<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934
For the quarterly period 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 1-6868
SIENA HOLDINGS, INC.
--------------------------------------
(FORMERLY LOMAS FINANCIAL CORPORATION)
(Exact name of registrant as specified in its charter)
Delaware 75-1043392
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
717 North Harwood, Dallas, Texas 75201
- ------------------------------------ -----------
(Address of principal executive offices) (Zip code)
(214) 665-6301
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
----- ------
On October 10, 1995, the Registrant and certain of its subsidiaries filed
bankruptcy proceedings under Chapter 11 of the Federal Bankruptcy Code in the
District of Delaware.
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of common
stock as of January 31, 1998: Common Stock, $.10 par value -- 4,000,000
shares.
<PAGE> 2
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - December 31, 1997 and June 30, 1997 . . 2
Statement of Consolidated Operations-Quarters and Six Months Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . 3
Statement of Consolidated Cash Flows - Six Months Ended
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 9
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . 10
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 12
</TABLE>
1
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEETS
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Reorganized Company
----------------------------------
December 31, 1997 June 30, 1997
----------------- --------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................................... $ 1,903 $ 1,941
Investment in real estate . ............................................. 4,800 4,800
Receivables . ........................................................... 327 242
Prepaid expenses and other assets ....................................... 116 68
---------------- --------------
$ 7,146 $ 7,051
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses ................................... $ 999 $ 990
Stockholders' equity:
Preferred stock -- ($1 par value, 1,000 shares authorized, 0 shares issued
and outstanding and 1,000 shares authorized, 0 shares issued and
outstanding, respectively)............................................. -- --
Common stock -- ($.10 par value, 15,000 shares authorized, 4,000 shares
issued and outstanding respectively).... .............................. 400 400
Other paid-in capital ................................................... 5,777 5,747
Accumulated deficit ..................................................... (30) (86)
---------------- --------------
6,147 6,061
---------------- --------------
$ 7,146 $ 7,051
================ ==============
</TABLE>
Note: The balance sheet at June 30, 1997, as presented is derived from the
audited financial statements at that date.
See notes to consolidated financial statements.
2
<PAGE> 4
STATEMENT OF CONSOLIDATED OPERATIONS (UNAUDITED)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
(IN THOUSANDS, EXCEPT NET LOSS PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Reorganized Predecessor Reorganized Predecessor
Company Company Company Company
--------------- -------------- ---------------- ----------------
Quarter Ended Quarter Ended Six Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
--------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Commissions and fees . . . . . . . . $ 61 $ 185 $ 212 $ 1,408
Interest . . . . . . . . . . . . . . 24 57 47 883
Investment . . . . . . . . . . . . . -- -- -- 16
Gain on sales . . . . . . . . . . . . -- 18 -- 188
Other . . . . . . . . . . . . . . . 115 78 162 381
--------------- -------------- ---------------- ----------------
200 338 421 2,876
--------------- -------------- ---------------- ----------------
Expenses:
Personnel . . . . . . . . . . . . . . 25 160 45 1,471
Depreciation and amortization . . . . -- -- -- 106
Other operating . . . . . . . . . . . 158 267 290 2,714
Loss on sale or disposal of assets. . -- -- -- 3,718
--------------- -------------- ---------------- ----------------
183 427 335 8,009
--------------- -------------- ---------------- ----------------
Income (loss) from continuing operations
before reorganization items . . . . 17 (89) 86 (5,133)
--------------- -------------- ---------------- ----------------
Reorganization items:
Interest earned on cash accumulated . -- 151 -- 2,905
Professional fees . . . . . . . . . . -- (1,045) -- (5,686)
Other bankruptcy expenses . . . . . . -- (35) -- (88)
--------------- -------------- ---------------- ----------------
-- (929) -- (2,869)
--------------- -------------- ---------------- ----------------
Income (loss) before federal income
tax . . . . . . . . . . . . . . . . . . 17 (1,018) 86 (8,002)
Federal income tax expense . . . . . . . (6) -- (30) --
--------------- -------------- ---------------- ----------------
Net income (loss) . . . . . . . $ 11 $ (1,018) $ 56 $ (8,002)
=============== ============== ================ =================
Earnings per common share:
Net income . . . . . . . . . . . . . $ 0.00 $ * $ 0.01 $ *
Earnings per common share - assuming
dilution:
Net income . . . . . . . . . . . . . $ 0.00 $ * $ 0.01 $ *
</TABLE>
See notes to consolidated financial statements.
* Per share amount is not meaningful due to reorganization.
3
<PAGE> 5
STATEMENT OF CONSOLIDATED CASH FLOWS (UNAUDITED)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Reorganized Predecessor
Company Company
---------------- ----------------
Six Months Ended Six Months Ended
December 31, December 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56 $ (8,002)
Adjustments to reconcile net income (loss) to net cash (used)
provided by operating activities before working capital changes:
Loss on sale or disposal of assets . . . . . . . . . . . . . . . . -- 3,718
Depreciation and amortization . . . . . . . . . . . . . . . . . . -- 106
Federal income tax expense . . . . . . . . . . . . . . . . . . . 30 --
---------------- ----------------
Cash (used) provided by operations before working capital changes . . 86 (4,178)
Net change in sundry receivables, payables, and other assets (124) (2,742)
---------------- ----------------
Net cash (used) provided by operating activities . . . . (38) (6,920)
---------------- ----------------
Investing activities:
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . -- (12,383)
Net sales of foreclosed real estate . . . . . . . . . . . . . . . . . -- 276
Net sales of fixed assets . . . . . . . . . . . . . . . . . . . . . . -- 25,374
Proceeds from assets sold to First Nationwide Mortgage Corp . . . . . -- 6,160
Distribution of LMUSA pursuant to reorganization plan . . . . . . . . . -- (191,557)
---------------- ----------------
Net cash (used) provided by investing activities . . . . -- (172,130)
---------------- ----------------
Financing activities:
Term debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . -- (11,632)
---------------- ----------------
Net cash used by financing activities . . . . . . . . . . -- (11,632)
---------------- ----------------
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . (38) (190,682)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 1,941 197,800
---------------- ----------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 1,903 $ 7,118
================ ================
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Federal income tax . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
DECEMBER 31, 1997
NOTE A -- BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Siena Holdings, Inc. ("SHI"), formerly Lomas Financial Corporation
("LFC"), and its subsidiaries (collectively, the "Company"). SHI's wholly-owned,
principal subsidiaries are Siena Housing Management Corp. and LLG Lands, Inc.
Prior to October 1, 1996, SHI's wholly-owned principal subsidiary was Lomas
Mortgage USA, Inc. ("LMUSA"), now known as Nomas Corp. As a result of the
Chapter 11 proceedings discussed in "Note B - Reorganization", the Company's
interest in LMUSA was extinguished effective October 1, 1996. LFC's plan of
reorganization was confirmed on October 4, 1996, but not effective until March
1997.
In accordance with the American Institute of Certified Public
Accountants' Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, the Company adopted fresh-start
accounting as of March 31, 1997, after all material conditions required by the
Plan were satisfied. The delay in the adoption of fresh-start accounting was
due to uncertainties surrounding the resolution of claims and intercompany
disputes between the LMUSA Creditors' Committee and the LFC Creditors'
Committee. In accordance with fresh-start accounting, the gain on discharge of
debt resulting from the bankruptcy proceedings was reflected on the predecessor
Company's financial statements for the period ended March 31, 1997. In
addition, the accumulated deficit of the predecessor Company at March 31, 1997
was eliminated, and, at April 1, 1997, the reorganized Company's financial
statements reflected no beginning retained earnings or deficit. See "Item 8.
Financial Statements and Supplementary Data" in the Company's annual Form 10-K
for the year ended June 30, 1997 for more details on fresh-start reporting.
Since April 1, 1997, the Company's financial statements have been
prepared as if it is a new reporting entity and a vertical black line has been
placed to separate post-reorganization operating results (the "Reorganized
Company") from pre-reorganization operating results (the "Predecessor Company")
since they are not prepared on a comparable basis. Under fresh-start
accounting, all assets and liabilities were restated to reflect their
reorganization value, which approximated fair value at the date of
reorganization.
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation at December 31, 1997 have been
included. Operating results for the quarter and six months ended December 31,
1997 are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual Form 10-K for the year ended June 30, 1997.
NOTE B -- REORGANIZATION
On October 10, 1995, LFC, two subsidiaries of LFC and LMUSA
(collectively the "Debtor Corporations") filed separate voluntary petitions for
reorganization under Chapter 11 of the Federal Bankruptcy Code in the District
of Delaware. The petitioning subsidiaries were Lomas Information Systems, Inc.
("LIS") and Lomas Administrative Services, Inc. ("LAS"). The Chapter 11 cases
were jointly administered until October 1, 1996. The Debtor Corporations
managed their businesses in the ordinary course as debtors-in-possession
subject to the control and
5
<PAGE> 7
supervision of the Federal Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court") from October 10, 1995 through October 4, 1996.
On October 23, 1995, a single creditors' committee (the "Joint
Creditors' Committee") was appointed by the U.S. Trustee for the District of
Delaware (the "U.S. Trustee") to represent creditors of all the Debtor
Corporations. On March 15, 1996, the U.S. Trustee revoked the appointment of
the Joint Creditors' Committee and appointed statutory committees of unsecured
creditors of LFC (the "LFC Creditors' Committee") and of LMUSA (the "LMUSA
Creditors' Committee").
The Debtor Corporations filed two separate proposed plans of
reorganization with the Bankruptcy Court. LFC, LIS and LAS (the "Joint
Debtors") filed their proposed joint plan of reorganization on April 8, 1996
and subsequently filed their first amended joint plan of reorganization on May
13, 1996 and their second amended joint plan of reorganization on July 3, 1996.
An order confirming the second amended joint plan of reorganization filed on
October 4, 1996 and a stipulation and order among the Joint Debtors and the LFC
Creditors' Committee regarding technical modifications to the plan of
reorganization and confirmation order filed on January 27, 1997 together with
the second amended joint plan of reorganization filed on July 3, 1996 are
collectively referred to herein as the "Joint Plan". LMUSA filed its own
proposed plan of reorganization on April 8, 1996 and subsequently filed its own
proposed first amended plan of reorganization on May 13, 1996 and its second
amended joint plan of reorganization on July 3, 1996 (the "LMUSA Plan" and
together with the Joint Plan, the "Plans"). In addition, on July 3, 1996, the
Joint Debtors filed with the Bankruptcy Court a proposed form of disclosure
statement relating to the Joint Plan (the "Joint Disclosure Statement"), and
LMUSA filed with the Bankruptcy Court a substantially similar proposed form of
disclosure statement (with the same Exhibits as the Joint Disclosure Statement)
relating to the LMUSA Plan (the "LMUSA Disclosure Statement" and together with
the Joint Disclosure Statement, the "Disclosure Statements").
The LMUSA Plan was confirmed by the Bankruptcy Court on October 1, 1996,
was discharged from the bankruptcy case, and changed its name to Nomas Corp.
As a result of LMUSA's reorganization plan, LFC distributed its interest in
LMUSA to LMUSA's creditors as of October 1, 1996. This distribution decreased
the Company's assets and liabilities by $293.3 million and $419.4 million,
respectively, and stockholders' deficit was increased by $126.1 million. The
operations of LMUSA are included in the Statement of Consolidated Operations
and the Statement of Consolidated Cash Flows through the date of distribution
of LMUSA.
The Joint Plan was confirmed on October 4, 1996, by the Bankruptcy
Court. The Joint Plan's effectiveness was conditioned on the satisfaction, or
waiver by the LFC Creditors' Committee, of certain conditions. On January 23,
1997, the LFC Creditors' Committee and the LMUSA Creditors' Committee signed an
agreement in respect of intercompany claims (the "Intercompany Agreement").
The Intercompany Agreement was approved by the Bankruptcy Court on February 21,
1997. As a result of the settlement, certain assets were transferred to the
Company on the effective date of March 7, 1997. The LFC Creditors' Committee
waived all other conditions and the Joint Plan became effective March 7, 1997
and the Company emerged with a new name, Siena Holdings, Inc. See Exhibit
10.1, Exhibit 10.2 and Exhibit 10.3 which are filed as exhibits to the
Company's annual Form 10-K for the year ended June 30, 1997.
6
<PAGE> 8
The following is a summary of the claims, excluding administrative, as
of the initial distribution date (as defined herein), (in thousands):
<TABLE>
<S> <C> <C>
Priority LIS claims - allowed . . . . . . . . . . . . . $ 234
Convenience claims - allowed . . . . . . . . . . . . . . 1
Unsecured Class 3 claims -
Bondholders - allowed . . . . . . . . . . . . . . . 145,433
Other claims - allowed . . . . . . . . . . . . . . . 1,366
MSP claims - disputed . . . . . . . . . . . . . . . . . . 8,803
------------------
$ 155,837
==================
</TABLE>
Pursuant to the Joint Plan, the Class 3 unsecured creditors will receive
a combination of cash and new common stock as settlement of their allowed
claim. On November 12, 1997, the initial distribution date (the "Initial
Distribution Date"), $12.5 million was disbursed to the distribution agent for
distribution to the Class 3 unsecured creditors. In addition, as assets in the
Creditors' Trust (see "Note D - Creditors' Trust") are liquidated, additional
distributions will be made to the Class 3 unsecured creditors. Also, on the
Initial Distribution Date pursuant to the Joint Plan and a decision by the LFC
Creditors' Committee, 4,000,000 shares of the new common stock were issued by
the stock transfer agent. For balance sheet presentation and earnings (loss)
per share, the 4,000,000 shares were considered issued as of April 1, 1997.
The estimated distribution is calculated based on fair values applied to
the assets upon adoption of fresh-start reporting and known liabilities. The
amounts ultimately distributed to the creditors are solely dependent on the
success of the Company and the amounts realized from the collection of assets
and the settlement of liabilities for both the Creditors' Trust and the
Litigation Trust. See "Note D - Creditors' Trust".
NOTE C -- ASSETS DISPOSED OF AND LIABILITIES ASSUMED
On October 2, 1995, LMUSA closed the sale to First Nationwide Mortgage
Corporation ("First Nationwide") of its GNMA servicing portfolio (approximately
$7.9 billion in unpaid principal balance of mortgage loans), its investment in
LMUSA Partnership and its loan production business including its mortgage loans
held for sale and the payment of the related warehouse lines of credit (the
"GNMA Sale"). On January 31, 1996, LMUSA closed the sale to First Nationwide
of its remaining mortgage servicing portfolio (approximately $12 billion in
unpaid principal balance of mortgage loans) and certain other assets pursuant
to Section 363 of the Bankruptcy Code (the "Section 363 Sale").
The above transactions resulted in a loss on sale or disposal of assets
in the Company's Statement of Consolidated Operations of $0 and $0 for the
quarters ended December 31, 1997 and 1996, respectively and $0 and $3.7 million
for the six months ended December 31, 1997 and 1996, respectively. These
transactions were subject to additional adjustments which are solely the
responsibility of Nomas Corp. as a result of the distribution of LMUSA by the
Company.
On July 16, 1996, the former Lomas headquarters and all other campus
buildings were sold through the Bankruptcy Court process for $23.5 million.
Pursuant to a stipulation and order among Travelers Insurance Company
("Travelers"), the Debtors', and the LMUSA Creditors' Committee, Travelers
received approximately $11.43 million of the proceeds. The net cash received
was deposited into a joint account for the Company and LMUSA. In conjunction
with the intercompany claims settlement process in March, 1997, the Company
received $1.3 million and LMUSA was granted the remainder plus accrued interest
from the joint account. Additionally, substantially all of the remaining
furniture, fixtures and equipment of the Company and LMUSA were sold by a
liquidator during July and August 1996.
7
<PAGE> 9
NOTE D -- CREDITORS' TRUST
The Joint Plan established a creditors' trust (the "Creditors' Trust")
which the Company serves as trustee. The Creditors' Trust holds the
nonreorganized assets of the Company in trust pending their disposition and/or
distribution to creditors in accordance with the terms of the Joint Plan. The
Creditors' Trust is organized for the sole purpose of liquidating the non-
reorganized assets and will terminate on October 4, 2001 unless an extension is
approved by the Bankruptcy Court. The assets and liabilities of the Creditors'
Trust are not reflected in the accompanying Consolidated Balance Sheet as the
Company is not the beneficiary of the Trust. Accordingly, revenues and
expenses related to the Creditors' Trust assets and liabilities since April 1,
1997, are not reflected in the accompanying Statement of Consolidated
Operations. The allocation of costs between the Creditors' Trust and the
Company is based on management's estimate of each entity's proportional share
of costs. Gains and losses from the Creditors' Trust are solely for the
creditors' benefit and the Company has no risk of loss on the assets or
liabilities. The amounts ultimately distributed to the creditors are solely
dependent on the amounts realized from the collection of the trust assets and
settlement of trust liabilities.
The following is a summary of the nonreorganized assets and liabilities
held in the Creditors' Trust as of December 31, 1997 (in thousands)
(unaudited):
<TABLE>
<S> <C>
Cash held in reserve for payment of administrative expenses and other trust
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,860
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . (1,517)
--------------
Cash available for future trust expenses . . . . . . . . . . . . . . . . . . . $ 343
==============
Cash held in reserve for payment of certain claims . . . . . . . . . . . . . . . . . $ 54
==============
MSP Trust cash held in reserve pending settlement of MSP claims and expenses . . . . $ 6,708
==============
Net assets available for future distribution to Class 3 creditors:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,048
Subordinated promissory note receivable pursuant to bankruptcy court
settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,100
Investments:
Two limited partnerships which fund institutional mortgage loans . . . . . 1,060
Residual cash in the MSP Trust pending settlement of MSP claims and
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,503
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . 2,584
--------------
Net assets available for future distribution to Class 3 creditors . $ 12,732 *
==============
</TABLE>
* Pursuant to the Joint Plan, an additional $300,000 of cash can be
set aside for payment of additional trust expenses, if needed.
On January 14, 1998, the Creditors' Trust received $8.1 million pursuant
to the final settlement of a subordinated promissory note. The settlement was
approved by the Bankruptcy Court on December 29, 1997.
Also on December 29, 1997, the Bankruptcy Court approved the procedures
to be used in settlement of the MSP litigation (see "Part II Other Information,
Item 1. Legal Proceedings"). Under the approved procedures the Creditors'
Trust and the beneficiaries of the MSP will share the assets remaining in the
trust equally after payment of certain legal expenses and MSP trust fees. The
procedures include application to federal district court for approval of a
class action and settlement. If the settlement is approved, the reserve for
MSP claimants would be $3.9 million as of December 31, 1997, thus increasing
the funds available for distribution to Class 3 unsecured creditors by $2.4
million. The ultimate amount to be distributed to MSP claimants may differ
from the above, pending the outcome of all bankruptcy and legal proceedings.
NOTE E -- EARNINGS (LOSS) PER SHARE
During the second quarter of 1998 the Company adopted SFAS 128 "Earnings
Per Share" ("FAS 128") which replaces the presentation of primary earnings per
share ("EPS") with a presentation of basic EPS and requires dual presentation
of basic and diluted EPS. The Company retroactively applied FAS 128 to the
quarter ended September 30, 1997. Adoption of FAS 128 did not have a material
impact on the earnings per share.
Earnings per common share for the quarter and six months ended December
31, 1997 was computed using the 4,000,000 shares reserved for issuance and
ultimately issued on November 12, 1997. The effects of outstanding options are
included in the calculation of earnings per common share - assuming dilution to
the extent that they are dilutive to earnings. Effective December 1, 1997 the
Company granted options under the Siena Holdings, Inc. Nonqualified Stock
Option Agreements (the "Nonqualified Stock Option Agreements"), included as
Exhibits 10.3 and 10.4 to this quarterly report Form 10-Q as of December 31,
1997, which are considered in the calculation of earnings per common share -
assuming dilution. Earnings (loss) per share information for the predecessor
is not presented because of the revision of the Company's capital structure
pursuant to the Plan of Reorganization makes such information not meaningful.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
In accordance with the American Institute of Certified Public
Accountants' Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, the Company adopted fresh-start
accounting as of March 31, 1997. See "Note A - Basis of Financial Statement
Presentation". The accumulated deficit of the predecessor Company at March 31,
1997 was eliminated, and, at April 1, 1997, the reorganized Company's financial
statements reflected no beginning retained earnings or deficit. Since April 1,
1997, the Company's financial statements have been prepared as if it is a new
reporting entity and a vertical black line has been placed to separate the
operating results of the Predecessor Company from those of the Reorganized
Company since they are not prepared on a comparable basis.
On October 1, 1996, the Company distributed its interest in LMUSA to
LMUSA's creditors pursuant to LMUSA's reorganization plan. Effective March 7,
1997, the Company settled its intercompany disputes with LMUSA resulting in the
transfer of assets and writeoff of receivables and payables with a net increase
in retained earnings of $16.8 million. See "Note B - Reorganization".
The operating results of the Company during the quarters and six
months ended December 31, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
Reorganized Predecessor Reorganized Predecessor
Company Company Company Company
------------ ------------ ------------ ------------
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating income (loss):
Mortgage banking ............................. $ -- $ -- $ -- $ (1,340)
Assisted care management ......................... 39 138 160 265
Other ........................................ 123 127 176 384
------------ ------------ ------------ ------------
162 265 336 (691)
Expenses:
General and administrative ................... (145) (354) (250) (724)
Loss on sale or disposal of assets ........... -- -- -- (3,718)
------------ ------------ ------------ ------------
(145) (354) (250) (4,442)
------------ ------------ ------------ ------------
Income (loss) from operations before reorganization
items ............................................ 17 (89) 86 (5,133)
Reorganization items---net .......................... -- (929) -- (2,869)
------------ ------------ ------------ ------------
Income (loss) before federal income tax expense ..... 17 (1,018) 86 (8,002)
Federal income tax expense .......................... (6) -- (30) --
------------ ------------ ------------ ------------
Net income (loss) .................... $ 11 $ (1,018) $ 56 $ (8,002)
============ ============ ============ ============
</TABLE>
The operating results presented above for the quarter and six months
ended December 31, 1997 are not comparable to those for the same periods in
fiscal year 1997. The first quarter of fiscal 1997 included the operations of
LMUSA prior to the distribution of LMUSA from the Company on October 1, 1996.
During that period, LMUSA recorded an additional loss on the sale of assets of
$3.7 million as a result of an adjustment to the calculation of interest on the
receivables from First Nationwide and an agreed upon settlement of the final
purchase price on the GNMA sale. Additionally, during the quarter and six months
ended December 31, 1996, the Company recorded net reorganization
9
<PAGE> 11
items of $0.9 million and $2.9 million, respectively. At fresh start on April
1, 1997, certain assets were transferred to the Creditors' Trust. See "Note D
- - Creditors' Trust". This resulted in lower income for the quarter and six
months ended December 31, 1997 than for the same periods in the prior fiscal
year as it relates to those assets that were transferred to the Creditors'
Trust.
The decreased profitability of the assisted care management operations
from $39,000 and $160,000 for the quarter and six months ended December 31,
1997, respectively, as compared to $138,000 and $265,000 for the quarter and six
months ended December 31, 1996, respectively, is primarily attributable to the
decreased management fee received by Siena Housing Management, Inc. ("SHM"), a
wholly-owned subsidiary of the Company. SHM manages and maintains an assisted
care facility in Houston, Texas under a management agreement into which it
entered on June 27, 1977 with Treemont, Inc. ("Treemont"). Treemont elected to
begin significant capital improvements for fire protection that are to be funded
by operations. These expenditures decreased the second quarter management fee
received by SHM and will continue to result in lower management fees until the
completion of the project which is expected to be finished by the end of fiscal
year 1998. After December 31, 1997, Treemont will no longer pay the Company for
pension benefits paid to the employees of SHM. The reduction in Treemont expense
will reduce the effect of the capital expenditures on SHM revenue during fiscal
year 1998 and increase profitability thereafter. Refer to the Company's annual
report on Form 10-K for the fiscal year ended June 30, 1997 for more information
on the Company's assisted care business and management contract.
The Company reported other operating income of $123,000 and $176,000 for
the quarter and six months ended December 31, 1997, respectively, including an
overhead allocation for certain expenses charged to the Creditors' Trust of
$114,000. The remaining income consisted of investment and dividend income.
Other operating income for the quarter and six months ended December 31, 1996
included investment and dividend income related to assets that were transferred
to the Creditors' Trust as of April 1, 1997, and thus not comparable to the
quarter and six months ended December 31, 1997.
The Company has reviewed the real estate interests held in its subsidiary
LLG Lands, Inc. and has begun to market the property zoned for multi-family use.
The Company holds approximately 150 net acres of undeveloped land in Allen,
Texas. Of this total, approximately 37 net acres are zoned for multi-family use,
the remaining net acreage is zoned for single family use and commercial use. The
Company will attempt to increase the values of the property through the
re-zoning and relocation of zoning in certain tracts. Refer to the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1997 for more
information on the Company's real estate investment.
General and administrative expenses decreased from the same period in
fiscal year 1997 as a result of the significant decrease in the number of
employees or consultants and related occupancy and other office expenses.
Effective December 1, 1997, the Board of Directors of the Company
approved the separate retention for its two officers, John P. Kneafsey - Chief
Executive Officer and W. Joseph Dryer - President, (the "Retention Agreements")
included as Exhibits 10.1 and 10.2, respectively, to this Form 10-Q for the
quarter ended December 31, 1997. The Retention Agreements, with a five year
term, provide for the payment of: (1) a monthly retainer, (2) severance upon
early termination of the contract by the Company, and (3) a success bonus based
upon certain performance criteria. The Retention Agreements also awarded stock
options to Mr. Kneafsey and Mr. Dryer pursuant to the SHI Nonqualified Stock
Option Agreements included as Exhibits 10.3 and 10.4, respectively, to this Form
10-Q for the quarter ended December 31, 1997. The stock options resulted in
related expense of $1,000 for the quarter ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the only liabilities of the Company were
accounts payable and accrued expenses which will be paid from current operating
cash available as of December 31, 1997.
10
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company had a Management Security Plan ("MSP") for certain of its
employees. According to the MSP, key employees of the Company who participated
in the MSP are to be paid, in the event of retirement or death, a portion of the
employee's salary which such employee chose as the basis for computation of
retirement or death benefits. The Company ceased new enrollments in 1985. The
LFC Creditors' Committee has argued that the funds contributed to the MSP are
held in a trust (the "MSP Trust") subject to the claims of creditors in the
event of insolvency.
Because of the bankruptcy filings by the Company and LMUSA, no
contributions, payments or actuarial evaluation have been made to the MSP since
the petition date. On June 11, 1996, the Bankruptcy Court authorized the LFC
Creditors' Committee to commence and prosecute an action against the trustee
seeking the return of funds held in such MSP Trust. The LFC Creditors' Committee
contends that the funds in the trust constitute property of the Company's
estate. However, the trustee, Bankers Trust, has asserted that the trustee is
obligated to hold the assets for the sole benefit of the MSP participants. In
addition, during the course of litigation, the Unofficial Committee of MSP
Beneficiaries filed a motion to intervene in the adversary proceeding which the
Bankruptcy Court granted, and filed an action against Bankers Trust to turn over
to the MSP beneficiaries the assets held in the MSP Trust.
On April 29, 1997, pursuant to a Stipulation and Order Regarding Reserve
for MSP Claimants, the Bankruptcy Court authorized the Company to maintain a
single distribution reserve in the amount of $6.3 million in order to satisfy
any obligations to the MSP Claimants under the Joint Plan. On December 31, 1997,
the balance of the MSP Trust was $8.2 million. Pursuant to the above
stipulation, the Creditors' Trust assumed $6.3 million of the MSP Trust balance
to be held in reserve for MSP claimants. The remainder of the MSP Trust, $1.9
million, net of a reserve of $0.4 million for MSP related legal fees and
expenses, is included as an asset in the Creditors' Trust available for
distribution to the Class 3 unsecured creditors. The preliminary MSP disputed
claims total $8.8 million. On December 29, 1997, the Bankruptcy Court approved
procedures for a settlement whereby the MSP claimants would receive fifty
percent of the MSP Trust balance after deducting certain legal fees and MSP
trust expenses. If this settlement is approved by a federal district court, the
reserve for MSP claimants would be $3.9 million, thus increasing the funds
available for distribution to the Class 3 unsecured creditors by $2.4 million.
The ultimate amount to be distributed to the MSP claimants may differ from the
above, pending the outcome of all bankruptcy and legal proceedings.
The LFC Committee also commenced an adversary proceeding to recover the
funds in the rabbi trust for the Company's Excess Benefit Plan (the "EBP Trust")
on September 20, 1996, having obtained the Bankruptcy Court's approval for such
action on September 9, 1996. Bankers Trust, the trustee of the EBP Trust, agreed
that the Company is entitled to the funds held in the EBP Trust, and
accordingly, funds totaling $0.6 million were received by the Company in June,
1997 and subsequently transferred to the Creditors' Trust. The remaining funds
were received in July 1997.
On August 28, 1996 the Bankruptcy Court authorized the LFC Committee to
commence an action against Residential Information Services Limited Partnership
("RIS") and certain of its affiliates and related companies. In a complaint
dated September 30, 1996, the LFC Committee commenced such an action. On January
10, 1997, the LFC Committee filed an amended complaint. The amended complaint
contains, inter alia, claims for breach of contract, fraud, tortious
interference with contract, turnover and quantum meruit against RIS and the
other defendants in connection with RIS' acquisition of substantially all of the
assets of Lomas Information Systems, Inc. in December 1994. The amended
complaint seeks substantial damages from the defendants together with interest,
costs and attorneys' fees and punitive damages. This case was settled and
proceeds of $5.4 million were received in June 1997 by the Company and
subsequently transferred, net of $234,000 for certain administrative claims, to
the Creditors' Trust.
11
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit
Number
------
(10.1) Retention Agreement effective December 1, 1997 by and between SHC
and John P. Kneafsey
(10.2) Retention Agreement effective December 1, 1997 by and between SHC
and W. Joseph Dryer
(10.3) Siena Holdings, Inc. Nonqualified Stock Option Agreement dated
December 1, 1997 by and between SHC and John P. Kneafsey
(10.4) Siena Holdings, Inc. Nonqualified Stock Option Agreement dated
December 1, 1997 by and between SHC and W. Joseph Dryer
(11) Computation of Earnings (Loss) Per Share
(27) Financial Data Schedule (submitted to the Securities and Exchange
Commission for its information).
(b) Reports on Form 8-K: None.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIENA HOLDINGS, INC.
----------------------------
(Registrant)
Date: February 11, 1998 By: /S/ W. JOSEPH DRYER
-----------------------------
President
Date: February 11, 1998 By: /S/ W. JOSEPH DRYER
-----------------------------
Principal Accounting Officer
13
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(10.1) Retention Agreement effective December 1, 1997 by and between SHC
and John P. Kneafsey
(10.2) Retention Agreement effective December 1, 1997 by and between SHC
and W. Joseph Dryer
(10.3) Siena Holdings, Inc. Nonqualified Stock Option Agreement dated
December 1, 1997 by and between SHC and John P. Kneafsey
(10.4) Siena Holdings, Inc. Nonqualified Stock Option Agreement dated
December 1, 1997 by and between SHC and W. Joseph Dryer
(11) Computation of Earnings (Loss) Per Share
(27) Financial Data Schedule (submitted to the Securities and Exchange
Commission for its information).
</TABLE>
<PAGE> 1
EXHIBIT 10.1
RETENTION AGREEMENT
This Retention Agreement (this "Agreement"), dated and effective as of the 1st
day of December, 1997 is by and between Siena Holdings, Inc., a Delaware
corporation ("Company"), and John P. Kneafsey, an individual residing in
Phoenix, Maryland, ("Officer").
In consideration of the mutual covenants set forth herein, Company and Officer,
intending to be legally bound, hereby agree as follows:
1. Relationship. Company hereby retains Officer, and Officer hereby
accepts such retention, upon the terms and conditions set forth in
this Agreement. Such retention relationship shall continue for the
stated term of this Agreement, as described in Section 7 hereof, or
until the earlier termination of such relationship and this Agreement
pursuant to Section 5 hereof.
2. Position and Responsibilities of Officer. Officer shall be retained as
the Chief Executive Officer of Company and shall be stationed in
Maryland or such other locations which during the term of this
Agreement, may be designated by Company and approved by Officer.
Officer shall devote approximately one-half of his business time and
attention to the business of Company. Officer shall make himself
available in person to render services on a regular basis equivalent
to four days a week, allowing for reasonable and customary vacations
and taking into account the nature of the services required; and
provided that Officer shall be required to render no less than 20
hours per week on average. Officer, shall, subject to the supervision,
direction and control of the Board of Directors of Company (the
"Board") and the provisions of the Certificate of Incorporation, as
amended from time to time in accordance with the provisions thereof,
and Bylaws, as amended from time to time in accordance with the
provisions thereof, of Company, manage, supervise and control such
business, and shall devote his best efforts to the faithful
performance of his duties on behalf of Company; provided, however,
that it is the understanding of parties that Officer shall be entitled
to engage in other business, professional and fiduciary obligations,
including but not limited to those currently being pursued by Officer
to the extent that such interests and obligations do no materially
interfere with Officer's performance of his duties for Company.
Officer's duties shall generally be those assigned to and customarily
performed by the Chief Executive Officer of a company and shall
include, specifically without limitation, management of Siena Housing
Management operations, LLG Lands real estate, provision of information
to trustee of the certain litigation trust("Litigation
Trustee")created pursuant to the Second Amended Joint Chapter 11 Plan
of Lomas Financial Corporation, Lomas Information Systems, Inc. and
Lomas Administrative Services, Inc.("Plan") and post-confirmation
creditor's committee as authorized in the confirmation order to the
Plan to
-1-
<PAGE> 2
execute the terms of the Plan, maintenance of existing records, and
general supervision of the corporate and legal affairs of the Company
and the LFC Creditors Trust while the Company is Trustee.
3. Compensation. As approved by the Board of Directors in its meeting of
November 24, 1997; for all services rendered by Officer pursuant to
this Agreement, Company shall pay to Officer, and Officer shall accept
as full compensation hereunder, the following:
(A) Retainer. Officer shall receive a monthly retainer of not
less than $10,666.67, with such adjustments thereto as may be
determined by the Board in its sole discretion. If Officer's base
annual retainer is increased at any time, it shall not thereafter be
decreased during the term of this Agreement, unless such decrease is
the result of a general reduction affecting the base salaries of all
other executive officers of the Company.
(B) Bonus. Such bonuses to be paid as part of the deal-maker
portion of the incentive plan which will pay a percentage of the deal
value established by the Board of Directors or the appreciated value
above the fair market value of the asset; which, as a result of the
fresh start adjustments is the same as book value on June 30, 1997.
Officer shall be paid 6% of the gross appreciation value above book
value or 6% of the deal value, upon the close of such transaction.
Such bonus provision shall apply to the Company and its subsidiaries
and shall be applied to the Company's results as Trustee of the LFC
Creditors Trust.
(C) Stock Options. Officer shall receive 271,750
non-qualified stock options which will vest at a rate of 20% per 12
months of service. Upon the event of any change-in-control of the
Company the stock options shall be 100% vested. The Board of Directors
may from time to time grant additional stock options or other forms of
long-term incentive compensation arrangements to the Officer. The
privilege to participate in these grants is at the discretion of the
Board of Directors and the stipulations regarding the granting of
these awards and their exercise by the Officer will be defined in
separate agreements or in other plans or actions of the Board of
Directors.
(D) Insurance. Company will provide Officer with coverage
under a customary insurance policy with respect to certain errors,
omission and acts of directors and officers as supplied to the Board
of Directors. Failure to provide such a policy shall constitute
constructive termination of Officer by Company and shall entitle
Officer to a termination payment in accordance with paragraph 6.
4. Reimbursement of Expense. Officer shall be entitled to reimbursement
for reasonable expenses incurred by Officer in the course of rendering
services to Company under this agreement.
5. Termination. The Retention relationship between Officer and Company
created hereunder shall terminate before the expiration of the stated
term of this Agreement upon the occurrence of any of the following
events:
-2-
<PAGE> 3
(a) Termination for Cause. The following events, which for
purposes of this Agreement shall constitute "cause" for
termination:
(i) the willful breach by Officer of any provision of
Sections 1 or 2 (including but not limited to a refusal to follow
lawful directives of the Board);
(ii) any act of fraud or dishonesty by Officer with respect
to any aspect of Company's business;
(iii) the illegal use of drugs by Officer during the term of
this Agreement that, in the determination of the Board, substantially
interferes with Company's business;
(iv) substantial failure of performance by Officer, which is
repeated or continued after written notice to Officer of such failure,
and which is reasonably determined by the Board to be materially
injurious to the business or interests of Company;
(v) conviction of Officer by a court of competent
jurisdiction of a felony or of a crime involving moral turpitude; or
(vi) death of Officer or disability because of injury,
illness, or other incapacity (physical or mental) which for more than
90 days renders Officer incapable of performing the essential
functions of the position contemplated by the Agreement herein.
Any notice of discharge shall describe with reasonable specificity the cause of
causes for the termination of Officer's retention, as well as the effective
date of the termination (which effective date may be the date of such notice).
If Company terminates Officer's retention for any of the reasons set forth
above in this Section 5(a), Company shall have no further obligations hereunder
from and after the effective date of termination (other than as set forth
below) and shall have all other rights and remedies available under this or any
other agreement and at law or in equity.
(b) Voluntary Termination. Officer provides 60 days written
notice to Company of his intent to terminate the retention
relationship with Company. Company retains the right after proper
notice of Officer's voluntary termination to require Officer to cease
retention immediately; however, in such event, Company shall remain
obligated to pay Officer his retention payment during the 60-day
notice period.
6. Compensation Upon Termination.
(a) General. Upon the termination of Officer's retention
under this Agreement before the expiration of the stated term hereof
for any reason, Officer shall be entitled to the compensation earned
by him before the effective date of termination, as provided in
Section
-3-
<PAGE> 4
3 hereof, prorated on the basis of the number of full days of service
rendered by Officer during the month to the effective date of
termination. Upon the event of any termination pursuant to this
section the Company the stock options identified above shall be 100%
vested.
(b) Termination Payment. If such termination is the result of
the discharge of Officer by Company for any reason other than cause
(as defined in Section 5(a) hereof), then Officer shall be entitled to
receive on the effective date of termination as a termination payment
an amount equal to the retention payment (excluding bonuses) that
Officer would have received for the next 12 months following
termination adjusted up to take into consideration taxes that would
have to paid on the Termination Payment. For the purpose of
determining the amount of such termination payment, "retention
payment" shall be deemed to be the average level of Officer's
retention payment that is established in accordance with Section 3(a)
hereof for the 90 day period ending on the effective date of
termination. On the last day of service, the termination contemplated
herein shall be paid in cash on the date of expiration or the
termination. If Officer's retention hereunder terminates because of
the death of the Officer, all amounts that are due to him under the
terms of this Agreement shall be paid to his administrators, personal
representatives, heirs and legatees, as may be appropriate.
(c) Termination For Cause or Voluntary Termination. If the
retention relationship hereunder is terminated by Company for cause or
voluntarily by Officer, Officer shall not be entitled to any
termination payment, other than pursuant to the terms of paragraph 3.
(d) Survival. The provisions of Section 6 hereof shall
survive the termination of the retention relationship hereunder and
this Agreement to the extent necessary or reasonably appropriate to
effect the intent of the parties hereto as expressed in such
provisions.
7. Term. The stated term of this Agreement and the retention relationship
created hereunder shall be and remain in effect for a period of five
years from the date hereof. The Board, upon notice to Officer not less
that 60 days prior to the expiration of the term of this Agreement
shall have the option to extend this Agreement for successive 6 month
periods under terms and retention payment to be mutually agreed to by
Company and Officer unless this Agreement is sooner terminated in
accordance with Section 5 hereof.
8. Relocation Expense. In the event that the corporate office of the
Company is moved at the direction of the Board to a location which is
more that 100 miles away from Maryland, and as a result and in order
to be able to effectively perform his services hereunder, Officer
relocates to the vicinity of such relocation, Company shall reimburse
Officer for all of his reasonable and documented relocation expenses.
9. Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of the provisions of this Agreement
and to exercise all other rights existing in its favor. The parties
hereto
-4-
<PAGE> 5
agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party
may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive
relief in order to enforce or prevent any violations of the provisions
of this Agreement.
10. Attorney's Fees. If any action at law or equity, including any action
for declaratory or injunctive relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall
be entitled to recover reasonable attorneys' fees from the
non-prevailing party, which fees may be set by the court in the trial
of such action, or may be enforced in a separate action brought for
that purpose, and which fees shall be in addition to any other relief
which may be awarded.
11. Assignment. This Agreement is personal to Officer and may not be
assigned in any way by Officer without the prior written consent of
Company. This Agreement shall not be assignable or delegated by
Company. Nothwithstanding the preceding sentence, this Agreement may
be assigned or delegated by Company to any subsidiary of Company. The
rights and obligations under this Agreement shall inure to the benefit
of and shall be binding upon the heirs, legatees, administrators and
personal representatives of Officer and upon the successors,
representatives and assigns of Company.
12. Severability and Reformation. The parties hereto intend all provisions
of this Agreement to be enforced to the fullest extent permitted by
law. If, however, any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future law, such
provision shall be fully severable, and this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable
provision were never a part hereof, and the remaining provisions shall
remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its termination.
13. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, mailed by certified mail
(return receipt requested) or sent by overnight delivery service,
cable, telegram, facsimile transmission or telex to the parties at the
following addresses or at such other address as shall be specified by
the parties by like notice:
If to Company: Siena Holdings, Inc.
717 N. Harwood Street, Suite 1110
Dallas, Texas 75201
If to Officer: John P. Kneafsey
12 Lochwynd Court
Phoenix, Maryland 21131-1210
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on
-5-
<PAGE> 6
the fourth calendar day after posting, in the case of notice so given by
overnight delivery service, on the date of actual delivery and, in the case of
notice so given by cable, telegram, facsimile transmission, telex or personal
delivery, on the date of actual transmission or, as the case may be, personal
delivery.
14. Further Actions. Whether or not specifically required under the terms
of this Agreement, each party hereto shall execute and deliver such
documents and take such further actions as shall be necessary in order
for such party to perform all of his or its obligations specified
herein or reasonably implied from the terms hereof.
15. GOVERNING LAW AND VENUE. THIS AGREEMENT IS MADE IN THE STATE OF TEXAS,
AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF SAID STATE.
16. Arbitration. Except for matters involving suits requesting injunctive
relief, any controversy or claim arising out of or relating to this
Agreement, or any breach hereof, shall be settled by arbitration. The
parties hereto agree that any such controversy shall be submitted to
three arbitrators in accordance with the Rules of Commercial
Arbitration of the American Arbitration Association. The arbitrators
shall be governed by and shall apply the substantive law of the State
of Texas in making their determination, and their ruling shall be
binding and conclusive upon the parties hereto. All arbitrations
(should any be required) shall occur in Texas.
17. Entire Agreement and Amendment. This Agreement contains the entire
understanding and agreement between the parties, and supersedes any
other agreement between Officer and Company, whether oral or in
writing, with respect to the subject matter hereof. This Agreement may
not be altered, amended, or rescinded, nor may any of its provisions
be waived, except by an instrument in writing signed by both parties
hereto or, in the case of an asserted waiver, by the party against
whom the waiver is sought to be enforced.
-6-
<PAGE> 7
18. Counterparts. This Agreement may be executed in counterparts, with the
same effect as if both parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together
and shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Company:
Siena Holdings, Inc.
By:
---------------------------------
Name: W. Joseph Dryer
Title: President
Officer:
- ------------------------------------
John P. Kneafsey
-7-
<PAGE> 1
EXHIBIT 10.2
RETENTION AGREEMENT
This Retention Agreement (this "Agreement"), dated and effective as of the 1st
day of December, 1997 is by and between Siena Holdings, Inc., a Delaware
corporation ("Company"), and W. Joseph Dryer, an individual residing in Dallas,
Texas, ("Officer").
In consideration of the mutual covenants set forth herein, Company and Officer,
intending to be legally bound, hereby agree as follows:
1. Relationship. Company hereby retains Officer, and Officer hereby
accepts such retention, upon the terms and conditions set forth in
this Agreement. Such retention relationship shall continue for the
stated term of this Agreement, as described in Section 7 hereof, or
until the earlier termination of such relationship and this Agreement
pursuant to Section 5 hereof.
2. Position and Responsibilities of Officer. Officer shall be retained as
the President of Company and shall be stationed in Dallas, Texas or
such other locations which during the term of this Agreement, may be
designated by Company and approved by Officer. Officer shall devote
approximately one-half of his business time and attention to the
business of Company. Officer shall make himself available in person to
render services on a regular basis equivalent to four days a week,
allowing for reasonable and customary vacations and taking into
account the nature of the services required; and provided that Officer
shall be required to render no less than 20 hours per week on average.
Officer, shall, subject to the supervision, direction and control of
the Board of Directors of Company (the "Board") and the provisions of
the Certificate of Incorporation, as amended from time to time in
accordance with the provisions thereof, and Bylaws, as amended from
time to time in accordance with the provisions thereof, of Company,
manage, supervise and control such business, and shall devote his best
efforts to the faithful performance of his duties on behalf of
Company; provided, however, that it is the understanding of parties
that Officer shall be entitled to engage in other business,
professional and fiduciary obligations, including but not limited to
those currently being pursued by Officer to the extent that such
interests and obligations do no materially interfere with Officer's
performance of his duties for Company. Officer's duties shall
generally be those assigned to and customarily performed by the
President of a company and shall include, specifically without
limitation, management of Siena Housing Management operations, LLG
Lands real estate, provision of information to trustee of the certain
litigation trust("Litigation Trustee")created pursuant to the Second
Amended Joint Chapter 11 Plan of Lomas Financial Corporation, Lomas
Information Systems, Inc. and Lomas Administrative Services,
Inc.("Plan") and post-confirmation
-1-
<PAGE> 2
creditor's committee as authorized in the confirmation order to the
Plan to execute the terms of the Plan, maintenance of existing
records, and general supervision of the corporate and legal affairs of
the Company and the LFC Creditors Trust while the Company is Trustee.
3. Compensation. As approved by the Board of Directors in its meeting of
November 24, 1997; for all services rendered by Officer pursuant to
this Agreement, Company shall pay to Officer, and Officer shall accept
as full compensation hereunder, the following:
(A) Retainer. Officer shall receive a monthly retainer of not
less than $12,000, with such adjustments thereto as may be determined
by the Board in its sole discretion. If Officer's base annual retainer
is increased at any time, it shall not thereafter be decreased during
the term of this Agreement, unless such decrease is the result of a
general reduction affecting the base salaries of all other executive
officers of the Company.
(B) Bonus. Such bonuses to be paid as part of the deal-maker
portion of the incentive plan which will pay a percentage of the deal
value established by the Board of Directors or the appreciated value
above the fair market value of the asset; which, as a result of the
fresh start adjustments is the same as book value on June 30, 1997.
Officer shall be paid 4% of the gross appreciation value above book
value or 4% of the deal value, upon the close of such transaction.
Such bonus provision shall apply to the Company and its subsidiaries
and shall be applied to the Company's results as Trustee of the LFC
Creditors Trust.
(C) Stock Options. Officer shall receive 163,000
non-qualified stock options which will vest at a rate of 20% per 12
months of service. Upon the event of any change-in-control of the
Company the stock options shall be 100% vested. The Chief Executive
Officer and/or the Board of Directors may from time to time grant
additional stock options or other forms of long-term incentive
compensation arrangements to the Officer. The privilege to participate
in these grants is at the discretion of the Chief Executive Officer
and/or the Board of Directors and the stipulations regarding the
granting of these awards and their exercise by the Officer will be
defined in separate agreements or in other plans or actions of the
Chief Executive Officer and/or the Board of Directors.
(D) Benefits and Perquisites. Officer shall be entitled to
retain the Airpass previously purchased by Lomas Financial Corporation
in the Officer's name.
(E) Insurance. Company will provide Officer with coverage
under a customary insurance policy with respect to certain errors,
omission and acts of directors and officers as supplied to the Board
of Directors. Failure to provide such a policy shall constitute
constructive termination of Officer by Company and shall entitle
Officer to a termination payment in accordance with paragraph 6.
4. Reimbursement of Expense. Officer shall be entitled to reimbursement
for reasonable expenses incurred by Officer in the course of rendering
services to Company under this agreement.
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5. Termination. The Retention relationship between Officer and Company
created hereunder shall terminate before the expiration of the stated
term of this Agreement upon the occurrence of any of the following
events:
(a) Termination for Cause. The following events, which for
purposes of this Agreement shall constitute "cause" for
termination:
(i) the willful breach by Officer of any provision of
Sections 1 or 2 (including but not limited to a refusal to follow
lawful directives of the Board);
(ii) any act of fraud or dishonesty by Officer with respect
to any aspect of Company's business;
(iii) the illegal use of drugs by Officer during the term of
this Agreement that, in the determination of the Board, substantially
interferes with Company's business;
(iv) substantial failure of performance by Officer, which is
repeated or continued after written notice to Officer of such failure,
and which is reasonably determined by the Board to be materially
injurious to the business or interests of Company;
(v) conviction of Officer by a court of competent
jurisdiction of a felony or of a crime involving moral turpitude; or
(vi) death of Officer or disability because of injury,
illness, or other incapacity (physical or mental) which for more than
90 days renders Officer incapable of performing the essential
functions of the position contemplated by the Agreement herein.
Any notice of discharge shall describe with reasonable specificity the cause of
causes for the termination of Officer's retention, as well as the effective
date of the termination (which effective date may be the date of such notice).
If Company terminates Officer's retention for any of the reasons set forth
above in this Section 5(a), Company shall have no further obligations hereunder
from and after the effective date of termination (other than as set forth
below) and shall have all other rights and remedies available under this or any
other agreement and at law or in equity.
(b) Voluntary Termination. Officer provides 60 days written
notice to Company of his intent to terminate the retention
relationship with Company. Company retains the right after proper
notice of Officer's voluntary termination to require Officer to cease
retention immediately; however, in such event, Company shall remain
obligated to pay Officer his retention payment during the 60-day
notice period.
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6. Compensation Upon Termination.
(a) General. Upon the termination of Officer's retention
under this Agreement before the expiration of the stated term hereof
for any reason, Officer shall be entitled to the compensation earned
by him before the effective date of termination, as provided in
Section 3 hereof, prorated on the basis of the number of full days of
service rendered by Officer during the month to the effective date of
termination. Upon the event of any termination pursuant to this
section the Company the stock options identified above shall be 100%
vested.
(b) Termination Payment. If such termination is the result of
the discharge of Officer by Company for any reason other than cause
(as defined in Section 5(a) hereof), then Officer shall be entitled to
receive on the effective date of termination as a termination payment
an amount equal to the retention payment (excluding bonuses) that
Officer would have received for the next 12 months following
termination adjusted up to take into consideration taxes that would
have to paid on the Termination Payment. For the purpose of
determining the amount of such termination payment, "retention
payment" shall be deemed to be the average level of Officer's
retention payment that is established in accordance with Section 3(a)
hereof for the 90 day period ending on the effective date of
termination. On the last day of service, the termination contemplated
herein shall be paid in cash on the date of expiration or the
termination. If Officer's retention hereunder terminates because of
the death of the Officer, all amounts that are due to him under the
terms of this Agreement shall be paid to his administrators, personal
representatives, heirs and legatees, as may be appropriate.
(c) Termination For Cause or Voluntary Termination. If the
retention relationship hereunder is terminated by Company for cause or
voluntarily by Officer, Officer shall not be entitled to any
termination payment, other than pursuant to the terms of paragraph 3.
(d) Survival. The provisions of Section 6 hereof shall
survive the termination of the retention relationship hereunder and
this Agreement to the extent necessary or reasonably appropriate to
effect the intent of the parties hereto as expressed in such
provisions.
7. Term. The stated term of this Agreement and the retention relationship
created hereunder shall be and remain in effect for a period of five
years from the date hereof. The Board, upon notice to Officer not less
that 60 days prior to the expiration of the term of this Agreement
shall have the option to extend this Agreement for successive 6 month
periods under terms and retention payment to be mutually agreed to by
Company and Officer unless this Agreement is sooner terminated in
accordance with Section 5 hereof.
8. Relocation Expense. In the event that the corporate office of the
Company is moved at the direction of the Board to a location which is
more that 100 miles away from Dallas, Texas, and, as a result and in
order to be able to effectively perform his services hereunder,
Officer relocates to the vicinity of such relocation, Company shall
reimburse Officer for all of his
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reasonable and documented relocation expenses.
9. Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of the provisions of this Agreement
and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive
relief in order to enforce or prevent any violations of the provisions
of this Agreement.
10. Attorney's Fees. If any action at law or equity, including any action
for declaratory or injunctive relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall
be entitled to recover reasonable attorneys' fees from the
non-prevailing party, which fees may be set by the court in the trial
of such action, or may be enforced in a separate action brought for
that purpose, and which fees shall be in addition to any other relief
which may be awarded.
11. Assignment. This Agreement is personal to Officer and may not be
assigned in any way by Officer without the prior written consent of
Company. This Agreement shall not be assignable or delegated by
Company. Nothwithstanding the preceding sentence, this Agreement may
be assigned or delegated by Company to any subsidiary of Company. The
rights and obligations under this Agreement shall inure to the benefit
of and shall be binding upon the heirs, legatees, administrators and
personal representatives of Officer and upon the successors,
representatives and assigns of Company.
12. Severability and Reformation. The parties hereto intend all provisions
of this Agreement to be enforced to the fullest extent permitted by
law. If, however, any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future law, such
provision shall be fully severable, and this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable
provision were never a part hereof, and the remaining provisions shall
remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its termination.
13. Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered personally, mailed by certified mail
(return receipt requested) or sent by overnight delivery service,
cable, telegram, facsimile transmission or telex to the parties at the
following addresses or at such other address as shall be specified by
the parties by like notice:
If to Company: Siena Holdings, Inc.
717 N. Harwood Street, Suite 1110
Dallas, Texas 75201
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If to Officer: W. Joseph Dryer
3401 Lakebrook Drive
Plano, Texas 75093
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by cable, telegram, facsimile transmission,
telex or personal delivery, on the date of actual transmission or, as the case
may be, personal delivery.
14. Further Actions. Whether or not specifically required under the terms
of this Agreement, each party hereto shall execute and deliver such
documents and take such further actions as shall be necessary in order
for such party to perform all of his or its obligations specified
herein or reasonably implied from the terms hereof.
15. GOVERNING LAW AND VENUE. THIS AGREEMENT IS MADE IN THE STATE OF TEXAS,
AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF SAID STATE.
16. Arbitration. Except for matters involving suits requesting injunctive
relief, any controversy or claim arising out of or relating to this
Agreement, or any breach hereof, shall be settled by arbitration. The
parties hereto agree that any such controversy shall be submitted to
three arbitrators in accordance with the Rules of Commercial
Arbitration of the American Arbitration Association. The arbitrators
shall be governed by and shall apply the substantive law of the State
of Texas in making their determination, and their ruling shall be
binding and conclusive upon the parties hereto. All arbitrations
(should any be required) shall occur in Texas.
17. Entire Agreement and Amendment. This Agreement contains the entire
understanding and agreement between the parties, and supersedes any
other agreement between Officer and Company, whether oral or in
writing, with respect to the subject matter hereof. This Agreement may
not be altered, amended, or rescinded, nor may any of its provisions
be waived, except by an instrument in writing signed by both parties
hereto or, in the case of an asserted waiver, by the party against
whom the waiver is sought to be enforced.
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<PAGE> 7
18. Counterparts. This Agreement may be executed in counterparts, with the
same effect as if both parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together
and shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Company:
Siena Holdings, Inc.
By:
--------------------------------
Name: John Kneafsey
Title: Chairman of the Board and
Chief Executive Officer
Officer:
- -----------------------------------
W. Joseph Dryer
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EXHIBIT 10.3
NON-QUALIFIED STOCK OPTION AGREEMENT
SIENA HOLDINGS, INC.
1. GRANT OF OPTION. Siena Holdings, Inc., a Delaware corporation (the
"Company" or "Siena") or its Subsidiaries, hereby grants to:
JOHN P. KNEAFSEY
(the "Grantee" "You" or "Your")
an option to purchase from the Company a total of 271,750 full shares
("Stock Options") of Ordinary Shares ("Common Stock") of the Company
at $0.92 per share in the amounts, during the periods, and upon the
terms and conditions set forth in this agreement. The Date of Grant
of this Stock Option is DECEMBER 1, 1997. This is a NON-QUALIFIED
STOCK OPTION.
2. SUBJECT TO PLAN. This Stock Option and its exercise are subject to
the terms and conditions of this Agreement. The capitalized terms
used in this Agreement are defined below. This Stock Option is
subject to any rules which have been or may be made by the Board or
the Committee and communicated to you in writing.
(A) Board. The Board of Directors (or equivalent governing authority)
of the Company, as appointed by the Chairman of Siena.
(B) Change in Control. A "Change in Control" shall mean a change in
control of a nature that would be required to be reported in response
to item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act as such Schedule, Regulation and Act were in effect on
the date of adoption of this Plan by the Board, assuming that such
Schedule, Regulation and Act applied to the Company, provided that
such a change in control shall be deemed to have occurred at such time
as:
(I) any "person" (as that term is used in Section 13(d) and
14(d)(2) of the Exchange Act) (other than Siena Holdings, Inc.
or an affiliate of Siena Holdings, Inc.) becomes, directly or
indirectly, the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of securities representing a 30% or
more of the combined voting power for election of members of
the Board of the then outstanding voting securities of the
Company or any successor of the Company;
(II) during any period of two (2) consecutive years or less,
individuals who at the beginning of such period constituted
the Board of the Company cease, for any reason, to constitute
at least a majority of the Board, unless the election or
nomination for
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election of each new member of the Board was approved by a
vote of at least two-thirds of the members of the Board then
still in office who were members of the Board at the beginning
of the period;
(III) the equity-holders of the Company approve any merger or
consolidation to which the Company is a party as a result of
which the persons who were equity-holders of the Company
immediately prior to the effective date of the merger or
consolidation (and excluding, however, any shares held by any
party to such merger or consolidation and their affiliates)
shall have beneficial ownership of less than 50% of the
combined voting power for election of members of the Board (or
equivalent) of the surviving entity following the effective
date of such merger or consolidation; or
(IV) the equity-holders of the Company approve any merger or
consolidation as a result of which the equity interests in the
Company shall be changed, converted or exchanged (other than a
merger with a wholly-owned subsidiary of the Company) or any
liquidation of the Company or any sale or other disposition of
50% or more of the assets or earnings power of the Company;
(C) Code. The Internal Revenue Code of 1986, as amended.
(D) Compensation Committee or Committee. The Committee, which shall
be comprised of three or more members who shall be appointed by the
Board to administer this Agreement, which the Board shall have the
power to fill vacancies on the Committee arising by resignation,
death, removal or otherwise. In the absence of a Committee, reference
thereto shall be to the Board.
(E) Common Stock. Siena Holdings, Inc. Class A Common Stock, which
the Company is authorized to issue or may in the future be authorized
to issue.
(F) Company. Siena Holdings, Inc. ("Siena"), its subsidiaries and any
successor corporation.
(G) Disability. Any complete and permanent disability as defined in
Section 22(e)(3) of the Code and determined in accordance with the
procedures set forth in the regulations thereunder.
(H) Officer. Any officer of the Company or any Parent or Subsidiary,
who, in the opinion of the Committee, is one of a select group of
executive officers, other officers or other key management personnel
of the Company or any Parent or Subsidiary who is in a position to
contribute materially to the continued growth and development and to
the continued financial success of the Company or any Parent or
Subsidiary, including executive officers and officers who are members
of the Board.
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<PAGE> 3
(I) Exchange Act. The Securities Exchange Act of 1934, as amended.
(J) Fair Market Value. The closing sales price of the Common Stock as
reported or listed on a national securities exchange on any relevant
date for valuation, or, if there is no such sale on such date, the
applicable prices as so reported on the nearest preceding date upon
which such sale took place. In the event the shares of Common Stock
are not listed on a national securities exchange, the Fair Market
Value of such shares shall initially; be based upon the book value of
the Company on June 30, 1997 which includes adjustments to reflect the
market value of the assets and liabilities pursuant to generally
accepted accounting principles, thereafter shall be determined by the
Committee in its sole discretion.
(K) Grantee. Any Officer or Director of the Company who in the
opinion of the Committee performs significant services for the benefit
of the Company and who is granted a Stock Option under this Agreement.
(L) Involuntary Termination. The termination of Grantee's retention
by Siena other than for death, Disability, Retirement, Terminated for
Cause, Terminated for Good Reason, or in the event of a Change of
Control (as defined in Section 2(B) above).
(M) Retirement. The termination of retention by the Company or any
Parent or Subsidiary constituting retirement as determined by the
Committee.
(N) Stock Option. A Non-Qualified Stock Option granted by the
Committee to a Grantee under this Agreement.
(O) Subsidiary. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section
424(f) of the Code.
(P) Termination for Cause. An Officer shall be deemed Terminated for
Cause if he or she is terminated as a result of a breach of his or her
written retention agreement.
(Q) Termination for Good Reason. The resignation of an Officer shall
be deemed to be a Termination for Good Reason if the Officers
resignation is within two years of a Change in Control as defined in
Section 2(B) above, caused by and within ninety (90) days of the
following: (I) without the express written consent of the Officer, any
duties that are assigned which are materially inconsistent with the
Officer's position, duties and status with Siena at the time of the
Change in Control; (ii) any action by Siena which results in a
material diminution in the position, duties or status of the Officer
with Siena at the time of the Change in Control or any transfer or
proposed transfer of the Officer for any extended period to a location
outside his principal place of retention at the time of the Change in
Control without his consent; (iii) the base annual compensation of the
Officer, as same may be hereafter be increased from time to time, is
reduced; or (iv) without limiting the generality or effect of the
foregoing, Siena fails to comply with any of its material obligations
hereunder.
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<PAGE> 4
3. VESTING: TIME OF EXERCISE. Except as specifically provided in this
Agreement and subject to certain terms, restrictions and conditions
set forth in this Agreement, this Stock Option is exercisable in the
following cumulative installments:
First installment. Up to 20% of the total Stock Options
at any time following the first
anniversary of the Date of Grant.
Second installment. Up to an additional 20% of the total
Stock Options at any time following
the second anniversary of the Date
of Grant.
Third installment. Up to an additional 20% of the total
Stock Options at any time following
the third anniversary of the Date of
Grant.
Forth installment. Up to an additional 20% of the total
Stock Options at any time following
the forth anniversary of the Date of
Grant.
Fifth installment. Up to an additional 20% of the total
Stock Options at any time following
the fifth anniversary of the Date of
Grant.
4. TERM; FORFEITURE. This Stock Option, and all unexercised Stock
Options granted hereunder, will terminate and be forfeited at the
first of the following to occur;
(A) 5:00 pm on December 1, 2007; or
(B) 5:00 pm on the date which is twelve (12) months following
termination of service due to death, Disability or six (6) months
after Retirement for Stock Options vested at termination; or
(C) 5:00 pm on the date which is twelve (12) months following
termination of service due to death, Disability or six (6) months
after Retirement for Stock Options that vest after termination; or
(D) 5:00 pm on the 31st day after the day of any other termination of
service.
(E) For purposes of termination of service due to death or Disability,
any non-vested portion of any outstanding Stock Option shall become
vested and immediately and fully exercisable, notwithstanding any
provision therein for the exercise in installments.
(F) For purposes of termination of service due to Retirement, any
non-vested portion of any outstanding Stock Options shall become
vested and immediately and fully exercisable, notwithstanding any
provision therein for the exercise in installments. immediately.
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<PAGE> 5
(G) For purposes of termination of service as a result of Involuntary
Termination (not Change in Control), any non-vested portion of any
outstanding Stock Options shall vest on a pro-rata basis based upon
the number of months the terminated Officer has been retained within
the applicable vesting schedule of this Agreement.
(H) In the event of Involuntary Termination or Termination for Good
Reason within two years of a Change in Control, all Stock Options then
outstanding shall become vested and immediately and fully exercisable,
notwithstanding any provision therein for the exercise in
installments.
5. WHO MAY EXERCISE. Subject to the terms and conditions set forth in
Sections 3 and 4 above, this Stock Option may be exercised only by
Grantee. If as a result of death or Disability prior to the
termination date specified in Section 4(A) hereof and Grantee have not
exercised this Stock Option as to the maximum percentage of Stock
Options set forth in Section 3 hereof as of the date of death of
Disability, the following persons may exercise the exercisable portion
of this Stock Option on behalf of Grantee at any time prior to the
earlier of the dates specified in Sections 4(A) or (B) hereof: (i) if
Grantee is disabled, your guardian; or (ii) if Grantee dies, the
personal representative of your estate, or the person who acquired the
right to exercise this Stock Option by bequest or inheritance or by
reason of Grantees death; provided that this Stock Option shall remain
subject to the other term of this Agreement, and applicable laws,
rules, and regulations.
6. RESTRICTIONS. This Stock Option may be exercised only with respect to
full shares and no fractional share of stock shall be issued.
7. MANNER OF EXERCISE. Subject to such rules as the Board or the
Committee may from time to time adopt, this Stock Option may be
exercised by the delivery of written notice to the Secretary of the
Company setting forth the number of shares of Common Stock with
respect to which the Stock Option is to be exercised and the date of
exercise thereof (the "Exercise Date") which shall be at least three
(3) days after giving such notice unless an earlier time shall have
been mutually agreed upon.
On the Exercise Date, Grantee shall deliver to the Company
consideration with a value equal to the total Option Price of the
shares to be purchased, payable as follows: (i) cash, certified check,
bank draft, or money order payable to the order of the Company, and/or
(ii) any other form of payment which is acceptable to the Committee.
Common Stock which is acquired by Grantee pursuant to the exercise of
this Stock Option may not b used to exercise a subsequent option until
and unless such shares have been held for a period of six months.
Upon payment of all amounts due, the Company shall cause certificates
for the Common Stock then being purchased to be delivered to Grantee
(or the person exercising Stock Option in the event of your death of
Disability) at its principal business office promptly after the
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<PAGE> 6
Exercise date. The obligation of the Company to deliver shares of
Common Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its sole discretion that the
listing, registration, or qualification of the Stock Option or the
Common Stock upon any securities exchange or under any state of
federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection
with, the Stock Option or the issuance or purchase of shares of Common
Stock thereunder, then the Stock Option may not be exercised in whole
or in part unless such, listing, registration, qualification, consent,
or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
If Grantee fails to pay for any of the Common Stock specified in such
notice or fail to accept delivery thereof, then your right to purchase
such Common Stock may be terminated by the Company.
8. TAX WITHHOLDING. The Company shall have the right to deduct from all
amounts hereunder paid in cash or other form, any Federal, state or
local taxes required by law to be deducted. As a requirement for
receiving shares of Common Stock issued under this Stock Option,
Grantee will be required to pay the Company the amount of any taxes
which the Company is required to withhold with respect to such shares
of Common Stock. Such payments shall be required to be made before
the delivery of any certificate representing such shares of Common
Stock will be issued. The Committee may determine such payment can be
made in cash, by check, or through the delivery of shares of Common
Stock owned by Grantee (which may be effected by the actual delivery
of shares of Common Stock by Grantee or if Grantee is not an insider
(as defined by the Securities and Exchange Commission), by the
Company's withholding a number of shares to be issued upon exercise of
this Stock Option, if applicable), which shares have an aggregate Fair
Market Value equal to the required minimum withholding payment, or any
combination thereof.
9. NON-ASSIGNABILITY. This Stock Option is not assignable or
transferable except by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the
Code or Title I of the Employee Retirement Income Security Act of
1974, as amended. However, after Grantee has shown reasonable
evidence of tax and/or financial advice from a third-party, Grantee
may make an irrevocable gift of the Stock Option to a family member or
trust.
10. RIGHTS AS STOCKHOLDER. You will have no rights as a stockholder with
respect to any shares covered by this Stock Option until the issuance
of a certificate or certificates to Grantee for the shares. No
adjustment shall be made for dividends or other rights for which the
record date is prior to the issuance of such certificate of
certificates.
11. ADJUSTMENT OF NUMBER OF SHARES AND RELATED MATTERS. The number of
shares of Common Stock covered by this Stock Option, and the Option
Price thereof, shall be subject to adjustment in accordance with
change in capitalization of Siena Holdings, Inc. or a
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<PAGE> 7
combination, merger, or reorganization of Siena Holdings, Inc. into or
with any other corporation or any other transaction with similar
effects.
12. GRANTEE'S REPRESENTATIONS. Notwithstanding any of the provisions
hereof, Grantee hereby agrees that Grantee will not exercise the Stock
Option granted hereby, and that the Company will not be obligated to
issue any shares to Grantee hereunder, if the exercise thereof or the
issuance of such shares shall constitute a violation by Grantee or the
Company of any provision of any law or regulation of any governmental
authority. Any determination in this connection by the Committee
shall be final, binding and conclusive. The obligations of the
Company and your rights are subject to all applicable laws, rules and
regulations.
Furthermore, if Grantee is an "insider" (as defined by the Securities
Exchange Commission), Grantee agrees that Grantee will not exercise
this Stock Option during the six (6) months following the Date of
Grant.
13. INVESTMENT REPRESENTATION. Unless the Common Stock is issued to
Grantee in a transaction registered under applicable Federal and state
securities laws, by Grantees execution hereof, Grantee represents and
warrants to the Company that all Common Stock which may be purchased
hereunder will be acquired by Grantee for investment purposes for your
own account and not with any intent for resale or distribution in
violation of Federal or state securities laws. Unless the Common
Stock is issued to you in a transaction registered under the
applicable Federal and state securities laws, all certificates issued
with respect to the Common Stock shall bear an appropriate restrictive
investment legend.
14. PARTICIPANT'S ACKNOWLEDGMENTS. As a Grantee under this Agreement,
Grantee acknowledges receipt of a copy of this Agreement, and
represents that Grantee is familiar with the terms and provisions of
this Agreement. By signing this Agreement, Grantee hereby accepts as
binding, conclusive, and final all decisions or interpretations of the
Committee, as that term is defined in this Agreement, upon any
questions arising under this Agreement. Any disagreement by Grantee
as to any decision or interpretation of the Committee shall be settled
exclusively by the terms of this Agreement.
15. LAW GOVERNING. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Delaware
(excluding any conflict of laws rule or principle of Delaware law that
might refer the governance, construction, or interpretation of this
agreement to the laws of another state).
In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution of the
rights granted under this Agreement, or which otherwise warrants
equitable adjustment because it interferers with the intended
operation of this Agreement, then if the Committee shall, in its sole
discretion, determine that such change requires an adjustment in the
number or kind of shares of stock or other securities or property
theretofore subject, or which may become subject, to issuance or
transfer under this
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<PAGE> 8
Agreement or in the terms and conditions of this Agreement, such
adjustment shall be made in accordance with such determination. The
Committee shall give notice to each Grantee, and upon notice such
adjustment shall be effective and binding for all purposes of this
Agreement.
16. NO RIGHT TO CONTINUE RETENTION. Nothing herein shall be construed to
confer upon Grantee the right to continue in the retention of the
Company or any Subsidiary or interfere with or restrict in any way the
right of the Company or any Subsidiary to discharge Grantee at any
time (subject to any contract rights Grantee might have).
17. LEGAL CONSTRUCTION. In the event that any one or more of the terms,
provisions or agreements that are contained in this Agreement shall be
held by a Court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect for any reason, the invalid, illegal or
unenforceable term, provision or agreement shall not affect any other
term, provision or agreement that is contained in this Agreement and
this Agreement shall be construed in all respects as if the invalid,
illegal or unenforceable term, provision or agreement had never been
contained herein.
18. ENTIRE AGREEMENT. This Agreement supersede any and all other prior
understandings and agreements, either oral or in writing, between the
parties with respect to the subject matter hereof and constitute the
sole and only agreements between the parties with respect to the said
subject matter. All prior negotiations and agreements between the
parties with respect to the subject matter hereof are merged into this
Agreement. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or
otherwise, have been made by any party or by anyone acting on behalf
of any party, which are not embodied in this Agreement and that any
agreement, statement or promise that is not contained in this
Agreement shall not be valid or binding or of any force or effect.
19. PARTIES BOUND. The terms, provisions, representations, warranties,
covenants, and agreements that are contained in this Agreement shall
apply to, be binding upon, and inure to the benefit of the parties and
their respective heirs, executors, administrators, legal
representatives, and permitted successors and assigns.
20. MODIFICATION. No change or modification of this Agreement shall be
valid or binding upon the parties unless the change or modification is
in writing and signed by the parties. Notwithstanding the preceding
sentence, the Company may amend this Agreement or revoke this Stock
Option to the extent permitted in this Agreement.
21. HEADINGS. The headings that are used in this Agreement are used for
reference and convenience purposes only and do not constitute
substantive matters to be considered in construing the terms and
provisions of this Agreement.
-8-
<PAGE> 9
22. NOTICE. Any notice required or permitted to be delivered hereunder
shall be deemed to be delivered only when actually received by the
Company or by Grantee, as the case may be, at the addresses set forth
below, or at such other addresses as they have theretofore specified
by written notice delivered in accordance herewith.
(A) Notice to the Company shall be addressed and delivered as follows:
Siena Holdings, Inc.
Attention: Chairman
717 Harwood Street, Suite 1110
Dallas, TX 75201
(B) Notice to Grantee shall be addressed and delivered as follows:
John P. Kneafsey
12 Lochwynd Court
Phoenix, MD 21131
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and Grantee, to evidence Grantees consent and approval
of all the terms hereof, has duly executed this Agreement, as of the date
specified in Section 1 hereof.
SIENA HOLDINGS, INC.
BY:
--------------------------------
TITLE:
-----------------------------
GRANTEE:
- -----------------------------------
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<PAGE> 1
EXHIBIT 10.4
NON-QUALIFIED STOCK OPTION AGREEMENT
SIENA HOLDINGS, INC.
1. GRANT OF OPTION. Siena Holdings, Inc., a Delaware corporation
(the "Company" or "Siena") or its Subsidiaries, hereby grants
to:
W. JOSEPH DRYER
(the "Grantee" "You" or "Your")
an option to purchase from the Company a total of 163,000 full
shares ("Stock Options") of Ordinary Shares ("Common Stock")
of the Company at $0.92 per share in the amounts, during the
periods, and upon the terms and conditions set forth in this
agreement. The Date of Grant of this Stock Option is DECEMBER
1, 1997. This is a NON-QUALIFIED STOCK OPTION.
2. SUBJECT TO PLAN. This Stock Option and its exercise are
subject to the terms and conditions of this Agreement. The
capitalized terms used in this Agreement are defined below.
This Stock Option is subject to any rules which have been or
may be made by the Board or the Committee and communicated to
you in writing.
(A) Board. The Board of Directors (or equivalent governing
authority) of the Company, as appointed by the Chairman of
Siena.
(B) Change in Control. A "Change in Control" shall mean a
change in control of a nature that would be required to be
reported in response to item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act as such
Schedule, Regulation and Act were in effect on the date of
adoption of this Plan by the Board, assuming that such
Schedule, Regulation and Act applied to the Company, provided
that such a change in control shall be deemed to have occurred
at such time as:
(I) any "person" (as that term is used in Section
13(d) and 14(d)(2) of the Exchange Act) (other than
Siena Holdings, Inc. or an affiliate of Siena
Holdings, Inc.) becomes, directly or indirectly, the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of securities representing a 30% or
more of the combined voting power for election of
members of the Board of the then outstanding voting
securities of the Company or any successor of the
Company;
(II) during any period of two (2) consecutive years
or less, individuals who at the beginning of such
period constituted the Board of the Company cease,
for any reason, to constitute at least a majority of
the Board, unless the election or nomination for
-1-
<PAGE> 2
election of each new member of the Board was approved
by a vote of at least two-thirds of the members of
the Board then still in office who were members of
the Board at the beginning of the period;
(III) the equity-holders of the Company approve any
merger or consolidation to which the Company is a
party as a result of which the persons who were
equity-holders of the Company immediately prior to
the effective date of the merger or consolidation
(and excluding, however, any shares held by any party
to such merger or consolidation and their affiliates)
shall have beneficial ownership of less than 50% of
the combined voting power for election of members of
the Board (or equivalent) of the surviving entity
following the effective date of such merger or
consolidation; or
(IV) the equity-holders of the Company approve any
merger or consolidation as a result of which the
equity interests in the Company shall be changed,
converted or exchanged (other than a merger with a
wholly-owned subsidiary of the Company) or any
liquidation of the Company or any sale or other
disposition of 50% or more of the assets or earnings
power of the Company;
(C.) Code. The Internal Revenue Code of 1986, as amended.
(D) Compensation Committee or Committee. The Committee, which
shall be comprised of three or more members who shall be
appointed by the Board to administer this Agreement, which the
Board shall have the power to fill vacancies on the Committee
arising by resignation, death, removal or otherwise. In the
absence of a Committee, reference thereto shall be to the
Board.
(E) Common Stock. Siena Holdings, Inc. Class A Common Stock,
which the Company is authorized to issue or may in the future
be authorized to issue.
(F) Company. Siena Holdings, Inc. ("Siena"), its subsidiaries
and any successor corporation.
(G) Disability. Any complete and permanent disability as
defined in Section 22(e)(3) of the Code and determined in
accordance with the procedures set forth in the regulations
thereunder.
(H) Officer. Any officer of the Company or any Parent or
Subsidiary, who, in the opinion of the Committee, is one of a
select group of executive officers, other officers or other
key management personnel of the Company or any Parent or
Subsidiary who is in a position to contribute materially to
the continued growth and development and to the continued
financial success of the Company or any Parent or Subsidiary,
including executive officers and officers who are members of
the Board.
-2-
<PAGE> 3
(I) Exchange Act. The Securities Exchange Act of 1934, as
amended.
(J) Fair Market Value. The closing sales price of the Common
Stock as reported or listed on a national securities exchange
on any relevant date for valuation, or, if there is no such
sale on such date, the applicable prices as so reported on the
nearest preceding date upon which such sale took place. In
the event the shares of Common Stock are not listed on a
national securities exchange, the Fair Market Value of such
shares shall initially; be based upon the book value of the
Company on June 30, 1997 which includes adjustments to reflect
the market value of the assets and liabilities pursuant to
generally accepted accounting principles, thereafter shall be
determined by the Committee in its sole discretion.
(K) Grantee. Any Officer or Director of the Company who in
the opinion of the Committee performs significant services for
the benefit of the Company and who is granted a Stock Option
under this Agreement.
(L) Involuntary Termination. The termination of Grantee's
retention by Siena other than for death, Disability,
Retirement, Terminated for Cause, Terminated for Good Reason,
or in the event of a Change of Control (as defined in Section
2(B) above).
(M) Retirement. The termination of retention by the Company
or any Parent or Subsidiary constituting retirement as
determined by the Committee.
(N) Stock Option. A Non-Qualified Stock Option granted by the
Committee to a Grantee under this Agreement.
(O) Subsidiary. Any corporation (whether now or hereafter
existing) which constitutes a "subsidiary" of the Company, as
defined in Section 424(f) of the Code.
(P) Termination for Cause. An Officer shall be deemed
Terminated for Cause if he or she is terminated as a result of
a breach of his or her written retention agreement.
(Q) Termination for Good Reason. The resignation of an
Officer shall be deemed to be a Termination for Good Reason if
the Officers resignation is within two years of a Change in
Control as defined in Section 2(B) above, caused by and within
ninety (90) days of the following: (I) without the express
written consent of the Officer, any duties that are assigned
which are materially inconsistent with the Officer's position,
duties and status with Siena at the time of the Change in
Control; (ii) any action by Siena which results in a material
diminution in the position, duties or status of the Officer
with Siena at the time of the Change in Control or any
transfer or proposed transfer of the Officer for any extended
period to a location outside his principal place of retention
at the time of the Change in Control without his consent;
(iii) the base annual compensation of the Officer, as same may
be hereafter be increased from time to time, is reduced; or
(iv) without limiting the generality or effect of the
foregoing, Siena fails to comply with any of its material
obligations hereunder.
-3-
<PAGE> 4
3. VESTING: TIME OF EXERCISE. Except as specifically provided in
this Agreement and subject to certain terms, restrictions and
conditions set forth in this Agreement, this Stock Option is
exercisable in the following cumulative installments:
First installment. Up to 20% of the total Stock Options
at any time following the first
anniversary of the Date of Grant.
Second installment. Up to an additional 20% of the total
Stock Options at any time following
the second anniversary of the Date of
Grant.
Third installment. Up to an additional 20% of the total
Stock Options at any time
following the third anniversary of the
Date of Grant.
Forth installment. Up to an additional 20% of the total
Stock Options at any time following the
forth anniversary of the Date of Grant.
Fifth installment. Up to an additional 20% of the total
Stock Options at any time following the
fifth anniversary of the Date of Grant.
4. TERM; FORFEITURE. This Stock Option, and all unexercised
Stock Options granted hereunder, will terminate and be
forfeited at the first of the following to occur;
(A) 5:00 pm on December 1, 2007; or
(B) 5:00 pm on the date which is twelve (12) months following
termination of service due to death, Disability or six (6)
months after Retirement for Stock Options vested at
termination; or
(C.) 5:00 pm on the date which is twelve (12) months following
termination of service due to death, Disability or six (6)
months after Retirement for Stock Options that vest after
termination; or
(D) 5:00 pm on the 31st day after the day of any other
termination of service.
(E) For purposes of termination of service due to death or
Disability, any non-vested portion of any outstanding Stock
Option shall become vested and immediately and fully
exercisable, notwithstanding any provision therein for the
exercise in installments.
(F) For purposes of termination of service due to Retirement,
any non-vested portion of any outstanding Stock Options shall
become vested and immediately and fully exercisable,
notwithstanding any provision therein for the exercise in
installments. immediately.
(G) For purposes of termination of service as a result of
Involuntary Termination (not
-4-
<PAGE> 5
Change in Control), any non-vested portion of any outstanding
Stock Options shall vest on a pro-rata basis based upon the
number of months the terminated Officer has been retained
within the applicable vesting schedule of this Agreement.
(H) In the event of Involuntary Termination or Termination for
Good Reason within two years of a Change in Control, all Stock
Options then outstanding shall become vested and immediately
and fully exercisable, notwithstanding any provision therein
for the exercise in installments.
5. WHO MAY EXERCISE. Subject to the terms and conditions set
forth in Sections 3 and 4 above, this Stock Option may be
exercised only by Grantee. If as a result of death or
Disability prior to the termination date specified in Section
4(A) hereof and Grantee have not exercised this Stock Option
as to the maximum percentage of Stock Options set forth in
Section 3 hereof as of the date of death of Disability, the
following persons may exercise the exercisable portion of this
Stock Option on behalf of Grantee at any time prior to the
earlier of the dates specified in Sections 4(A) or (B) hereof:
(i) if Grantee is disabled, your guardian; or (ii) if Grantee
dies, the personal representative of your estate, or the
person who acquired the right to exercise this Stock Option by
bequest or inheritance or by reason of Grantees death;
provided that this Stock Option shall remain subject to the
other term of this Agreement, and applicable laws, rules, and
regulations.
6. RESTRICTIONS. This Stock Option may be exercised only with
respect to full shares and no fractional share of stock shall
be issued.
7. MANNER OF EXERCISE. Subject to such rules as the Board or the
Committee may from time to time adopt, this Stock Option may
be exercised by the delivery of written notice to the
Secretary of the Company setting forth the number of shares of
Common Stock with respect to which the Stock Option is to be
exercised and the date of exercise thereof (the "Exercise
Date") which shall be at least three (3) days after giving
such notice unless an earlier time shall have been mutually
agreed upon.
On the Exercise Date, Grantee shall deliver to the Company
consideration with a value equal to the total Option Price of
the shares to be purchased, payable as follows: (i) cash,
certified check, bank draft, or money order payable to the
order of the Company, and/or (ii) any other form of payment
which is acceptable to the Committee.
Common Stock which is acquired by Grantee pursuant to the
exercise of this Stock Option may not be used to exercise a
subsequent option until and unless such shares have been held
for a period of six months.
Upon payment of all amounts due, the Company shall cause
certificates for the Common Stock then being purchased to be
delivered to Grantee (or the person exercising Stock Option in
the event of your death of Disability) at its principal
business office promptly after the
-5-
<PAGE> 6
Exercise date. The obligation of the Company to deliver
shares of Common Stock shall, however, be subject to the
condition that if at any time the Committee shall determine in
its sole discretion that the listing, registration, or
qualification of the Stock Option or the Common Stock upon any
securities exchange or under any state of federal law, or the
consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection
with, the Stock Option or the issuance or purchase of shares
of Common Stock thereunder, then the Stock Option may not be
exercised in whole or in part unless such, listing,
registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not
acceptable to the Committee.
If Grantee fails to pay for any of the Common Stock specified
in such notice or fail to accept delivery thereof, then your
right to purchase such Common Stock may be terminated by the
Company.
8. TAX WITHHOLDING. The Company shall have the right to deduct
from all amounts hereunder paid in cash or other form, any
Federal, state or local taxes required by law to be deducted.
As a requirement for receiving shares of Common Stock issued
under this Stock Option, Grantee will be required to pay the
Company the amount of any taxes which the Company is required
to withhold with respect to such shares of Common Stock. Such
payments shall be required to be made before the delivery of
any certificate representing such shares of Common Stock will
be issued. The Committee may determine such payment can be
made in cash, by check, or through the delivery of shares of
Common Stock owned by Grantee (which may be effected by the
actual delivery of shares of Common Stock by Grantee or if
Grantee is not an insider (as defined by the Securities and
Exchange Commission), by the Company's withholding a number of
shares to be issued upon exercise of this Stock Option, if
applicable), which shares have an aggregate Fair Market Value
equal to the required minimum withholding payment , or any
combination thereof.
9. NON-ASSIGNABILITY. This Stock Option is not assignable or
transferable except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended. However,
after Grantee has shown reasonable evidence of tax and/or
financial advice from a third-party, Grantee may make an
irrevocable gift of the Stock Option to a family member or
trust.
10. RIGHTS AS STOCKHOLDER. You will have no rights as a
stockholder with respect to any shares covered by this Stock
Option until the issuance of a certificate or certificates to
Grantee for the shares. No adjustment shall be made for
dividends or other rights for which the record date is prior
to the issuance of such certificate of certificates.
11. ADJUSTMENT OF NUMBER OF SHARES AND RELATED MATTERS. The
number of shares of Common Stock covered by this Stock Option,
and the Option Price thereof, shall be subject to adjustment
in accordance with change in capitalization of Siena Holdings,
Inc. or a
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<PAGE> 7
combination, merger, or reorganization of Siena Holdings, Inc.
into or with any other corporation or any other transaction
with similar effects.
12. GRANTEE'S REPRESENTATIONS. Notwithstanding any of the
provisions hereof, Grantee hereby agrees that Grantee will not
exercise the Stock Option granted hereby, and that the Company
will not be obligated to issue any shares to Grantee
hereunder, if the exercise thereof or the issuance of such
shares shall constitute a violation by Grantee or the Company
of any provision of any law or regulation of any governmental
authority. Any determination in this connection by the
Committee shall be final, binding and conclusive. The
obligations of the Company and your rights are subject to all
applicable laws, rules and regulations.
Furthermore, if Grantee is an "insider" (as defined by the
Securities Exchange Commission), Grantee agrees that Grantee
will not exercise this Stock Option during the six (6) months
following the Date of Grant.
13. INVESTMENT REPRESENTATION. Unless the Common Stock is issued
to Grantee in a transaction registered under applicable
Federal and state securities laws, by Grantees execution
hereof, Grantee represents and warrants to the Company that
all Common Stock which may be purchased hereunder will be
acquired by Grantee for investment purposes for your own
account and not with any intent for resale or distribution in
violation of Federal or state securities laws. Unless the
Common Stock is issued to you in a transaction registered
under the applicable Federal and state securities laws, all
certificates issued with respect to the Common Stock shall
bear an appropriate restrictive investment legend.
14. PARTICIPANT'S ACKNOWLEDGMENTS. As a Grantee under this
Agreement, Grantee acknowledges receipt of a copy of this
Agreement, and represents that Grantee is familiar with the
terms and provisions of this Agreement. By signing this
Agreement, Grantee hereby accepts as binding, conclusive, and
final all decisions or interpretations of the Committee, as
that term is defined in this Agreement, upon any questions
arising under this Agreement. Any disagreement by Grantee as
to any decision or interpretation of the Committee shall be
settled exclusively by the terms of this Agreement.
15. LAW GOVERNING. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the
State of Delaware (excluding any conflict of laws rule or
principle of Delaware law that might refer the governance,
construction, or interpretation of this agreement to the laws
of another state).
In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution
of the rights granted under this Agreement, or which otherwise
warrants equitable adjustment because it interferers with the
intended operation of this Agreement, then if the Committee
shall, in its sole discretion, determine that such change
requires an adjustment in the number or kind of shares of
stock or other securities or property theretofore subject, or
which may become subject, to issuance or transfer under this
-7-
<PAGE> 8
Agreement or in the terms and conditions of this Agreement,
such adjustment shall be made in accordance with such
determination. The Committee shall give notice to each
Grantee, and upon notice such adjustment shall be effective
and binding for all purposes of this Agreement.
16. NO RIGHT TO CONTINUE RETENTION. Nothing herein shall be
construed to confer upon Grantee the right to continue in the
retention of the Company or any Subsidiary or interfere with
or restrict in any way the right of the Company or any
Subsidiary to discharge Grantee at any time (subject to any
contract rights Grantee might have).
17. LEGAL CONSTRUCTION. In the event that any one or more of the
terms, provisions or agreements that are contained in this
Agreement shall be held by a Court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect for any
reason, the invalid, illegal or unenforceable term, provision
or agreement shall not affect any other term, provision or
agreement that is contained in this Agreement and this
Agreement shall be construed in all respects as if the
invalid, illegal or unenforceable term, provision or agreement
had never been contained herein.
18. ENTIRE AGREEMENT. This Agreement supersede any and all other
prior understandings and agreements, either oral or in
writing, between the parties with respect to the subject
matter hereof and constitute the sole and only agreements
between the parties with respect to the said subject matter.
All prior negotiations and agreements between the parties with
respect to the subject matter hereof are merged into this
Agreement. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally
or otherwise, have been made by any party or by anyone acting
on behalf of any party, which are not embodied in this
Agreement and that any agreement, statement or promise that is
not contained in this Agreement shall not be valid or binding
or of any force or effect.
19. PARTIES BOUND. The terms, provisions, representations,
warranties, covenants, and agreements that are contained in
this Agreement shall apply to, be binding upon, and inure to
the benefit of the parties and their respective heirs,
executors, administrators, legal representatives, and
permitted successors and assigns.
20. MODIFICATION. No change or modification of this Agreement
shall be valid or binding upon the parties unless the change
or modification is in writing and signed by the parties.
Notwithstanding the preceding sentence, the Company may amend
this Agreement or revoke this Stock Option to the extent
permitted in this Agreement.
21. HEADINGS. The headings that are used in this Agreement are
used for reference and convenience purposes only and do not
constitute substantive matters to be considered in construing
the terms and provisions of this Agreement.
22. NOTICE. Any notice required or permitted to be delivered
hereunder shall be deemed to be
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<PAGE> 9
delivered only when actually received by the Company or by
Grantee, as the case may be, at the addresses set forth below,
or at such other addresses as they have theretofore specified
by written notice delivered in accordance herewith.
(A) Notice to the Company shall be addressed and
delivered as follows:
Siena Holdings, Inc.
Attention: Chairman
717 Harwood Street, Suite 1110
Dallas, TX 75201
(B) Notice to Grantee shall be addressed and
delivered as follows:
W. Joseph Dryer
3401 LakeBrook Drive
Plano, TX 75093
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and Grantee, to evidence Grantees consent and approval
of all the terms hereof, has duly executed this Agreement, as of the date
specified in Section 1 hereof.
SIENA HOLDINGS, INC.
BY:
----------------------------
TITLE:
-------------------------
GRANTEE:
- --------------------------------
-9-
<PAGE> 1
EXHIBIT 11
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES)
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Reorganized Predecessor Reorganized Predecessor
Company Company Company Company
----------- ----------- ----------- -----------
Six Months Six Months
Quarter Ended Quarter Ended Ended Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE:
Average common shares outstanding 4,000 * 4,000 *
Net income $ 11 * $ 56 *
Earnings per common share:
Net income $ .00 * $ .01 *
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Average common shares outstanding 4,000 * 4,000 *
Average common stock equivalent under SHI
Nonqualified Stock Option Plan 9 * 4 *
----------- ----------- ----------- -----------
TOTAL SHARES 4,009 * 4,004 *
=========== =========== =========== ===========
Net income $ 11 * $ 56 *
Earnings per common share - assuming dilution:
Net income $ .00 * $ .01 *
</TABLE>
* Average shares outstanding and per share amount not meaningful due to
reorganization.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000060150
<NAME> JOSEPH DRYER
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,903
<SECURITIES> 0
<RECEIVABLES> 327
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,146
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 5,747
<TOTAL-LIABILITY-AND-EQUITY> 7,146
<SALES> 0
<TOTAL-REVENUES> 421
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (335)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 86
<INCOME-TAX> (30)
<INCOME-CONTINUING> 56
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
