number of Shares be withheld from issuance upon the exercise of an Option (or
any combination of any of the foregoing) as the Board reasonably determines
necessary to satisfy the obligation of the Company or any of its subsidiaries,
or Banyan Management Corp.'s, or in order to sustain a right of the Company or
Banyan Management Corp.'s to a tax deduction under federal, state or local law
with respect to the exercise of an Option.
XIV. Condition of Employment. The Plan, this Option Agreement and any
Option granted under the Plan and this Option Agreement 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.
XV. Plan Controlling. This Option Agreement is executed pursuant to the
provisions of the Plan and is subject to all of the provisions of the Plan which
shall be controlling.
XVI. Successors and Assigns. This Option Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Optionee or his beneficiary and all rights granted
to the Company hereunder or as stipulated in the Plan shall be binding upon the
Optionee's or the beneficiary's heirs, legal representatives and successors.
XVII. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set his
hand and seal, as of the day and year first above written.
SEMELE GROUP, INC.
By: _________________________________
Its: Chairman of the Board
_____________________________________
<PAGE>
(Optionee)
<PAGE>
EXHIBIT 10.7
SEMELE GROUP, INC.
QUALIFIED STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 30th day of December, 1997 by and
between SEMELE GROUP, INC. (the "Company"), and James A. Coyne (the "Optionee").
All definitions contained in the Semele Group, Inc. Amended 1994 Executive and
Director Stock Option Plan (the "Plan") are hereby incorporated by reference and
shall have the same meanings in this Agreement as are contained in the Plan.
WHEREAS, the Optionee is employed by the Company, its subsidiaries or
Banyan Management Corp. and in the course of this employment provides services
to the Company, its subsidiaries or Banyan Management Corp., and
WHEREAS, by affording an opportunity to purchase Shares (as defined
below), the Company desires to provide additional motivation to the Optionee to
achieve long-term growth in stockholder equity,
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth and other good and valuable consideration, the Company and
the Optionee agree as follows:
I. Grant of Option. Subject to the terms and conditions of the Plan and
this Option Agreement, the Company hereby grants to the Optionee the option to
purchase an aggregate of 400,000 shares of the Company's Common Stock (the
"Shares"). The Options granted hereunder are designated as incentive stock
options as described in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
II. Purchase Price. The price per share at which Shares may be acquired on
exercise shall be $0.925, which is not less than 100% of the Fair Market Value
of a share of the Company's Common Stock on the date hereof.
III. Exercise Schedule. Subject to becoming exercisable earlier as
provided in the Plan, and subject to the provisions of Section 4 of this
Agreement, the 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; provided, however, that if the
Optionee shall die or become permanently or totally disabled or retire in
accordance with the Company's or Banyan Management Corp.'s retirement
procedures, then all options granted hereunder shall become immediately
exercisable.
IV. Period and Cancellation. The exercise period of each Option shall
terminate ten years from the date of grant, unless sooner terminated as provided
in this Option Agreement or under
<PAGE>
the Plan. The exercise period of each Option shall also terminate on the
Optionee's Termination of Employment except if:
1. the Termination of Employment is due to: (a) the death or
permanent and total disability of the Optionee; or (b) the retirement in
accordance with the Company's or Banyan Management Corp.'s retirement
practices; then any unexercised Options to acquire Shares will become
immediately exercisable (without regard to meeting or complying with the
other vesting provisions of this Option Agreement or the Plan) as of the
date of death, disability or retirement and may be exercised by the
Optionee, the Optionee's legal representative or the Optionee's
beneficiary(ies), as the case may be, at any time within one year in the
case of (a) and 90 days in the case of (b);
2. the Termination of Employment is due to any reason other than as
described in subsection (i) above, any unexercised Options which have
vested pursuant to the terms of this Option Agreement and the Plan on or
before the Termination of Employment must be exercised by the Optionee,
his legal representative or his beneficiary(ies) within 30 days after the
date of Termination of Employment; or
3. the Termination of Employment is due to a reason described in
subsection (i) above (other than death) and the Optionee dies prior to the
expiration of the applicable exercise period set forth therein, the
Options may be exercised by his legal representative or his
beneficiary(ies) within the remainder of the period that would have been
applicable to the Optionee prior to the Optionee's death.
Termination of the exercise period shall result in termination and
cancellation of the Options. For purposes of this Option Agreement, "disability"
of the Optionee shall be deemed to have occurred if the Optionee has suffered
permanent and total physical or mental illness, injury or infirmity of such a
nature, degree or effect as to render the Optionee substantially unable to
perform his or her duties at the same level as previously performed for the
Company, one of its subsidiaries or Banyan Management Corp. The Board shall
determine, according to the facts then available to it, whether and when
disability has occurred, and the date of disability shall be the date of any
such determination.
V. Method of Option Exercise. The Optionee shall exercise Options by
delivering written notice of intent to exercise to the Company's Chief Operating
Officer at the Company's principal office located at One Canterbury Green, 8th
Floor, 201 Broad Street, Stamford, CT 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 as the Board may direct). Each notice shall: (i) state the
Optionee's election to exercise the Option and the number of Shares in respect
of which the Option is being exercised; (ii) be signed by the person or persons
exercising the Option; (iii) be accompanied by proof, reasonably satisfactory to
the Company's Chief Operating Officer, of the right of that person or persons to
exercise the Option if the Option is being exercised by any person or persons
other than the Optionee; and (iv) be accompanied by payment, in cash, Shares or
any other form of payment acceptable to the Board. An Option shall not have been
exercised unless all the preceding provisions of this paragraph shall have been
complied with and, for all purposes of this Option Agreement, the date of the
exercise of the Option with respect to any particular Shares shall be the date
on which the notice, proof (if required) and payment shall all have been
<PAGE>
received by the Chief Operating Officer. The certificate or certificates for the
Shares as to which the Option shall have been so exercised shall be registered
in the name of the person or persons so exercising the Option and shall be
delivered to or upon the written order of the person or persons exercising the
Option as soon as practicable after receipt by the Chief Operating Officer of
the notice, proof (if required) and payment. Delivery of the certificate shall
be made at the place designated by the Optionee in the written notice of intent
to exercise.
VI. Change in Control. Notwithstanding the provisions of Section 3 of this
Agreement, if while unexercised Options remain outstanding under the Option
Agreement the Termination of Employment of the Optionee shall occur due to a
Change in Control (as defined below), all outstanding Options evidenced hereby
shall become exercisable from and after the date of Termination of Employment.
For the purposes of this Section 6, the term "Change in Control" shall
mean an occurrence whereby (i) any person, partnership, corporation, entity or
group (as that term is used in the Securities Exchange Act of 1934) shall, in
any single transaction or series of related transactions, directly or indirectly
acquire beneficial ownership of more than 50% of the Company's voting 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 the election of directors do not constitute a majority of the Board
following such election or (iii) the Optionee fails to be reelected a director
of the Company, unless the Optionee was not nominated for reelection with his
consent.
VII. No Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for the Shares; no adjustment for cash
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of exercise of the Option.
VIII. Requirements of Law. The Company may issue or deliver certificates
for Shares prior to: (i) listing of the Shares on any stock exchange on which
the Shares 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 the 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. If
the disposition of Shares 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, (i) the
acquired Shares shall be restricted against transfer to the extent required by
the Securities Act or regulations thereunder;(ii) 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 Shares for investment only
and not for resale or with a view to distribution; and (iii) any certificates
for Shares issued pursuant to the terms of this Option Agreement or the Plan
shall bear the following or similar legend:
The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or under the
securities laws of any state and may not be sold or transferred except
upon
<PAGE>
registration or receipt by the Company of an opinion of counsel
satisfactory to the Company, in form and substance satisfactory to the
Company, that registration is not required for sale or transfer.
IX. Cause to be Registered Under the Act. The Board may, in its
discretion, register the Shares acquired by the Optionee under the Securities
Act. Further, if at any time the Company proposes to register any of its equity
securities under the Securities Act, whether or not for its own account, and
there exist Shares which cannot be sold under an existing registration statement
or Rule 144(k) (or any similar provision then enforced), then the Company shall
give written notice of the proposed filing to the holder of the Shares at least
20 days before the anticipated filing date. This notice shall offer the holder
the opportunity to register the Shares. The Company shall register all Shares
with respect to which the Company has received a written request for inclusion
therein within 15 business days after notice has been duly given to the
applicable holder. The holder of restricted Shares shall be permitted to
withdraw all or any part of the restricted Shares from this registration at any
time prior to the effective date of the registration.
X. Non-transferability. The Option shall not be assigned, transferred
(except as herein provided), pledged, or hypothecated in any way (whether by
operation of law or otherwise), other than by will or the laws of descent and
distribution. The Option is exercisable during an Optionee's lifetime only by
the Optionee or the appointed guardian or legal representative of the Optionee,
and no Option shall be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition
contrary to the provisions hereof, and the levy of any attachment or similar
process upon the Option shall be null and void and without effect. The Company
shall have the right to terminate the Option upon any assignment, transfer,
pledge, hypothecation, other disposition of the Option, or levy of attachment or
similar process, by notice to that effect to the person then entitled to
exercise the Option; provided, however, that termination of the Option hereunder
shall not prejudice any rights or remedies which the Optionee, the Company or
any subsidiary of the Company may have under this Option Agreement or otherwise.
XI. Changes in Company's Capital Structure. The existence of the Option
shall not affect in any way the right or authority of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
XII. Board Action Final. Any dispute or disagreement which shall arise
under, as a result of, or in any way relate to the interpretation or
construction of this Option Agreement or the Plan shall be determined by the
Board. Any such determination made hereunder shall be final, binding, and
conclusive for all purposes.
XIII. Withholding. The Optionee and Company agree that the Company shall
have no obligation to issue or transfer Shares upon the exercise of the Option,
unless and until the
<PAGE>
Optionee or beneficiary shall have reasonably satisfied the obligation of the
Company and any of its subsidiaries or Banyan Management Corp. with respect to
the withholding of federal, state or local taxes, or in order to reasonably
sustain a right of the Company to a tax deduction under federal, state or local
law with respect to the exercise of an Option. At the election of the Optionee
or the beneficiary, as the case may be, the Company's or Banyan Management
Corp.'s withholding obligation may be satisfied by the Optionee or beneficiary
tendering cash, or Shares previously owned by the Optionee or directing that a
number of Shares be withheld from issuance upon the exercise of an Option (or
any combination of any of the foregoing) as the Board reasonably determines
necessary to satisfy the obligation of the Company or any of its subsidiaries,
or Banyan Management Corp.'s, or in order to sustain a right of the Company or
Banyan Management Corp.'s to a tax deduction under federal, state or local law
with respect to the exercise of an Option.
XIV. Condition of Employment. The Plan, this Option Agreement and any
Option granted under the Plan and this Option Agreement 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.
XV. Plan Controlling. This Option Agreement is executed pursuant to the
provisions of the Plan and is subject to all of the provisions of the Plan which
shall be controlling.
XVI. Successors and Assigns. This Option Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Optionee or his beneficiary and all rights granted
to the Company hereunder or as stipulated in the Plan shall be binding upon the
Optionee's or the beneficiary's heirs, legal representatives and successors.
XVII. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set his
hand and seal, as of the day and year first above written.
SEMELE GROUP, INC.
By: _________________________________
Its: Chairman, Compensation Committee
of the Board
<PAGE>
_____________________________________
(Optionee)
<PAGE>
EXHIBIT 10.8
SEMELE GROUP, INC.
DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 30th day of December, 1997 by and
between Semele Group, Inc. (the "Company"), and Joseph W. Bartlett (the
"Optionee"). All definitions contained in the Semele Group, Inc. Amended 1994
Executive and Director Stock Option Plan (the "Plan") are hereby incorporated by
reference and shall have the same meanings in this Agreement as are contained in
the Plan.
WHEREAS, the Optionee is a director of the Company, and by affording an
opportunity to purchase Shares, the Company desires to provide additional
motivation to the Optionee to achieve long-term growth in stockholder equity;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. Grant of Option. Subject to the terms and conditions of the Plan and
this Option Agreement, the Company hereby grants to the Optionee the option to
purchase 50,000 shares of the Company's Common Stock (the "Shares"). The Options
granted hereunder are designated as nonqualified stock options and the Options
are not incentive stock options as described in Section 422 of the Internal
Revenue Code of 1986, as may be amended (the "Code").
2. Purchase Price. The price per share which Shares may be acquired on
exercise shall be $0.925, which is not less than one hundred percent (100%) of
the Fair Market Value of a share of the Company's Common Stock on the date
hereof.
3. Exercise Schedule. Subject to becoming exercisable earlier as provided
in the Plan and subject to the provisions of Section 4 of this Agreement, the
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;
provided, however, that if the Optionee shall die or become permanently or
totally disabled or retire in accordance with the Company's retirement
procedures, then all Options granted hereunder shall become immediately
exercisable.
4. Period and Cancellation. The exercise period of each Option shall
terminate ten years and one day from the date of grant, unless sooner terminated
as provided in this Option Agreement or under the Plan. The exercise period of
each Option shall also terminate if the Optionee ceases to be a director of the
Company except if:
<PAGE>
(i) the Optionee ceases to be a director of the Company due to: (a)
the death or permanent and total disability of the Optionee; or (b) the
expiration of the director's term in office after the director attains his
75th birthday; then any unexercised Options to acquire Shares will become
exercisable, as of the date of death, disability or retirement and may be
exercised by the Optionee, the Optionee's legal representative or the
Optionee's beneficiary(ies), as the case may be, at any time within one
year in the case of (a) and 90 days in the case of (b);
(ii) the Optionee ceases to be a director of the Company due to any
reason other than as described in subsection (i) above, any unexercised
Options which have been vested pursuant to the terms of this Option
Agreement and the Plan on or before the last date the Optionee is a
director of the Company must be exercised by the Optionee, his legal
representative or his beneficiary(ies) within 30 days after the last date
the Optionee is a director of the Company; and
(iii) the Optionee ceases to be a director of the Company due to a
reason described in subsection (i) above (other than death) and the
Optionee dies prior to the expiration of the applicable exercise period
set forth therein, the Options may be exercised by his legal
representative or his beneficiary(ies) within the remainder of the period
that would have been applicable to the Optionee prior to the Optionee's
death.
Termination of the exercise period shall result in termination and
cancellation of the Options. For purposes of this Option Agreement, "disability"
of the Optionee shall be deemed to have occurred if the Optionee has suffered
permanent and total physical or mental illness, injury or infirmity of such a
nature, degree or effect as to render the Optionee substantially unable to serve
as a director. The remaining members of the Board shall determine, according to
the facts then available to them, whether and when disability has occurred, and
the date of disability shall be the date of any such determination.
5. Method of Option Exercise. The Optionee shall exercise Options by
delivering written notice of intent to exercise to the Company's Chief Operating
Officer at the Company's principal office located at One Canterbury Green, 8th
Floor, 201 Broad Street, Stamford, CT 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 as the Board may direct). Each notice shall: (i) state the
Optionee's election to exercise the Option and the number of Shares in respect
of which the Option is being exercised; (ii) be signed by the person or persons
exercising the Option; (iii) be accompanied by proof, reasonably satisfactory to
the Company's Chief Operating Officer, of the right of that person or persons to
exercise the Option if the Option is being exercised by any person or persons
other than the Optionee; and (iv) be accompanied by payment, in cash or Shares.
An Option shall not have been exercised unless all the preceding provisions of
this paragraph shall have been complied with and, for all purposes of this
Option Agreement, the date of the exercise of the Option with respect to any
particular Shares shall be the date on which the notice, proof (if required) and
payment shall all have been received by the Chief Operating Officer. The
certificate or certificates for the Shares as to which the Option shall have
been so exercised shall be registered in the name of the person or persons so
exercising the Option and shall be delivered to or upon the written order of the
person or persons exercising the Option as soon as practicable after receipt by
the Chief Operating Officer of the notice, proof (if required)
<PAGE>
and payment. Delivery of the certificate shall be made at the place designated
by the Optionee in the written notice of intent to exercise.
6. No Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for the Shares; no adjustment for cash
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of exercise of the Option.
7. Requirements of Law. The Company may issue or deliver certificates for
Shares prior to: (i) listing of the Shares on any stock exchange on which the
Shares 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 the 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. If the
disposition of Shares 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, (i) the
acquired Shares shall be restricted against transfer to the extent required by
the Securities Act or regulations thereunder; (ii) 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; and (iii) any
certificates for Shares issued under this Section 7 shall bear the following or
similar legend:
The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the securities
laws of any state and may not be sold or transferred except upon
registration or receipt by the Company of an opinion of counsel
satisfactory to the Company, in form and substance satisfactory to the
Company, that registration is not required for sale or transfer.
8. Cause to be Registered Under the Act. The Board may, in its discretion,
register the Shares acquired by the Optionee under the Securities Act. Further,
if at any time the Company proposes to register any of its equity securities
under the Securities Act, whether or not for its own account, and there exist
Shares which cannot be sold under an existing registration statement or Rule
144(k) (or any similar provision then enforced), then the Company shall give
written notice of the proposed filing to the holder of the Shares at least 20
days before the anticipated filing date. This notice shall offer the holder the
opportunity to register the Shares. The Company shall register all Shares with
respect to which the Company has received a written request for inclusion
therein within 15 business days after notice has been duly given to the
applicable holder. The holder of restricted Shares shall be permitted to
withdraw all or any part of the restricted Shares from this registration at any
time prior to the effective date of the registration.
9. Non-transferability. The Option shall not be assigned, transferred
(except as herein provided), pledged, or hypothecated in any way (whether by
operation of law or otherwise), other than by will or the laws of descent and
distribution. The Option is exercisable during an Optionee's lifetime only by
the Optionee or the appointed guardian or legal
<PAGE>
representative of the Optionee, and no Option shall be subject to execution,
attachment, or similar process. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition contrary to the provisions hereof, and the
levy of any attachment or similar process upon the Option shall be null and void
and without effect. The Company shall have the right to terminate the Option
upon any assignment, transfer, pledge, hypothecation, other disposition of the
Option, or levy of attachment or similar process, by notice to that effect to
the person then entitled to exercise the Option; provided, however, that
termination of the Option hereunder shall not prejudice any rights or remedies
which the Optionee or the Company may have under this Option Agreement or
otherwise.
10. Changes in Company's Capital Structure. The existence of the Option
shall not affect in any way the right or authority of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company's capital structure or
its business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
11. Board Action Final. Any dispute or disagreement which shall arise
under, as a result of, or in any way relate to the interpretation or
construction of this Option Agreement or the Plan shall be determined by the
Board. Any such determination made hereunder shall be final, binding, and
conclusive for all purposes.
12. Plan Controlling. This Option Agreement is executed pursuant to the
provisions of the Plan and is subject to all of the provisions of the Plan which
shall be controlling.
13. Successors and Assigns. This Option Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Optionee or his beneficiary and all rights granted
to the Company hereunder or as stipulated in the Plan shall be binding upon the
Optionee's or the beneficiary's heirs, legal representatives and successors.
14. Choice of Law. This Option Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Company has caused this Option Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set his
hand and seal, as of the day and year first above written.
SEMELE GROUP, INC.
By:___________________________________
Its:__________________________________
<PAGE>
______________________________________
(Optionee)
<PAGE>
EXHIBIT 10.9
SEMELE GROUP, INC.
Amendment to
DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS AMENDMENT TO OPTION AGREEMENT is made as of the 30th day of December,
1997 by and between SEMELE GROUP, INC. (the "Company"), and Gerald L. Nudo (the
"Optionee").
WHEREAS, the Optionee in July 1994 was granted the option (the "Option")
to purchase 50,000 shares of the Common Stock of Semele Group, Inc. (then named
Banyan Strategic Land Fund II) (the "Company"), at a purchase price of $1.125
per share, pursuant to the Company's 1994 Executive and Director Stock Option
Plan (the "Plan"), and the Option is evidenced by an Option Agreement between
the Company and the Optionee; and
WHEREAS, the Board of Directors of the Company on December 30, 1997, voted
to adjust such purchase price from $1.125 per share to $0.925 per share in
accordance with Section IV.G.(3) of the Plan to reflect the effect of the $0.20
per share return of capital dividend paid to the stockholders of the Company on
November 14, 1997;
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Amendment of Director Stock Option Agreement. Section 2 of the Option
Agreement evidencing the Option is hereby amended by deleting the purchase price
of $1.125 per share set forth therein and inserting in place thereof the
purchase price of $0.925 per share.
2. Ratification. The Option Agreement evidencing the Option as amended
hereby is hereby ratified and confirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment to Option
Agreement to be executed by its duly authorized officer, and the Optionee has
hereunto set his hand and seal, as of the day and year first above written.
SEMELE GROUP, INC.
By:_________________________________
Its:________________________________
(Optionee)
____________________________________
<PAGE>
EXHIBIT 10.10
SEMELE GROUP, INC.
Amendment to
DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS AMENDMENT TO OPTION AGREEMENT is made as of the 30th day of December,
1997 by and between SEMELE GROUP, INC. (the "Company"), and Robert M.
Ungerleider (the "Optionee").
WHEREAS, the Optionee in July 1994 was granted the option (the "Option")
to purchase 50,000 shares of the Common Stock of Semele Group, Inc. (then named
Banyan Strategic Land Fund II) (the "Company"), at a purchase price of $1.125
per share, pursuant to the Company's 1994 Executive and Director Stock Option
Plan (the "Plan"), and the Option is evidenced by an Option Agreement between
the Company and the Optionee; and
WHEREAS, the Board of Directors of the Company on December 30, 1997, voted
to adjust such purchase price from $1.125 per share to $0.925 per share in
accordance with Section IV.G.(3) of the Plan to reflect the effect of the $0.20
per share return of capital dividend paid to the stockholders of the Company on
November 14, 1997;
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Amendment of Director Stock Option Agreement. Section 2 of the Option
Agreement evidencing the Option is hereby amended by deleting the purchase price
of $1.125 per share set forth therein and inserting in place thereof the
purchase price of $0.925 per share.
2. Ratification. The Option Agreement evidencing the Option as amended
hereby is hereby ratified and confirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment to Option
Agreement to be executed by its duly authorized officer, and the Optionee has
hereunto set his hand and seal, as of the day and year first above written.
SEMELE GROUP, INC.
By:_________________________________
Its:________________________________
____________________________________
(Optionee)
<PAGE>
EXHIBIT 10.11
SEMELE GROUP, INC.
Amendment to
DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS AMENDMENT TO OPTION AGREEMENT is made as of the 30th day of December,
1997 by and between SEMELE GROUP, INC. (the "Company"), and Walter E. Auch (the
"Optionee").
WHEREAS, the Optionee in July 1994 was granted the option (the "Option")
to purchase 50,000 shares of the Common Stock of Semele Group, Inc. (then named
Banyan Strategic Land Fund II) (the "Company"), at a purchase price of $1.125
per share, pursuant to the Company's 1994 Executive and Director Stock Option
Plan (the "Plan"), and the Option is evidenced by an Option Agreement between
the Company and the Optionee; and
WHEREAS, the Board of Directors of the Company on December 30, 1997, voted
to adjust such purchase price from $1.125 per share to $0.925 per share in
accordance with Section IV.G.(3) of the Plan to reflect the effect of the $0.20
per share return of capital dividend paid to the stockholders of the Company on
November 14, 1997;
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Amendment of Director Stock Option Agreement. Section 2 of the Option
Agreement evidencing the Option is hereby amended by deleting the purchase price
of $1.125 per share set forth therein and inserting in place thereof the
purchase price of $0.925 per share.
2. Ratification. The Option Agreement evidencing the Option as amended
hereby is hereby ratified and confirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment to Option
Agreement to be executed by its duly authorized officer, and the Optionee has
hereunto set his hand and seal, as of the day and year first above written.
SEMELE GROUP, INC.
By:_________________________________
Its:________________________________
____________________________________
(Optionee)
<PAGE>
EXHIBIT 13
<TABLE>
<CAPTION>
SEMELE GROUP INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
<S> <C>
Management's Discussion and Analysis of Financial
Condition or Plan of Operation 77-80
Report of Independent Auditors 81
Consolidated Balance Sheets as of December 31, 1997 and 1996 82
Consolidated Statements of Operations
For the Years Ended December 31, 1997 and 1996 83
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1997 and 1996 84
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996 85
Notes to Consolidated Financial Statements 86-95
</TABLE>
All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedule or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OR PLAN OF OPERATION
GENERAL
Certain statements in this annual report 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", "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 (see Notes 3 and 11 to the consolidated financial
statements). Actual results could differ materially from those projected in the
forward-looking statements.
Semele Group Inc. (the "Company"), formerly known as Banyan Strategic Land
Fund II, was originally established to invest primarily in short-term, junior,
pre-development and construction mortgage loans. The borrowers subsequently
defaulted on these mortgage loan obligations, adversely affecting the Company.
As a result of these defaults, the Company suspended the making of new loans,
except for advances of additional funds under circumstances in which it was
deemed necessary to preserve the value of existing collateral, including
instances where the Company had foreclosed upon or taken title, directly or
indirectly, to the collateral. In 1990, the Company implemented a plan designed
to preserve its assets and manage its properties acquired through foreclosure or
otherwise until they would be disposed of in an orderly manner. On February 25,
1997, the Directors of the Company authorized management to engage an investment
banking firm for purposes of evaluating strategic alternatives for maximizing
stockholder value. The Company executed and delivered an Exchange Agreement
dated April 30, 1997 (amended as of August 7, 1997, the "Agreement") among the
Company, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships affiliated with EFG ("the Partnerships"). Pursuant to the
Agreement, the Company issued to the Partnerships 1,987,000 shares of the
Company's common stock at the price of $1.50 per share. Cash proceeds received
by the Company, $2,480,500, were net of related costs of $500,000. In addition,
the Partnerships made a three-year loan to the Company in the amount of
$4,419,500. These transactions are intended to provide capital to assist the
Company in a new growth-oriented business plan, which includes the development
of the Company's property known as Rancho Malibu.
The Loan was initially disbursed into a segregated account, the proceeds
of which were not available to the Company until stockholder consent to certain
proposals ("the Consent") was obtained. The transaction also called for a one
time $0.20 per share cash dividend to be paid in the event the stockholder
proposals were approved. The Company solicited its stockholders for proxies in
connection with proposed changes in the Company's Certificate of Incorporation
and By-laws. Among the principal changes requested were: (i) the election of new
Directors nominated by EFG for terms of up to 3 years and an increase in size of
the Board of Directors (the "Board") to as many as nine members, provided a
majority of the Board shall consist of members independent of the Company, EFG
or any affiliate; (ii) an amendment extending the Company's life to perpetual
and changing its name and (iii) an amendment 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 a 5% stockholder within the meaning of Section 382 (g) of the Internal
Revenue Code. The Consent of the stockholders was obtained and proposals
including the changes described in (i) through (iii) above were adopted on
October 21, 1997.
Pursuant to the Agreement, the Administrative Services Agreement between
the Company and Banyan Management Corp. ("BMC") was amended to provide, among
other things, for the immediate payment to BMC of a termination fee in the
amount of $251,823 and the transfer of the Company's ownership interest in BMC
to BMC's designee. Pursuant to the Agreement, the Company also entered into a
new Administrative Services Agreement with EFG (see Note 7 Transactions with
Affiliates and Related Parties).
The Company currently holds an ownership interest in a 274 acre land
parcel located in Southern California known as the Rancho Malibu property. The
Company also holds a 0.3% beneficial interest in a liquidating trust,
established for the benefit of a group of unsecured creditors of a previous
borrower of the Company, which holds interests in various assets. In addition,
the Company has two loans referred to as Hemet IV and Lindfield Tract A (See
Note 2 to the Consolidated Financial Statements).
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. EFG's computer
programs were designed and written using four digits to define the
77
<PAGE>
applicable year. As a result, EFG does not anticipate system failure or
miscalculations causing disruptions of operations.
Based on recent assessments, EFG determined that minimal modification of
software is required so that its network operating system will function properly
with respect to dates in the year 2000 and thereafter. EFG believes that with
these modifications to the existing operating system, the Year 2000 Issue will
not pose significant operational problems for its computer systems.
EFG will utilize internal resources to upgrade software for Year 2000
modifications and anticipates completing the Year 2000 project by December 31,
1998, which is prior to any anticipated impact on its operating system. The
total cost of the Year 2000 project is expected to be insignificant and have no
effect on the results of operations of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments. The
Company's cash and cash equivalents balance at December 31, 1997 and 1996 was
$7,884,593 and $145,335, respectively. The increase in total cash and cash
equivalents of $7,739,258 is the result of cash generated principally through
investing and financing activities of $9,749,989 and $92,330, respectively,
offset by $2,103,061 cash used for operating activities.
Cash Flow From Operating Activities: Net cash used in operating activities
increased by $271,148 for the year ended December 31, 1997 to $2,103,061 from
$1,831,913 for the same period in 1996.
Cash Flow From Investing Activities: For the year ended December 31, 1997,
net cash provided by investing activities was $9,749,989 compared to $1,427,939
for the same period in 1996. This increase of $8,322,050 is due primarily to
distributions from the Company's investment in real estate venture of $4,713,101
(see below), proceeds received from the sale of foreclosed real estate of
$617,388 (see below) and proceeds from note payable - affiliate received
pursuant to the Exchange Agreement (described above) during the year ended
December 31, 1997 compared to $658,856 of proceeds received from the disposition
of the Company's Westholme assets during the same period in 1996. In 1996, the
Company also received proceeds from sale of investment securities of $310,007,
principal payments on investment securities of $316,939, and principal payments
of $248,000 relating to the Hemet Phase III promissory note.
Cash Flow From Financing Activities: During the year ended December 31,
1997, net cash provided by financing activities was $92,330 resulting from the
issuance of stock pursuant to the Exchange Agreement described above, offset by
$2,388,170 cash used in connection with the dividend to stockholders.
The Company's future liquidity needs are dependent upon, among other
things: (i) the level of liquidity required to successfully implement a new
growth-oriented business plan (ii) the Company's ability to favorably resolve
the La Chusa litigation which impacts the Rancho Malibu property; and (iii) the
Company's ability to control its property level and Company level operating
expenses.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which was required to be adopted on
December 31, 1997. This statement establishes standards for computing and
presenting earnings per share. The statement replaces primary earnings per share
with basic earnings per share. Basic earnings per share excludes all dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share is computed similarly to fully diluted earnings per share.
Diluted earnings per share reflects the potential dilution that could occur if
stock options and stock award grants were exercised. All prior year amounts have
been restated to conform to SFAS No. 128.
As of December 31, 1997 and 1996, the Company's mortgage loan portfolio
consisted of loans with a carrying value totaling $475,000 and $1,035,000,
respectively. During the year ended December 31, 1997, the Company received
interest payments of $28,990 on a purchase money mortgage note (Lindfield Tract
A). During the year ended December 31, 1996, the Company received final
principal and interest payments on its Hemet Phase III loan totaling $261,225.
78
<PAGE>
RESULTS OF OPERATIONS
Total income from lending and investing activities for the year ended
December 31, 1997 increased to $234,641 from $79,107 for the year ended December
31, 1996. This increase is due primarily to an increase in income earned on
investments. The increase in income on investments reflects an increase in cash
available for investment resulting primarily from the issuance of stock and the
sale of the Company's investment in the H-Street real estate venture.
Total expenses for the year ended December 31, 1997 decreased to
$3,339,108 from $4,654,565 for the year ended December 31, 1996. This decrease
of $1,315,457 for the year ended December 31, 1997 when compared to the same
period in 1996 is due to a decrease of $3,349,929 in total expenses from
property operating activities offset by an increase of $2,034,472 in total other
expenses. The decrease in total property operating expenses is due primarily to
the recognition of net income from operations of the real estate venture of
$412,236, relating to the Company's interest in the H Street property, for the
year ended December 31, 1997 as compared to a net loss of $2,927,490 for the
same period in 1996. See discussion below for further details regarding the
operating results and sale of the H Street property. Further contributing to the
decrease in total property operating expenses is a decrease in net loss from
operations of foreclosed real estate held for sale of $111,005. The decrease in
the net loss from operations of foreclosed real estate held for sale is due to a
reduction in legal and entitlement costs relating to the Rancho Malibu property
subsequent to the approval of the project by the Los Angeles County Board of
Supervisors (see Note 3 to the Consolidated Financial Statements). Partially
offsetting the decrease in total property operating expenses was the recognition
of a net loss of $32,612 from disposition of the foreclosed real estate held for
sale during the year ended December 31, 1997, compared to a net gain of $68,190
during the same period in 1996 (see discussion below). The increase in total
other expenses is due primarily to a provision for losses on loans, notes,
advances and interest receivable recorded in 1997 in the amount of $1,166,246 in
connection with amounts loaned to Northholme Partners (see Note 6 to the
Consolidated Financial Statements). The increase in general and administrative
expenses reflects a termination fee of $251,823 paid to BMC in connection with
the Exchange Agreement (see Note 7 to the Consolidated Financial Statements) and
a termination fee paid to the former President and Chief Executive Officer in
connection with his resignation. Other professional fees increased due primarily
to legal costs related to the Westholme litigation (see Note 11 to the
Consolidated Financial Statements) and costs incurred to engage an investment
banking firm for purposes of evaluating strategic alternatives for maximizing
stockholder value.
During the year ended December 31, 1997, the Company recorded net income
of $412,236 from the operations of a real estate venture as compared to a net
loss of $2,927,490 for the same period in 1996. This net income (loss) reflects
the Company's 47% interest in the H Street Venture (the "Venture"). The Venture
owned an office building with approximately 55,900 square feet of gross leasable
area (the "Victor Building") and an adjacent land parcel consisting of 36,100
square feet (the "H Street Assemblage") located in Washington, D.C. On March 20,
1997, the Venture sold approximately 3,500 square feet of the Venture's land to
the United States General Services Administration on behalf of the United States
of America ("GSA") for a purchase price of $1,680,000. GSA also paid the Venture
$150,000 as a reimbursement of expenses that the Venture incurred in
anticipation of this transaction. Ultimately, the Venture received net sales
proceeds of $1,828,900. On July 29, 1997, the Venture sold the remaining land
and office building to an unaffiliated third party for $9,000,000 and received
additional net sale proceeds of $8,469,821. The Company's share of the gain on
disposition recognized by the Venture was $371,979 and is included in net income
from operations of real estate venture for the year ended December 31, 1997 on
the accompanying consolidated statements of operations. During the year ended
December 31, 1997, the Company received aggregate distributions from the Venture
of $4,713,101, including its allocation of such sales proceeds. At December 31,
1997, the Venture had no further ownership interest in the H Street Assemblage
property.
On June 23, 1997, the Company sold the Lindfield Tract D property, having
a carrying value of $650,000, to an unaffiliated third party for a purchase
price of $675,000. Cash proceeds received, net of transaction costs, were
$617,388 resulting in a loss on disposition of $32,612 for financial reporting
purposes. During the year ended December 31, 1996, the Company recognized a net
gain from the disposition of its interests in the Lindfield Tract A property and
Hemet Phase III property of $68,190.
The above discussed changes resulted in a decrease in the net loss for the
year ended December 31, 1997 to $3,104,467 ($0.28 per share) from $4,575,458
($0.46 per share) for the year ended December 31, 1996. On April 30, 1997, the
Company issued 1,987,000 shares of stock. As a result, the net loss per share
79
<PAGE>
for the year ended December 31, 1997 is based on the weighted average number
of shares outstanding during the year of 11,275,605 as compared to 9,936,421
for the same period in 1996.
On a quarterly basis, management reviews the mortgage loans in the
Company's portfolio and records appropriate loss provisions. The provisions are
based upon a number of factors, including management's analyses of the value of
the collateral and, in certain cases, ongoing negotiations regarding disposition
of this collateral, as well as consideration of the general business conditions
affecting the Company's portfolio. Management also reviews the investment
properties held by the Company on a quarterly basis and, when it has been
determined that a permanent impairment in the value of a given property has
occurred, the carrying value of the property is then written down to its fair
market value. During the year ended December 31, 1997, the Company recorded a
provision for losses on loans, notes, advances and interest receivable in the
amount of $1,166,246 relating to Northholme Partners (see Note 6 to the
Consolidated Financial Statements). During the year ended December 31, 1996, the
H Street Venture recorded a $6,000,000 valuation allowance relating to the H
Street Assemblage, pursuant to its decision to sell the property rather than to
pursue the redevelopment of the property. The Company's share of the H Street
Assemblage valuation allowance was $2,820,000.
LITIGATION
In connection with the Company's interest in a joint venture which owns a
274 acre land parcel known as the Rancho Malibu property ("the Venture"), the
Venture has been engaged in zoning and entitlement activities which have been
opposed by the City of Malibu and various citizen groups. During the year ended
December 31, 1997, the Venture incurred approximately $657,000 in costs in
connection with Rancho Malibu relating to entitlement activities, holding costs
and litigation. These costs, treated as capital contributions to the Venture by
the Company, were included in total expenses from property operating activities
on the Company's consolidated statements of operations. See Note 3 to the
Consolidated Financial Statements.
The Company continues to be engaged in litigation involving a real estate
development project known as "Winding River". The ultimate outcome of this
matter cannot be determined at this time. However, in the opinion of management
of the Company, the eventual outcome of this matter will not have a material
adverse effect on the financial position of the Company. The financial
statements do not include any adjustments for liability, if any, arising from
this matter. See Note 11 to the consolidated financial statements.
80
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Semele Group Inc.
We have audited the accompanying consolidated balance sheets of Semele Group
Inc. (formerly Banyan Strategic Land Fund II) as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Semele Group
Inc. at December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
March 2, 1998
81
<PAGE>
SEMELE GROUP INC.
Consolidated Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents ....................... $ 7,884,593 $ 145,335
Interest Receivable on Loans .................... 3,565 118,821
Loans Receivable ................................ 475,000 1,035,000
Foreclosed Real Estate Held for Sale, Net ....... 9,961,991 10,611,991
Investment in Real Estate Venture ............... -- 4,300,865
Other Assets .................................... -- 551,868
------------- -------------
Total Assets .................................... $ 18,325,149 $ 16,763,880
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note Payable - Affiliate ........................ $ 4,419,500 $ --
Accrued Expenses - Affiliate .................... 49,166 --
Accounts Payable and Accrued Expenses ........... 404,358 266,903
Accrued Real Estate Taxes ....................... -- 32,715
------------- -------------
Total Liabilities ............................... 4,873,024 299,618
------------- -------------
Stockholders' Equity
Shares of Common Stock, $0.01 Par Value,
50,000,000 Authorized, 21,253,268 and
19,266,268 Shares Issued
at December 31, 1997 and 1996, respectively ... 171,019,463 170,927,133
Accumulated Deficit ............................. (141,713,131) (138,608,664)
Deferred Compensation, 154,826 Shares ........... (263,204) --
Treasury Stock at Cost, 9,175,021 Shares ........ (15,591,003) (15,854,207)
------------- -------------
Total Stockholders' Equity ..................... 13,452,125 16,464,262
------------- -------------
Total Liabilities and Stockholders' Equity ...... $ 18,325,149 $ 16,763,880
============= =============
Book Value Per Share of Common Stock
(11,923,421 and 9,936,421 Shares Outstanding at
December 31, 1997 and 1996, respectively) ..... $ 1.13 $ 1.66
============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
82
<PAGE>
SEMELE GROUP INC.
Consolidated Statements of Operations
For the Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable ........................ $ 28,333 $ 72,576
Income on Investments ............................... 206,308 6,531
------------- -------------
Total Income From Lending and Investing
Activities .......................................... 234,641 79,107
------------- -------------
EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real
Estate Held for Sale .............................. 660,994 771,999
Net (Gain) Loss From Disposition of
Foreclosed Real Estate Held for Sale .............. 32,612 (68,190)
Net (Income) Loss From Operations of Real
Estate Venture .................................... (412,236) 2,927,490
------------- -------------
Total Expenses From Property Operating Activities ..... 281,370 3,631,299
------------- -------------
Other Expenses:
Stockholder Expenses ................................ 120,031 96,830
Directors' Fees, Expenses, and Insurance ............ 234,075 197,081
Other Professional Fees ............................. 371,966 150,216
General and Administrative .......................... 1,007,307 579,139
Management Fees - Affiliate ......................... 49,166 --
Interest Expense - Affiliate ........................ 108,947 --
Provision for Losses on Loans, Notes, Advances
and Interest Receivable ........................... 1,166,246 --
------------- -------------
Total Other Expenses .................................. 3,057,738 1,023,266
------------- -------------
Total Expenses ........................................ 3,339,108 4,654,565
------------- -------------
Net Loss .............................................. $ (3,104,467) $ (4,575,458)
============= =============
Net Loss Per Share of Common Stock Basic
(Based on the Weighted Average Number of Shares
Outstanding of 11,275,605 and 9,936,421,
Respectively) ....................................... $ (0.28) $ (0.46)
============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
83
<PAGE>
SEMELE GROUP INC.
Consolidated Statements of Stockholders' Equity
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
----------------------------- Accumulated Deferred Treasury
Shares Amount Deficit Compensation Stock Total
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stockholder's Equity,
December 31, 1995 ....... 19,266,268 $ 170,927,133 $(134,033,206) $ -- $ (15,854,207) $ 21,039,720
Net Loss .................. -- -- (4,575,458) -- -- (4,575,458)
------------- ------------- ------------- ------------- ------------- -------------
Stockholder's Equity,
December 31, 1996 ....... 19,266,268 170,927,133 (138,608,664) -- (15,854,207) 16,464,262
Issuance of Stock, Net .... 1,987,000 2,480,500 -- -- -- 2,480,500
Dividend to
Stockholders ............ -- (2,388,170) -- -- -- (2,388,170)
Deferred Compensation
154,826 Shares of Stock.. -- -- -- (263,204) 263,204 --
Net Loss .................. -- -- (3,104,467) -- -- (3,104,467)
------------- ------------- ------------- ------------- ------------- -------------
Stockholder's Equity,
December 31, 1997 ....... 21,253,268 $ 171,019,463 $(141,713,131) $ (263,204) $ (15,591,003) $ 13,452,125
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
84
<PAGE>
SEMELE GROUP INC.
Consolidated Statements of Cash Flows
For the Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ..................................................... $ (3,104,467) $ (4,575,458)
Adjustments to Reconcile Net Loss to Net Cash Used
In Operating Activities:
Provision for Losses on Loans, Notes, Advances and ......... 1,166,246 --
Interest Receivable
Net (Gain) Loss From Disposition of Foreclosed Real
Estate Held For Sale ..................................... 32,612 (68,190)
Net (Income) Loss From Operations of Real Estate Venture ... (412,236) 2,927,490
Net Change In:
Interest Receivable on Investments ......................... -- 3,754
Interest Receivable on Loans ............................... 657 (59,351)
Other Assets ............................................... 60,221 270,724
Accrued Expenses - Affiliate ............................... 49,166 --
Accounts Payable and Accrued Expenses ...................... 137,455 (363,597)
Accrued Real Estate Taxes .................................. (32,715) 32,715
------------- -------------
Net Cash Used In Operating Activities ........................ (2,103,061) (1,831,913)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Investment Securities ................ -- 310,007
Principal Payments on Investment Securities ................ -- 316,939
Proceeds from the Sale of Foreclosed Real Estate Held
for Sale ................................................. 617,388 658,856
Distributions from Investment in Real Estate Venture ....... 4,713,101 --
Investment in Real Estate Venture .......................... -- (105,863)
Proceeds from Note Payable - Affiliate ..................... 4,419,500 --
Collection of Loans Receivable ............................. -- 248,000
------------- -------------
Net Cash Provided By Investing Activities .................... 9,749,989 1,427,939
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock, Net ..................................... 2,480,500 --
Dividend to Stockholders ................................... (2,388,170) --
------------- -------------
Net Cash Provided By Financing Activities .................... 92,330 --
------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents ......... 7,739,258 (403,974)
Cash and Cash Equivalents at Beginning of Year ............... 145,335 549,309
------------- -------------
Cash and Cash Equivalents at End of Year ..................... $ 7,884,593 $ 145,335
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ..................... $ 108,947 $ --
============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
85
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Semele Group Inc. (the "Company"), formerly known as Banyan Strategic Land
Fund II, was organized as a corporation under the laws of the State of Delaware,
pursuant to the Certificate of Incorporation filed April 14, 1987.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries and consolidated ventures which
hold title to the Company's properties. In April 1996, the Company acquired 100%
of the outstanding shares of BMC Banden Corp. The acquired assets had no value,
so consolidation had no effect on respected amounts. All intercompany balances
and transactions have been eliminated in consolidation. The Company's 47%
interest in the H Street Assemblage is accounted for under the equity method and
is reported as an investment in real estate joint venture.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which was required to be adopted on
December 31, 1997. This statement establishes standards for computing and
presenting earnings per share. The statement replaces primary earnings per share
with basic earnings per share. Basic earnings per share excludes all dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share is computed similarly to fully diluted earnings per share.
Diluted earnings per share reflects the potential dilution that could occur if
stock options and stock award grants were exercised. All prior year amounts have
been restated to conform to SFAS No. 128.
REVENUE RECOGNITION
Interest income is accrued when earned. The accrual of interest is
discontinued when the borrower acknowledges its inability to make payments or
when payments become contractually delinquent ninety days or more, unless the
loan is in the process of collection. Once a loan has been placed in a
non-accrual status, all cash received is applied against the outstanding loan
balance until such time as the borrower has demonstrated an ability to make
payments under the terms of the then current loan agreement. That portion of
accrued interest income which the Company considers to be unlikely of collection
is reflected in the accompanying consolidated statements of operations in the
provision for losses on loans, notes, advances and interest receivable. However,
the Company intends to pursue the collection of all amounts contractually due
from the borrowers.
FORECLOSED REAL ESTATE HELD FOR SALE
Foreclosed real estate held for sale is recorded at its estimated fair
market value, net of selling costs.
INCOME TAXES
On March 20, 1996, the Company notified the Internal Revenue Service of
its intent to revoke its tax election to be treated as a real estate investment
trust ("REIT") under section 856(c) (1) of the Internal Revenue Code of 1986, as
amended, in order to avoid the adverse tax effects associated with the potential
disposition or development of its real estate assets for which a REIT structure
is not intended. Pursuant to the revocation of tax election 856(c) (1),
effective January 1, 1996, the Company became taxable as a "C" corporation and
therefore is no longer required to meet certain pre-determined distribution,
asset and income requirements.
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". Tax provisions are
made based upon earnings reported for financial statement
86
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
purposes and includes deferred taxes for the effects of timing differences
between financial accounting and taxable earnings. Reserves are recorded against
deferred tax assets in accordance with FAS 109.
CASH EQUIVALENTS
The Company considers liquid debt instruments with a maturity of three
months or less when purchased to be cash equivalents. From time to time, the
Company invests excess cash with large institutional banks in federal agency
discount notes and reverse repurchase agreements with overnight maturities.
Under the terms of the agreements, title to the underlying securities passes to
the Company. The securities underlying the agreements are book entry securities.
At December 31, 1997, the Company had $7,864,213 invested in federal agency
discount notes and reverse repurchase agreements secured by U.S. Treasury Bills
or interests in U.S. Government securities.
VALUATION OF STOCK OPTIONS
The Company's Stock Options awarded pursuant to its 1994 Directors and
Executive Option Plans are accounted for in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain 1996 balances have been reclassified to conform to the 1997
presentation.
2. LOANS RECEIVABLE
The Company's loan portfolio consists of the following loans which approximate
fair value at December 31, 1997:
<TABLE>
<CAPTION>
Borrowing Partnership/Property Pledged as Carrying Interest
Collateral/Interest Rate/Maturity Date Face Amount Amount Receivable
- -------------------------------------- ----------- ------ ----------
<S> <C> <C> <C>
Hemet IV $500,000 $225,000 $ --
Land Parcel
Interest Rate: 10%
Maturity Date: (a)
Lindfield Tract A 250,000 250,000 3,565
Land Parcel
Interest Rate: (18%)
Maturity Date: (b)
======== ======== ========
Total Investment in Loans Receivable $750,000 $475,000 $ 3,565
</TABLE>
87
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
(a) During 1994, in connection with a restructuring of Anden, the Company was
conveyed an interest in a first mortgage loan collateralized by a parcel
of land located in Hemet, California. The borrower is Hemet Phase IV
Partners L.P., an affiliate of the Anden Group. The Company recorded its
interest in the loan acquired at $500,000 as of the date of foreclosure.
During 1994, the Company recorded a provision for losses on loans, notes
and interest receivable relating to the Hemet IV loan in the amount of
$275,000. The interest rate on the loan is 10%. Interest and principal on
the loan shall be due and payable upon the sale or disposition of the
collateral. Pursuant to the Company's valuation of the underlying
collateral, the note has been placed on non-accrual status. No interest
has been recognized in 1997 or 1996.
(b) The Lindfield Tract A property is a land parcel which consists of 13 acres
and is zoned tourist-commercial within a multi-use planned unit
development, located in Kissimmee (near Orlando), Florida. On October 15,
1996, the Company sold its interest in the Lindfield Tract A property to
an unaffiliated third party for a sales price of $700,000. Pursuant to the
sale, the Company received cash proceeds of $372,000, net of prorations
and closing costs of approximately $78,000, and a $250,000 secured
purchase money mortgage note (the "Note"). The Note, which matured on
October 15, 1997, was renegotiated and extended until March 31, 1998. The
unpaid principal accrued interest at a rate of 8% per annum through
November 30, 1997, then accrues interest at a rate of 18% per annum for
the remainder of the term.
3. FORECLOSED REAL ESTATE HELD FOR SALE
Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Company
and Legend Properties, Inc. (f/k/a Banyan Mortgage Investment Fund) ("Legend")
acquired title to the property pursuant to a deed in lieu of foreclosure
agreement. The Company owns a 98.6% general partner interest in the Venture
while Legend holds the remaining 1.4% interest as a limited partner. The
Venture's results are consolidated in the accompanying financial statements.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities that have been opposed by the City of Malibu and various
citizen groups. The city initiated two separate legal actions intended to
preclude the issuance of a Coastal Development Permit, both of which were
ultimately resolved in favor of the Venture.
Concurrent with the aforementioned litigation, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
September 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote, approved a revised plan to develop a fifty-one unit housing community on
the Rancho Malibu property. The Los Angeles County Regional Planning
Commission's approval was appealed to the Los Angeles County Board of
Supervisors. On May 14, 1996, the Los Angeles County Board of Supervisors
approved a compromise project (the "Project") to create forty-six single family
lots. These approvals are specified in Los Angeles County CUP No. 91-315(3), Oak
Tree Permit No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May
14, 1996. On June 17, 1996, a neighboring homeowners association filed an action
entitled La Chusa Highlands Property Owners Association, Inc. v. Los Angeles
County, et al., Los Angeles County Superior Court Case No. BS039789 (the "La
Chusa Litigation"), challenging the aforesaid approvals. The Company, Legend and
the Venture are named as real parties in interest.
The La Chusa Litigation was tried before a Court on January 27, 1997. On
February 5, 1997, the Court issued its ruling, granting the Petitioner's Writ
and remanding the matter to the County Board of Supervisors for further action
on three separate grounds: (i) the Supervisors' analyses and findings relating
to the consistency of the Projects' cul de sacs and streets within certain
County of Los Angeles Code provisions restricting the length of cul de sacs to
1,000 feet were deemed inadequate; (2) a proposed deed restriction requiring the
Venture to "diligently seek" approval for a second living unit on five of the
forty-six lots was held to be too abstract to comply with the low income housing
requirement of state law and (3) the Court found that the County acted
improperly when it approved the Project in January of 1996 and later approved a
Supplemental Environmental Impact Report ("SEIR") in May of 1996.
88
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
The Court's order specifically rejected challenges to the Project's
entitlements predicated on (i) the adequacy of the Supervisors' analyses of the
environmental impacts of the Project under the SEIR; (ii) the consistency of the
Project with the County General Plan; (iii) the approval of a sewage treatment
plant and (iv) the density of the Project under the Hillside Management
Ordinance.
The Court entered a final judgment in the La Chusa Litigation on March 25,
1997. The Venture filed a notice of appeal of this judgment on April 25, 1997
and also intends to seek further action by the Supervisors to address the three
issues specified by the Court in order to reinstate the entitlements set aside
by the Court. The Venture appeared before the Supervisors at a public hearing on
November 6, 1997. The matter was heard and continued with no action taken. On
January 27, 1998, the Supervisors held a continued public hearing and directed
County staff to present the Final SEIR and environmental finding at a future
meeting (scheduled for February 24, 1998) for review and consideration for
approval. On February 24, 1998, the Supervisors certified the Final SEIR and
adopted environmental findings for the Project. The public hearing was continued
for the Board to review and consider approval of Project entitlements.
On April 29, 1997, counsel for La Chusa Highlands Property Owners
Association, Inc., presented a petition for an award of attorney's fees in
connection with the Court's judgment of March 25, 1997. The Court heard argument
on the petition and on April 30, 1997 awarded the petitioner's counsel the sum
of $126,711 in attorney's fees and related costs. An appeal of this order has
been incorporated into the Company's appeal of the March 25, 1997 judgment
discussed above. The Company's initial brief was filed on October 9, 1997. The
petitioner's response was filed on February 9, 1998. On March 2, 1998, the
Company filed its reply brief. The Court has not set the hearing date on this
matter.
In an earlier action, the Venture challenged the General Plan and the
Environmental Impact Report adopted by the City of Malibu on November 20, 1995
in a lawsuit entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of
Malibu, Los Angeles County Superior Court Case No. SS006374. On July 31, 1996,
the Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the City's General Plan and which precludes the City from challenging the
Venture's entitlements before any public body (in the absence of a significant
requested change). The City is also precluded by the settlement agreement from
participating in the La Chusa Litigation.
During the year ended December 31, 1997 and 1996, the Venture incurred
approximately $657,000 and $705,000, respectively, in costs in connection with
Rancho Malibu relating to entitlement activities, holding costs and litigation.
These costs, treated as capital contributions to the Venture by the Company,
were included in total expenses from property operating activities on the
Company's consolidated statements of operations. As of December 31, 1997, the
Company's carrying balance for the property is $9,961,991.
4. DISPOSITION OF FORECLOSED REAL ESTATE HELD FOR SALE AND LOANS RECEIVABLE
The Lindfield Tract D property is an 8.5-acre parcel of land zoned for
commercial use within a multi-use planned unit development, located in
Kissimmee, Florida. On June 23, 1997, the Company sold the Lindfield Tract D
property to an unaffiliated third party for a purchase price of $675,000. The
Company's carrying value for this property at the time of the sale was $650,000.
Cash proceeds received, net of transaction costs, were $617,388, resulting in a
net loss on disposition of $32,612 for financial reporting purposes.
The Lindfield Tract A property is a land parcel which consists of 13 acres
and is zoned tourist-commercial within a multi-use planned unit development,
located in Kissimmee (near Orlando), Florida. On October 15, 1996, the Company
sold its interest in the Lindfield Tract A property to an unaffiliated third
party for a sales price of $700,000. Pursuant to the sale, the Company received
cash proceeds of approximately $387,000, net of prorations for closing costs of
approximately $63,000, and a $250,000 secured purchase money mortgage note (the
"Note"). The Company recognized a gain on disposition of approximately $37,100.
The Note which matured on October 15, 1997, was renegotiated and extended until
March 31, 1998 (See Note 2 for details). The Company had obtained ownership of
the Lindfield Tract A property pursuant to a deed in lieu of foreclosure
settlement on its Westholme loans.
89
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
Hemet Phase III is an approximately 19-acre land parcel zoned for the
development of 75 single family home lots located in Hemet, California. On April
18, 1996, the Company sold its interest in the Hemet Phase III property to an
unaffiliated third party (the "Purchaser") for a sales price of $385,000.
Pursuant to the sale, the Company received cash proceeds of approximately
$126,000, net of prorations for closing costs of approximately $11,000, and a
$248,000 collateralized promissory note (the "Note"). The Company recognized a
gain on disposition of approximately $31,100. The Company obtained ownership of
the Hemet Phase III property pursuant to a deed in lieu of foreclosure
settlement on its Westholme loans. During the year ended December 31, 1996, the
Company received final principal and interest payments of $248,000 and $13,225,
respectively, on the Note. The Company has no further interest in the Hemet
Phase III property.
On February 15, 1996, the Company sold the 11 remaining single family home
lots of the total 14 single family home lots in the Lake Rogers development to
an unaffiliated third party for approximately $165,000. After prorations for
closing costs of approximately $19,000, the Company received net proceeds of
approximately $146,000 and recognized a loss of approximately $77,300 which was
reflected in the consolidated statements of operations for the year ended
December 31, 1995. The Company recognized no gain or loss on the sale of the
Lake Rogers property for the year ended December 31, 1996. The Company had
obtained ownership of the Lake Rogers property pursuant to a deed in lieu of
foreclosure settlement on its Westholme loans.
5. DISPOSITION OF INVESTMENT IN REAL ESTATE VENTURE
On October 22, 1990, the Company acquired title to the property known as
the H Street Assemblage located in Washington, D.C. pursuant to an agreement
with Banyan Strategic Realty Trust ("BSRT"). On June 5, 1992, the Company and
BSRT formed a joint venture (the "Venture") to pursue its development rights.
The Company had a 47% interest in the Venture while BSRT owned the remaining
53%. This property consisted of 36,100 square feet of undeveloped land in
downtown Washington D.C. plus an approximately 55,900 square foot office
building. The entire property was zoned for office development.
On March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration ("GSA") for
a purchase price of $1,680,000. GSA also paid the Venture $150,000 as
reimbursement of expenses that the Venture incurred in anticipation of this
transaction. Ultimately, the Venture received net sales proceeds of $1,828,900.
On July 29, 1997, the Venture sold the remaining land and office building to an
unaffiliated third party for $9,000,000 and received additional net sale
proceeds of $8,469,821. The Company's share of the gain on disposition
recognized by the Venture was $371,979 and is included in net income from
operations of real estate venture for the year ended December 31, 1997 on the
accompanying consolidated statements of operations. During the year ended
December 31, 1997, the Company received aggregate distributions from the Venture
of $4,713,101, including its allocation of such sales proceeds. At December 31,
1997, the Venture had no further ownership interest in the H Street Assemblage
property.
90
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
Summary financial information for the H Street Assemblage as of December
31, 1996 is as follows:
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Investment Property, Net $ 9,944,205
Other Assets 534,900
Other Liabilities (464,481)
-----------
Total Equity 10,014,624
===========
Total Revenues $ 529,931
===========
Net Loss $(6,228,702)
===========
</TABLE>
6. PROVISION FOR LOSSES ON LOANS, NOTES, ADVANCES AND INTEREST RECEIVABLE
Northholme Partners ("Northholme"), of which the Company holds an 80%
limited partnership interest, was created by the Company and a partner of The
Anden Group on August 31, 1992. On September 2, 1992, the Company and Northholme
entered into a loan agreement whereby the Company committed to lend Northholme
$700,000. The partner associated with the Anden Group, Eugene S. Rosenfeld, owns
a 20% participation in the loan. The loan pertains to a 1,000-acre land parcel
located north of Los Angeles, California which is owned by a third party (the
"Owner"). The Company also advanced $491,647 for costs associated with the
completion of the zoning and entitlement work for the property. Northholme has a
profit participation arrangement with the Owner based on the proceeds received
from the sale or refinancing of the property. Based on the Owner's disclosure
related to the property, it was determined that a reserve should be established
in the amount of the loan and all advances plus accrued interest. The Company
recorded a provision for losses on loans, notes, advances and interest
receivable in the amount of $1,166,246 for the year ended December 31, 1997.
Notwithstanding the reserve, the Company intends to pursue its rights to collect
on its investment.
7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Administrative costs, primarily salaries and general and administrative
expenses, were incurred on the Company's behalf by Banyan Management Corp.
("BMC") and were reimbursed at cost by the Company. These costs were allocated
to the Company and other entities to which BMC provided administrative services
based upon the actual number of hours spent by BMC personnel on matters related
to that particular entity in relation to total BMC personnel hours. The
Company's allocable share of costs for the years ended December 31, 1997 and
1996 aggregated $107,781 and $269,508, 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,
Equis Financial Group Limited Partnership ("EFG") entered into an Administrative
Services Agreement to provide administrative services to the Company, replacing
BMC. During the year ended December 31, 1997, the Company incurred $49,166 in
administrative costs for services provided by EFG personnel for Company related
matters. This amount is reflected as Accrued Expenses - Affiliate on the
Consolidated Balance Sheet at December 31, 1997.
The Company executed and delivered an Exchange Agreement dated April 30,
1997 (amended as of August 7, 1997, the "Agreement") among the Company, Equis
Exchange L.L.C., a Massachusetts limited liability company ("Equis"), EFG and
certain partnerships managed by EFG ("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 the price of $1.50 per share. Cash
proceeds received by the Company, $2,480,500, were 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. These transactions are intended to
provide capital to assist the Company in a new growth-oriented business plan,
which includes the development of the Company's Rancho Malibu property.
91
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
The Loan was initially disbursed into a segregated account, the proceeds
of which were not available to the Company until the stockholder consent to
certain proposals ("the Consent") was obtained. The Consent of the stockholders
was obtained and all proposals were adopted on October 21, 1997. 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 Rancho
Malibu property. At December 31, 1997 the carrying value of the note payable
approximates fair value.
Pursuant to the Agreement, the Administrative Services Agreement between
the Company and BMC was amended to provide, among other things, for the
immediate payment to BMC of a termination fee in the amount of $251,823 and the
transfer of the Company's ownership interest in BMC to BMC's designee. Pursuant
to the Agreement, the Company also entered into a new Administrative Services
Agreement with EFG.
8. EXECUTIVE AND DIRECTOR STOCK OPTION PLAN
On June 30, 1994, the stockholders approved and adopted the 1994 Executive
and Directors Stock Option Plan (the "Plan"). On December 30, 1997, the Board of
Directors of the Company adopted, subject to stockholder approval at the 1998
Annual Meeting of Stockholders, an amendment to the Plan to permit the grant of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code. The Plan granted the Board of Directors the authority to issue up
to 1,000,000 shares of the Company's common stock for stock option awards
("Options"). The Plan consists of an Executive Option Grant Program and a
Director Option Grant Program. Under the Director Option Grant Program, each of
the Directors, in consideration of their length of service on the board received
an option to acquire 50,000 shares. The exercise price of the options initially
granted to the Board of Directors under the Director Option Grant Program was
$1.125. The exercise price was reduced to $0.925 by a vote of the Board of
Directors on December 30, 1997.
The Board administers the Executive Option Grant Program and has the
authority to determine, among other things, the individuals to be granted
Executive Options, the exercise price at which shares may be acquired, the
number of shares subject to each option and the exercise period of each option.
No Director is eligible to receive options under the Executive Option Grant
Program. The Board granted 90,000 options on each of April 16, 1996, July 11,
1995 and January 18, 1994 (270,000 options in total) to management under the
Plan, at a price equal to the closing price of the Company's stock as reported
by NASDAQ on the day of the grant of options ($1.25 per share at April 16, 1996,
$1.50 per share at July 11, 1995 and $1.125 per share at January 18, 1994)
Pursuant to the terms of the grants, options for all shares granted under the
Executive Option Grant Program were exercisable and vested 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. Options for all
shares as granted under the Director Option Grant Program were exercisable in
installments as follows: (i) 50% of the number of shares commencing on the first
anniversary of the date of grant; and (ii) 50% of the number of shares
commencing on the second anniversary of the date of the grant. The Board is
granted discretion to determine the term of each Option granted under the
Executive Option Grant Program, but in no event will the term exceed ten years
and one day from the date of the grant.
During 1997, the Company's executives who held unexercised options issued
under the Executive Option Grant Program agreed to cancel and surrender these
options in consideration of the Company paying each holder $0.20 in cash for
each share of Common Stock subject to such holder's options. The Company retired
68,500 options to purchase shares of the Company's common stock at a price of
$0.20 per share or $13,700. The options held by Mr. Levine (180,000 options),
were canceled and surrendered in connection with his resignation. Those options
granted pursuant to the Director Option Grant Program (150,000 options), were
outstanding and exercisable at December 31, 1997.
SFAS No. 123 "Accounting for Stock-Based Compensation," is effective for
1996. This statement addresses accounting and reporting standards for
stock-based employee compensation plans. The Company has elected to
92
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
continue to recognize compensation expense using the intrinsic value-based
method of accounting prescribed by APB Opinion No. 25. Proforma information
regarding net income and earnings per share is required by SFAS 123. Proforma
disclosures must include all stock-based compensation grants made in fiscal
years that begin after December 15, 1994.
Proforma results of net income and earnings per share using the fair value
method for accounting for stock-based employer compensation plans for the year
ended December 31, 1996 are not presented, as results differ by less than one
percent from those reported. For the purpose of SFAS 123, compensation expense
was not recognized in 1997 for the 248,500 options canceled. Also, SFAS 123 does
not apply to the options outstanding at December 31, 1997, as these options were
granted in 1994.
For purposes of estimating the fair value of the Company's employee stock
options at the grant date, a Black-Scholes option pricing model was used with
the following weighted average assumptions for 1996: risk-free interest rate of
6.48%, dividend yield of 0%, and volatility factors of the expected market price
of the Company's common stock of .457. The weighted average life of the stock
options is three years as of December 31, 1996. For purposes of the proforma
calculation, the estimated fair value of the options was amortized to expense
over the options vesting period.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of Options.
The effects on 1997 and 1996 pro forma net income and pro forma basic
earnings per common share and common share equivalent of amortizing to expense
the estimated fair value of stock options are not necessarily representative of
the effects on net income to be reported in future years due to such things as
the vesting period of the stock options, and the potential for issuance of
additional stock options in future years.
A summary of the Company's stock option activity, and related information
for the years ended December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Subject to Exercise Price Per
Option Share
------------------ -------------------
<S> <C> <C>
Balance at January 1, 1996...... 325,000 1.229
Options granted.............. 90,000 1.250
Options canceled............. (16,500) 1.295
------------------ -------------------
Balance at December 31, 1996.... 398,500 1.231
Options granted.............. -- --
Options canceled............. (248,500) 1.294
------------------ -------------------
Balance at December 31, 1997 ... $ 150,000 $ 0.925
================== ===================
</TABLE>
At December 31, 1997, Options on 150,000 shares were exercisable. The
exercise price of these options was originally $1.125 per share. The exercise
price was reduced to $0.925 by a vote of the Board of Directors on December 30,
1997.
93
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
9. DEFERRED COMPENSATION
In December 1997, the Company established an incentive compensation plan
(the "Plan") for Messrs. Engle and Coyne (the "Participants"). The Plan provides
for all or some of the Participants' salary to be deferred. All such deferred
compensation is held subject to the claims of creditors of the Company in a
"rabbi" trust until paid to the Participants following the Participants'
termination of employment. The amounts deferred are invested in common stock of
the Company. Pursuant to the Plan, the Participants deferred $96,766 of
compensation during 1997 which represented 154,826 shares of common stock using
the December 30, 1997 closing price of $0.625. The deferred amount was expensed
by the Company in 1997 and is included in general and administrative expenses on
the consolidated statement of operations for the year ended December 31, 1997.
Future compensation will be deferred and invested in common stock which will be
issued on a monthly basis to the trust for the benefit of the Participants.
10. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for income tax purposes. Deferred income taxes
consist of the following at December 31,:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Deferred tax assets:
Loans receivable $ 93,000 $ 111,000
Mortgage loans in substantive foreclosure 2,327,000 14,464,000
Foreclosed real estate held for sale, net 1,195,000 4,164,000
Investment in partnership -- 5,475,000
Investment in real estate venture 40,000 2,331,000
Net operating loss carry forwards 28,558,000 26,167,000
--------------- ---------------
Sub-total 32,213,000 52,712,000
Less valuation allowance for deferred tax assets (32,213,000) (37,206,000)
--------------- ---------------
Total deferred tax assets -- 15,506,000
Deferred tax liabilities:
Note payable -- (15,506,000)
--------------- ---------------
Net deferred tax assets $ -- $ --
=============== ===============
</TABLE>
As of December 31, 1997, the Company had net operating loss carry forwards
of approximately $83,995,000 which expire as follows: $18,817,000 in 2005;
$47,337,000 in 2006; $281,000 in 2007; $2,981,000 in 2008; $4,086,000 in 2009;
$1,265,000 in 2010; $2,028,000 in 2011 and $7,200,000 in 2012.
11. LITIGATION
On June 16, 1994, Coastal Group, Inc. brought an action against Westholme
Partners, (an entity in which the Company has a limited partnership interest),
Bank of America (f/k/a Continental Bank, N.A.) ("CINB"), BMC Westholme Corp., (a
wholly owned subsidiary of the Company); the Anden Group ("Anden"), William A.
Brandt, Jr. and Kent Kneblekamp in the New Jersey Superior Court, Middlesex
County. The case was subsequently removed to the United States District Court
for the District of New Jersey and assigned case # 94-3010. The case involves a
real estate development project located in New Jersey known as "Winding River."
94
<PAGE>
SEMELE GROUP INC.
Notes To Consolidated Financial Statements
(Continued)
BMC Westholme Corp. was served with Summons and Complaint in June of 1994,
but was not actively involved in the various motions and other procedural
matters which extended for approximately thirty months. On February 10, 1997,
BMC Westholme Corp. filed its Answer and began to take a more active role in the
case.
The plaintiff's complaint has been substantially reduced by favorable
rulings, entered October 3, 1996, on various motions to dismiss whereby ten of
plaintiff's sixteen counts were dismissed and another count was limited in
scope. The complaint now alleges breach of contract, unjust enrichment, breach
of the implied covenant of good faith and fair dealing, fraudulent transfer and
also seeks relief under a theory of promissory estoppel and requests the
creation of a constructive trust for the benefit of plaintiff.
The case arises from a failed development and a subsequent foreclosure
filed by defendant CINB. The plaintiff contends, among other things, that CINB
and BMC Westholme conspired with Anden to deprive the plaintiff of its interest
in the Winding River project, damaging plaintiff's reputation as a homebuilder
and causing it to lose business opportunities. The amount in controversy exceeds
$6,000,000, although the Company believes that if there is any liability to the
plaintiffs in this matter, it rests with defendants other than BMC Westholme
Corp. All discovery has been concluded. A pre-trial order has been submitted by
all parties. A motion for summary judgment was filed by CINB. The Company joined
in that motion. No decision has yet been rendered on the motions. The case is
expected to be tried during the first quarter of 1998 unless it is resolved by
the pending motion.
The ultimate outcome of this matter cannot be determined at this time,
however, in the opinion of management of the Company, the eventual outcome of
this matter will not have a material adverse effect on the financial position or
results of operations of the Company. The financial statements do not include
any adjustments for liability, if any, arising from this matter.
95
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-KSB) of Semele Group Inc. of our report dated March 2, 1998, included in the
1997 Annual Report to stockholders of Semele Group Inc.
ERNST & YOUNG LLP
Boston, Massachusetts
March 2, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEMELE GROUP
INC.'S FORM 10KSB FOR THE YEAR ENDED DECEMBER 31,1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,884,593
<SECURITIES> 0
<RECEIVABLES> 478,565
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,888,158
<PP&E> 9,961,991
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,325,149
<CURRENT-LIABILITIES> 453,524
<BONDS> 0
0
0
<COMMON> 13,452,125
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,325,149
<SALES> 0
<TOTAL-REVENUES> 234,641
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,172,862
<LOSS-PROVISION> 1,166,246
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,104,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,104,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,104,467)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
