SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
SIENA HOLDINGS, INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
4. Proposed maximum aggregate value transaction:
--------------------------------------------------------------------
5. Total fee paid:
--------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
--------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
3. Filing Party:
--------------------------------------------------------------------
4. Date Filed:
--------------------------------------------------------------------
<PAGE>
SIENA HOLDINGS, INC.
5068 West Plano Parkway, Suite 300
Plano, Texas 75093
NOTICE OF ANNUAL MEETING
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of Siena
Holdings, Inc. will be held on December 15, 2000 at 10 o'clock EST, at The Hotel
DuPont, Wilmington, Delaware, for the following purposes:
1. To elect five directors to serve until the next annual meeting and
until their successors are elected and qualified;
2. To approve and authorize the Board to effect, in its discretion, a
reverse stock split followed by a forward stock split of the
Company's Common Stock.
3. To ratify the appointment of KPMG LLP as independent public
accountants for the Company for the fiscal year ending June 30,
2001; and
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only holders of record of Common Stock as of the close of business on
November 1, 2000 are entitled to receive notice of and vote at the meeting or
any adjournment or adjournments thereof.
By Order of the Board of Directors:
/s/ W. Joseph Dryer
----------------------------------------
Secretary
Dated at Plano, Texas
October 30, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY
PROMPTLY IN THE ENCLOSED POSTAGE PAID RETURN ENVELOPE.
<PAGE>
SIENA HOLDINGS, INC.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Siena Holdings, Inc. (together with
its wholly-owned subsidiaries, the "Company") of proxies from the holders of the
Company's common stock for use at the Annual Meeting (the "Meeting") to be held
on December 15, 2000, and any adjournment or adjournments thereof. The giving of
a proxy does not affect your right to vote should you attend the Meeting in
person, and the proxy may be revoked at any time before it is voted by giving
the Secretary of the Company a signed instrument revoking the proxy or a signed
proxy of a later date. Each properly executed proxy not revoked will be voted in
accordance with instructions thereon. If no contrary instructions are specified
in the proxy, it is the intention of the persons named in the accompanying proxy
to vote FOR the election of the nominees named herein as directors of the
Company and FOR the matters described in Items 2, 3, and 4 in the Notice of
Annual Meeting.
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 2000 (the "Annual Report"), containing audited consolidated financial
statements, in the form of the information filed by the Company with the
Securities and Exchange Commission on Form 10-K, is being mailed to Stockholders
along with the Notice of Annual Meeting and Proxy Statement. The consolidated
financial statements and discussion and analysis by management of the Company's
financial condition and results of operations contained in the Annual Report are
incorporated herein by reference.
The mailing address of the Company's principal executive office is: 5068
West Plano Parkway, Suite 300, Plano, Texas 75093, and the approximate date on
which this Proxy Statement and the form of proxy are first being sent to
stockholders is November 13, 2000.
Only holders of record of the Company's Common Stock, par value $.10 per
share (the "Common Stock"), at the close of business on November 1, 2000, are
entitled to vote at the Meeting, one vote for each share of Common Stock so
held. On that date, there were 6 million shares of Common Stock outstanding.
PRINCIPAL STOCKHOLDERS
The following table shows, as of October 30, 2000, the total number of
shares of Common Stock owned beneficially by persons or groups, within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
known to the Company to be the beneficial owners of more than 5% of the Common
Stock:
- 2 -
<PAGE>
Shares Beneficially
Name and Address of Owned Directly or Percent of
Beneficial Owner Indirectly Common Stock
------------------- ------------------- ------------
John P. Kneafsey 2,539,612 (1) 42.3%
c/o Pathfinder Advisory Services
9515 Deereco Road, Suite 903
Timonium, MD 21093
Credit Suisse 910,509 (2) 15.2%
First Boston Corporation
11 Madison Avenue
New York, NY 10010
(1) Based on information set forth in the Schedule 13G filing dated August 26,
1998, by John P. Kneafsey, who is Chairman and Chief Executive Officer of
SHI. According to the filing, John P. Kneafsey beneficially owns the
securities reported herein. The amount and percent of class of securities
owned was adjusted by Mr. Kneafsey to reflect securities owned as of
October 30, 2000, including the November 5, 1998 transaction whereby Mr.
Kneafsey paid the Company $2.2 million in exchange for 2 million shares of
the Company's common stock. This offer was considered and accepted by the
Company's Board of Directors at its regularly scheduled meeting held in
Wilmington, Delaware on September 23, 1998. The Chairman did not
participate in the vote of the Board accepting this offer. This
transaction increased the number of outstanding shares of common stock to
6 million.
(2) Based on information set forth in the Schedule 13G filing dated February
23, 1998, by Credit Suisse First Boston, a registered bank in Zurich,
Switzerland, acting solely on behalf of the Credit Suisse First Boston
business unit. According to the filing, Credit Suisse First Boston
Corporation directly beneficially owns the securities reported herein. The
percent of class was adjusted due to the increase in the number of
outstanding shares of common stock to 6 million, as discussed above.
According to the Joint Plan and a decision by the LFC Creditors'
Committee, 4,000,000 shares of new common stock of Siena Holdings, Inc. were
held in reserve for issuance as of March 31, 1997 and ultimately issued on
November 12, 1997 by the stock transfer agent for distribution to the Class 3
unsecured creditors, pending finalization of all paperwork. As of November 12,
1997, the estimated Class 3 claims totaled $146.8 million. The composition of
the Class 3 unsecured creditors includes claims relating to the holders of LFC
senior convertible notes due 2003 (the "Bondholders") of $145.4 million and
other unsecured claims of $1.4 million.
As of June 30, 2000, the identities of all the Bondholders are not known,
therefore, management of the Company is not aware of all persons or groups
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, who would be a beneficial owner of more than 5 percent of SHI's
outstanding Common Stock, except for those listed above. The process by the
stock distribution agent has resulted in 4,000,000 shares of common stock
actually distributed to former creditors.
ELECTION OF DIRECTORS
The five persons named in the following table have been designated as
nominees for election to the Board of Directors, each to serve for a one-year
term and until his successor is duly elected and qualified. All of the nominees
listed below currently serve as directors of the Company. If any of such
nominees declines or becomes unable to serve, the persons named in the proxy
will vote for the election of any substitute nominee designated by the Board of
Directors. The Company has no reason to believe that any nominee will decline or
be unable to serve.
<TABLE>
<CAPTION>
Name, Age, Principal Occupation During Served as Shares Beneficially Owned
Past Five Years, and Other Corporate Director
Directorships Since Amount Percent
-------------------------------------- --------- ------ -------
<S> <C> <C> <C>
JOHN P. KNEAFSEY - Chairman and Chief Executive 1997 2,539,612 42.3%
Officer of the Company, since October 1996;
President, Pathfinder Advisory Services, Inc., since
1997; Senior Vice President-Investments, Prudential
Securities, Inc., from 1980 to 1997. Age 53
ERIK M. BODOW - Chief Administrative Officer, GEM 1997 -- --
Capital Management, Inc., since 1998, Senior
Vice-President, Sagner/Marks, Inc., from 1992 to
1998; Vice President, First National Bank of
Chicago, from 1985 to 1992. Age 57
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
JAMES D. KEMP - Principal, Antaean Solutions, LLC, 1997 -- --
since 1997; President and Chief Executive Officer,
The Trust Company, N.A., from 1996 to 1997;
President and Chief Executive Officer, Kemp
Consulting, from 1992 to 1997; President, Ameritrust
Texas, N.A., from 1980 to 1992. Age 53
MATTHEW S. METCALFE - Chairman and President, 1997 5,129 0.1%
Airland Corporation; Director Emeritus, Amsouth
Bankcorporation; Member, State of Alabama Oil and
Gas Board; Chairman, Mobile Airport Authority. Age
69
FRANK B. RYAN - Professor of Mathematics at Rice 1997 -- --
University (currently on leave); Director, Danielson
Holding Corporation; Director, Texas Micro, Inc.;
Director, America West Airlines, Inc. Age 64
</TABLE>
The Board of Directors recommends a vote "FOR" the election of the above
nominees as directors of the Company.
BOARD ORGANIZATION AND COMPENSATION
The Board of Directors held four meetings during the fiscal year ended
June 30, 2000. All directors attended all four meetings. In addition, the
Company has an Audit Committee and a Compensation Committee, but does not have a
Nominating Committee.
The Audit Committee of the Board of Directors is composed of all four
independent members of the Board. The Audit Committee reviews with KPMG LLP, the
Company's independent auditors, the audit plan and the internal accounting
controls for the Company and its subsidiaries, as well as the Company's
consolidated financial statements and management letter. The Audit Committee
reports to the full Board of Directors. It also recommends to the Board of
Directors the selection of independent auditors for the Company. The Audit
Committee is not governed by a charter but has stated that it intends to adopt a
charter and expects to have a final charter ready by the end of the second
fiscal quarter.
- 4 -
<PAGE>
The Compensation Committee of the Board of Directors, composed of all four
independent members of the Board of Directors, did not meet during the fiscal
year ended June 30, 2000. This Committee periodically reviews the Company's
management compensation and reports its actions or recommendations to the Board
of Directors. The Committee also approves the general salary scale for employees
of the Company. There were no changes to management compensation during this
period.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of June 30, 2000 and related
information are as follows:
John P. Kneafsey, Chairman and Chief Executive Officer (See information under
"Election of Directors" above.)
W. Joseph Dryer, President and Chief Accounting Officer since October 4, 1996,
prior thereto, Senior Vice President from January 1995; Secretary/Treasurer of
Worldcorp, Inc. from February 1999 to March 2000, President since March 2000;
also, President and Director of Russian River Energy Co. from 1992 to 1994; and
President and Director of Geothermal Resources International, Inc. since 1994;
prior thereto, an Officer since 1984. Age 45.
EXECUTIVE MANAGEMENT COMPENSATION
Compensation of Executive Officers
The following table sets forth all compensation paid by the Company for
the year ended June 30, 1999, the year ended June 30, 1998, the three-month
period ended June 30, 1997 and the nine-month period ended March 31, 1997, and
for services rendered in all capacities to the two executive officers of the
Company during fiscal year 2000.
Base Other Cash Total Cash
Officer Period Compensation Compensation Compensation
John P. Kneafsey Year Ended 6/30/00 $128,000 -- $128,000
Year Ended 6/30/99 $128,000 $298,000 (1) $426,000
Year Ended 6/30/98 $ 84,667 $ 6,200 (2) $ 90,867
3 Mos. Ended 6/30, $ 6,000 -- $ 6,000
9 Mos. Ended 3/31, $ 12,000 -- $ 12,000
W. Joseph Dryer Year Ended 6/30/00 $144,000 $144,000
Year Ended 6/30/99 $144,000 -- $144,000
Year Ended 6/30/98 $139,000 -- $336,467
3 Mos. Ended 6/30, $ 33,000 $197,467 (3) $ 33,000
9 Mos. Ended 3/31, $170,106 -- $170,106
(1) Includes a bonus in the amount of $295,000 earned in May 1998, in
accordance with Mr. Kneafsey's retention agreement discussed below. Mr.
Kneafsey elected not to receive the payment until February 1999, thus it
was carried in accounts payable and accrued expenses in the Consolidated
Balance Sheet as of June 30, 1998. Director fees received in fiscal year
1999 in the amount of $3,000 are also included. An additional $7,000 in
director fees were earned but deferred in accordance with the SHI Deferred
Compensation Plan. See "Executive Compensation - Compensation of
Directors" below.
(2) Includes $5,000 in director fees and a $1,200 bonus paid in accordance
with Mr. Kneafsey's retention agreement discussed below.
(3) Includes bonuses in the amount of $196,667 and $800 paid in accordance
with Mr. Dryer's retention agreement discussed below.
- 5 -
<PAGE>
Employment and Other Compensatory Agreements
Effective December 1, 1997, the Board of Directors approved two separate
retention agreements for John P. Kneafsey and W. Joseph Dryer (the "Retention
Agreements"), filed as exhibits to the Company's quarterly Form 10-Q for the
period ended December 31, 1997, which are summarized as follows:
John P. Kneafsey. Mr. Kneafsey has a retention agreement with SHI expiring
December 1, 2002, retaining the officer as the Chief Executive Officer of SHI.
Mr. Kneafsey's base annual retainer beginning December 1, 1997 is $128,000, with
such adjustments thereto as may be determined by the Board of Directors in its
sole discretion. The agreement also provides for success incentive bonuses for
the sale or liquidation of assets based on a percentage of the deal value
established by the Board of Directors or the appreciated value above the fair
market value of the asset, which as a result of the fresh start adjustments is
the same as book value as of March 31, 1997. Mr. Kneafsey shall be paid 6% of
the gross appreciation value above book value or 6% of the deal value, upon the
close of such transaction. Such bonus provision shall be applied to the Company
and its subsidiaries and the Company's results as trustee of the Creditors'
Trust. Mr. Kneafsey shall also receive non-qualified stock options as defined in
separate agreements. The Board of Directors shall have the option to extend the
agreement for successive 6 month periods, upon proper notice of not less than 60
days to the officer, under terms and retention payments to be mutually agreed to
by the Company and Mr. Kneafsey. In the event of termination without cause or
other breach of the agreement by SHI, Mr. Kneafsey will be entitled to receive a
lump-sum termination payment equal to the retention payment (excluding bonuses)
that Mr. Kneafsey would have received for the next 12 months following
termination, adjusted up to take into consideration taxes that would have to be
paid on the termination payment.
W. Joseph Dryer. Mr. Dryer has a retention agreement with SHI expiring
December 1, 2002, retaining the officer as President of SHI. Mr. Dryer's base
annual retainer beginning December 1, 1997 is $144,000, with such adjustments
thereto as may be determined by the Board of Directors in its sole discretion.
The agreement also provides for success incentive bonuses for the sale or
liquidation of assets based on a percentage of the deal value established by the
Board of Directors or the appreciated value above the fair market value of the
asset, which as a result of the fresh start adjustments is the same as book
value as of March 31, 1997. Mr. Dryer shall be paid 4% of the gross appreciation
value above book value or 4% of the deal value, upon the close of such
transaction. Such bonus provision shall be applied to the Company and its
subsidiaries and the Company's results as trustee of the Creditors' Trust. Mr.
Dryer shall also receive non-qualified stock options as defined in separate
agreements. The Board of Directors shall have the option to extend the agreement
for successive 6 month periods, upon proper notice of not less than 60 days to
the officer, under terms and retention payments to be mutually agreed to by the
Company and Mr. Dryer. In the event of termination without cause or other breach
of the agreement by SHI, Mr. Dryer will be entitled to receive a lump-sum
termination payment equal to the retention payment (excluding bonuses) that Mr.
Dryer would have received for the next 12 months following termination, adjusted
up to take into consideration taxes that would have to be paid on the
termination payment.
Pursuant to the retention agreements defined above for Mr. Kneafsey and
Mr. Dryer, two transactions were closed in fiscal year 1998 that resulted in
success incentive bonuses, as follows:
o On January 14, 1998, the Creditors' Trust received $8.1 million pursuant
to the negotiated final settlement of a subordinated promissory note. The
Company as trustee began negotiations early in 1997. The Bankruptcy Court
approved a settlement on December 29, 1997. The settlement provided the
Creditors' Trust with a gain of $5.9 million. This gain was recognized for
income tax purposes in April 1997 upon the transfer of the promissory note
from the Company to the Creditors' Trust. The Company received $590,000 in
May 1998 for the bonus pool from the proceeds received by the Creditors'
Trust based on the cash received by the Creditors' Trust in excess of book
value. The Board of Directors approved an aggregate bonus amount of
$492,000 for the executive officers. Mr. Dryer was paid a success bonus on
the transaction in the amount of $197,000 in May 1998. Mr. Kneafsey's
success bonus in the amount of $295,000 was included in accounts payable
and accrued expenses on the Company's Consolidated Balance Sheet as of
June 30, 1998, and paid in February 1999. The remaining $98,000 of the
revenue received from the Creditors' Trust was deferred pursuant to the
directors' compensation plan discussed below.
o The Company sold its investment in Vistamar, Inc., a former real estate
subsidiary incorporated in Puerto Rico, for $20,000 in April 1998. Upon
receipt of the proceeds, Mr. Kneafsey and Mr. Dryer received $1,200 and
$800, respectively, in accordance with their retention agreements.
Stock Option Plan
The Retention Agreements also awarded stock options to Mr. Kneafsey and
Mr. Dryer pursuant to the SHI Non-qualified Stock Option Agreements, included as
exhibits to the Company's quarterly report on Form 10-Q for the quarter ended
December 31, 1997. The plan according to the SHI Non-qualified Stock Option
Agreements (the "Stock Option Plan") granted Mr. Kneafsey and Mr. Dryer options
to purchase 271,250 and 163,000 shares, respectively, 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 (as defined) of the Company, the stock options shall be 100%
vested. Additional stock options or other forms of long-term incentive
compensation arrangements may from time to time be granted by the board of
directors.
All of the Predecessor Company's stock plans or other retirement benefits
for the officers were canceled during the nine months ended March 31, 1997,
pursuant to the confirmation of the Joint Plan.
Security Ownership of Executive Officers
The stock ownership by directors and executive officers of SHI as of
October 30, 2000, is as follows:
Amount and
Nature of
Beneficial Percent of
Title of Class Name of Beneficial Owner Ownership Class
----------------- ---------------------------- ---------- -----------
SHI Common Stock John P. Kneafsey............ 2,539,612 42.3%
W. Joseph Dryer............. 71,800 1.2%
Compensation of Directors
Directors of the Company receive annual compensation at the rate of $5,000
and fees of $1,000 for each directors' meeting attended, plus reimbursement for
all reasonable expenses. Additional compensation of the Board of Directors is
summarized as follows:
(1) Directors' Additional Compensation Plan. 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 5, 1998. The Directors' Additional Compensation Plan provides for a
success incentive bonus contingent on the sale or liquidation of certain assets,
which will pay a percentage of the deal value established by the Board of
Directors or the appreciated value above the fair market value of the asset,
which as a result of the fresh start adjustments is the same as book value as of
March 31, 1997. In aggregate, the non-officer directors shall be paid a total of
2% of the gross appreciation value above book value or 2% of the deal value,
upon the close of any such transaction. Such bonus provision shall be applied to
the Company and its subsidiaries and the Company's results as trustee of the
Creditors' Trust.
During the year ended June 30, 1998, two transactions were closed that,
upon shareholder approval of the Directors' Additional Compensation Plan,
authorized success bonus payments to the non-officer directors, as follows:
o As discussed above, the Company received proceeds in May 1998 from the
Creditors' Trust based on the cash received by the Creditors' Trust in
excess of the book value upon the liquidation of a subordinated promissory
note held in the Creditors' Trust. $98,000 of the revenue received from
the Creditors' Trust was deferred and carried in accounts payable and
accrued expenses as of June 30, 1998. One director was paid in December
1998. Two of the three other non-officer directors elected to defer a
portion or all of the payment pursuant to the SHI Deferred Compensation
Plan defined below. The bonus payments not deferred or paid as of June 30,
2000, are included in accounts payable and accrued expenses on the
Company's Consolidated Balance Sheet.
o The Company sold its investment in Vistamar, Inc., a former real estate
subsidiary incorporated in Puerto Rico, for $20,000 in April 1998. Upon
approval by the Shareholders, each non-officer director received $100.
Certain of the non-officer directors elected to defer payments due to them
pursuant to the SHI Deferred Compensation Plan (the "Deferred Compensation
Plan"), approved by the Board of Directors on and effective as of December 16,
1998. The SHI Deferred Compensation Plan Document is included as Exhibit 10.1 to
the annual report on Form 10-K for the year ended June 30, 1999. The Deferred
Compensation Plan allows the member of the Board of Directors to defer annual
director fees, meeting fees, and success bonus payments for a given calendar
year. Interest earned on the cash will be accrued and paid to the director. A
deferred compensation balance of $102,000, plus accrued interest, is included in
accounts payable and accrued expenses on the Company's Consolidated Balance
Sheet as of June 30, 2000.
(2) Non-qualified Stock Option Agreements. The Non-qualified Stock Option
Agreements for the Board of Directors (the "Directors' Stock Option Plan") were
approved by the shareholders of SHI (the "Shareholders") on December 16, 1998
(the "Date of Shareholder Approval"), and were included as exhibits to the
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 Shareholder Approval was $0.84375. Upon
the event of any change-in-control of the Company (as defined) the stock options
shall be 100% vested.
All of the Predecessor Company's stock plans or other retirement benefits
for the directors were canceled during the nine months ended March 31, 1997,
pursuant to the confirmation of the Joint Plan.
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A
FORWARD STOCK SPLIT OF THE COMMON STOCK
The Board has unanimously adopted a resolution declaring the advisability
of, and submits to the Stockholders for approval, a proposal to amend the
Company's certificate of incorporation (a) to effect, as determined by the Board
in its discretion, a reverse stock split of the outstanding Common Stock as of
5:00 p.m. (Delaware time) on the effective date of the amendment (the "Effective
Date"), pursuant to which each 100 shares then outstanding will be converted
into one share (the "1-for-100 Reverse Split"), and (b) to effect a forward
split of the Common Stock as of 6:00 a.m. (Delaware time) on the day following
the effective date of the Reverse Split, pursuant to which Common Stock then
outstanding as of such date will be converted into the number of shares of the
Common Stock that such shares represented immediately prior to the Effective
Date ("Forward Split"). In lieu of issuing less than one whole share resulting
from the proposed stock split to holders of fewer than 100 shares, as the case
may be, the Company would make a cash payment based on the higher of either the
stated book value of the Company on June 30, 2000 or the closing prices of the
Common Stock, as discussed below. The Board will select, in its discretion, to
effect the Reverse Split based on factors existing at the time of determination,
including (a) the availability of funds necessary to consummate the Reverse
Split and the cost of such funds; (b) the market price of the Common Stock; (c)
the Board's determination of whether the Reverse Split will result in a
reduction in the Company's administrative expenses; (d) prevailing market
conditions; (e) the likely effect on the market price of the Common Stock; and
(f) other relevant factors.
Consummation of the Reverse Stock Split/Forward Stock Split will not
change the number of shares of Common Stock authorized by the Company's
certificate of incorporation, which will remain at 15 million shares.
Stockholders may approve or reject the Reverse Split/Forward Split in whole but
not in part. If, for any reason the Board deems it advisable to abandon the
proposed stock splits following their approval by Stockholders, the proposed
stock splits may be abandoned by the Board at any time before the Effective
Date. The Reverse Split/Forward Split will become effective on the date that the
certificate of amendment to the Company's certificate of incorporation is
- 6 -
<PAGE>
accepted for filing by the Delaware Secretary of State. If the Board determines
to consummate a Reverse Stock Split/Forward Stock Split, the Company will
publicly announce the determination at least 10 days prior to the Effective
Date.
The combined effect of the proposed stock splits on the holders of Common
Stock will be as follows:
(a) The Common Stock of holders of record of fewer than 100 shares of
Common Stock on the Effective Date will automatically be converted in the
Reverse Split into the right to receive cash in lieu of less than one whole
share in the amount set forth below. See "Cash Payment in Lieu of Shares."
(b) The Common Stock of holders of record of 100 or more shares on the
Effective Date will be automatically converted in the Reverse Split into the
number of shares equal to the number of their shares divided by 100 shares.
However, as of 6:00 a.m. (Delaware time), on the day after the Effective Date,
each such remaining Stockholder's Common Stock (giving effect to the Reverse
Split) will be converted, pursuant to the Forward Split, into Common Stock, on
the basis of 100 shares per share of Common Stock and any fraction thereof held
immediately after the Reverse Stock Split. As a result, the number of shares
held by each remaining Stockholder immediately after the Forward Stock Split
will equal the number of shares of Common Stock such record holder held
immediately prior to the Reverse Stock Split.
CASH PAYMENT IN LIEU OF SHARES. In lieu of issuing less than one whole
share resulting from the Reverse Split to holders of record of fewer than 100
shares, the Company will value each outstanding share of Common Stock held on
the Effective Date of the Reverse Split at the higher of the stated book value
as of June 30, 2000 or the average daily closing price per share of the Common
Stock as reported for the 10 trading days preceding the Effective Date. Such per
share price is hereinafter referred to as the "Purchase Price."
Stockholders who hold fewer than 100 shares of record on the Effective
Date will be entitled to receive in lieu of the less than one whole share
arising as a result of the Reverse Split, cash in the amount of the Purchase
Price times the number of shares of Common Stock held immediately prior to the
Reverse Split.
Any Stockholder owning of record fewer than 100 shares of Common Stock who
desires to retain an equity interest in the Company after the Effective Date may
do so by purchasing, prior to the Effective Date, sufficient shares of Common
Stock in the open market to increase the number of shares held in his name to
100 or more shares.
As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates which represent issued Common Stock outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
such certificate or certificates to the Company's designated exchange agent in
exchange for cash payments in lieu of shares or certificates representing the
number of whole shares of Common Stock
- 7 -
<PAGE>
into which the shares of Common Stock has been converted as a result of the
proposed stock splits. No cash payment will be made or new certificate issued to
a Stockholder until he has surrendered his outstanding certificates together
with the letter of transmittal to the Company's exchange agent. See "Exchange of
Stock Certificates."
EFFECT OF THE PROPOSED STOCK SPLITS. Under Delaware law, Stockholders have
no right to dissent from the proposed stock splits, or to dissent from the
payment of cash in lieu of issuing less than one whole share resulting from the
Reverse Split.
On the Effective Date, each Stockholder of record who owns fewer than 100
shares of Common Stock will have only the right to receive cash based upon the
Purchase Price in lieu of receiving less than one whole share. The interest of
each such Stockholder in the Company will thereby be terminated, and each such
Stockholder will have no right to vote as a Stockholder or share in the
Company's assets, earnings or profits.
Each Stockholder on the Effective Date who owns of record 100 or more
shares of Common Stock will continue as a Stockholder with respect to the share
or shares resulting from the Reverse Split, and such shares will be forward
split as of 6:00 a.m. (Delaware time), on the date immediately after the
Effective Date so as to convert each share plus any fraction thereof held by
such record holder immediately after the Effective Date into Common Stock, on
the basis of 100 shares of Common Stock for each share then held. Each such
Stockholder will continue to share in the Company's assets, earnings or profits,
if any, to the extent of each such Stockholder's ownership of Common Stock
following the proposed stock splits.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The proposed stock splits will not
affect the registration of the Common Stock under the Exchange Act, and the
Company has no current intention of terminating its registration under the
Exchange Act to become a "private" company.
The cost of administering each Stockholder's account and the amount of
time spent by management in responding to Stockholder requests is the same
regardless of the number of shares held in the account. Accordingly, the cost to
the Company of maintaining many small accounts is disproportionately high when
compared with the total number of shares involved. In view of the
disproportionate cost to the Company of retaining small Stockholder accounts,
management believes that it would be beneficial to the Company and its
Stockholders as a whole to eliminate the administrative burden and cost
associated with accounts containing fewer than 100 shares of Common Stock.
Also, the Reverse Split will enable Stockholders holding of record fewer
than 100 shares to dispose of their investment at market value and, in effect,
avoid brokerage fees on the transaction. Stockholders owning a small number of
shares would, if they chose to sell their shares, probably incur brokerage fees
disproportionately high relative to the market value of their shares. In some
cases, it might be difficult to find a broker to handle such small transactions.
- 8 -
<PAGE>
EXCHANGE OF STOCK CERTIFICATES. If the Board determines to consummate the
proposed stock splits, as soon as practicable after the Effective Date, the
Company will send letters of transmittal to all Stockholders of record on the
Effective Date for use in transmitting stock certificates ("old certificates")
to the Company's exchange agent. Upon proper completion and execution of the
letter of transmittal and return thereof to the exchange agent, together with
old certificates, each stockholder who holds of record fewer than 100 shares on
the Effective Date will receive cash in the amount to which the holder is
entitled. After the Effective Date and until surrendered, each outstanding old
certificate held by a Stockholder who holds of record fewer than 100 shares
shall be deemed for all purposes to represent only the right to receive the
amount of cash to which the holder is entitled as a result of the Reverse Split.
No interest will be paid on cash sums due as of the Effective Date. See "Cash
Payment in Lieu of Shares."
Upon proper completion and execution of the letter of transmittal and
return thereof to the exchange agent, together with old certificates, holders of
record of 100 or more shares on the Effective Date will receive certificates
("new certificates") representing the number of whole shares of Common Stock
into which their shares of Common Stock have been converted as a result of the
proposed stock splits. Until surrendered, each outstanding old certificate held
by a Stockholder who holds of record 100 or more shares shall be deemed for all
purposes to represent the number of whole shares to which the holder is entitled
as a combined result of the proposed stock splits.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion describes
certain federal income tax consequences of the proposed stock splits to
Stockholders who are citizens or residents of the United States, other than
Stockholders who received their Common Stock as compensation. The consequences
for each Stockholder will be governed by the specific facts and circumstances
pertaining to his acquisition and ownership of Common Stock. Thus, the Company
recommends that each stockholder consult with his tax advisor concerning his own
personal tax situation. In general, the federal income tax consequences of the
proposed stock splits will vary among Stockholders depending upon whether they
receive solely cash for their shares or solely new certificates in exchange for
old certificates. Further, the income tax consequences to a Stockholder who
receives cash for shares and who continues to own, or is treated (see
description of constructive ownership under item 5 below) as continuing to own,
Common Stock immediately following the transaction will depend on factors which
cannot be predicted with certainty. A Stockholder may receive cash in the
transaction and own shares immediately after the transaction, if he holds shares
in more than one account. The Company has not sought and will not seek an
opinion of counsel or a ruling from the Internal Revenue Service regarding the
federal income tax consequences of the proposed stock splits. The Company,
however, believes that because the proposed stock splits are not part of a plan
to increase periodically a stockholder's proportionate interest in the Company's
assets or earnings and profits, the proposed stock splits probably will have the
following federal income tax effects:
1. A stockholder who receives only cash as a result of the Reverse Split
and who is not treated as owning any Common Stock immediately following the
transaction will generally be treated as having sold his Common Stock
represented by old certificates and will recognize gain or
- 9 -
<PAGE>
loss to the extent that the cash received differs from his basis in such Common
Stock. If the shares are a capital asset in the hands of the Stockholder, the
gain or loss will be recognized as a capital gain or loss. Whether gains or
losses from the sale or exchange of capital assets are short-term or long-term
capital gains or losses depends on the period the capital asset was held.
2. A Stockholder who receives solely new certificates will not recognize
gain or loss on the exchange. In the aggregate, the Stockholder's basis in the
Common Stock represented by new certificates will equal the holder's basis in
the Common Stock represented by old certificates.
3. The income tax consequences to a Stockholder who receives cash as a
result of the Reverse Split and who owns, or is treated as owning, any Common
Stock immediately following the transaction will depend on whether the
percentage of the outstanding Common Stock which the stockholder owned, or is
treated as owning, immediately after the transaction is less than the percentage
of the outstanding Common Stock which the Stockholder owned, or was treated as
owning, immediately prior to the transaction. If there has been a reduction in
such percentage, the Stockholder will generally be treated as having sold the
shares for which he received cash and will recognize gain or loss on such shares
in the manner described under item 1 above. If there is no reduction in such
percentage, the stockholder will generally be treated as having received a
dividend distribution equal to the amount of cash received. A dividend
distribution would be ordinary income to the extent of the Company's current or
accumulated earnings and profits. Amounts in excess of earnings and profits
would be a return of capital to the extent of the Stockholder's basis in his
directly owned shares and, assuming the shares are held as a capital asset, any
balance of the cash distribution would be capital gain.
4. Generally a taxpayer is deemed to own shares actually owned by, and in
certain instances, constructively owned by, certain family members, corporations
in which the stockholder has a major interest, partnerships, trusts and estates
in which the Stockholder has an interest, or which the taxpayer may acquire by
exercise of an option or by conversion of a security. In addition, a taxpayer
which is a partnership, trust or estate is deemed to own shares owned by persons
having an interest in the taxpayer and a taxpayer which is a corporation will be
deemed constructively to own shares owned by major stockholders of the
corporation.
The Board of Directors recommends a vote FOR approval of the proposed
stock splits.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors appointed the firm of KPMG LLP to act as
independent auditors for the Company for the fiscal year ended June 30, 2000.
The Board of Directors, upon recommendation of the Audit Committee, has selected
the firm of KPMG LLP to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 2001. A representative of KPMG LLP
is expected to be present at the Meeting, have an opportunity to make a
statement, and be available to respond to appropriate questions.
- 10 -
<PAGE>
The Board of Directors recommends a vote "FOR" the proposal to ratify the
appointment of KPMG LLP as independent auditors for the fiscal year ending June
30, 2001.
VOTING PROCEDURES
Each proposal submitted to the Company's stockholders for a vote is deemed
approved if a majority of the shares of Common Stock of the Company present in
person or by proxy at a meeting at which a quorum is present votes in favor of
the proposal. The presence in person or by proxy of stockholders entitled to
cast a majority of all the votes entitled to be cast at the meeting constitutes
a quorum. A stockholder is entitled to one vote for each share owned.
Stockholder votes are tabulated by the Company's Registrar and Transfer
Agent. Proxies received by the Registrar, if such proxy is properly executed and
delivered, will be voted in accordance with the voting specifications made on
such Proxy. Proxies received by the Registrar on which no voting specification
has been made by the stockholder will be voted FOR all items discussed in the
Proxy Statement, in the manner stated on the proxy card. Stockholders who
execute and deliver proxies retain the right to evoke them by notice in writing
delivered to the Company's Secretary at any time before such proxies are voted.
Under applicable Delaware corporate law and the Charter and By-Laws of
the Company, proxies received by the Registrar specifying an abstention as to
any proposal will cause the shares so represented to be counted toward a quorum,
but are not counted as favorable votes and, therefore, have the same effect as a
vote against the proposal. To the extent holders or brokers having the right to
vote shares do not attend the meeting or return a proxy, such shares will not
count toward a quorum, and if a quorum is otherwise achieved, will have no
effect on the vote of the proposals considered at the meeting which shall be
based solely upon the vote of the shares represented at the meeting.
2001 ANNUAL MEETING OF STOCKHOLDERS
If any stockholder intends to present a proposal for consideration at the
2001 Annual Meeting of Stockholders, such proposal must be received by the
Company on or before September 1, 2001, in order to be included in the Company's
Proxy Statement and form of proxy for such meeting. Nothing in this paragraph
shall be deemed to require the Company to include in its proxy statement and
form of proxy relating to the 2001 Annual Meeting of Stockholders any
stockholder proposal which does not meet all of the requirements for such
inclusion established by the Securities and Exchange Commission at that time in
effect.
As of the date of this Proxy Statement, the Board of Directors knows of no
matters, other than those stated above, that may be brought before the Meeting.
However, if other matters do properly come before the Meeting, the persons named
in the enclosed proxy will vote upon them in their discretion and in accordance
with their best judgment.
- 11 -
<PAGE>
A copy of the Company's Form 10-K Annual Report as filed with the
Securities and Exchange Commission, Washington, D.C., has been provided to each
Stockholder of record in connection with the Notice of the Annual Meeting.
The cost of preparing and mailing the Notice of Meeting, Proxy Statement
and form of proxy will be paid by the Company. The Company will request banks,
brokers, fiduciaries, and similar persons to forward copies of such material to
beneficial owners of the Company's common stock in a timely manner and to
request authority for execution of proxies, and the Company will reimburse such
persons and institutions for their reasonable out-of-pocket expenses incurred in
connection therewith. To the extent necessary to assure sufficient
representation, officers and regular employees of the Company may solicit the
return of the proxies by telephone, telegram, or personal interview. The extent
of this solicitation by personal contact will depend upon the response to the
initial solicitation by mail. It is anticipated that the costs of such
solicitation, if undertaken, will not exceed $4,000.
By the Order of the Board of Directors.
/s/ W. Joseph Dryer
------------------------------------
Secretary
Dated at Plano, Texas
October 30, 2000
- 12 -
