<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 TO 1934
For the quarterly period ended March 31, 1999
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.
--------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 75-1043392
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
5068 West Plano Parkway, Suite 345, Plano, Texas 75093
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(Address of principal executive offices) (Zip code)
</TABLE>
(972) 381-4255
----------------------------------------------------
(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 April 30, 1999: Common Stock, $.10 par value -- 6,000,000 shares.
<PAGE> 2
SIENA HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
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<CAPTION>
PAGE
----
PART I -- FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1999 and June 30, 1998........................................... 2
Statements of Consolidated Operations - Quarters and Nine Months Ended March 31, 1999 and 1998........... 3
Statements of Consolidated Cash Flows - Nine Months Ended March 31, 1999 and 1998........................ 4
Notes to Consolidated Financial Statements............................................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations.................................................................................... 10
Liquidity and Capital Resources.......................................................................... 12
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................................................................ 12
Item 3. Defaults Upon Senior Securities.......................................................................... 13
Item 6. Exhibits and Reports on Form 8-K......................................................................... 13
</TABLE>
1
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEETS
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 4,166 $ 2,475
Receivables......................................................... 116 119
Prepaid expenses.................................................... 138 54
------------------- -------------------
4,420 2,648
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Long Term Investments:
Investment in real estate........................................... 4,870 4,800
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$ 9,290 $ 7,448
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses............................... $ 281 $ 594
Long Term Liabilities:
Accrued medical insurance premiums.................................. 664 711
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945 1,305
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Stockholders' Equity:
Preferred stock--($1.00 par value, 1,000 shares authorized, 0
shares issued and outstanding ................................... -- --
Common stock--($.10 par value, 15,000 shares authorized, 6,000
shares issued and outstanding and 4,000 shares issued and
outstanding, respectively)........................................ 600 400
Other paid-in capital............................................... 7,804 5,782
Accumulated deficit................................................. (59) (39)
------------------- -------------------
8,345 6,143
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$ 9,290 $ 7,448
=================== ===================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT NET EARNINGS (LOSS) PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31 March 31
-------------- -------------- -------------- --------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Commissions and fees......................... $ 116 56 395 267
Interest..................................... 46 25 123 72
Trust expense reimbursement.................. 43 105 186 263
Other........................................ 1 1 9 50
-------------- -------------- -------------- --------------
206 187 713 652
-------------- -------------- -------------- --------------
Expenses:
Personnel.................................... 109 91 333 240
Other operating.............................. 95 111 400 341
-------------- -------------- -------------- --------------
204 202 733 581
-------------- -------------- -------------- --------------
Income (loss) from operations before federal
income tax................................... 2 (15) (20) 71
Federal income tax (expense) benefit.................. -- 5 -- (25)
-------------- -------------- -------------- --------------
Net income (loss)..................................... $ 2 (10) (20) 46
============== ============== ============== ==============
Basic earnings (loss) per share:
Net income (loss)............................ $ 0.00* $ (0.00)* $ (0.00)* $ 0.01*
Average number of shares.............................. 6,000* 4,000 * 5,073 * 4,000*
Diluted earnings (loss) per share:
Net income (loss)............................ $ 0.00* $ (0.00)* $ (0.00)* $ 0.01*
Average number of shares.............................. 6,000* 4,093 * 5,073 * 4,033*
</TABLE>
* Per share amounts are based on shares issued or reserved for issuance to
creditors.
See notes to consolidated financial statements.
3
<PAGE> 5
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(IN THOUSANDS)
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<CAPTION>
Nine Months Ended Nine Months Ended
March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Operating activities:
Net income (loss)....................................................... $ (20) $ 46
Adjustments to reconcile net income (loss) to net cash provided (used)
by operating activities:
Compensation expense for stock options............................. 22 6
Federal income tax expense charged to other paid-in capital due to
the utilization of pre-reorganization tax attributes............ -- 25
(Increase) decrease in receivables and prepaid expenses................. (81) 183
Increase (decrease) in current accounts payable and accrued expenses.... (313) (15)
Decrease in long term accrued medical insurance premiums................ (47) (42)
------------------ ------------------
Net cash provided (used) by operating activities............ (439) 203
------------------ ------------------
Investing activities:
Increase in investment in real estate................................... (70) --
------------------ ------------------
Net cash provided (used) by investing activities............ (70) --
------------------ ------------------
Financing activities:
Issuance of common stock 2,200 --
------------------ ------------------
Net cash provided (used) by financing activities............ 2,200 --
------------------ ------------------
Net increase (decrease) in cash and cash equivalents......................... 1,691 203
Cash and cash equivalents at beginning of period............................. 2,475 1,941
------------------ ------------------
Cash and cash equivalents at end of period................................... $ 4,166 $ 2,144
================== ==================
Cash payments for:
Interest................................................................ $ -- $ --
Federal income tax...................................................... $ -- $ --
Non-cash transactions:
Issuance of stock options............................................... $ 22 $ 6
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
MARCH 31, 1999
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
confirmation of LMUSA's Chapter 11 reorganization plan (see "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
April 1, 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. Since
April 1, 1997, the Company's financial statements have been prepared as if it is
a new reporting entity. Under fresh-start accounting, all assets and liabilities
were restated to reflect their reorganization value, which approximated fair
value at the date of reorganization. See "Item 8. Financial Statements and
Supplementary Data" in the Company's annual report on Form 10-K for the year
ended June 30, 1998 for more details on fresh-start reporting.
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 have been included. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Certain reclassifications have been made to prior quarters' financial
statements to conform to the current presentation. Operating results for the
quarter are not necessarily indicative of the results that may be expected for
the fiscal year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended June 30, 1998.
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 Debtor Corporations filed two separate plans of reorganization with the
Bankruptcy Court. An order confirming the second amended joint plan of
reorganization filed on October 4, 1996 for LFC, LIS and LAS (the "Joint
Debtors") and a stipulation and order among the Joint Debtors and the appointed
statutory committee of unsecured creditors of LFC (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".
5
<PAGE> 7
The Joint Plan was confirmed on October 4, 1996, by the Bankruptcy Court.
An agreement in respect of intercompany claims between the LFC Creditors'
Committee and the appointed statutory committee of the unsecured creditors of
LMUSA (the "Intercompany Agreement") was approved by the Bankruptcy Court on
February 21, 1997, and became effective in March 1997. Additionally, the Company
transferred $3 million in cash to partially fund a litigation trust to pursue
third-party claims pursuant to the LFC/LMUSA joint litigation trust agreement
among LFC and its subsidiaries and LMUSA, dated March 6, 1997 (the "LFC/LMUSA
Litigation Trust"), filed as an exhibit to the Company's annual report on Form
10-K for the year ended June 30, 1997. Subject to certain exceptions in the
Intercompany Agreement, the LFC Creditors' Trust (as defined herein) and the
creditors' trust established pursuant to the LMUSA Plan will receive sixty and
forty percent, respectively, of net proceeds from litigation. There can be no
assurance that the LFC/LMUSA Litigation Trust will produce any proceeds which
will benefit the Creditors Trust and former creditors. 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. For more
information on the reorganization process, refer to the Company's annual report
on Form 10-K for the year ended June 30, 1998.
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 the Class 3
unsecured creditors. On May 11, 1998, a second distribution in the amount of
$6.2 million was disbursed to the distribution agent for benefit of the Class 3
unsecured creditors. The third cash distribution was made to the distribution
agent on April 21, 1999, in the amount of $4.3 million, for a total cash
distribution through April 21, 1999, of approximately $23 million. In addition,
as assets in the Creditors' Trust (see "Note C - Creditors' Trust") are
liquidated and/or the contingent obligations are favorably resolved, 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 process by the stock distribution agent resulted in 3,986,720
shares of common stock actually distributed to former creditors through March 7,
1999. As of that date, there were 13,280 shares of common stock issued but not
delivered related to bonds not exchanged for stock by the March 7, 1999 deadline
and 164,599 shares of common stock held for disputed claims that have been
resolved. The Company expects the total of 177,879 shares to be redistributed by
the stock distribution agent in the fourth quarter of fiscal year 1999 to all
allowed creditors that have received prior stock distributions.
Recognizing the need of the Company for additional working capital, the
Chairman of the Company offered to make a cash investment for a certain number
of shares of the Company's common stock. This offer was considered and accepted
by the Company's Board of Directors at its regularly scheduled quarterly meeting
held in Wilmington, Delaware on September 23, 1998. The Chairman did not
participate in the vote of the Board accepting this offer. On November 5, 1998,
the Company received $2.2 million in exchange for 2 million shares of the
Company's common stock. This transaction increased the number of outstanding
shares of common stock to 6 million.
THE 6,000,000 SHARES OF THE NEW COMMON STOCK ARE RESTRICTED IF THE EFFECT
OF A TRANSFER WOULD RESULT IN AN OWNERSHIP INCREASE TO 4.5 PERCENT OR ABOVE OF
THE TOTAL OUTSTANDING SHARES OR FROM 4.5 PERCENT TO A GREATER PERCENTAGE OF THE
TOTAL OUTSTANDING SHARES, WITHOUT PRIOR APPROVAL BY THE BOARD OF DIRECTORS AS
DESCRIBED IN THE RESTATED CERTIFICATE OF INCORPORATION. SEE EXHIBITS TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997.
The amounts ultimately distributed to the former creditors will be solely
dependent on the success of the Company, the amounts realized from the
collection of assets and the settlement of liabilities for both the Creditors'
Trust and the Litigation Trust. See "Note C - Creditors' Trust".
6
<PAGE> 8
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN. SEE "NOTE C - CREDITORS'
TRUST".
NOTE C -- CREDITORS' TRUST
The Joint Plan established a creditors' trust (the "Creditors' Trust") in
which the Company serves as trustee. The Creditors' Trust holds the
non-reorganized assets of the Company in trust pending their disposition and/or
distribution to the 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 including proceeds, if any from the LFC/LMUSA Litigation
Trust 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 Sheets 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 Statements 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 former creditors' benefit and the Company
has no risk of loss on the assets or liabilities. The amounts ultimately
distributed to the former creditors will be solely dependent on the success of
the Company, the amounts realized from the collection of assets and settlement
of liabilities for both the Creditors' Trust and the LFC/LMUSA Litigation Trust.
Stockholders who are not former creditors of the Joint Debtors are not
beneficiaries of the Creditors' Trust.
There can be no assurance that the LFC/LMUSA Litigation Trust will produce
any proceeds which will benefit the Creditors' Trust and former creditors.
The following is a summary of the non-reorganized assets and liabilities
held in the Creditors' Trust as of March 31, 1999 (in thousands) (unaudited):
<TABLE>
<S> <C>
Cash held in reserve for payment of administrative expenses and other trust liabilities.. $ 196
Accounts payable and accrued expenses.................................................... (9)
---------------
Cash available for future trust expenses*......................................... $ 187
===============
Cash held in reserve for payment of certain claims....................................... $ 85
===============
Net assets of the Creditors' Trust:
Cash**............................................................................ $ 5,378
Cash reserved for contingent obligations.......................................... 3,500
Investments....................................................................... 21
---------------
Net assets of the Creditors' Trust..................................... $ 8,899
===============
</TABLE>
* Pursuant to the Joint Plan, an additional $300,000 of cash was set
aside during the year ended June 30, 1998, and depleted during the
second quarter of fiscal year 1999. Beginning October 1, 1998, all
interest earned from the cash held by the Creditors' Trust has been used
to increase the cash held in reserve for payment of administrative
expenses and other trust liabilities. The interest income added to the
reserve amounted to $212,000 for the period October 1, 1998 through
March 31, 1999.
** On April 21, 1999, $4.3 million was disbursed to the distribution
agent for distribution to the Class 3 unsecured creditors, for a total
cash distribution through April 21, 1999, to the Class 3 unsecured
creditors of approximately $23 million. See "Note B - Reorganization".
7
<PAGE> 9
The Company charged to the Creditors' Trust expenses of $43,000 and
$186,000 for the quarter and nine months ended March 31, 1999, respectively, and
$105,000 and $263,000 for the quarter and nine months ended March 31, 1998,
respectively, reported as trust expense reimbursement on the Company's Statement
of Consolidated Operations. The expenses consisted of an overhead allocation
from the Company, based upon management's estimate of resources used by the
Creditors' Trust. The allocation of overhead to the Creditors' Trust is expected
to continue to decrease during fiscal year 1999.
The cash reserve for contingent obligations in the amount of $3.5 million
as of March 31, 1999, includes $1.0 million for a contingent liability to SHI
related to insurance retention, $1.0 million for possible additional legal
expense related to the LFC/LMUSA Litigation Trust and $1.5 million for other
legal and administrative expenses.
In February 1999, the Creditors' Trust received a distribution of $268,000
from the investment it carried in two limited partnerships which funded
institutional mortgage loans. The funds received reduced the $440,000 writeoff
which occurred in the first quarter of fiscal year 1999.
On July 1, 1998, a federal district court approved a settlement of the
funds held in the Management Security Plan ("MSP") trust whereby the Creditors'
Trust and the MSP beneficiaries would equally share the assets remaining after
payment of certain legal expenses and MSP trust fees, in the amount of $0.4
million. Accordingly, on July 10, 1998, the Creditors' Trust received $4.085
million pursuant to the final settlement. Refer to the Company's annual report
on Form 10-K for the year ended June 30, 1998, for more information on the MSP
trust.
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN. SEE "NOTE B -
REORGANIZATION".
NOTE D -- STOCK AND COMPENSATION PLANS
Compensation Plans. Separate retention agreements (the "Retention
Agreements"), filed as an exhibit to the Company's quarterly report on Form 10-Q
for the period ended December 31, 1997, were approved by the Board of Directors
effective December 1, 1997, for the Company's two executive officers, John P.
Kneafsey - Chief Executive Officer and W. Joseph Dryer - President. 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 of the
Company and its subsidiaries and the Company's results as trustee of the
Creditors' Trust.
In accordance with the success bonus defined above, the Board of Directors
approved a bonus payable in the fourth quarter of fiscal year 1998 to the
executive officers of the Company based on cash received by the Creditors' Trust
in excess of the book value upon liquidation of a subordinated promissory note
held in the Creditors' Trust. The Company received $590,000 in May 1998 for the
bonus pool from the proceeds received by the Creditors' Trust. The Board of
Directors approved an aggregate bonus amount of $492,000 for the executive
officers. One payment was made in May 1998 and the remaining balance of $295,000
was paid in February 1999. A payable of $0 and $295,000 is included in accounts
payable and accrued expenses on the Company's Consolidated Balance Sheet as of
March 31, 1999 and June 30, 1998, respectively.
Directors' Compensation Plans. At the annual meeting on December 16,
1998, the shareholders of SHI (the "Shareholders") approved additional
compensation with a retroactive effective date of December 1, 1997, for the
non-officer members of the Board of Directors (the "Directors' Additional
Compensation Plan"), as described in the SHI Proxy Statement dated November 9,
1998. The Directors' Additional Compensation Plan, with a five year term,
provides for a success bonus for each non-officer director based on the same
performance criteria as the success bonuses for the officers. During the year
ended June 30, 1998, two transactions were closed that resulted in an aggregate
bonus to the non-officer directors under the Directors' Additional Compensation
Plan of $98,000. One payment was made in December 1998, after
8
<PAGE> 10
approval by the Shareholders. The three other non-officer directors elected to
defer the payments pursuant to the SHI Deferred Compensation Plan (the "Deferred
Compensation Plan"), approved by the Board of Directors on December 16, 1998.
The SHI Deferred Compensation Plan Document is expected to be finalized and
filed in the fourth quarter of fiscal year 1999.
The Deferred Compensation Plan, with an effective date of December 16,
1998, allows the members of the Board of Directors to defer annual director
fees, meeting fees, and success bonus payments for a given calendar year. A
deferred compensation balance of $101,000 and a payable balance of $98,000 is
included in accounts payable and accrued expenses on the Company's Consolidated
Balance Sheet as of March 31, 1999 and June 30, 1998, respectively.
Stock Option Plan. The Retention Agreements also awarded stock options to
Mr. Kneafsey and Mr. Dryer pursuant to the SHI Nonqualified Stock Option
Agreements (the "Stock Option Plan"), included as exhibits to the Company's
quarterly report on Form 10-Q for the period ended December 31, 1997. The Stock
Option Plan granted the officers options to purchase an aggregate of 434,750
shares of the Company's common stock, with an effective date of December 1, 1997
(the "Date of Grant").
The options granted under the Stock Option Plan have an exercise price of
$0.92 per common share and vest at a rate of twenty percent per year for five
years on the anniversary of the Date of Grant. The fair market value of the
common stock on the Date of Grant was $1.109. Upon the event of any
change-in-control of the Company the stock options shall be 100% vested. The
stock options resulted in compensation expense of $4,000 and $12,000, with a
corresponding increase in additional paid-in capital, for the quarter and nine
months ended March 31, 1999, respectively, and $4,000 and $6,000 for the quarter
and nine months ended March 31, 1998, respectively. Additional stock options or
other forms of long-term incentive compensation arrangements may from time to
time be granted by the Board of Directors.
Directors' Stock Option Plan. The Nonqualified Stock Option Agreements
for the Board of Directors (the "Directors' Stock Option Plan") were also
approved by the Shareholders on December 16, 1998, and are included as Exhibits
10.1 - 10.4 to this quarterly report on Form 10-Q for the period ended March 31,
1999. The Directors' Stock Option Plan granted each of the five directors' the
option to purchase 40,000 shares of the Company's common stock, with an
effective date of December 1, 1997 (the "Date of Grant").
The options granted under the Directors' Stock Option Plan have an exercise
price of $0.92 per common share and vest at a rate of twenty percent per year
for five years on the anniversary of the Date of Grant. The fair market value of
the common stock on the Date of Grant was $1.109. Upon the event of any
change-in-control of the Company the stock options shall be 100% vested. The
directors' stock options resulted in compensation expense of $2,000 and $10,000,
with a corresponding increase in additional paid-in capital, for the quarter and
nine months ended March 31, 1999, respectively. The compensation expense
recognized in the second quarter was for the period December 1, 1997 through
December 31, 1998.
NOTE E -- EARNINGS (LOSS) PER SHARE
During the second quarter of fiscal year 1998 the Company adopted SFAS No.
128 "Earnings Per Share" ("SFAS No. 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. SFAS No. 128 is effective for both
interim and annual financial statements issued after December 15, 1997. The
Company retroactively applied SFAS No. 128 to the quarter ended September 30,
1997. Adoption of FAS 128 did not have a material impact on the earnings (loss)
per share.
On November 5, 1998, the Company received $2.2 million in exchange for 2
million shares of the Company's common stock. This transaction increased the
number of outstanding shares of common stock to 6 million.
Earnings (loss) per common share for the quarters ended March 31, 1999 and
1998, were determined using the weighted average shares issued or reserved for
issuance as of March 31, 1999 and 1998, respectively. Effective December 1, 1997
the Company granted options under the Stock Option Plan and the Directors' Stock
Option Plan. The effects of outstanding options are included in the calculation
of diluted earnings per common share to the extent that they are dilutive to
earnings. The options under the Directors' Stock Option Plan were not included
in the calculation of diluted earnings
9
<PAGE> 11
per common share until the second quarter of fiscal year 1999 as they were not
approved by the Shareholders until December 16, 1998.
NOTE F -- ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"). This statement requires that companies disclose segment data
on the basis that it is used internally by management for evaluating segment
performance and allocating resources to segments. This statement requires that a
company report a measure of segment profit or loss, certain specific revenue and
expense items, and segment assets. It also requires various reconciliations of
total segment information to amounts in the consolidated financial statements.
The Company's current definition of its business segments will not materially
change from the current presentation. SFAS No. 131 is effective for fiscal years
beginning after December 31, 1997, thus the Company will adopt this statement as
of June 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Statements contained herein that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
but not limited to statements regarding the Company's expectations, hopes,
beliefs, intentions or strategies regarding the future. Actual results could
differ materially from those projected in any forward-looking statements as a
result of a number of factors, including those detailed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, as
well as those set forth elsewhere herein. The forward-looking statements are
made as of the date of these financial statements and the Company undertakes no
obligation to update or revise the forward-looking statements, or to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.
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". Since
April 1, 1997, the Company's financial statements have been prepared as if it is
a new reporting entity.
The operating results of the Company during the quarters and nine months
ended March 31, 1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31 March 31
---------------------------- -----------------------------
1999 1998 1999 1998
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
Operating income (loss):
Assisted care management.......................... $ 77 $ 31 $ 269 $ 191
Real estate....................................... (4) (2) (13) 8
Other............................................. 84 127 302 336
----------- ------------ ------------- -------------
157 156 558 535
Expenses:
General and administrative........................ (155) (171) (578) (464)
----------- ------------ ------------- -------------
Income (loss) before federal income tax expense............ 2 (15) (20) 71
Federal income tax (expense) benefit....................... -- 5 -- (25)
----------- ------------ ------------- -------------
Net income (loss)....................... $ 2 $ (10) $ (20) $ 46
=========== ============ ============= =============
</TABLE>
10
<PAGE> 12
Assisted Care Management. The increase in the profitability of the assisted
care management operations from $31,000 and $191,000 for the quarter and nine
months ended March 31, 1998, respectively, to $77,000 and $269,000 for the
quarter and nine months ended March 31, 1999, respectively, is primarily
attributable to the increased 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 make significant capital improvements for
fire protection that were funded by operations. These expenditures decreased the
quarterly management fee received by SHM beginning with the second quarter of
fiscal year 1998 through the first quarter of fiscal year 1999. Upon completion
of the fire protection capital improvements, Treemont reduced the related
accrual to actual costs incurred. As SHM receives a fee based on Treemont's net
income, the elimination of this accrual resulted in a non-recurring increase to
SHM's management fee income in the amount of $61,000 and a related increase in
personnel expense of $15,000, for the quarter ended December 31, 1998. Refer to
the Company's annual report on Form 10-K for the fiscal year ended June 30, 1998
for more information on the Company's assisted care business and management
contract.
In the fourth quarter of fiscal year 1998, the owners of Treemont contacted
the Company's management and requested a legal review of the management
agreement as they believed certain parts of the contract were illegal. The
Company's position is that the agreement is substantially secured at this time
by the Treemont property in Houston. There have been no further discussions
related to this matter.
Real Estate. The Company's investment in real estate is owned by LLG Lands,
Inc. ("LLG"), a wholly-owned subsidiary of the Company. 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 was zoned for single family use and commercial use. The Company
attempted to increase the values of the property through the re-zoning and
relocation of zoning in certain tracts. The Company has been notified that its
re-zoning application has been approved. By this application the Company
relocated its multi-family tract to a more accessible location and changed the
single family zoning to light industrial. Refer to the Company's annual report
on Form 10-K for the fiscal year ended June 30, 1998 for more information on the
Company's real estate investment.
The decrease in operating income for the nine months ended March 31, 1999
from the same period in fiscal year 1998 is primarily due to decreased interest
income as a result of a decision by management to maintain a smaller cash
balance at the subsidiary company. Costs related to the re-zoning, marketing and
developing the property were consistent between periods and will continue, some
of which may be capitalized.
Other Operations. The Company reported other operating income of $84,000
and $302,000 for the quarter and nine months ended March 31, 1999, respectively,
and $127,000 and $336,000 for the quarter and nine months ended March 31, 1998,
respectively. This included an overhead allocation based upon management's
estimate of resources used by the Creditors' Trust and charged to the Creditors'
Trust of $43,000 and $186,000 for the quarter and nine months ended March 31,
1999, respectively, as compared to $105,000 and $263,000 for the quarter and
nine months ended March 31, 1998, respectively. The allocation of overhead to
the Creditors' Trust is expected to decrease during fiscal year 1999.
The remaining income consisted primarily of interest income of $40,000 and
$109,000 for the quarter and nine months ended March 31, 1999, respectively,
compared to only $21,000 and $28,000 for the quarter and nine months ended March
31, 1998, respectively. This increase is due to a decision by management to
maintain a larger cash balance at the parent company and the $2.2 million
increase in cash as a result of the issuance of additional common stock on
November 5, 1998.
Expenses. General and administrative expenses were $155,000 and $578,000
for the quarter and nine months ended March 31, 1999, respectively, as compared
to $171,000 and $464,000 for the quarter and nine months ended March 31, 1998,
respectively. The increase for the nine month period is attributable to: (1)
non-recurring consulting expenses of $90,000 in the first quarter of fiscal
1999, (2) an increase in the monthly retainer as a result of the officers' new
retention agreements effective December 1, 1997, for an increase of $48,000 for
the nine months ended March 31, 1999, (3) additional directors fees of $22,000
as compared to the same nine month period in the prior year resulting from the
accrual of the directors' 1999 annual fee and two additional meetings (the
directors' fiscal 1998 annual fee was paid and expensed
11
<PAGE> 13
in the fourth quarter of fiscal 1997), and (4) stock options for the officers
and directors resulted in related expense of $22,000 for the nine month period
ended March 31, 1999 as compared to only $6,000 in the prior year. These
increases were offset slightly by decreases in corporate insurance, accounting,
and SEC reporting and stockholder expenses. The decrease for the quarter is
primarily due to a decrease in corporate insurance expense.
Due to the Company's lack of dependence on computer software, the Company
does not expect the cost of addressing the Year 2000 issue to have a material
impact on the Company's future operating results.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the only liabilities of the Company were accounts
payable and accrued expenses which will be paid from current operating cash
available as of March 31, 1999.
In December 1997, the Company received a letter from the attorney of the
insurance company that carried the former directors and officers insurance
coverage, stating that there is a $1.0 million per claim retention which must be
completely exhausted before the insurance company is implicated. Management at
this time believes that the Company is not responsible for this retention amount
as a result of the Joint Plan.
Management has reviewed the Company's position pursuant to the trustee
agreement and the Joint Plan to lend additional funds to the LFC/LMUSA
Litigation Trust and believes the Company has no financial obligation.
On September 25, 1998 the Company was advised that it was named as a
Counter-Defendant in the counterclaim filed by the defendants of the LFC/LMUSA
Litigation Trust's lawsuit against certain former officers and directors of
Lomas Financial Corporation and subsidiaries. The counterclaim seeks joint and
several liability. The Company has responded to the counterclaim denying
liability and preserving the Company's rights and defenses. Separately the
Company initiated litigation in the Delaware Bankruptcy Court to obtain a
declaration of rights and an order to turn over records. A successful outcome in
the Delaware court should resolve the counterclaim.
Recognizing the need of the Company for additional working capital, the
Chairman of the Company offered to make a cash investment for a certain number
of shares of the Company's common stock. This offer was considered and accepted
by the Company's Board of Directors at its regularly scheduled quarterly meeting
held in Wilmington, Delaware on September 23, 1998. The Chairman did not
participate in the vote of the Board accepting this offer. On November 5, 1998,
the Company received $2.2 million in exchange for 2 million shares of the
Company's common stock. This transaction increased the number of outstanding
shares of common stock to 6 million.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In December 1997, the Company received a letter from the attorney of the
insurance company that carried the former directors and officers insurance
coverage, stating that there is a $1.0 million per claim retention which must be
completely exhausted before the insurance company is implicated. Management at
this time believes that the Company is not responsible for this retention amount
as a result of the Joint Plan.
Management has reviewed the Company's position pursuant to the trustee
agreement and the Joint Plan to lend additional funds to the LFC/LMUSA
Litigation Trust and believes the Company has no financial obligation.
On September 25, 1998 the Company was advised that it was named as a
Counter-Defendant in the counterclaim filed by the defendants of the LFC/LMUSA
Litigation Trust's lawsuit against certain former officers and directors of
Lomas Financial Corporation and subsidiaries. The counterclaim seeks joint and
several liability. The Company has responded to the counterclaim denying
liability and preserving the Company's rights and defenses. Separately the
Company initiated litigation in the Delaware Bankruptcy Court to obtain a
declaration of rights and an order to turn over records. A successful outcome in
the Delaware court should resolve the counterclaim.
12
<PAGE> 14
The LFC Creditors' Trust and any proceeds from the LFC/LMUSA Litigation
Trust are solely for the benefit of the former creditors of the Joint Debtors.
Stockholders will not benefit from these trusts unless they held Class 3 -
general unsecured claims as defined in the Joint Plan.
The assisted care facility management subsidiary, SHM, is a wholly-owned
subsidiary of the Company, and conducts business in Houston, Texas pursuant to a
management agreement. 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. In the fourth quarter of fiscal year 1998, the owners of
Treemont contacted the Company's management and requested a legal review of the
management agreement as they believed certain parts of the contract were
illegal. The Company's position is that the agreement is substantially secured
at this time by the Treemont property in Houston. There have been no further
discussions related to this matter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Refer to the Company's annual report on Form 10-K for the year ended June
30, 1998, for information regarding defaults by the Company relating to the debt
obligations of the Predecessor Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
(10.1) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and Eric M. Bodow
(10.2) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and James D. Kemp
(10.3) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and Matthew S.
Metcalfe
(10.4) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and Frank B. Ryan
(11) Computation of Earnings (Loss) Per Share
(27) Financial Data Schedule (submitted to the Securities
and Exchange Commission for its information).
</TABLE>
(b) Reports on Form 8-K: None.
13
<PAGE> 15
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: May 12, 1999 By: /s/ W. JOSEPH DRYER
---------------------------------
President
Date: May 12, 1999 By:/s/ W. JOSEPH DRYER
---------------------------------
Principal Accounting Officer
14
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ---------------
<S> <C>
(10.1) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and Eric M. Bodow
(10.2) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and James D. Kemp
(10.3) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and Matthew S.
Metcalfe
(10.4) Siena Holdings, Inc. Nonqualified Stock Option Agreement, effective December 1, 1997
and approved by shareholders December 16, 1998, by and between SHI and Frank B. Ryan
(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
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:
ERIK M. BODOW
(the "Grantee" "You" or "Your")
an option to purchase from the Company a total of 40,000 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
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<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.
Fourth 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 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
-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
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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.
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
5068 W. Plano Parkway, Suite 345
Plano, TX 75093
(B) Notice to Grantee shall be addressed and delivered as follows:
Erik M. Bodow
43 New England Drive
Lake Hiawatha, NJ 07034
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: /s/ W. JOSEPH DRYER
------------------
TITLE: PRESIDENT
----------------
GRANTEE:
/s/ ERIK M. BODOW
- ----------------------
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<PAGE> 1
EXHIBIT 10.2
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:
JAMES D. KEMP
(the "Grantee" "You" or "Your")
an option to purchase from the Company a total of 40,000 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
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<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.
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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.
Fourth 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
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<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 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.
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
5068 W. Plano Parkway, Suite 345
Plano, TX 75093
(B) Notice to Grantee shall be addressed and delivered as follows:
James D. Kemp
10661 Steppington Drive, Suite 4082
Dallas, TX 75230
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: /s/ W. JOSEPH DRYER
-----------------------
TITLE: PRESIDENT
--------------------
GRANTEE:
/s/ JAMES D. KEMP
- --------------------------
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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:
MATHEW S. METCALFE
(the "Grantee" "You" or "Your")
an option to purchase from the Company a total of 40,000 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
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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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(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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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.
Fourth 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
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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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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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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.
22. NOTICE. Any notice required or permitted to be delivered hereunder shall be
deemed to be
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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
5068 W. Plano Parkway, Suite 345
Plano, TX 75093
(B) Notice to Grantee shall be addressed and delivered as follows:
Matthew S. Metcalfe
Airland Corporation
PO Box 2903
Mobile, AL 36652
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: /s/ W. JOSEPH DRYER
-------------------------
TITLE: PRESIDENT
----------------------
GRANTEE:
/s/ MATTHEW S. METCALFE
---------------------------
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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:
FRANK RYAN
(the "Grantee" "You" or "Your")
an option to purchase from the Company a total of 40,000 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
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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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(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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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.
Fourth 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
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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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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.
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
5068 W. Plano Parkway, Suite 345
Plano, TX 75093
(B) Notice to Grantee shall be addressed and delivered as follows:
Frank Ryan
Route 121, Houghtonville Road
PO Box 185
Grafton, VT 05146
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: /s/ W. JOSEPH DRYER
--------------------------
TITLE: PRESIDENT
-----------------------
GRANTEE:
/s/ FRANK B. RYAN
- -----------------------------
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<PAGE> 1
EXHIBIT 11
SIENA HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(in thousands, except per share data)
<TABLE>
Quarter Ended Nine Months Ended
March 31 March 31
------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
COMPUTATION:
Net income (loss) available to common stockholders... $ 2 $ (10) $ (20) $ 46
============== ============== ============== ===============
Weighted average common shares outstanding........... 6,000 4,000* 5,073* 4,000*
BASIC EARNINGS (LOSS) PER SHARE:
Net income (loss) available to common stockholders... $ 0.00* $ (0.00)* $ (0.00)* $ 0.01*
============== ============== ============== ===============
DILUTED EARNINGS (LOSS) PER SHARE
COMPUTATION:
Income (loss) available to common stockholders ...... $ 2 $ (10) $ (20) $ 46
Income effect of assumed conversions ................ -- -- -- --
-------------- -------------- -------------- ---------------
Net income (loss) available to common stockholders
+ assumed conversions ........................... $ 2 $ (10) $ (20) $ 46
============== ============== ============== ===============
Weighted average common shares outstanding .......... 6,000* 4,000* 5,073* 4,000*
Plus: Dilutive potential common shares under the SHI
Nonqualified Stock Option Plan and
Directors' Nonqualified Stock Option Plan ... -- * 93* -- * 33*
-------------- -------------- -------------- ---------------
Adjusted weighted average shares outstanding ........ 6,000* 4,093* 5,073* 4,033*
============== ============== ============== ===============
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) available to common stockholders ...... $ 0.00* $ (0.00)* $ (0.00)* $ 0.01*
Income effect of assumed conversions ................ -- -- -- --
-------------- -------------- -------------- ---------------
Net income (loss) available to common stockholders
+ assumed conversions .......................... $ 0.00* $ (0.00)* $ (0.00)* $ 0.01*
============== ============== ============== ===============
</TABLE>
* Average share and per share amounts are based on shares issued or reserved for
issuance to creditors.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,166
<SECURITIES> 0
<RECEIVABLES> 116
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,420
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,290
<CURRENT-LIABILITIES> 281
<BONDS> 0
0
0
<COMMON> 600
<OTHER-SE> 7,745
<TOTAL-LIABILITY-AND-EQUITY> 9,290
<SALES> 0
<TOTAL-REVENUES> 206
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2
<INCOME-TAX> 0
<INCOME-CONTINUING> 2
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
