<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
SEMELE GROUP INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
[SEMELE LETTERHEAD]
October 4, 2000
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders of
Semele Group Inc. (the "Company") in lieu of the 2000 Annual Meeting, to be held
at the offices of the Company at 200 Nyala Farms, Westport, Connecticut, on
November 2, 2000, at 10:00 a.m., local time.
At the Meeting, stockholders of record as of September 29, 2000, will be
asked to approve the issuance of 711,462 shares of the Company's Common Stock to
Gary D. Engle, James A. Coyne and certain trusts for the benefit of Mr. Engle's
children in payment of $3,600,000, plus accrued interest of $99,600, that is due
under the terms of promissory notes issued on December 22, 1999, in connection
with the Company's purchase of Equis II Corporation. For purposes of determining
the number of shares to be issued, a value of $5.20 was put on a share of Common
Stock of the Company. At the Meeting, stockholders will also be asked to elect
two directors of the Company. Details of all the proposals to be presented to
the stockholders at the Meeting are contained in the enclosed Proxy Statement,
which you are encouraged to read carefully.
Whether or not you plan to attend the Meeting, please complete, sign and
date the enclosed proxy card and return it in the enclosed prepaid envelope. You
may revoke your proxy in the manner described in the Proxy Statement at any time
before it has been voted at the Meeting. If you attend the Meeting, you may vote
in person, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated. This solicitation is authorized by and
is made on behalf of the Company's Board of Directors.
Sincerely,
SEMELE GROUP INC.
James A. Coyne
PRESIDENT AND CHIEF OPERATING OFFICER
<PAGE>
SEMELE GROUP INC.
200 NYALA FARMS
WESTPORT, CONNECTICUT 06880
(203) 341-0555
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
IN LIEU OF ANNUAL MEETING
To the Stockholders of Semele Group Inc.:
Notice is hereby given that a Special Meeting of Stockholders of Semele
Group Inc., a Delaware corporation, in lieu of the 2000 Annual Meeting will be
convened at the offices of the Company at 200 Nyala Farms, Westport,
Connecticut, on November 2, 2000, at 10:00 a.m., local time. All stockholders of
the Company are entitled to attend the Meeting, which will be held for the
following purposes:
1. To elect two directors to hold office until the 2003 Annual Meeting of
Stockholders, or otherwise as provided in the Company's By-Laws;
2. To consider and vote upon a proposal to issue 711,462 shares of the
Company's Common Stock to Gary D. Engle, James A. Coyne and certain
trusts for the benefit of Mr. Engle's children in payment of $3,600,000,
plus accrued interest of $99,600, payable to them under the terms of
promissory notes issued in connection with the Company's purchase of
Equis II Corporation;
3. To concur in the selection of Ernst & Young LLP as the Company's
independent auditor for the fiscal year ending December 31, 2000; and
4. To transact any other business as may properly come before the Meeting,
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on September 29, 2000,
are entitled to receive notice of and to vote at the Meeting or any adjournment
or postponement of the Meeting. A list of these stockholders will be available
for inspection at the Company's offices for at least ten days prior to the
Meeting.
A Proxy Statement and form of proxy are enclosed. Also enclosed is the
Company's 1999 annual report on Form 10-KSB. Whether or not you expect to attend
the Meeting, it is important that you fill in, sign, date and mail in the proxy
in the enclosed envelope so that your shares may be voted for you.
<TABLE>
<S> <C>
October 4, 2000 By order of the Board of Directors:
Craig D. Mills
SECRETARY
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PRINCIPAL HOLDERS OF SEMELE COMMON STOCK.................... 4
MATTERS TO BE CONSIDERED BY STOCKHOLDERS.................... 5
PROPOSAL 1: ELECTION OF DIRECTORS......................... 5
Nominees.................................................. 6
Continuing Directors...................................... 6
Recommendation of the Board............................... 7
PROPOSAL 2: TO CONSIDER AND VOTE UPON A PROPOSAL TO ISSUE
711,462 SHARES OF THE COMPANY'S COMMON STOCK IN PAYMENT
OF CERTAIN AMOUNTS DUE IN CONNECTION WITH THE PURCHASE
BY THE COMPANY OF EQUIS II CORPORATION.................. 7
What Stockholders are being Asked to Approve.............. 8
The Transaction........................................... 8
Interests of Messrs. Engle and Coyne in the Transaction... 9
Voting Trust; Investment Company Act...................... 9
Resale of Company Common Stock Issued in the Transaction;
Registration Rights..................................... 10
Accounting Treatment...................................... 10
Federal Income Tax Considerations......................... 10
Pro Forma Combined Financial Statements................... 11
Recommendation of the Board............................... 17
PROPOSAL 3: SELECTION OF INDEPENDENT AUDITOR.............. 17
Recommendation of the Board............................... 17
EXECUTIVE OFFICERS.......................................... 18
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS............ 19
Director Compensation..................................... 19
Executive Compensation.................................... 19
Executive and Director Stock Option Plan.................. 21
Certain Relationships and Related Transactions............ 21
STOCKHOLDER PROPOSALS....................................... 23
OTHER MATTERS............................................... 23
</TABLE>
2
<PAGE>
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS OF
SEMELE GROUP INC.
IN LIEU OF ANNUAL MEETING
NOVEMBER 2, 2000
This Proxy Statement is furnished to the holders of shares of the Common
Stock, par value $.10, of Semele Group Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Company's
Board of Directors for use at a Special Meeting of Stockholders in lieu of
Annual Meeting. The Meeting will be convened on November 2, 2000, at
approximately 10:00 a.m., local time, and any adjournment or postponement of the
Meeting will be announced at the Meeting. Copies of this Proxy Statement, and
the enclosed form of proxy, were first sent or given to stockholders on or about
October 4, 2000. Stockholders who wish to attend the Meeting should contact the
Company at (203) 341-0555 so that arrangements can be made.
Shares represented by properly executed proxies in the enclosed form
received by the Board of Directors prior to the Meeting will be voted at the
Meeting. Shares not represented by properly executed proxies will not be voted.
If a stockholder specifies a choice with respect to any proposal to be acted on
at the Meeting, the shares represented by that proxy will be voted as specified.
If a stockholder does not specify a choice, in an otherwise properly executed
proxy, with respect to any proposal to be acted on, the shares represented by
that proxy will be voted on that proposal in accordance with the recommendation
of the Board of Directors as described in this Proxy Statement. A stockholder
who signs and returns a proxy in the enclosed form may revoke it by: (i) giving
written notice of revocation to the Company before the proxy is voted at the
Meeting; (ii) executing and delivering a later-dated proxy before the proxy is
voted at the Meeting; or (iii) attending the Meeting and voting the shares in
person. Merely attending the Meeting will not be sufficient to revoke a proxy.
The Company will bear all costs in connection with the solicitation of
proxies, including the cost of preparing, printing and mailing this Proxy
Statement. In addition to the use of the mails, proxies may be solicited by the
Company's directors and officers and by employees of Equis Financial Group
Limited Partnership, which provides administrative services to the Company. None
of these individuals will be additionally compensated, but they may be
reimbursed for out-of-pocket expenses in connection with the solicitation.
Arrangements will also be made with brokerage houses, banks and other
custodians, nominees and fiduciaries for the forwarding of proxies and proxy
material to the beneficial owners of the Common Stock held of record by those
persons, and the Company may reimburse those custodians, nominees and
fiduciaries for their expenses in so doing. Further, the Company has retained
the services of Corporate Investor Communications, Inc., to assist in the
solicitation of proxies for the Meeting at a fee payable by the Company of
$5,000, plus expenses.
The close of business on September 29, 2000, has been fixed as the date for
determining those stockholders entitled to notice of and to vote at the Meeting
(the "Record Date"). At the Record Date, the Company had 1,732,798 shares
outstanding, each of which entitles the holder to one vote at the Meeting. Only
stockholders of record at the Record Date will be entitled to vote at the
Meeting. The presence of a majority of the outstanding shares of Common Stock,
represented in person or by proxy at the Meeting, will constitute a quorum. For
the proposal to elect directors, the two nominees receiving the greatest number
of votes cast by holders of the Company's Common Stock present in person or by
proxy at the Meeting and entitled to vote will be elected as directors of the
Company. Each of the remaining proposals requires the affirmative vote of a
majority of the shares present in person or by proxy at the Meeting and entitled
to vote on the matter. Abstentions, withheld votes and broker non-votes (i.e.,
shares held by brokers that are present but not voted because the brokers are
prohibited from exercising discretionary authority) will be counted in
calculating the number of shares present in person or by proxy at the Meeting
for purposes of establishing a quorum for the transaction of business.
Abstentions will be counted in calculating the number of shares entitled to vote
on a matter, whereas broker non-votes will be excluded.
3
<PAGE>
PRINCIPAL HOLDERS OF SEMELE COMMON STOCK
The following table sets forth certain information regarding beneficial
owners of Common Stock at the Record Date by: (i) each person or entity who is
known by the Company to own more than 5% of the Common Stock (together with such
person's address); (ii) each director and each executive officer of the Company
named in the executive compensation table; and (iii) all current directors and
officers as a group. Share amounts and percentages shown for each person or
entity are adjusted to give effect to shares of Common Stock that are not
outstanding but may be acquired by that person or entity upon exercise of all
options and warrants exercisable by that person or entity within 60 days of the
Record Date. However, those shares of Common Stock are not deemed to be
outstanding for the purpose of computing the percentage of outstanding shares
beneficially owned by any other person or entity.
<TABLE>
<CAPTION>
PERCENT OF
NAME OF PERSON OR ENTITY NUMBER OF SHARES TOTAL SHARES
------------------------ ---------------- ------------
<S> <C> <C>
AFG Hato Arrow Limited Partnership.......................... 198,700(1) 11.5%
AFG Dove Arrow Limited Partnership
AIP/Larkfield Limited Partnership
c/o Equis Financial Group
88 Broad Street
Boston, Massachusetts 02110
Gary D. Engle .............................................. 559,511(2) 32.3%
Chairman, Chief Executive Officer, Director
James A. Coyne ............................................. 247,110(3) 14.3%
President Chief Operating Officer, Director
Walter E. Auch, Sr. ........................................ 6,000(4) Less than 1%
Director
Joseph W. Bartlett ......................................... 5,000(4) Less than 1%
Director
Robert M. Ungerleider ...................................... 5,600(4) Less than 1%
Director
823,221 47.1%
All Directors and Officers of the Company as a group (six
persons)..................................................
</TABLE>
------------------------
(1) Based upon reports filed with the Securities and Exchange Commission (the
"SEC") by certain affiliates of Equis Financial Group Limited Partnership
("EFG") pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), indicating ownership of 5% or more of the
outstanding Common Stock. At the Record Date: (i) AFG Hato Arrow Limited
Partnership owns 63,544 shares, amounting to 3.7% of the outstanding Common
Stock; (ii) AFG Dove Arrow Limited Partnership owns 61,673 shares, amounting
to 3.6% of the outstanding Common Stock; and (iii) AIP/Larkfield Limited
Partnership owns 73,483 shares, amounting to 4.2% 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) Includes 288,400 shares owned directly and 72,411 shares owned by the
trustee of a rabbi trust for the benefit of Mr. Engle over which Mr. Engle
has voting control. The shares held by such trustee represent salary
deferred by Mr. Engle through the Record Date pursuant to the Company's
Incentive Compensation Plan. Because Mr. Engle has effective control over
AFG Hato Arrow Limited Partnership, AFG Dove Arrow Limited Partnership and
AIP/Larkfield Limited Partnership, he is also deemed to beneficially own the
198,700 shares owned by those partnerships.
(3) Includes 174,700 shares owned directly and 72,410 shares owned by the
trustee of a rabbi trust for the benefit of Mr. Coyne over which Mr. Coyne
has voting control. The shares held by such trustee
4
<PAGE>
represent salary deferred by Mr. Coyne through the Record Date pursuant to
the Company's Incentive Compensation Plan.
(4) Includes 5,000 shares underlying currently-exercisable options granted under
the Company's 1994 Executive and Director Stock Option Plan.
The Company is not aware of any other person who, alone or as part of a
group, beneficially owns more than 5% of the outstanding shares of Common Stock
at the Record Date. The Company is not aware of any arrangements, the operation
of which may at a subsequent date result in a change of control of the Company.
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial statements of beneficial ownership
(Form 3), and statements of changes in beneficial ownership (Forms 4 or 5), of
Common Stock and other equity securities of the Company with the SEC and the
National Association of Securities Dealers, Inc. (the "NASD"). The SEC requires
officers, directors and greater than 10% stockholders to furnish the Company
with copies of all these forms filed with the SEC or the NASD.
To the Company's knowledge, based solely on its review of the copies of
these forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that all filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with during 1999.
MATTERS TO BE CONSIDERED BY STOCKHOLDERS
PROPOSAL 1: ELECTION OF DIRECTORS
Two individuals will be elected at the Meeting to serve as directors of the
Company for a three-year term expiring at the 2003 Annual Meeting. The nominees
for the class whose term will expire at the 2003 Annual Meeting are Walter E.
Auch, Sr., and Gary D. Engle, both of whom are being nominated for re-election.
Unless instructions to the contrary are given, the persons named as proxy voters
in the enclosed proxy, or their substitutes, will vote for Mr. Auch and
Mr. Engle for director with respect to all proxies received by the Company. If a
nominee should become unavailable for any reason, the votes for that nominee
will be cast for a substitute nominee designated by the Board of Directors. The
directors have no reason to believe that Mr. Auch or Mr. Engle will be unable to
serve if elected.
5
<PAGE>
NOMINEES.
The nominees for director are as follows:
<TABLE>
<CAPTION>
YEAR DURING WHICH
INDIVIDUAL FIRST
NAME AGE BECAME A DIRECTOR OTHER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
---- -------- ----------------- -------------------------------------------------
<S> <C> <C> <C>
Walter E. Auch, Sr............. 78 1987 Prior to retiring, Mr. Auch was the Chairman and
Chief Executive Officer of the Chicago Board
Options Exchange. Prior to that time, Mr. Auch
was Executive Vice President, director and a
member of the executive committee of PaineWebber.
Mr. Auch is a director of Smith Barney Concert
Series Funds, Smith Barney Trak Fund, The Brinson
Partners Funds and Nicholas Applegate Funds. He
is also a trustee of Hillsdale College and the
Arizona Heart Institute. Mr. Auch is also a
trustee of Banyan Strategic Realty Trust and a
director of Legend Properties, Inc. (f/k/a Banyan
Mortgage Investment Fund).
Gary D. Engle.................. 51 1997 Mr. Engle has been Chairman and Chief Executive
Officer of the Company since November 1997.
Mr. Engle is President and Chief Executive
Officer of EFG, which he joined in 1990 as
Executive Vice President. Mr. Engle purchased a
controlling interest in EFG in December 1994. He
is also President of AFG Realty, Inc. From 1987
to 1990, Mr. Engle was a principal and co-founder
of Cobb Partners Development, Inc., a real estate
and mortgage banking company, with principal
offices in Florida. From 1980 to 1987, Mr. Engle
served in various capacities with Arvida Disney
Company, a large-scale community real estate
development company owned by the Walt Disney
Company with real estate development projects
worldwide.
</TABLE>
CONTINUING DIRECTORS.
The continuing directors of the Company are as follows:
<TABLE>
<CAPTION>
YEAR DURING WHICH
INDIVIDUAL FIRST
NAME AGE BECAME A DIRECTOR OTHER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
---- -------- ----------------- -------------------------------------------------
<S> <C> <C> <C>
Joseph W. Bartlett............. 66 1997 Mr. Bartlett has been a partner in the law firm
of Morrison & Foerster LLP since March 1996. From
July 1991 until March 1996 he was a partner in
the law firm of Mayer, Brown & Platt.
Mr. Bartlett is also a director of Cyrk, Inc.,
which designs, manufactures and distributes
products for promotional programs and
custom-designed sports apparel and accessories.
Mr. Bartlett's term expires at the 2002 Annual
Meeting.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
YEAR DURING WHICH
INDIVIDUAL FIRST
NAME AGE BECAME A DIRECTOR OTHER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
---- -------- ----------------- -------------------------------------------------
<S> <C> <C> <C>
James A. Coyne................. 39 1997 Mr. Coyne has been President and Chief Operating
Officer of the Company since 1997. Mr. Coyne is
Executive Vice President/Capital Markets of Equis
Corporation, the general partner of EFG, and is
also Vice President of AFG Realty Inc., an
affiliate of EFG. He is responsible for EFG's
real estate activities in both the United States
and Australia. Mr. Coyne joined EFG in 1989,
remained until May 1993, and rejoined EFG in
November 1994. From 1993 through November 1994 he
was with the Raymond Company, a private
investment firm, where he was responsible for
obtaining financing for corporate and real estate
acquisitions. Mr. Coyne's term expires at the
2001 Annual Meeting.
Robert M. Ungerleider.......... 59 1987 Mr. Ungerleider is of counsel to the law firm of
Felcher Fox & Litner. Mr. Ungerleider has
founded, developed and sold a number of startup
ventures including Verifone Finance, an equipment
leasing company, Smartpage, a paging service
company, and Financial Risk Underwriting Agency,
Inc., an insurance firm specializing in financial
guarantee transactions. Prior to that,
Mr. Ungerleider practiced real estate and
corporate law in New York City for ten years.
Mr. Ungerleider is also a director of Legend
Properties, Inc. (f/k/a Banyan Mortgage
Investment Fund). Mr. Ungerleider's term expires
at the 2002 Annual Meeting.
</TABLE>
The Board is required to meet at least four times each year either in person
or by telephonic conference. The Board met five times in 1999. The directors
have established a compensation committee, which is composed of
Messrs. Bartlett and Ungerleider and which met once during 1999, and an audit
committee, which is composed of Messrs. Auch, Bartlett and Ungerleider and which
met once during 1999. Each of the members of the audit committee is independent.
A copy of the audit committee charter is attached to this Proxy Statement as
Appendix A. The directors have not established a nominating committee or other
committee performing a similar function.
RECOMMENDATION OF THE BOARD.
The Board hereby recommends and nominates the following nominees for
election as a director of the Company by the stockholders at the Meeting to
serve until the 2003 Annual Meeting of Stockholders: Walter E. Auch, Sr., and
Gary D. Engle.
VOTE REQUIRED. The two nominees receiving the highest vote totals will be
elected as directors of the Company.
PROPOSAL 2: TO CONSIDER AND VOTE UPON A PROPOSAL TO ISSUE 711,462 SHARES OF THE
COMPANY'S COMMON STOCK IN PAYMENT OF CERTAIN AMOUNTS DUE IN CONNECTION WITH THE
PURCHASE BY THE COMPANY OF EQUIS II CORPORATION.
7
<PAGE>
WHAT STOCKHOLDERS ARE BEING ASKED TO APPROVE.
The Company is seeking stockholder approval of the issuance and delivery of
711,462 shares of Common Stock of the Company to Gary D. Engle, James A. Coyne
and certain trusts for the benefit of Mr. Engle's children in order to satisfy
the requirements of the National Association of Securities Dealers (the "NASD")
for continued listing of the Company's Common Stock on the Nasdaq Small-Cap
Market. In particular, under rules promulgated by the NASD, the Company is
required to seek stockholder approval prior to issuing shares in connection with
the acquisition of the stock of another company if any director, officer or
substantial stockholder of the Company has a 5% or greater interest (or these
persons collectively have a 10% or greater interest) in the acquired company.
During the past ten months, the Company acquired Equis II Corporation ("Equis
II") for a purchase price consisting of approximately $19.6 million in cash,
paid by the issuance of promissory notes, plus 510,000 shares of the Company's
Common Stock. Messrs. Engle and Coyne are each directors and officers of the
Company, and each owns a substantial interest in the Company. Messrs. Engle and
Coyne also had a 5% or greater interest in Equis II. Thus, stockholder approval
was required, and was obtained at the 1999 Annual Meeting, for the issuance of
the 510,000 shares of Common Stock that were part of the purchase price for
Equis II. Now, the Company, Messrs. Engle and Coyne and the Engle family trusts
are proposing that the principal payment of $3,600,000 that was due on May 31,
2000, under the promissory notes issued by the Company in connection with the
purchase of Equis II, plus accrued interest through August 31, 2000, of $99,600,
be paid in 711,462 shares of the Company's Common Stock valued at $5.20 per
share. Stockholder approval is required before the Company can issue these
shares.
The Company's 1999 Annual Report on Form 10-KSB is enclosed with this Proxy
Statement and is incorporated into this Proxy Statement by reference.
THE TRANSACTION.
On December 22, 1999, the Company purchased 85% of the stock of Equis II, a
Delaware corporation, for approximately $19.6 million. The Company paid the
entire purchase price by issuing promissory notes to the selling stockholders.
Prior to the purchase, Equis II was owned entirely by Gary D. Engle, James A.
Coyne and certain trusts for the benefit of Mr. Engle's children for which
Mr. Engle's brother serves as trustee. In connection with the purchase, the
Company entered into an agreement with Messrs. Engle and Coyne and the Engle
family trusts, which gave the Company the right to purchase, and gave these
stockholders the right to sell to the Company, the remaining 15% of Equis II for
510,000 shares of the Company's Common Stock if stockholder approval for payment
in shares was obtained. The stockholders approved the issuance of the 510,000
shares in payment of the purchase price for 15% of Equis II on March 6, 2000,
and the purchase was completed on April 20, 2000.
The Company purchased 85% of the outstanding Common Stock of Equis II by
delivering promissory notes to the selling Equis II stockholders having a total
principal value of $19,586,000. Of the $19,586,000 of notes, notes having an
aggregate principal amount of $14,600,000 mature on October 31, 2005, and bear
interest at the annual rate of 7%, of which 3% is due and payable on a current
quarterly basis and 4% accrues to the maturity date. Principal payments of
$3,600,000, $4,000,000, $4,000,000 and $3,000,000 are due and payable on
May 31, 2000, October 31, 2002, May 31, 2003, and the maturity date,
respectively.
The Company and the former Equis II stockholders have agreed that the
$3,600,000 installment that was due on May 31, 2000, plus accrued interest
through August 31, 2000, of $99,600, be paid in 711,462 shares of the Company's
Common Stock valued at $5.20 per share, if stockholder approval for payment in
shares is obtained at the Meeting. The payment in shares will leave the Company
with cash to pursue its goal of diversifying its asset base. The Company's three
independent directors, Messrs. Auch, Bartlett and Ungerleider, have unanimously
approved the payment in shares of the principal amounts that were due on
May 31, 2000, under the notes, plus accrued interest through August 31, 2000.
8
<PAGE>
INTERESTS OF MESSRS. ENGLE AND COYNE IN THE TRANSACTION.
The purchase price for 85% of the stock of Equis II was allocated among the
former Equis II stockholders in proportion to their former ownership interest in
85% of Equis II, as shown below. Also shown are the principal amounts that were
due to each former stockholder on May 31, 2000, plus accrued interest through
August 31, 2000, and the number of shares that will be issued to each of them if
stockholder approval for payment in shares of the amounts due is approved at the
Meeting.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AND SHARES OF COMMON
NAME PROMISSORY NOTES INTEREST DUE STOCK TO BE ISSUED
---- ------------------- ------------- ------------------
<S> <C> <C> <C>
Gary D. Engle.................................. $11,033,447 $2,084,108 400,789
James A. Coyne................................. 6,593,953 $1,245,532 239,525
Wayne Ellis Engle ............................. 489,650 $ 92,490 17,787
Trustee Staci Albury Trust u/i/t dated July
21, 1998(1)
Wayne Ellis Engle ............................. 489,650 $ 92,490 17,787
Trustee, Kristen Engle Trust u/i/t dated July
21, 1998(1)
Wayne Ellis Engle ............................. 489,650 $ 92,490 17,787
Trustee, Sydney Peyton Engle Trust u/i/t
dated July 21, 1998(1)
Wayne Ellis Engle ............................. 489,650 $ 92,490 17,787
Trustee, Zoe P. Engle Trust u/i/t dated
July 21, 1998(1)
----------- ---------- -------
TOTAL.................................... $19,586,000 $3,699,600 711,462
=========== ========== =======
</TABLE>
------------------------
(1) Wayne Ellis Engle is Gary D. Engle's brother, and each trust is for the
benefit of one of the children of Gary D. Engle.
The Company and the former Equis II stockholders determined the number of
shares to be issued in payment of the amounts due by putting a value of $5.20 on
a share of Common Stock of the Company and dividing that per share amount into
the amounts due. The total number of shares to be issued is 711,462. On June 6,
2000, the day the Board approved the payment in shares, the closing price of a
share of the Company's Common Stock on the Nasdaq Small Cap Market, where the
Company's Common Stock is traded, was $4.625 per share, and on the Record Date
the closing price was $ per share. If these share prices had been used
instead of the $5.20 share price agreed to by the former Equis II stockholders,
the total number of shares to be issued would be 799,914 and ,
respectively, rather than the 711,462 shares to be issued at the agreed upon
share price of $5.20.
If shareholder approval is obtained at the Meeting and the Company pays the
amounts due in shares, Mr. Engle will own or otherwise control approximately
39.3% of the Company's Common Stock, and Mr. Coyne will own approximately 19.9%
of the Company's Common Stock, based on their ownership of shares on the Record
Date.
VOTING TRUST; INVESTMENT COMPANY ACT.
The interests owned by Equis II in four Delaware business trusts are subject
to a voting trust dated December 16, 1999, of which Gary D. Engle is the sole
trustee. The voting trust gives Mr. Engle the authority to vote all the Class B
Subordinated Beneficiary Interests in the trusts owned by Equis II, which
represent approximately 62% of the outstanding voting beneficial interests in
each trust. The voting trust also gives Mr. Engle the authority to vote all the
shares of AFG ASIT Corporation, the Managing Trustee
9
<PAGE>
of each of the trusts, which are owned by Equis II. Equis II and Mr. Engle have
agreed that the voting trust will be terminated simultaneously with the payment
by the Company in shares of the amounts that were due under the notes on
May 31, 2000, if stockholder approval for the payment in shares is obtained at
the Meeting. Upon termination of the voting trust, the Company will no longer be
within the definition of an investment company under the Investment Company Act
of 1940.
RESALE OF COMPANY COMMON STOCK ISSUED IN THE TRANSACTION; REGISTRATION RIGHTS.
The shares of Common Stock of the Company to be issued to the former Equis
II stockholders will be issued pursuant to exemptions from the registration
requirements of federal and state securities laws. These shares may, therefore,
be resold without registration only as provided for by Rule 144 under the
Securities Act of 1933 or as otherwise provided under the Securities Act.
A registration rights agreement entered into in connection with the purchase
of Equis II obligates the Company, upon the request of stockholders who hold in
the aggregate at least 50% of the shares of Common Stock of the Company acquired
in connection with the sale of Equis II and at the Company's expense, to prepare
and file an appropriate registration statement under the Securities Act covering
some or all of the shares of Common Stock issued to them in the transaction. The
Company is not obligated to file a registration statement in response to a
request received before December 22, 2000, the one-year anniversary of the
closing of the purchase of 85% of Equis II, or to file more than one
registration statement at the request of the stockholders. The registration
rights agreement also provides that if the Company proposes to file a
registration statement under the Securities Act, the stockholders have the
right, subject to certain limitations, to require the Company to include in the
registration statement some or all of their shares of Common Stock of the
Company received in connection with the sale of Equis II.
ACCOUNTING TREATMENT.
The Company has accounted for its investment in Equis II using the equity
method of accounting. Upon termination of the voting trust, the Company will
consolidate Equis II and the underlying trusts.
FEDERAL INCOME TAX CONSIDERATIONS.
As long as the Company does not suffer an ownership change within the
meaning of Section 382(g) of the Internal Revenue Code, the Company will be
entitled to use its existing net operating losses against future income through
the remainder of the carryforward period for such net operating losses. Any such
ownership change, however, would result in a substantial reduction in the
Company's ability to use its net operating loss carryforwards. The use of Common
Stock of the Company to pay the amounts that were due to the former Equis II
stockholders on May 31, 2000, plus interest through August 31, 2000, will not,
in and of itself, cause the Company to suffer an ownership change within the
meaning of Section 382 of the Internal Revenue Code, and, accordingly, in the
absence of any other transactions affecting ownership of the Company's Common
Stock, the full amount of the Company's net operating loss carryforwards will be
available to offset future income.
10
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS.
SEMELE GROUP INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SEMELE EQUIS II ADJUSTMENTS PRO FORMA
GROUP INC. CORPORATION AND ELIMINATIONS CONSOLIDATED
----------- ----------- ---------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............... $ 3,331,850 $ 49,891 $ 25,758,285 (1) $ 29,140,026
Marketable securities................... -- -- 720,000 (1) 720,000
96,982 (1)
Marketable securities--affiliate........ -- -- (96,982)(3) --
Rent receivable......................... 91,005 -- 1,350,455 (1) 1,441,460
Accounts receivable--affiliate.......... 2,544 -- 542,614 (1) 545,158
Accounts receivable--other.............. -- -- 89,167 (1) 89,167
Interest receivable..................... -- -- 36,806 (1) 36,806
Interest receivable--affiliates......... 51,306 74,853 -- 126,159
462,353 (1)
Notes receivable--affiliates............ 1,036,205 1,901,000 (462,353)(2) 2,937,205
Due from affiliates..................... -- 2,082,302 (2,082,302)(4) --
Real estate held for development........ 10,177,251 -- -- 10,177,251
Loan receivable--Kettle Valley.......... -- -- 152,279 (1) 152,279
Investment in Kettle Valley............. -- -- 8,772,500 (1) 8,772,500
Investment in EFG/Kirkwood.............. 750,000 -- 8,318,880 (1) 9,068,880
639,813 (1)
Investment--affiliate................... -- -- (639,813)(5) --
Investment--other....................... -- -- 217,562 (1) 217,562
Investment in Trusts.................... -- (295,242) 295,242 (1) --
Special Beneficiary Interests........... 6,463,332 -- (6,463,332)(7) --
(18,176,349)(6)
(3,768,401)(6)
(1,157,582)(6)
Investment in Equis II Corporation...... 21,567,227 -- 1,535,105 (6) --
Investment in partnerships and trusts... 3,391,687 -- (457,501)(8) 2,934,186
Land.................................... 1,929,000 -- -- 1,929,000
Building, net of accumulated
depreciation.......................... 10,580,049 -- -- 10,580,049
80,593,031 (1)
Equipment, net of accumulated
depreciation.......................... -- -- 79,349 (9) 80,672,380
915,346 (1)
Other assets............................ 354,215 -- (79,349)(9) 1,190,212
----------- ---------- ------------ ------------
Total assets........................ $59,725,671 $3,812,804 $ 97,191,805 $160,730,280
=========== ========== ============ ============
</TABLE>
11
<PAGE>
SEMELE GROUP INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
JUNE 30, 2000
<TABLE>
<CAPTION>
SEMELE EQUIS II ADJUSTMENTS PRO FORMA
GROUP INC. CORPORATION AND ELIMINATIONS CONSOLIDATED
------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C>
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY (DEFICIT)
$ (462,353)(2)
Notes payable--affiliates............. $ 37,009,745 $ -- (3,600,000)(12) $ 32,947,392
Notes payable......................... 6,304,229 -- 61,533,347 (1) 67,837,576
Accrued interest--affiliates.......... 632,894 -- (75,600)(12) 557,294
Accrued interest...................... 37,020 -- 765,709 (1) 802,729
115,302 (1)
Due to affiliates..................... 2,153,420 -- (2,082,302)(4) 186,420
Accounts payable and accrued
expenses............................ 885,183 28,000 187,804 (1) 1,100,987
Deferred rental income................ 62,570 -- 132,795 (1) 195,365
Other liabilities..................... -- -- 3,013,206 (1) 3,013,206
Distributions payable................. 52,063 -- -- 52,063
------------- ---------- ------------ -------------
Total liabilities................. 47,137,124 28,000 59,527,908 106,693,032
------------- ---------- ------------ -------------
63,229,555 (1)
(639,813)(5)
100,794 (7)
Minority interest..................... 3,744,653 -- (457,501)(8) 65,977,688
------------- ---------- ------------ -------------
Total minority interest........... 3,744,653 -- 62,233,035 65,977,688
------------- ---------- ------------ -------------
Stockholders' equity (deficit)
Common Stock, $0.10 par value,
5,000,000 authorized,............. 3,675,600 (12)
2,590,185 shares issued before
debt repayment and 3,297,031
shares issued after debt
repayment....................... 173,022,115 -- (272,602)(3) 176,425,113
Common stock, $0.01 par value,
3,000 authorized and issued....... -- 30 (30)(6) --
Additional paid in capital.......... -- 4,207,129 (4,207,129)(6) --
(6,564,126)(7)
Deemed distribution................. -- -- (18,176,349)(6) (24,740,475)
(16,403)(1)
186,105 (3)
441,018 (6)
1,535,105 (6)
Accumulated deficit................. (147,969,246) (424,615) (1,157,582)(6) (147,405,618)
(10,485)(3)
Unrealized gain (loss).............. -- 2,260 (2,260)(6) (10,485)
Deferred compensation, 135,705
shares............................ (2,306,978) -- -- (2,306,978)
Treasury stock at cost, 866,503
shares............................ (13,901,997) -- -- (13,901,997)
------------- ---------- ------------ -------------
Total stockholders' equity
(deficit)....................... 8,843,894 3,784,804 (24,569,138) (11,940,440)
------------- ---------- ------------ -------------
Total liabilities, minority
interest and stockholders'
equity (deficit)................ $ 59,725,671 $3,812,804 $ 97,191,805 $ 160,730,280
============= ========== ============ =============
Book value per share, 1,723,682
shares outstanding before debt
repayment and 2,430,528 shares
outstanding after debt
repayment....................... $ 5.13 (12) $ (4.91)
============= =============
</TABLE>
12
<PAGE>
SEMELE GROUP INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
SEMELE EQUIS II ADJUSTMENTS PRO FORMA
GROUP INC. CORPORATION AND ELIMINATIONS CONSOLIDATED
----------- ----------- ---------------- ------------
<S> <C> <C> <C> <C>
Income:
Income from lending and investing
activities:
Income from investment in Trusts......... $ -- $1,274,442 $ (1,274,442)(1) $ --
Income from investment in Equis II....... 1,157,582 -- (1,157,582)(6) --
Income on investments.................... 119,881 7,061 866,255 (1) 993,197
----------- ---------- ------------ ------------
Total income from lending and investing
activities............................... 1,277,463 1,281,503 (1,565,769) 993,197
----------- ---------- ------------ ------------
Other income:
Lease revenue............................ 584,838 -- 9,204,526 (1) 9,789,364
22,928 (1)
Interest on notes
receivable--affiliates................. 75,944 42,102 (22,928)(10) 118,046
Gain on sale of equipment................ 3,780 -- 1,082,458 (1) 1,086,238
Gain on sale of marketable securities.... -- -- 215,198 (1) 215,198
Management fee income.................... -- 88,644 (88,644)(1) --
Other income............................. 99,614 -- 588,167 (1) 687,781
----------- ---------- ------------ ------------
Total other income......................... 764,176 130,746 11,001,705 11,896,627
----------- ---------- ------------ ------------
Total income............................... 2,041,639 1,412,249 9,435,936 12,889,824
----------- ---------- ------------ ------------
Expenses:
Expenses from property operating
activities:
Net loss from operations of real estate
held for development................... 141,231 -- -- 141,231
----------- ---------- ------------ ------------
Total expenses from property operating
activities............................... 141,231 -- -- 141,231
----------- ---------- ------------ ------------
Other expenses:
Stockholder expenses..................... 31,355 -- -- 31,355
Director fees, expenses, and insurance... 91,825 -- -- 91,825
Other professional fees.................. 240,266 -- -- 240,266
832,336 (1)
General and administrative............... 244,988 27,195 (26,693)(11) 1,077,826
Administrative
reimbursement--affiliate............... 78,478 -- -- 78,478
Management fees--affiliates.............. -- -- 430,955 (1) 430,955
(22,928)(10)
Interest expense--affiliates............. 1,499,633 19,931 (72,000)(12) 1,424,636
Interest expense......................... 261,774 103,642 2,637,068 (1) 3,002,484
Depreciation expense..................... 256,668 -- 5,381,962 (1) 5,638,630
(1,535,105)(6)
Amortization expense..................... 1,546,885 -- 121,993 (1) 133,773
1,121,451 (1)
Minority interest expense................ -- -- 26,693 (11) 1,148,144
----------- ---------- ------------ ------------
Total other expenses....................... 4,251,872 150,768 8,895,732 13,298,372
----------- ---------- ------------ ------------
Total expenses............................. 4,393,103 150,768 8,895,732 13,439,603
----------- ---------- ------------ ------------
Net income (loss).......................... $(2,351,464) $1,261,481 $ 540,204 $ (549,779)
----------- ---------- ------------ ------------
Net loss per share of common stock basic
(based on the weighted average number of
shares outstanding of 1,402,105;
2,094,413 after debt repayment).......... $ (1.68) (13) $ (0.26)
=========== ============
</TABLE>
13
<PAGE>
SEMELE GROUP INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
SEMELE EQUIS II ADJUSTMENTS PRO FORMA
GROUP INC. CORPORATION AND ELIMINATIONS CONSOLIDATED
----------- ----------- ---------------- ------------
<S> <C> <C> <C> <C>
Income:
Income from lending and investing
activities:
Managing Trustee income.................. $ -- $ 490,623 $ (490,623)(1) $ --
Income from Investment in Trusts......... -- 5,046,306 (5,046,306)(1) --
Income on investments.................... 289,257 8,922 2,697,379 (1) 2,995,558
----------- ---------- ------------ ------------
Total income from lending and investing
activities............................... 289,257 5,545,851 (2,839,550) 2,995,558
----------- ---------- ------------ ------------
Other income:
Rental income............................ 1,187,044 -- 33,584,000 (1) 34,771,044
46,235 (1)
Interest on notes
receivable--affiliates................. 313,455 131,250 (46,235)(10) 444,705
Gain on sale of equipment................ 24,750 -- 503,777 (1) 528,527
Management fee income.................... -- 121,535 (121,535)(1) --
Other income............................. 71,581 -- 1,044,464 (1) 1,116,045
----------- ---------- ------------ ------------
Total other income......................... 1,596,830 252,785 35,010,706 36,860,321
----------- ---------- ------------ ------------
Total income............................... 1,886,087 5,798,636 32,171,156 39,855,879
----------- ---------- ------------ ------------
Expenses:
Expenses from property operating
activities:
Net loss from operations of real estate
held for development................... 691,140 -- -- 691,140
----------- ---------- ------------ ------------
Total expenses from property operating
activities............................... 691,140 -- -- 691,140
----------- ---------- ------------ ------------
Other expenses:
Stockholder expenses..................... 34,473 -- -- 34,473
Director fees, expenses, and insurance... 180,715 -- -- 180,715
Other professional fees.................. 357,910 -- -- 357,910
2,326,097 (1)
General and administrative............... 864,955 44,441 (58,828)(11) 3,176,665
Administrative
reimbursement--affiliate............... 153,823 -- -- 153,823
Management fees--affiliates.............. -- -- 1,592,695 (1) 1,592,695
(46,235)(10)
Interest expense--affiliates............. 1,292,140 353,300 (3,600)(12) 1,595,605
Interest expense......................... 541,055 2,017,608 5,426,669 (1) 7,985,332
Depreciation expense..................... 517,378 -- 14,584,307 (1) 15,101,685
Amortization expense..................... 23,563 307,924 79,940 (1) 411,427
Recovery of losses on loans, notes,
advances and interest receivable....... (434,171) -- -- (434,171)
8,322,774 (1)
Minority interest expense................ -- -- 58,828 (11) 8,381,602
----------- ---------- ------------ ------------
Total other expenses....................... 3,531,841 2,723,273 32,282,647 38,537,761
----------- ---------- ------------ ------------
Total expenses............................. 4,222,981 2,723,273 32,282,647 39,228,901
----------- ---------- ------------ ------------
Net income (loss).......................... $(2,336,894) $3,075,363 $ (111,491) $ 626,978
=========== ========== ============ ============
Net income (loss) per share of common stock
basic (based on the weighted average
number of shares outstanding of
1,162,821; 1,179,892 after debt
repayment)............................... $ (2.01) (13) $ 0.53
=========== ============
</TABLE>
14
<PAGE>
SEMELE GROUP INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying pro forma consolidated financial statements of Semele
Group Inc. ("Semele") have been prepared to give effect to the change in
accounting method for Semele's investment in Equis II Corporation ("Equis II")
as a result of the assumed termination of the voting trust. As discussed below,
the termination of the voting trust will allow Semele to consolidate the
financial position and operating results of Equis II and the four Delaware
business trusts (AFG Investment Trust A, AFG Investment Trust B, AFG Investment
Trust C, and AFG Investment Trust D, collectively, the "Trusts").
The interests owned by Equis II in the Trusts are subject to a voting trust
dated December 16, 1999, of which Gary D. Engle is the sole trustee. The voting
trust gives Mr. Engle the authority to vote all of the Class B Subordinated
Beneficiary Interests owned by Equis II, which represent 62% of the outstanding
voting beneficial interests in each trust. The voting trust also gives
Mr. Engle the authority to vote all of the shares of AFG ASIT Corporation, the
Managing Trustee of each of the Trusts, which are owned by Equis II. As a
result, although Equis II (and indirectly Semele) owns a majority interest in
each of the Trusts, Mr. Engle has voting control on most matters which require
the consent of the beneficiaries of the Trusts, and he has management control of
each of the Trusts through his voting control of AFG ASIT Corporation. As a
result, Semele's investment in Equis II and Equis II's investment in the Trusts
have been accounted for, to date, using the equity method of accounting.
In order to prepare the pro forma consolidated financial statements, certain
assumptions and adjustments were made that are described in the notes below. For
purposes of preparing the pro forma consolidated balance sheet, it is assumed
that Semele's combination with Equis II occurred on June 30, 2000. For purposes
of preparing the pro forma consolidated statements of operations, it is assumed
that Semele's combination with Equis II occurred on January 1, 1999. However,
interest expense on that portion of the Equis II acquisition indebtedness, which
Semele is not seeking to repay by the issuance of common stock, has not been
adjusted to reflect its existence on January 1, 1999. Had such an adjustment
been recorded, it would have resulted in additional interest expense of
$1,229,366 during the year ended December 31, 1999 and a pro forma net loss for
that year of $602,388 ($0.51 per share).
NOTES TO THE PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30, 2000 AND PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
1. Adjustment to consolidate the accounts of the Trusts with Equis II in
connection the combination of Semele and Equis II.
2. Adjustment to eliminate an intercompany note receivable/payable pertaining
to an investment by AFG Investment Trust A in Semele as a result of an asset
exchange in 1997. (The adjustment described in Note 3 eliminates the
investment of AFG Investment Trust A in Semele.)
3. Adjustment to eliminate the investment of AFG Investment Trust A in Semele
common stock.
4. Adjustment to eliminate intercompany receivables and payables.
5. Adjustment to eliminate the investment of AFG Investment Trust D in limited
partnership interests of AFG International Limited Partnership ("AFG
International"). AFG International is owned approximately 51% by a
subsidiary of Semele and, therefore, the accounts of AFG International are
consolidated in Semele's financial statements.
6. Adjustment to eliminate Semele's investment in Equis II against the net
assets of Equis II. Upon the assumed termination of the voting trust, Semele
ceased recording this investment under the equity method of accounting and
consolidated the financial position and results of operations of Equis II.
The excess of the purchase price of the investment over the net assets
acquired is recorded as a deemed distribution to the former owners of Equis
II. During the six months ended June 30, 2000,
15
<PAGE>
SEMELE GROUP INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Semele had recorded income from and amortization expense related to its
investment in Equis II in the amount of $1,157,582 and $1,535,105,
respectively, under the equity method of accounting.
7. Adjustment to eliminate Semele's investment in certain Special Beneficiary
interests in the Trusts against the capital deficit of the Trusts
attributable to the Special Beneficiary interests. Upon the assumed
termination of the voting trust, Semele ceased recording this investment
under the equity method of accounting and consolidated the financial
position and results of operations of the Trusts. The excess of the carrying
value of the investment over the capital deficit is recorded as a deemed
distribution to the former owners of the Special Beneficiary interests.
8. Adjustment to eliminate Semele's investment in certain Class A beneficiary
interests in the Trusts.
9. Adjustment to conform the financial statement presentation and reclassify
equipment on operating lease, included in other assets on Semele's financial
statements, to equipment on the pro forma consolidated balance sheet.
10. Adjustment to eliminate interest income/expense between Semele and AFG
Investment Trust A pertaining to the intercompany note described in Note 2
above.
11. Adjustment to conform the financial statement presentation and reclassify
minority interest expense, included in general and administrative expenses
on Semele's financial statements, to minority interest expense on the pro
forma consolidated statement of operations.
12. Adjustment to record the issuance of 706,846 shares of Semele Common Stock
to the former stockholders of Equis II in payment of the principal amount of
$3,600,000 that was due on May 31, 2000, plus accrued interest through
June 30, 2000. The Company is seeking consent to issue 711,462 shares of
Semele Common Stock reflecting additional accrued interest from July 1, 2000
through August 31, 2000. The related interest expense has been eliminated
from Semele's pro forma consolidated statements of operations.
13. Assumes 692,308 shares of Semele Common Stock were issued on December 22,
1999 in payment of the indebtedness of $3,600,000 described in Note 12
above.
16
<PAGE>
RECOMMENDATION OF THE BOARD.
The Board has unanimously approved the issuance of 711,462 shares of the
Company's Common Stock to the former stockholders of Equis II in payment of
amounts due under notes issued by the Company in connection with the purchase by
the Company of Equis II, which was owned by Gary D. Engle, James A. Coyne and
certain trusts for the benefit of Mr. Engle's children. The Board recommends
that the stockholders adopt the following resolution which will be presented for
a vote of the stockholders at the Meeting:
RESOLVED, that the stockholders approve of the issuance of 711,462 shares of
the Company's Common Stock to the former stockholders of Equis II Corporation in
payment of the principal amount of $3,600,000 that was due on May 31, 2000, plus
accrued interest through August 31, 2000, of $99,600, under the promissory notes
issued in connection with the purchase by the Company of the stock of Equis II
Corporation, which was owned by Gary D. Engle, James A. Coyne and certain trusts
for the benefit of Mr. Engle's children.
VOTE REQUIRED. The affirmative vote of a majority of the shares present in
person or by proxy at the Meeting is required for approval of the issuance of
711,462 shares of the Company's Common Stock in connection with the payment of
amounts due to the former Equis II stockholders.
PROPOSAL 3: SELECTION OF INDEPENDENT AUDITOR
The Company's financial statements, including those for the fiscal year
ended December 31, 1999, are included in the annual report on Form 10-KSB being
furnished to all stockholders with this Proxy Statement. The year-end statements
have been audited by the independent firm of Ernst & Young LLP, which has served
as the Company's independent auditor since the fiscal year ended December 31,
1989. The Board believes that Ernst & Young LLP is knowledgeable about the
Company's operations and accounting practices and is well qualified to act in
the capacity of independent auditor. Therefore, the Board has selected Ernst &
Young LLP as the Company's independent auditor to examine its financial
statements for the fiscal year ended December 31, 2000. Although the selection
of an auditor does not require a stockholder vote, the Board believes it is
desirable to obtain the concurrence of the stockholders to this selection.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD.
The Board considers Ernst & Young LLP to be well-qualified, and recommends
that the stockholders adopt the following resolution which will be presented for
a vote of the stockholders at the Meeting:
RESOLVED, that the stockholders concur in the appointment, by the Board, of
Ernst & Young LLP to serve as the Company's independent auditor for the fiscal
year ended December 31, 2000.
VOTE REQUIRED. The affirmative vote of a majority of the shares present in
person or by proxy at the Meeting is required for the adoption of the foregoing
resolution.
17
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth information with respect to the Company's
executive officers. Each officer is elected annually by the directors and serves
until his successor is elected and qualified or until his death, resignation or
removal by the directors:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING
NAME AGE PAST 5 YEARS OFFICE
---- -------- ---------------------------------- -------------------------------
<S> <C> <C> <C>
Gary D. Engle.................. 51 See "Proposal 1--Election of Chairman and Chief Executive
Directors--Nominees" above Officer
James A. Coyne................. 39 See "Proposal 1--Election of President and Chief Operating
Directors--Continuing Directors" Officer
above
Michael J. Butterfield......... 41 Mr. Butterfield has been Chief Chief Financial Officer and
Financial Officer of the Company Treasurer
since June 2000 and Treasurer of
the Company since November 1997.
Mr. Butterfield is Executive
Vice President and Chief
Operating Officer 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, Senior
Vice President in July 1999 and
Executive Vice President and
Chief Operating Officer in June
2000. Prior to joining EFG,
Mr. Butterfield was an audit
manager with Ernst & Young LLP,
which he joined in 1987.
Mr. Butterfield was employed in
public accounting and industry
positions in New Zealand and
London, England, prior to coming
to the United States in 1987.
Mr. Butterfield attained his
Associate Chartered Accountant
(A.C.A.) professional
qualification in New Zealand and
has completed his C.P.A.
requirements in the United
States.
</TABLE>
18
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
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.
EXECUTIVE COMPENSATION.
Compensation paid to Messrs. Engle and Coyne for the years ended
December 31, 1999, 1998 and 1997, is as follows:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------
AWARDS PAYOUTS
OTHER ---------- --------------------------------
ANNUAL COMPENSATION ANNUAL RESTRICTED OPTIONS ALL OTHER
----------------------------------- COMPEN- STOCK SARS LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARDS (#) PAYOUTS SATION
--------------------------- -------- ---------- -------- -------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary D. Engle ............ 1999 $120,000(1) n/a n/a n/a n/a n/a n/a
Chairman and Chief 1998 $120,000(1) n/a n/a n/a n/a n/a n/a
Executive Officer 1997(2) $ 48,383(1) n/a n/a n/a 40,000(4) n/a n/a
James A. Coyne ........... 1999 $120,000(1) n/a n/a n/a n/a n/a n/a
President and Chief 1998 $120,000(1) n/a n/a n/a n/a n/a n/a
Operating Officer 1997(3) $ 48,383(1) n/a n/a n/a 40,000(4) n/a n/a
</TABLE>
------------------------
(1) Payment of these amounts has been deferred. The amounts are being held for
the account of the executive in the form of shares of Common Stock of the
Company in a rabbi trust. See discussion below.
(2) Mr. Engle became Chairman and Chief Executive Officer on November 10, 1997.
(3) Mr. Coyne became President and Chief Operating Officer on May 1, 1997.
(4) These options were canceled in connection with the purchase of 85% of Equis
II on December 22, 1999.
Mr. Engle serves as Chief Executive Officer of the Company pursuant to an
executive employment agreement dated November 10, 1997, and Mr. Coyne serves as
Chief Operating Officer of the Company pursuant to an executive employment
agreement dated May 1, 1997. The provisions of the two agreements (the
"Agreements") are identical.
Pursuant to the Agreements, the Company paid each executive a base salary of
$48,383 for services rendered to the Company in 1997. For 1998 and thereafter,
the Agreements provide that the Company will pay each executive a base salary at
the rate of not less than $120,000 per year, subject to adjustment by the Board
of Directors based upon the performance by the executive of his duties and the
financial performance of the Company. The Company paid each executive a base
salary of $120,000 for services rendered to the Company in 1999, which both of
the executives deferred. 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 (the "Incentive Plan")
established for the executives, unless the executive for any prospective period
elects to have his salary paid to him directly. The Agreements also provide that
the Company will defer, under the Incentive Plan on account of each executive
with respect to each fiscal year
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of the Company an incentive bonus amount equal to 6% of the Company's pre-tax
profits for that year, excluding results attributable to the Company's Rancho
Malibu property in Malibu, California. With respect to the Rancho Malibu
property, the Agreements provide that the Company will contribute on account of
each executive an incentive bonus amount equal to 10% of the amounts that the
Company realizes in excess of its carrying value for the property. Finally, the
Company acting through the compensation committee of the Board of Directors may
defer from time to time under the Incentive Plan additional discretionary
bonuses for the executives. To date, no incentive bonus amounts have been paid
to or deferred on account of either executive.
Pursuant to the Agreements and the Incentive Plan, Messrs. Engle and Coyne
each deferred his respective base salary for 1999, 1998 and 1997, which is being
held in the form of 55,906 and 55,905 shares of Common Stock, respectively, in a
rabbi trust established by the Company in connection with the Incentive Plan.
For 1997, the number of shares of Common Stock held for the account of each
executive was determined under the Incentive Plan by dividing the dollar amount
of the salary deferred by the closing price of a share of the Company's Common
Stock on December 30, 1997, the effective date of the Incentive Plan. For 1998
and thereafter, the number of shares of Common Stock held for the account of
each executive is determined under the Incentive Plan by dividing the dollar
amount of the salary deferred each month by the average of the closing prices of
a share of the Company's Common Stock for the last ten trading days of the
month. Each executive has also deferred his base salary for 2000.
Amounts attributable to an executive's salary deferred under the Incentive
Plan are not subject to forfeiture. Amounts attributable to an executive's
bonuses deferred under the Incentive Plan are forfeited upon the Company's
termination of the executive for cause under his Agreement. All amounts
forfeited are returned to the Company. The Agreement provides that "cause" means
that the Board of Directors of the Company has determined that (i) the executive
has repeatedly failed or refused to perform his duties under the Agreement and
the failure or refusal has continued for 30 days following written notice from
the Board, (ii) the executive has breached his covenant not to use or disclose
proprietary information of the Company or his covenant not to solicit employees
to leave the Company or (iii) the executive has committed fraud, embezzlement,
misappropriation of funds, malfeasance or other act of dishonesty against the
Company which has a material adverse affect on the Company.
Pursuant to the Agreements, incentive stock options to purchase 40,000
shares of Common Stock of the Company at an exercise price of $9.25 per share
were granted to each executive on December 30, 1997. These options were
cancelled in connection with the acquisition of 85% of Equis II on December 22,
1999.
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. For purposes of the
Agreement, a "Change-in-Control" means an occurrence whereby (i) any person,
partnership, corporation, entity or group (as that term is used in the
Securities Exchange Act of 1934), in any single transaction or series of related
transactions, directly or indirectly acquires 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
executive fails to be elected or re-elected to the Board, unless the executive
was not nominated with his consent. If the Company terminates an executive or
the Company
20
<PAGE>
elects not to renew an executive's Agreement within 24 months following a
Change-in-Control, the Company must pay to the executive in a lump sum an amount
equal to the greater of (i) three times the base salary paid to the executive in
the 36 months preceding the Change-in-Control and (ii) the base salary due to be
paid the executive through the end of the term (or renewal term) of his
Agreement. If the Company terminates the employment of an executive without
cause, all payments under his Agreement continue through the end of the then
term. If the Company elects not to renew an executive's Agreement at the end of
the original term or any renewal term, the executive will receive a termination
settlement equal to 12 months' salary and will continue to receive insurance
benefits for 12 months, unless such non-renewal occurs within 24 months
following a Change-in-Control, in which event the executive will receive the
benefits described above. Upon termination of an Agreement voluntarily by an
executive, upon the election by the executive not to renew his Agreement or by
the Company for cause, all payments and benefits under the Agreement cease on
the date of termination. If Mr. Engle ceases to be Chief Executive Officer and a
director of the Company and if Mr. Coyne ceases to be President and a director
of the Company, except if the executive resigns voluntarily or is terminated for
cause, the notes issued by the Company in the Equis II acquisition in the
original principal amount of $14,600,000 become immediately due and payable.
EXECUTIVE AND DIRECTOR STOCK OPTION PLAN.
No stock options were granted or exercised under the Company's 1994
Executive and Director Stock Option Plan by executive officers in 1999. During
1999, in connection with the acquisition of Equis II, Messrs. Engle and Coyne
delivered back to the Company, and the Company cancelled, the options that each
of them held to purchase 40,000 shares of Common Stock of the Company at an
exercise price of $9.25 per share. Currently, no executive officer holds any
options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 22, 1999, the Company purchased, for approximately
$19.6 million, 85% of the stock of Equis II from Gary D. Engle, President, Chief
Executive Officer and Chairman of the Board of Directors of the Company, James
A. Coyne, President and Chief Operating Officer of the Company, and certain
trusts established for the benefit of Mr. Engle's children. Equis II owns
Class B Interests in four Delaware business trusts (the "Trusts"). One of the
Trusts owns 20,969 shares of the Company's Common Stock and holds a note
receivable from the Company in the amount of $462,353 that matures in
April 2001. Through its ownership of Class B Interests, Equis II holds
approximately 62% of the voting interests in each of the Trusts, although it is
a not entitled to vote on certain matters, principally those involving
transactions with related parties. Equis II also owns the Managing Trustee of
the Trusts. The Managing Trustee has a 1% carried interest in the Trusts and
significant influence over the operations of the Trusts. Currently, however,
Mr. Engle has the authority to vote all the Class B Interests and the shares of
the Managing Trustee pursuant to a voting trust executed in connection with the
Equis II purchase. The voting trust will be terminated if stockholder approval
for payment in shares of the amounts that were due to the former Equis II
stockholders on May 31, 2000, is obtained at the meeting. See "Proposal 2."
In connection with the purchase of Equis II, the Company also purchased from
EFG, which is controlled by Mr. Engle, the Special Beneficiary Interests in the
Trusts for approximately $9.7 million. Also in connection with the purchase of
Equis II, the Company entered into a put and call agreement with Messrs. Engle
and Coyne and the Engle family trusts, which gave the Company a call right to
purchase, and gave the Equis II stockholders a put right to sell, for 510,000
shares of the Company's Common Stock, subject to stockholder approval, the 15%
of Equis II that Messrs. Engle and Coyne and the Engle family trusts continued
to own. Stockholder approval was obtained at the 1999 Annual Meeting on
March 6, 2000, and the purchase was completed on April 20, 2000.
The Company purchased the Special Beneficiary Interests from EFG for
$9,652,500 by delivery of a non-recourse note having a 10-year term that bears
interest at 7% per year. Interest and principal payments are required to be paid
only out of and to the extent of cash distributions paid to the Company
21
<PAGE>
on account of the Special Beneficiary Interests. In January 2000, the Company
received cash distributions of $3,102,000 on account of the Special Beneficiary
Interests and paid an equal amount of principal and accrued interest on the
note. The outstanding balance of the note was $6,634,544 at June 30, 2000.
The Company purchased 85% of the stock of Equis II by delivery of promissory
notes to the selling Equis II stockholders having a total principal value of
$19,586,000. In connection with the acquisition, Messrs. Engle and Coyne
delivered back to the Company, and the Company canceled, the options that each
of them held to purchase 40,000 shares of Common Stock of the Company at an
exercise price of $9.25 per share that were granted to them on December 30,
1997. A portion of the notes, having an aggregate principal amount of
$14,600,000, mature on October 31, 2005, and bear interest at the annual rate of
7%, of which 3% is due and payable on a current quarterly basis and 4% accrues
to the maturity date. Principal payments of $3,600,000, $4,000,000, $4,000,000
and $3,000,000 are due and payable on May 31, 2000, October 31, 2002, May 31,
2003, and the maturity date, respectively. The $14,600,000 of notes are
prepayable without penalty.
The balance of the promissory notes issued to the Equis II stockholders in
connection with the purchase of 85% of Equis II, which have a total principal
value of $4,986,000, have terms identical to the terms of promissory notes
payable by Messrs. Engle and Coyne to Equis II ($1,901,000) and to Old North
Capital Limited Partnership ($3,085,000). (The Company, through its subsidiary
Ariston Corporation, has a 98% limited partnership interest in Old North Capital
Limited Partnership.) Therefore, the Company is effectively the payee of notes
and accrued interest from Messrs. Engle and Coyne of $4,986,000, and it is the
payor of notes to Messrs. Engle and Coyne and the Engle family trusts in the
same amount. Of the $4,986,000 of promissory notes issued by the Company to the
selling Equis II stockholders, promissory notes having a total principal value
of $1,901,000 have terms identical to promissory notes payable to Equis II from
Messrs. Engle and Coyne. These notes bear interest at the annual rate of 7.5%
payable quarterly, and all outstanding principal and interest is due on
August 8, 2007. The $3,085,000 balance of the promissory notes issued by the
Company to the selling Equis II stockholders have terms identical to a
promissory note payable to Old North Capital Limited Partnership by
Messrs. Engle and Coyne, which bears interest at the annual rate of 11.5% and is
payable on demand. The Company intends to make the payments on the $4,986,000 of
promissory notes from the proceeds of payments made by Messrs. Engle and Coyne
on their indebtedness to Equis II and Old North Capital Limited Partnership. If
either individual fails to make timely payments, the Company will be relieved of
its obligations on the $4,986,000 of notes until the default is cured. On
January 26, 2000, Messrs. Engle and Coyne paid principal and accrued interest of
$2,082,302 to Old North Capital Limited Partnership in partial payment of their
respective notes. On the same date, the Company paid principal and accrued
interest to Messrs. Engle and Coyne of $2,082,302 in partial payment of the
notes issued to them by the Company in connection with the Equis II transaction.
The outstanding balance on the promissory notes issued to the Equis II
stockholders was $17,537,205 at June 30, 2000.
The $19,586,000 of promissory notes are general obligations of the Company
secured by a pledge to the selling Equis II stockholders of the shares of
Equis II owned by the Company. In the case of the $14,600,000 of promissory
notes, those notes issued to Mr. Engle and to the Engle family trusts become
immediately due and payable if Mr. Engle ceases to be the Chief Executive
Officer and a director of the Company, except if he resigns voluntarily or is
terminated for cause, and those notes issued to Mr. Coyne become immediately due
and payable if Mr. Coyne ceases to be the President and a director of the
Company, except if he resigns voluntarily or is terminated for cause, as cause
is defined in the executives' employment agreements with the Company.
On May 1, 1999, the Company and the Trusts formed EFG/Kirkwood Capital LLC
("EFG/ Kirkwood") for the purpose of acquiring preferred and common stock
interests in Kirkwood Associates Inc. ("KAI"). EFG/Kirkwood's investment
consists of a common stock interest in KAI of approximately 16% as well as
preferred stock and convertible debt. The Company purchased a Class B Interest
in EFG/Kirkwood and the Trusts purchased Class A Interests in EFG/Kirkwood.
Generally, the holders of Class A Interests are entitled to certain preferred
returns prior to distributions being paid to the
22
<PAGE>
Company, as the holder of the Class B Interest. KAI owns a ski resort, a local
public utility, and land that is held for development. The resort is located in
Kirkwood, California, and is approximately 30 miles from South Lake Tahoe,
Nevada. Subsequent to making its investment in KAI, EFG/Kirkwood made a 50%
investment in Mountain Springs Resorts LLC, an entity formed for the purpose of
acquiring an ownership interest in a Colorado ski resort. The Company's
investment in EFG/Kirkwood had a cost of $750,000.
On August 31, 1998, the Company acquired all the Common Stock of Ariston
Corporation, a Delaware corporation, for $12,450,000. The Company acquired
Ariston from EFG, which is controlled by Gary D. Engle. Ariston is a holding
company with two investments, (i) a 99% limited partnership interest in AFG
Eireann Limited Partnership ("AFG Eireann"), a Massachusetts limited partnership
with a tax interest in a diversified pool of lease contracts owned by an
institutional investor and (ii) a 98% limited partnership interest in Old North
Capital Limited Partnership ("ONC"), a Massachusetts limited partnership with
investments in cash and notes, equipment leases and limited partnerships which
are engaged in either equipment leasing or real estate, including the ownership
of two commercial buildings in Washington, D.C., and Sydney, Australia, that are
leased to an investment-grade educational institution. Messrs. Engle and Coyne
are both affiliated with ONC and Mr. Engle is affiliated with AFG Eireann.
Effective May 6, 1997, EFG entered into an agreement to provide
administrative services to the Company. Administrative costs, primarily salaries
and general and administrative expenses, of $153,823 in 1999, $152,201 in 1998
and $49,166 in 1997 were incurred by EFG on behalf of the Company for services
provided by EFG personnel on Company-related matters. As one of its
administrative services, EFG serves as the paying agent for general and
administrative costs of the Company. As part of providing this payment service,
EFG maintains a bank account on behalf of the Company.
On April 30, 1997, the Company entered into an Exchange Agreement (as
amended August 7, 1997) with Equis Exchange L.L.C., EFG and three partnerships
managed by EFG, AFG Hato Arrow Limited Partnership, AFG Dove Arrow Limited
Partnership and AIP/Larkfield Limited Partnership (the "Partnerships"). The
Partnerships are effectively controlled by Mr. Engle. Pursuant to the Agreement,
the Company issued 198,700 shares of the Company's Common Stock to the
Partnerships at a price of $15.00 per share and received cash proceeds of
$2,480,500, 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. The loan, which
originally matured on April 30, 2000, and which has been extended to April 30,
2001, bears interest at the rate of 10% per annum with mandatory principal
reductions prior to maturity if and to the extent net proceeds are received from
the sale or refinancing of the Company's Rancho Malibu property.
STOCKHOLDER PROPOSALS
Stockholder proposals for the 2001 Annual Meeting of Stockholders must be
received by the Company at its executive office in Westport, Connecticut, on or
prior to March 3, 2001, for inclusion in the Company's Proxy Statement for that
meeting. Any stockholder proposal must also meet the other requirements for
stockholder proposals as set forth in the rules of the SEC relating to
stockholder proposals.
OTHER MATTERS
As of the date of this Proxy Statement, no business other than that
discussed above is to be acted upon at the Meeting. If other matters not known
to the Board should, however, properly come before the Meeting, the persons
appointed by the signed proxy intend to vote it in accordance with their best
judgment.
YOUR VOTE IS IMPORTANT. THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. PLEASE PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
23
<PAGE>
APPENDIX A
SEMELE GROUP INC. AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the Audit Committee. The Committee
will review and reassess the charter at least annually. The Committee will be
appointed by the Board of Directors and will be composed of at least two
directors, a majority of whom are independent of management and the Company.
Members of the Committee will be considered independent if they have no
relationship that may interfere with the exercise of their independence from
management and the Company.
STATEMENT OF POLICY
The Audit Committee will provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community and others relating to the quality and
integrity of the Company's financial statements and the financial reporting
process, the systems of internal accounting and financial controls, and the
annual independent audit of the Company's financial statements. In so doing, it
is the responsibility of the Committee to maintain open communication between
the Committee, the independent auditors, and the management of the Company. In
discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outside counsel
or other experts for this purpose.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board, including
management's implementation of quality financial reporting, sound business risk
practices and ethical behavior, and report the results of their activities to
the Board. Management is responsible for preparing the Company's financial
statements, and the independent auditors are responsible for auditing those
financial statements. The policies and procedures of the Committee in carrying
out its responsibilities should remain flexible, in order to best react to
changing conditions and circumstances.
The principal recurring processes of the Audit Committee in carrying out its
oversight responsibilities will be the following:
- The Committee will have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of
the Company's stockholders. The Committee will have the ultimate authority
and responsibility to evaluate and, where appropriate, recommend the
replacement of the independent auditors. The Committee will discuss with
the auditors their independence from management and the Company and the
matters included in the written disclosures required by the Independence
Standards Board. Annually, the Committee will review and recommend to the
Board the selection of the Company's independent auditors, subject to
stockholder approval.
- The Committee will discuss with the independent auditors the overall scope
and plans for their respective audits including the adequacy of staffing
and compensation. Also, the Committee will discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs. Further, the
Committee will meet separately with
24
<PAGE>
the independent auditors, with and without management present, to discuss
results of their examinations.
- Prior to the filing of the Company's Quarterly Report on Form 10-QSB,
management and the independent auditors will review the interim financial
statements, and the independent auditors will communicate to, and the
Committee will discuss with the independent auditors, any issues raised
during the quarterly review. Also, the Committee will discuss any other
matters required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards. The Chair of the
Committee may represent the entire Committee for the purposes of this
review.
- The Committee will review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on
Form 10-KSB (or the annual report to stockholders if distributed prior to
the filing of Form 10-KSB), including their judgment about the quality,
not just acceptability, of accounting principles, the reasonableness of
significant judgments and the clarity of the disclosures in the financial
statements. Also, the Committee will discuss the results of the annual
audit and any other matters required to be communicated to the Committee
by the independent auditors under generally accepted auditing standards.
25
<PAGE>
SEMELE GROUP INC.
200 NYALA FARMS
WESTPORT, CONNECTICUT 06880
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Gary D. Engle and James A. Coyne,
and each of them, as Proxies, with the power to appoint their substitutes,
and hereby authorizes them to represent and vote, as designated below, all
the shares of Common Stock, par value $.10 per share ("Common Stock"), of
Semele Group Inc. (the "Company") held of record by the undersigned on
September 29, 2000, at the Annual Meeting of Stockholders when convened on
November 2, 2000, and any adjournment thereof.
THIS PROXY, IF PROPERLY EXECUTED AND RECEIVED IN TIME FOR VOTING,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY, IF PROPERLY EXECUTED AND RECEIVED IN
TIME FOR VOTING, WILL BE VOTED FOR PROPOSALS 1 THROUGH 3, AND IN ACCORDANCE
WITH THE JUDGMENT OF THE PERSONS ACTING UNDER THE PROXIES ON OTHER MATTERS
PRESENTED FOR A VOTE.
[x] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of FOR AGAINST PROPOSAL to elect two directors
Directors [ ] [ ] to hold office until the 2003
Annual Meeting of Stockholders,
or otherwise as provided in the
Company's By-Laws (check one box).
NOMINEES: Walter E. Auch, Sr.,
Gary D. Engle
For, except vote withheld from the following
nominee(s):
--------------------------------------------
2. Approval of FOR AGAINST ABSTAIN PROPOSAL to issue shares of the
Issuance of [ ] [ ] [ ] Company's Common Stock in payment
Stock of certain amounts due to
Gary D. Engle, James A. Coyne and
certain trusts for the benefit of
Mr. Engle's children (check one
box).
3. Selection of FOR AGAINST ABSTAIN PROPOSAL to concur in the
Independent [ ] [ ] [ ] appointment of Ernst & Young LLP
Auditor as the Company's independent
auditor for the fiscal year ending
December 31, 2000 (check one box).
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
THIS CARD USING THE ENCLOSED ENVELOPE
SIGNATURE(S) DATE
---------------------------------------- --------------------
NOTE: Sign exactly as name appears above. If joint tenant, both should
sign. If attorney, executor, administrator, trustee or guardian, give
full title as such. If corporation, please sign in corporate name by
President or authorized officer. If partnership, sign in full
partnership name by authorized person.
