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
[X] Definitive Proxy Statement
[ ] Definitive]Definitive Additional Materials
[ ] Soliciting]Soliciting Material Pursuant to (S)ss. 240.14a-11(c) or (S)ss. 240.14a-12
GREENBRIAR CORPORATION
(Name of Registrant As Specified in 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]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:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..................................................................................................................................................
2) Form, Schedule or Registration Statement No.:
..................................................................................................................................................
3) Filing Party:
..................................................................................................................................................
4) Date Filed:
..................................................................................................................................................
GREENBRIAR CORPORATION
4265 KELLWAY CIRCLE
ADDISON, TEXASKellway Circle
Addison, Texas 75244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997To Be Held July 31, 1998
Dear Stockholders of Greenbriar Corporation:
You are cordially invited to attend the Annual Meeting of Stockholders of
Greenbriar Corporation (the "Company") to be held at 10:00 a.m., local time on
May 22, 1997,July 31, 1998, at 4265 Kellway Circle, Addison, Texas 75244, to consider and
vote upon the following matters:
1. To elect one Class III Director and three Class I Directors to
hold office in accordance with the Articles of Incorporation and Bylaws of
the Company ("Proposal 1");
2. To consider and act upon a proposal to approve and adopt the Company's
1997 Stock Option Plan under which 500,000 shares of Common Stock will be
reserved for issuance to key employees, directors and consultants of the
Company ("Proposal 2");
3. To ratify the selection of Grant Thornton, LLP as the Company's
auditors ("Proposal 3"2"); and
4.3. The transaction of such other business that may properly come
before the meeting or any adjournment or postponement thereof.
Only Stockholders of record at the close of business on April 24, 1997July 2, 1998 who
own Common Stock or Series B or Series D Preferred Stock will be entitled to
notice of and to vote at the Annual Meeting or any adjournments thereof.
All Stockholders are cordially invited and urged to attend the Annual
Meeting. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE STILL REQUESTED TO SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ADDRESSED ENVELOPE.Even if you plan to attend the Annual Meeting, you are still requested
to sign, date and return the accompanying proxy in the enclosed addressed
envelope. If you attend, you may vote in person if you wish, even though you
have sent your proxy.
By Order of the Board of Directors
Robert L. Griffis, Secretary
April 29, 1997July 10, 1998
GREENBRIAR CORPORATION
4265 KELLWAY CIRCLE
ADDISON, TEXASKellway Circle
Addison, Texas 75244
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997To Be Held July 31, 1998
This Proxy Statement (the "Proxy Statement") and the accompanying proxy
card are being furnished to the holders of common stock, par value $.01 per
share ("Common Stock"), and Series B and Series D Preferred Stock, par value
$0.10 per share ("Preferred Stock") (collectively, the "Stockholders"), of
Greenbriar Corporation, a Nevada corporation ("Greenbriar" or the "Company"), in
connection with a solicitation of proxies by the Board of Directors of the
Company from the Stockholders for use at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting"). Proxies will be voted at the Annual Meeting
to be held at the time and place and for the purposes set forth in the
accompanying Notice. This Proxy Statement and the enclosed form of proxy is
being mailed on or about April 29, 1997.July 10, 1998.
The expense of this solicitation, including the reasonable costs
incurred by custodians, nominees, fiduciaries and other agents in forwarding the
proxy material to their principals, will be borne by the Company. The Company
will also reimburse brokerage firms and other custodians and nominees for their
expenses in distributing proxy material to beneficial owners of the Company's
Common Stock in accordance with Securities and Exchange Commission requirements.
In addition to the solicitation made hereby, certain directors, officers and
employees of the Company may solicit proxies by telephone and personal contact.
The Company's principal executive office is located at 4265 Kellway
Circle, Addison, Texas 75244, and its telephone number is (972) 407-8400.
VOTING AND PROXY INFORMATION
The Board of Directors of the Company has fixed the close of business
on April 24, 1997,July 2, 1998, as the record date (the "Record Date") for determining the
holders of Common Stock and Preferred Stock entitled to receive notice of and to
vote at the Annual Meeting. At the close of business on the Record Date, there
were outstanding 6,564,2816,733,579 shares of Common Stock, 991615 shares of Series B
Preferred Stock, and 675,000 shares of Series D Preferred Stock, the only
outstanding securities of the Company entitled to vote at the Annual Meeting.
The Common Stock, Series B and Series D Preferred Stock were held by
approximately 7,642, 114,000, eight and one stockholders of record, respectively.
For each share held on the Record Date, a holder of Common Stock or
Preferred Stock is entitled to one vote on all matters properly brought before
the Stockholders at the Annual Meeting. Such votes may be cast in person or by
proxy. Abstentions may be specified as to the approval of any of the Proposals.
Under the rules of the American Stock Exchange (the "Exchange"), brokers holding
shares for customers have authority to vote on certain matters when they have
not received instructions from the beneficial owners, and do not have such
authority as to certain other matters (so-called "broker non-votes"). The
Exchange rules prohibitallow member firms of the Exchange from votingto vote on Proposal 2both Proposals
without specific instructions from beneficial owners. The affirmative vote,
either in person or by proxy, of the holders of more than 50% of the shares of
Common Stock and Series B and Series D Preferred Stock attending the Annual
Meeting, voting as one class, is necessary to approve Proposal 2. Accordingly,
if a Stockholder abstains from voting certain shares on the approval of Proposal
2, it will have the effect of a negative vote, but if a broker indicates that it
does not have authority to vote certain shares, those shares will not be
considered as shares present and entitled to vote with respect to the approval
of Proposal 2 and therefore will have no effect on the outcome of the vote.
On the Record Date, Mr. James R. Gilley, Chairman of the Board of the
Company, a corporation wholly owned by him, and his spouse and adult children
(as individuals or as trustees for various family trusts), beneficially owned an
aggregate of approximately 29%32% of the outstanding Common Stock and 100% of the
outstanding Series D Preferred 1
Stock of the Company (approximately 36%38.2% of
shares entitled to vote); Mr. Victor L. Lund, a director of the Company,
beneficially owned approximately 19%16.5% of the outstanding shares of Common Stock
(approximately 17%15% of shares entitled to vote); and Floyd B. Rhoades, President,
Chief Executive Officer and a director of the Company, beneficially owned
approximately 13%12.9% of the outstanding shares of Common Stock (approximately
12%11.7% of shares entitled to
1
vote). All such persons have indicated they will vote their shares, comprising a
total of more than 61%64.9% of the shares entitled to vote, for the approval of
each of the Proposals, which will insure such approval by the Stockholders.
All shares of Common Stock and Preferred Stock that are represented at
the Annual Meeting by properly executed proxies received by the Company prior to
or at the Annual Meeting and not revoked will be voted at the Annual Meeting in
accordance with the instructions indicated in such proxies. Unless instructions
to the contrary are specified in the proxy, each such proxy will be voted FOR
the election as a Director of the nomineenominees listed herein and for approval of the
other Proposals.Proposal.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of the Company, before the vote is taken at the Annual
Meeting, a written notice of revocation bearing a date later than the date of
the proxy, (ii) duly executing and delivering a subsequent proxy relating to the
same shares, or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice of revocation should be sent to:
Corporate Secretary, Greenbriar Corporation, 4265 Kellway Circle, Addison, Texas
75244.
PROPOSAL 1
ELECTION OF DIRECTOR
NOMINEEDIRECTORS
Nominees
At the Annual Meeting, one Class III director will be elected to hold
office until the 2000 Annual Meeting of Stockholders or until his successor is
elected and qualified, and three Class I directors will be elected to hold
office until the 2001 Annual Meeting of Stockholders or until their successors
are elected and qualified. The Company's Articles of Incorporation provide that
the directors are divided into three classes of equal or approximately equal
number, and that the number of directors constituting the Board of Directors
will from time to time be fixed and determined by a vote of a majority of the
Company's directors serving at the time of such vote. The Board of Directors is
now comprised of nineseven members, with each ClassClasses I and II consisting of three
members.members and Class III consisting of one member. The Board of Directors has
provided, however, that there shall be seveneight members of the Board effective the
date of the Annual Meeting, with each of Class I and II consisting of three
members and Class III consisting of one member who will be
elected at the Annual Meeting.two members.
It is intended that the accompanying proxy, unless contrary
instructions are set forth therein, will be voted for the election of the
nomineenominees for election as a directordirectors as set forth in the following table. If the
nominee becomesnominees become unavailable for election to the Board of Directors, the persons
named in the proxy may act with discretionary authority to vote the proxy for
such other person,persons, if any, as may be designated by the Board of Directors.
However, the Board is not aware of any circumstances likely to render the
nomineenominees unavailable for election. The withholding of authority or abstention
will have no effect upon the election of directors by holders of Common Stock
and Series B and D Preferred Stock because under Nevada law directors are
elected by a plurality of the votes cast, assuming a quorum is present. The
presence of a majority of the outstanding shares of Common Stock and Series B
and D Preferred Stock, voting as one class, will constitute a quorum. The shares
held by each holder of Common Stock and Series B and D Preferred Stock who signs
and returns the enclosed form of proxy will be counted for purposes of
determining the presence of a quorum at the meeting.
The following table sets forth certain information with respect to the
personpersons who will be the nomineenominees for election at the Annual Meeting and the
other incumbent directors and executive officers of the Company. Included within
the information below is information concerning the business experience of each
such person during the past five years. The number of shares of Common Stock
beneficially owned by each of the directors as of MarchMay 31, 19971998 is set forth
below in "Securities Ownership of Certain Beneficial Owners."
2
NOMINEE AND BUSINESS EXPERIENCE
Class III
Being elected at Annual Meeting for a term to expire in 2000
- ------------------------------------------------------------
Don C. Benton Mr. Benton has been a Director since June 1994.
Age 42 Mr. Benton is currently a consultant to various
twelve step ministry programs. He was Director
of Twelve Step Ministries, Lovers Lane United
Methodist Church of Dallas from 1991 and until
1997 has been a Consultant for Spiritual
Counseling and Education for the Addiction
Recovery Center since 1993 and also served in
that capacity for the Argyle Specialty Hospital.
He has served as unit coordinator, admissions
coordinator, and milieu therapist for various
hospitals and facilities throughout Texas since
1988. He is a Licensed Chemical Dependency
Counselor, and a Certified Alcohol and Drug
Abuse Counselor.
INCUMBENT DIRECTORS AND BUSINESS EXPERIENCE
Class I
Term expires in 1998
- --------------------
James R. Gilley Mr. Gilley has been Chairman of the Company
Age 63 since November 1989 and was President and Chief
Executive Officer from November 1989 until
December 31, 1996.
Floyd B. Rhoades Mr. Rhoades has been a Director and Chief
Age 56 Executive Officer of the Company since December
31, 1996. He has been the Chairman, President
and Chief Executive Officer of American Care
Communities, Inc. ("American Care") since its
inception in 1992. American Care became a wholly
owned subsidiary of the Company on December 31,
1996. From 1985 to 1991 Mr. Rhoades served as
President of Living Centers. In 1992 Mr. Rhoades
was the recipient of the National Council of
Aging's Distinguished Service Award. He was the
founding President of the North Carolina
Assisted Living Association, and he is a Board
Member of the Accreditation Commission for Home
Care.
Paul G. Chrysson Mr. Chrysson has been a Director since May 1995.
Age 42 He is President of C.B. Development Co., Inc., a
North Carolina real estate developer, a position
he has held for over five years. Mr. Chrysson is
a member of the boards of directors of Triad
Bank and United Carolina Bank (NC) and has
served on the boards of various charitable
organizations. He has been a licensed real
estate agent since 1974 and a licensed
contractor since 1978.
Class II
Term expires in 1999
- --------------------
Michael E. McMurray Mr. McMurray has been a Director since May 1991.
Age 42 Since July 1987, Mr. McMurray has been Vice
President of Investments for Prudential
Securities. Prior to joining Prudential
Securities, Mr. McMurray was a financial
consultant for Shearson Lehman Hutton from 1983
until July 1987.
Matthew G. Gallins Mr. Gallins has been a Director since June 1994.
Age 41 Since 1990, Mr. Gallins has been a Director,
President and Chief Operations Officer of
Gallins Vending Company, Inc., a food services
vending company. He has also been the owner and
served as Vice President and Secretary of Exit
Inc.
3
(dba Tomatoz Grill), a restaurant, since 1993.
He is a Foundation Board Director for Tanglewood
Park in North Carolina, a Member of the Annual
Campaign Fund for the United Way, and past
Chairman of Special Events Solicitation
Committee for the Forsyth County Mental Health
Association. He is director of Southern
Community Bank in Winston-Salem, North Carolina.
Victor L. Lund Mr. Lund was the founder of Wedgwood Retirement
Age 68 Inns, Inc.("Wedgwood") in 1977. Wedgwood became
a wholly owned subsidiary of the Company on
March 31, 1996. For most of Wedgwood's
existence, he was the Chairman of the Board,
President and Chief Executive Officer, positions
he held until Wedgwood was acquired
Nominees and Business Experience
Class III
Being elected at Annual Meeting for a term to expire in 2000
- ------------------------------------------------------------
William A. Shirley, Jr. Mr. Shirley was Chairman of the Board and President of Villa
Age 55 Residential Care Homes, Inc. from 1989 until its acquisition
by the
Company. He presently continues to serve as
Chairman of the Board of Wedgwood.
OTHER EXECUTIVE OFFICERS AND BUSINESS EXPERIENCE
Gene S. Bertcher Mr. Bertcher has been Executive Vice President
Age 48 and Chief Financial Officer and Treasurer of the
Company since November 1989 and was a Director
from November 1989 until September 1996. He is a
certified public accountant.
Robert L. Griffis Mr. Griffis has been Senior Vice President of
Age 61 the Company on December 31, 1997. Mr. Shirley is also
President of Pascal Enterprises, a real estate investment
company wholly owned by Mr. Shirley.
Class I
Being elected at Annual Meeting for a term to expire in 2001
- ------------------------------------------------------------
James R. Gilley Mr. Gilley has been Chairman of the Company since November
Age 64 1989 and was President and Chief Executive Officer from
November 1989 until December 31, 1996.
Floyd B. Rhoades Mr. Rhoades has been a Director and Chief Executive Officer
Age 57 of the Company since December 31, 1996. He has been the
Chairman, President and Chief Executive Officer of American
Care Communities, Inc. ("American Care") since its inception
in 1992. American Care became a wholly owned subsidiary of
the Company on December 31, 1996. From 1985 to 1991 Mr.
Rhoades served as President of Living Centers. In 1992 Mr.
Rhoades was the recipient of the National Council of Aging's
Distinguished Service Award. He was the founding President
of the North Carolina Assisted Living Association, and he is
a Board Member of the Accreditation Commission for Home
Care.
Paul G. Chrysson Mr. Chrysson has been a Director since May 1995. He is
Age 43 President of C.B. Development Co., Inc., a North Carolina
real estate developer, a position he has held for over five
years. Mr. Chrysson is a member of the boards of directors
of Boddie-Noell Properties, Inc. and the Board of Advisors
of Wachovia Bank-Winston Salem and has served on the boards
of various charitable organizations. He has been a licensed
real estate agent since 1974 and a licensed contractor since
1978.
Incumbent Directors and Business Experience
Class II
Term expires in 1999
- --------------------
Michael E. McMurray Mr. McMurray has been a Director since May 1991. Since July
1987, Mr. McMurray has been Vice President of Investments
Age 43 for Prudential Securities. Prior to joining Prudential
Securities, Mr. McMurray was a financial consultant for
Shearson Lehman Hutton from 1983 until July 1987.
Matthew G. Gallins Mr. Gallins has been a Director since June 1994. Since 1990,
Age 42 Mr. Gallins has been a Director, President and Chief
Operations Officer of Gallins Vending Company, Inc., a food
services vending company. He has also been the owner and
served as Vice President and Secretary of Exit Inc. (d.b.a.
Tomatoz Grill), a restaurant, since 1993. He is a Foundation
Board Director for Tanglewood Park in North Carolina, a
Member of the Annual Campaign Fund for the United Way, and
past Chairman of Special Events Solicitation Committee for
the Forsyth County Mental Health
3
Association. He is director of Southern Community Bank in
Winston- Salem, North Carolina.
Victor L. Lund Mr. Lund was the founder of Wedgwood Retirement Inns, Inc.
Age 69 ("Wedgwood") in 1977. Wedgwood became a wholly owned
subsidiary of the Company on March 31, 1996. For most of
Wedgwood's existence, he was the Chairman of the Board,
President and Chief Executive Officer, positions he held
until Wedgwood was acquired by the Company. He presently
continues to serve as Chairman of the Board of Wedgwood.
Class III
Term expires in 2000
- --------------------
Don C. Benton Mr. Benton has been a Director since June 1994. Mr. Benton
Age 43 currently serves as a consultant to various twelve step
ministry programs. He was Director of Twelve Step
Ministries, Lovers Lane United Methodist Church of Dallas
from 1991 until 1997 and has been a Consultant for Spiritual
Counseling and Education for the Addiction Recovery Center
since 1993 and also served in that capacity for the Argyle
Specialty Hospital. He has served as unit coordinator,
admissions coordinator, and milieu therapist for various
hospitals and facilities throughout Texas since 1988. He is
a Licensed Chemical Dependency Counselor, and a Certified
Alcohol and Drug Abuse Counselor.
Other Executive Officers and Business Experience
Gene S. Bertcher Mr. Bertcher has been Executive Vice President and Chief
Age 49 Financial Officer and Treasurer of the Company since
November 1989 and was a Director from November 1989 until
September 1996. He is a certified public accountant.
Robert L. Griffis Mr. Griffis has been Senior Vice President of the Company
Age 62 since November 1992 and Secretary since June 1994 and was a
Director from June 1994 until September 1996. For the nine
years prior to becoming an officer of the Company, he was
involved in the healthcare industry, as Senior Vice
President of Retirement Corporation of America, Senior Vice
President of National Heritage, Inc., President of Health
Resources, Inc., President of the long term care division of
Clinitex Corp., and from 1991 to 1992 as a consultant to the
Company.
Paul W. Dendy Mr. Dendy was appointed the President
Securities Ownership of Age 47 Wedgwood in April 1995 following its acquisition
by the Company and Executive Vice President of
the Company in May 1996 and served on the board
of directors of the Company from May until
September 1996. He was until such time the Vice
President-Project Acquisition and Financing of
Wedgwood, a position he held since he joined
Wedgwood in April 1993. From 1989 to February
1993, he was Vice President-Finance of Leisure
Care, Inc., a privately held company in the
retirement housing and assisted living business.
Gary S. Smith Mr. Smith has been Executive Vice President of
Age 44 the Company since April 7, 1997. Mr. Smith was a
co-founder of American Care and since its
inception in 1992 has been Executive Vice
President of Administration and Treasurer. From
1988 to 1992 he was President of Consultare, a
consulting and construction company in Fort
Smith, Arkansas.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERSCertain Beneficial Owners
The following table sets forth as of March 31, 1997,June 30, 1998, certain information
with respect to all Stockholders known by the Company to own beneficially more
than 5% of the outstanding Common Stock and Series D, F and G Preferred Stock
(which are the only outstanding classes of voting securities of the Company, except for
Series B Preferred Stock), as well as information with respect to the Company's
Common Stock and Series D, F and G Preferred Stock owned beneficially by each
director and director nominee, current executive officer whose compensation from
the Company in 19961997 exceeded $100,000, and by all directors and executive
officers as a group. Unless otherwise indicated, each of such Stockholders has
sole voting and investment
4
power with respect to the shares beneficially owned.
The number of shares of Series B Preferred Stock outstanding and convertible
into Common Stock is immaterial and no information has been provided below
regarding Series B Preferred Stock ownership.
All shares of Common Stock have been adjusted for the
1 for 5 reverse split effected in December 1995.4
PREFERRED STOCK COMMON STOCK
-----------------------------Preferred Stock Common Stock
------------------------ ---------------------------------------------------------------
NUMBER OF SHARES-
NUMBER PERCENT NUMBER PERCENT ASSUMING FULL PERCENT
NAME AND ADDRESS OF OF OF OF CONVERSION OF PREFERRED OF
BENEFICIAL OWNER SHARES SERIES SHARES SERIES STOCK AND OPTIONS BY HOLDERS CLASS
- ---------------- ---------------Number of Shares--
Number Percent Number Percent Assuming Full Percent
Name and Address of of of of Conversion of Preferred of
of Beneficial Owner Shares Series Shares Class Stock and Options by Holder Class
------------------- ----------- ------------ ------ ------------------------------------ -------- -------- --------------------------- -------
Series D Preferred Stock/(1)/
-----------------------------
Stock(1)
--------------------------
James R. Gilley 675,000/(2)/675,000(2) 100% 2,407,151/(3)/ 34.1% 2,744,651 37.0%2,607,151(3) 35.0% 2,944,651 37.9%
4265 Kellway Circle
Addison, TX 75244
Sylvia M. Gilley 675,000/(2)/675,000(2) 100% 2,407,151/(3)/ 34.1% 2,744,651 37.0%2,607,151(3) 35.0% 2,944,651 37.9%
6211 Georgian Court
Dallas, TX 75240
W. Michael Gilley - - 256,700/(4)/ 3.9% 256,700 3.7%
3535 University Blvd.
Dallas, TX 75205
Victor L. Lund - - 1,214,961 18.5%18.0% 1,214,961 17.6%18.0%
816 N.E.NE 87th Ave.
Vancouver, WA 98664
Floyd B. Rhoades - - 870,517 13.3% 870,517 12.6%1,022,000(4) 14.7% 1,022,000(4) 14.7%
4265 Kellway Circle
Addison, TX 75244
Gene S. Bertcher - - 74,000/(5)/74,000(5) 1.1% 74,000 1.0%1.1%
4265 Kellway Circle
Addison, TX 75244
Robert L. Griffis - - 30,000/(6)/ 0.5%30,000(6) * 30,000 0.4%*
4265 Kellway Circle
Addison, TX 75244
Michael E. McMurray - - - - - -10,000(7) * 10,000 *
5330 Merrick Rd.
Massapequa, NY 11758
Matthew G. Gallins - - 25,000/(7)/ 0.4% 25,000 0.4%15,000(8) * 15,000 *
715 Stadium Drive
Winston-Salem, NC 27101
Paul G. Chrysson - - - - - -10,000(9) * 10,000 *
1045 Burke Street
Winston-Salem, NC 27101
Richards D. Barger/(8)/ - - 200 - 200 -
945 San Marino Ave.
San Marino, CA 91108
Steven R. Hague/(8)/ - - - - - -
1650 Bank One Tower
221 W. Sixth Street
Austin, TX 78701
Don C. Benton - - 10,000(10) * 10,000 *
Arrowhead Ranch
Route 1
Clarksville, TX 75246
William A. Shirley, Jr. - - 568,446(11) 7.7% 568,446 7.7%
2621 State Street
Dallas, Texas 75204
Series F and G Preferred Stock(12)
------------------------------
Lone Star Opportunity 2,200,000 100% - - 9200 Inwood Road1,257,143 15.7%
Fund, L.P.
600 North Pearl Street
Suite 1550
Dallas, TX 75220Texas 75201
American Realty Trust, Inc.(14) - - 197,500 2.9% 197,500 2.9%
10670 North Central Expressway
Suite 300
Dallas, Texas 75231
Basic Capital Management,
Inc.(14) - - 141,260 2.1% 141,260 2.1%
10670 North Central Expressway
Suite 600
5
Dallas, Texas 75231
Preferred Stock Common Stock
------------------------ ---------------------------------------------------------------
Number of Shares--
Number Percent Number Percent Assuming Full Percent
Name and Address of of of of Conversion of Preferred of
of Beneficial Owner Shares Series Shares Class Stock and Options by Holder Class
------------------- ----------- -------- -------- -------- --------------------------- -------
Nevada Sea Investments,
Inc.(14) - - 72,800 1.1% 72,800 1.1%
10670 North Central
Expressway
Suite 501
Dallas, Texas 75231
International Health Products,
Inc.(14) - - 249,085 3.7% 249,085 3.7%
10670 North Central Expressway
Suite 410
Dallas, Texas 75231
Davister Corp.(14) - - 251,200 3.7% 251,200 3.7%
10670 North Central Expressway
Suite 410
Dallas, Texas 75231
Institutional Capital
Corporation (14) - - 242,500 3.6% 242,500 3.6%
10670 North Central Expressway
Suite 411
Dallas, Texas 75231
All executive officers 675,000/(1)(2)/675,000(1)2) 100% 4,743,361 63.8% 5,055,861 69.6%5,561,558 68.1% 5,899,058 69.4%
and directors and director
nominees as a group
(13(10 persons)
- --------------------
5
____________________* Less than one percent.
(1) Represents Series D Preferred Stock which votes with Common Stock and
Series B Preferred Stock as one class. Series D Preferred Stock is
convertible into Common Stock at a rate of one share of Common Stock for
two shares of Series D Preferred Stock.
(2) The shares are owned by a grantor trust for the benefit of Mr. and Mrs.
Gilley. Sylvia M. Gilley is the spouse of James R. Gilley.
(3) Consists of 972,851 shares of Common Stock owned by JRG Investments Co.,
Inc., a corporation wholly owned by James R. Gilley ("JRG"); 390,300 shares
of Common Stock owned by a grantor trust for the benefit of James R. and
Sylvia M. Gilley; options to James R. Gilley to purchase 200,000 shares of
Common Stock at $10.75 per share, exercisable through December 1, 2000;
options to James R. Gilley to purchase 200,000 shares of Common Stock at
$13.275 per share, excersiableexercisable through December 31, 2006; options to James
R. Gilley to purchase 200,000 shares of Common Stock at $17.50 per share,
exercisable through December 31, 2007; a warrant to purchase 108,000 shares
at an exercise price of $12.98 per share, exercisable through October 1,
2006, owned by the grantor trust for the benefit of Mr. and Mrs. Gilley;
and 536,000 shares of Common Stock owned of record by Mrs. Gilley. Other
than shares owned by the grantor trust, Mrs. Gilley disclaims any
beneficial ownership of the shares owned by Mr. Gilley and JRG. Mr. Gilley
and JRG disclaim beneficial ownership of the shares owned by Mrs. Gilley.
Mr. Gilley has pledged all of his shares in JRG to Institutional Capital
Corporation (formerly known as MS Holding Corp.), a nonaffiliatednon-affiliated entity,
as collateral for repayment of a promissory note payable by JRG to
Institutional Capital Corporation in the remaining principal amount of
$2,996,373. The note requires payment of annual interest only until
December 31, 1998, when the principal balance and all accrued interest is
due and payable. Of the shares of Common Stock owned by the grantor trust,
200,000 shares were acquired by the trust from the Company in November 1993
in consideration of a $2,250,000 partial recourse promissory note executed
by the grantor trust and Mr. Gilley (as co-maker). This note bears interest
at an annual rate of 5.5% until November 2003, when the entire
6
principal balance and all accrued interest is due. The note is
collateralized by the 200,000 shares purchased by the grantor trust, and
the grantor trust and Mr. Gilley (as co-maker) have personal recourse only
for the first 20% of the principal balance.
(4) W. Michael Gilley is the adult son of James R. Gilley and Sylvia M. Gilley.
Consists of 117,000 shares of Common Stock owned of record, and 139,700820,000 shares of Common Stock owned by seven trusts for which Mr. Gilley acts as
co-trustee for the benefit of the children and grandchildren of James R.
and Sylvia M. Gilley. Of the 117,000Rhoades, options to
Mr. Rhoades to purchase 200,000 shares of Common Stock 46,000at $17.50 per share,
and 2,000 shares were issued for promissory notesowned by his spouse. Mr. Rhoades disclaims beneficial
ownership of $237,500, for which 30,000the shares are
currently pledged as collateral.owned by his spouse.
(5) Consists of 54,000 shares of Common Stock issued for promissory notes of
$92,500, for which 13,000 shares are currently pledged as collateral, and
options to purchase 20,000 shares of Common Stock for $11.25 per share, all
of which are vested.
(6) In November 1992, Mr. Griffis obtained a loan from the Company for $75,000
which was used to exercise options to purchase 30,000 shares of the
Company's Common Stock. The loan is collateralized by the shares purchased
by Mr. Griffis.
(7) Consists of 20,000options to purchase 10,000 shares of Common Stock owned by a trust for which Mr.
Gallins acts as co-trustee for the benefit$17.75
per share.
(8) Consists of one of the grandchildren of
James R. and Sylvia M. Gilley, 3,000 shares of Common Stock owned by Matthew G. Gallins LLC, and
2,000 shares of Common Stock owned by Mr. Gallins' minor children, for
which he serves as custodian.custodian, and options to Mr. Gallins disclaimsto purchase 10,000
shares of Common Stock for $17.75 per share.
(9) Consists of options to purchase 10,000 shares of Common Stock for $17.75
per share.
(10) Consists of options to purchase 10,000 shares of Common Stock for $17.75
per share.
(11) Includes 85,155 shares of Common Stock owned of record by Mr. Shirley and
483,291 shares of Common Stock which Mr. Shirley may acquire upon
conversion of certain limited partnership units.
(12) The holders of Series F Convertible Preferred Stock ("Series F Preferred
Stock") are entitled to elect one member to the Board, but this right has
not been exercised by such holders. Series F Preferred Stock is not
otherwise entitled to vote except with regard to certain matters that
effect changes to its rights and preferences. Series G Senior NonVoting
Convertible Preferred Stock ("Series G Preferred Stock") is not entitled to
vote except with regard to certain matters that effect changes to its
rights and preferences.
(13) There are 1,400,000 shares of Series F Preferred Stock outstanding and
800,000 shares of Series G Preferred Stock outstanding. The Series F
Preferred Stock and Series G Preferred Stock presently are convertible into
800,000 shares of Common Stock and 457,143 shares of Common Stock,
respectively.
(14) Based on a Schedule 13D, dated April 8, 1998, filed by each of these
entities and by Gene E. Phillips, each of these entities owns of record the
number of shares set forth for such entity in the table above and each of
such entities and Mr. Phillips disclaim they filed such Schedule 13D as a
"group". According to the Schedule 13D, Basic Capital Management, Inc. may
be deemed to beneficially own 311,560 shares, including the shares owned of
record by American Realty Trust, Inc. and Nevada Sea Investments, Inc., and
Mr. Phillips may be deemed to beneficially own all 1,154,345 shares owned
of record and beneficially by these six entities. In the Schedule 13D, Mr.
Phillips does not affirm beneficial ownership of the 20,000 shares held in trust.
(8) Will not be a director following the Annual Meeting.
EXECUTIVE COMPENSATIONany of these shares.
Executive Compensation
The following tables set forth the compensation paid by the Company for
services rendered during the fiscal years ended December 31, 1997, 1996 1995 and 19941995
to the Chief Executive Officer of the Company and to the other executive
officers of the Company whose total annual salary in 19961997 exceeded $100,000, the
number of options granted to any of such persons during 1996,1997, and the value of
the unexercised options held by any of such persons on December 31, 1996.
61997.
7
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION-
NUMBER OF
SHARES OF
NAME AND ANNUAL COMMON STOCK ALL
PRINCIPAL COMPENSATION- UNDERLYING OTHER
POSITION YEAR SALARY OPTIONS COMPENSATION/(1)/
---------Summary Compensation Table
Long Term
Compensation-
Name and Number of
Principal Shares of
Position Annual Common Stock All
-------- Compensation- Underlying Other
Year Salary Options Compensation(1)
---- ------------- ----------------------- ------------------------------ ---------------
James R. Gilley, 19961997 $460,000 200,000 $8,500
Chairman/(2)/$6,500
Chairman(2) 1996 460,000 200,000 8,500
1995 460,000 200,000 7,500
1994 460,000Floyd B. Rhoades 1997 200,000 200,000 6,500
President and Chief 1996 152,000 - 6,500-
Executive Officer(2) 1995 153,000 - -
Gene S. Bertcher, 1997 180,000 - -
Executive Vice 1996 180,000 - 7,500
Executive VicePresident and Chief 1995 172,500 - 6,500
President and Chief 1994 150,000 20,000 6,500
Financial Officer
W. Michael Gilley, 1996 150,000 - 7,500
Executive Vice 1995 143,750 - 6,500
President/(3)/ 1994 - - -
Floyd B. Rhoades, 1996 152,000 - -
President and Chief 1995 153,000 - -
Executive Officer (2) 1994 150,000 - -
Robert L. Griffis, 1997 100,000 - -
Senior Vice President 1996 120,000 - 7,500
Senior Vice President 1995 115,000 - 6,500
1994 100,000Paul W. Dendy (3)
Executive Vice President 1997 125,000 - 6,500
-
1996 131,250 10,000 7,500
1995 75,000 - -
- -------------------------
(1) Constitutes directors' fees paid by the Company to the named individuals.
(2) James R. Gilley served as President and Chief Executive Officer until
December 31, 1996. Floyd B. Rhoades was named President and Chief Executive
Officer on December 31, 1996 as part of the American Care Acquisition. Mr.
Rhoades has a three year employment agreement with the Company under which
he will receive an annual salary of $200,000.
(3) Paul W. Michael GilleyDendy ceased to be an executive officer Januaryin May 1998. His
compensation for 1995 and a portion of 1996 represent compensation paid by
Wedgwood Retirement Inns, Inc. prior to its acquisition by the Company on
March 31, 1997.
OPTION GRANTS TABLE
(OPTION GRANTS IN LAST FISCAL YEAR)1996.
Option Grants Table
(Option Grants in Last Fiscal Year)
Percent of
Number of Securities Total Options Exercise or
Underlying Granted to Employees in Base Price Expiration
Name Options Granted Fiscal Year Per Share Date
---- -------------------- ------------------------ ---------------------------- ------------ ---------- -----
James R. Gilley 200,000 46.3% $ 10.75 5/24/0150% $17.50 12/31/07
Floyd B. Rhoades 200,000 46.3% 13.27550% 17.50 12/31/0607
78
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION VALUES
Aggregated Option Exercises in Last Fiscal
Year and FY-End Option Values
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options at 1996
Options at 1996 FY-End FY-End1997
Shares Acquired Value ----------------------------- --------------------------Options at 1997 FY-End FY-End
---------------------- -----------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------------- ----------- -------- ----------------------------- ------------------------------------- ------------- ----------- -------------
James R. Gilley - - 400,000600,000 - $2,695,000 $$2,244,000 $-
Floyd B. Rhoades - - 200,000 - - -
Gene S. Bertcher - - 20,000 - 150,000127,500 -
Paul W. Michael GilleyDendy - - 10,000 - - - -
Robert L. Griffis - - - - -63,750 -
STOCK OPTION PLANStock Option Plan
The Compensation Committee administers the Company's 1992 Stock Option
Plan, as amended (the "Plan""1992 Plan"), and 1997 Stock Option Plan (the "1997
Plan"), each of which provides for grants of incentive and non-
qualifiednon-qualified stock
options to the Company's executive officers, as well as its directors and other
key employees.employees, and consultants in the case of the 1997 Plan. Under the Plan,both Plans,
options are granted to provide incentives to participants to promote long-term
performance of the Company and specifically, to retain and motivate senior
management in achieving a sustained increase in stockholder value. Currently,
theneither Plan has noa pre-set formula or criteria for determining the number of
options that may be granted. The exercise price for an option granted under the Planboth
Plans is determined by the Compensation Committee, in an amount not less than
100 percent of the fair market value of the Company's Common Stock on the date
of grant. The Compensation Committee reviews and evaluates the overall
compensation package of the executive officers and determines the awards based
on the overall performance of the Company and the individual performance of the
executive officers. The Company currently has reserved 207,500217,500 shares of Common
Stock for issuance under the 1992 Plan and 500,000 shares of which 77,500Common Stock under
the 1997 Plan. As of the date of this Proxy Statement, options had been granted
for all but 63,500 shares are covered by outstandingreserved under the 1992 Plan and no options as ofhad been
granted under the 1997 Plan.
Employment Agreements
Effective December 31, 1996.
EMPLOYMENT AGREEMENTS
Effective upon the closing of the acquisition of American Care (the
"American Care Acquisition"),1996, the Company entered into an employment
agreement with Floyd B. Rhoades to become is the President and Chief Executive
Officer of the Company. Mr. Rhoades' agreement is for a term of three years,
with an annual salary of $200,000.
Effective January 1, 1997, the Company entered into an Employment
Agreement with James R. Gilley to serve as Chairman for a three year term that
recommences each day. The Agreement provides for base salary of $460,000 and
200,000 fully vested, non-qualified stock options each year in lieu of any cash
bonus. The Agreement may be terminated early only upon resignation, mutual
consent or for good cause.
Also effective January 1, 1997, the Company entered into an Employment
Agreement with Gene S. Bertcher to serve as Executive Vice President for a two
year term that recommences each day. The Agreement provides for base salary of
$180,000 and discretionary bonus, and may be terminated early only upon
resignation, mutual consent, or for good cause.
8
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSCertain Relationships and Related Transactions
The following paragraphs describe certain transactions between the
Company and (i) any stockholder beneficially owning more than 5% of the
outstanding Common Stock, (ii) the executive officers and directors of the
9
Company and (iii) members of the immediate family or affiliates of any of the
foregoing, which transactions occurred since the beginning of the 19951996 fiscal
year.
On November 19, 1993 the Company sold 200,000 unregistered shares of
its Common Stock, to The April Trust, a grantor trust for the benefit of James
R. Gilley, Chairman of the Board of the Company, and his wife, at a price equal
to the closing price of the shares on the American Stock Exchange on that date
($11.25) per share for consideration consisting of a $2,250,000 promissory note
(for which Mr. Gilley is a co-maker) for the full purchase price thereof, of
which 20% of the principal amount of the note is a recourse obligation of Mr.
Gilley and the grantor trust and the balance of the note is nonrecourse. Such
note bears interest at the rate of 5.5% per annum, which accrues and is payable
along with all principal upon maturity on November 18, 2003, and is secured by a
pledge of the stock back to the Company to hold as collateral for payment of the
note pending payment in full. On December 16,1996, the Compensation Committee
extended the due date of such note to November 18, 2008.
Gene S. Bertcher and Robert L. Griffis, officers of the Company, are
indebted to the Company for an aggregate of $92,500 and $75,000, respectively,
for notes issued in payment for shares of Common Stock. Mr. Bertcher's notes are
secured by a pledge of 13,000 shares of Common Stock. Mr. Griffis''Griffis" note is
secured by a pledge of his 30,000 shares. Such notes bear interest at a rate
equal to any cash or stock dividends declared on the purchased stock, and are
due in a single installment for each such note on or before December 31, 1999.
In connection with the sale of four properties in Georgia previously owned by
the Company, the Company retained first mortgages which were subordinate to a
series of tax free bonds issued upon the defeasance of the bonds. The Series B
Bonds were purchased for investment by Sylvia M. Gilley, wife of James R.
Gilley. The Company had the opportunity to sell the mortgages but only if the
Company would guarantee the B Bonds, which it did following Board of Director
approval. Due to current litigation with the purchaser of the property, it is
possible that the bond interest will not be paid. The Conflicts of Interest
Committee approved the reimbursement of the legal fees of Sylvia M. Gilley in
the litigation instituted to collect defaulted interest. The Company will be
reimbursed for such fees from the proceeds of any recovery.
Beginning in 1992, subsidiaries of the Company have provided construction
services at an assisted living project in Norman, Oklahoma which is owned by a
trust for Sylvia M. Gilley. As of December 31, 1994, the Company was owed
$173,623, which included a fee of $80,000 for services rendered. This amount was
paid in 1995. The Company provided construction services through the first half
of 1995, at which time the project was completed.
As part of the Wedgwood Acquisition and as an accommodation to the
Sellers to assist them to help achieve a tax-free acquisition, James R. Gilley
and members of his family agreed to contribute a retail property in North
Carolina to the Company in exchange for 675,000 shares of the Company's Series D
Preferred Stock. Mr. Gilley and his family had owned the retail property for
over five years. The consideration received by James R. Gilley and members of
his family, valued at $3,375,000, was based upon an independent appraisal of the
North Carolina shopping center. The Series D Preferred Stock is unregistered,
has no trading market unless converted to Common Stock, and is entitled to one
vote per share on all matters to come before a meeting of stockholders. The
Series D Preferred Stock bears a cumulative quarterly dividend of 9.5% per year,
which approximates the cash flow Mr. Gilley and his family members were
receiving from the retail property prior to its contribution to the Company. The
Series D Preferred Stock is convertible into unregistered shares of Common Stock
at a ratio of one share of Common Stock for two shares of Series D Preferred
Stock. Mr. Gilley and his family members and affiliates transferred all of the
shares of Series D Preferred Stock to The April Trust effective April 1997.
The Company agreed to register the shares of Common Stock into which
the Series D Preferred Stock is convertible under limited circumstances, as
follows: (i) the Company agreed to give the holders of such shares the right to
demand registration of all or a portion of the Common Stock upon conversion
provided holders of at least a majority of the shares join in such demand; and
(ii) the Company agreed to give the holders of Common Stock "piggy-back"
9
registration rights to include all or a portion of the shares in any other
registration statement filed by the Company under the Securities Act (other than
on Form S-8 or Form S-4), subject to certain rights of the Company not to
include all or a portion of such shares under certain circumstances. The Company
agreed to pay all expenses of the demand or piggy-backpiggyback registration, other than
underwriting fees, discounts or commissions.
The Company agreed to register the shares of Common Stock into which
the Series E Preferred Stock was converted in connection with the Wedgwood
Acquisition, a large percentage of which is held by Victor L. Lund, under
limited circumstances, as follows: (i) commencing two years after the closing of
the Wedgwood Acquisition, the Company agreed to give the holders of such shares
the right to demand registration of all or a portion of the Common Stock
provided at least a majority of the shares join in such demand; and (ii) the
Company agreed to give the holders of the Common Stock "piggy-back" registration
rights to include all or a portion of the shares in any other registration
statement filed by the Company under the Securities Act (other than on Form S-8
or Form S-4), subject to certain rights of the Company not to include all or a
portion of such shares under certain circumstances. The Company agreed to pay
all expenses of the demand or piggy-back registration, other than underwriting
fees, discounts or commissions.
In connection with the Wedgwood Acquisition, the Company entered into a
Construction Management Agreement with Victor L. Lund pursuant to which Mr. Lund
agreed to serve, for three years following closing of the Wedgwood Acquisition,
as a construction manager to oversee construction for the Company of up to 20
assisted living facilities, including those that provide Alzheimer's care,
during the term of the agreement. The Construction Management Agreement was
terminated by mutual agreement in October 1997. Mr. Lund will receivereceived monthly fees
based
10
on the percentage of completion of each facility with a total fee of $150,000
for each facility successfully completed, less any distributions paid to Mr.
Lund from any partnership or limited liability company in which Mr. Lund and the
Company both own equity interests. Mr. Lund iswas responsible for paying the costs
of any construction supervisors or similar on-site personnel employed by him to
satisfy his oversight duties to the Company. Mr. Lund owns a 51% equity interest
and the Company owns a 49% equity interest in two limited partnerships. The
Company has an option to buy Mr. Lund's interests in these partnerships for
$10,000.
AlsoVarious representations were made to the Company in connection with the
Wedgwood Acquisition,Acquisition. Subsequent to the acquisition, two lawsuits were filed
against the Company advanced
$500,000 toand Victor L. Lund. In October 1997, the Company and Mr.
Lund entered into an agreement whereby the Company would indemnify him for any
damages resulting from the lawsuits and to be usedagree to assume responsibility for
operating Wedgwoodall legal fees associated with the lawsuits. In return, Mr. Lund agreed to give
the Company 125,000 shares of Common Stock. Subsequent to entering into this
agreement, the Company and its predecessor
entities throughMr. Lund were awarded a summary judgment and a
directed verdict, including legal fees, by the closing date. Pursuant to the terms of such loan, the
principal and interest were forgiven as of the closing of the Wedgwood
Acquisition.respective courts.
Victor L. Lund and Mark W. Hall, a former officer of the Company, have made
loans to Wedgwood of $880,158 during the past several years prior to the Company's
acquisition of Wedgwood to partially fund construction and acquisition of
facilities, and for working capital. The unpaid
balances of such loans at December 31, 1996 aggregated $352,915 to Mr. Lund and
$289,852 to Mr. Hall. The notes bear interest at rates ranging
from 9.25% to 10.50% and arewere due on demand. The remaining balances of these
loans were paid in full in March 1998. In addition, as of June 30, 1998, Mr.
Lund has guaranteed repayment of approximately $43,200,000$11,000,000 of Wedgwood
indebtedness and leases for Wedgwood's
facilities, and the Company has agreed to indemnify Mr. Lund against any
liability under his guarantees.
Until August 1996 Victor L. Lund subleased to the Company the regional offices
located at 816 NE 87th Avenue, in Vancouver, Washington. The lease covered
approximately 6,000 square feet of office space at a rental of $6,194 per
month.. In August 1996 Mr. Lund assigned the lease to the Company, and the lease
expires April 30, 1997
In December 1995, the Company purchased land, plans and specifications for an
assisted living facility in Winston-Salem, North Carolina from Sylvia M. Gilley
for an aggregate purchase price of $221,000, which was her cost in the land,
plans and specifications. Mrs. Gilley had owned the land for over five years.
In 1996, The April Trust purchased a Stock Purchase Warrant from an
unaffiliated holder to purchase 108,000 shares of Common Stock at an exercise
price of $12.98 per share. Such warrant contains anti-dilution clauses requiring
a reduction in the exercise price to adjust for any issuances of Common Stock at
a price less than the exercise price, which had occurred and would occur in
connection with the merger with American Care. To eliminate any future conflicts
and negotiations of changes in the exercise price, the warrant was amended to
fix the exercise price at $10.00 and to extend the termination date until
October 1, 2006.
On January 13, 1998, Lone Star Opportunity Fund, L.P. ("Lone Star")
purchased 1,400,000 shares of Series F Preferred Stock and 800,000 shares of
Series G Preferred Stock for an aggregate purchase price of $22,000,000. The
Series F Preferred Stock and Series G Preferred Stock are convertible into
1,257,143 shares of Common Stock. The Company agreed to register the shares of
Common Stock into which the Series F Preferred Stock and Series G Preferred
Stock are convertible under limited circumstances, as follows: (i) the Company
agreed to give the holders of such shares the right to demand registration on
two occasions of all or a portion of the Common Stock upon conversion provided
holders of at least a majority of the shares join in such demand and the
aggregate offering price is equal to at least $3 million; (ii) the Company
agreed to give the holders of Common Stock "piggy-back" registration rights to
include all or a portion of the shares in any other registration statement filed
by the Company under the Securities Act (other than on Form S-8 or Form S-4),
subject to certain rights of the Company not to include all or a portion of such
shares under certain circumstances; and (iii) the Company agreed to register the
shares on Form S-3 upon conversion, if Form S-3 is available to the Company, as
long as the aggregate offering price for the shares registered on such Form S-3
were at least equal to $3 million and provided the Company will not be required
to effect more than one registration on Form S-3 during any twelve month period.
The Company agreed to pay all expenses of any demand, piggy-back or Form S-3
registration, other than underwriting fees, discounts or commissions.
It is the policy of the Company that all transactions between the
Company and any officer or director, or any of their affiliates, must be
approved by the Conflict of Interest Committee, which is comprised of
non-management members of the Board of Directors of the Company. All of the
transactions described above were approved.
10
ORGANIZATION OF THE BOARD OF DIRECTORSOrganization of the Board of Directors
The Board of Directors has the following committees:
COMMITTEE MEMBERS11
Committee Members
--------- -------
Executive James R. Gilley - Chairman
Victor L. Lund
Paul Chrysson/(1)/Chrysson
Michael E. McMurray
Floyd B. Rhoades
Audit Matthew G. Gallins - Chairman
Don C. Benton
Paul G. Chrysson
Michael E. McMurray
William A. Shirley, Jr.(1)
Compensation Committee Michael E. McMurray - Chairman
Don C. Benton
Paul G. Chrysson
Matthew G. Gallins
Conflicts of Interest Richards D. BargerPaul G. Chrysson - Chairman/(1)/Chairman
Don C. Benton
Paul G. Chrysson
Matthew G. Gallins
Michael E. McMurray
Steven R. Hague/(1)/
______________________
William A. Shirley, Jr.(1)
Messrs. Barger and Hague- -------------------
(1) Mr. Shirley will ceasebe appointed to be directors afterthese two Committees upon his election to
the Annual
Meeting. Mr. Chrysson will replace Mr. Barger as Chairmanboard of Directors at the Conflicts
of Interest Committee.
______________________annual meeting.
The Executive Committee conducts the normal business operations of the
Company and acts as Nominating Committee. The Audit Committee recommends an
independent auditor for the Company, consults with such independent auditor and
reviews the Company's financial statements. The Compensation Committee fixes the
compensation of officers and key employees of the Company and administers the
Company's stock option plans. The Conflicts of Interest Committee receives and
investigates any reports of or perceived conflicts of interest in any activities
undertaken by the Company.
Any stockholder who wishes to recommend a prospective nominee for the
Board of Directors for consideration by the Executive Committee may write Robert
L. Griffis, Secretary, 4265 Kellway Circle, Addison, Texas 75244.
The Company's Board of Directors had sixheld three meetings during 1996. The Executivethe year
ended December 31, 1997. Each Director attended at least 75% of the aggregate
number of meetings held by the Board of Directors and its Committees during the
time each such Director was a member of the Board or of any Committee met four times,of the
Audit Committee met two times, the ConflictsBoard.
Compensation of Interest Committee met two times, the Compensation Committee met one time.
COMPENSATION OF DIRECTORSDirectors
The Company pays each director a fee of $2,500 per year, plus a meeting
fee of $1,000 for each Board meeting attended.
11
SECTIONSection 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company
pursuant to Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), or upon written representations received by the Company,
the Company is not aware of any failure by any director, officer or beneficial
owner of more than 10% of the Company's Common Stock to timely file with the
Securities and Exchange Commission any Form 3, 4 or 5 relating to 1996.1997.
12
PROPOSAL 2
APPROVAL OF 1997 STOCK OPTION PLAN
GENERAL
The Company's Board of Directors has approved, and recommends that the
stockholders approve, the adoption of the 1997 Stock Option Plan (the "1997
Plan") under which the Company will reserve 500,000 shares of Common Stock for
issuance to key employees, directors and consultants of the Company pursuant to
options granted by the Board of Directors (or the Compensation Committee of the
Board of Directors, if appointed) during the term of the Plan. Following is a
description of the 1997 Plan.
The purposes of the 1997 Plan are to encourage key employees,
directors and consultants of the Company and its subsidiaries to acquire a
proprietary interest in the Company and thus share in the future success of the
Company's business; to enable the Company, by offering comparable incentives, to
attract and retain quality management personnel, directors and consultants who
are in a position to make important and direct contributions to the success of
the Company; and to promote a closer identity of interests between the Company's
employees, directors and consultants and its stockholders. The maximum number
of shares reserved for issuance and subject to option under the 1997 Plan will
be 500,000 shares of Common Stock. Under the 1997 Plan, officers, key
employees, directors and consultants of the Company and its subsidiaries will be
eligible to receive options to purchase Common Stock. The exercise period of
each option will be determined by the Board of Directors, but no option shall
have a term longer than ten years. Options granted under the 1997 Plan may be
either Incentive Stock Options or options that are not intended to be Incentive
Stock Options ("Nonqualified Stock Options"). The Board of Directors is
authorized to designate the recipients of options, the dates of grants, the
number of shares subject to options, the option price, the terms of payment upon
exercise of the options, and the time during which the options may be exercised.
The Board of Directors may delegate its authority to a committee of the Board of
Directors from time to time under the Plan.
The 1997 Plan will continue for a period of ten years and no options
will be granted on or after May 22, 2007. All options granted prior to that
time will remain in effect in accordance with their terms. In the event of any
future change in the Company's Common Stock as a result of stock splits or stock
dividends, or combinations or exchanges of stock, or otherwise, the number of
shares available for option and subject to any option and the price per share of
shares subject to any option may be proportionately adjusted by the Board of
Directors, which will administer the 1997 Plan, subject to its power to
delegate authority from time to time to a committee of the Board of Directors to
administer the 1997 Plan.
The Board of Directors has full power to select optionees from among
the officers, key employees, directors and consultants of the Company and its
subsidiaries, and to specify the terms and conditions of any option granted
under the 1997 Plan; however, no option may be granted at an exercise price less
than 100% of the fair market value of the Company's Common Stock on the business
day preceding the date of the grant of such option. No option may be
exercisable more than ten years after the date of its grant, but options may
have differing permissible exercise periods.
The Board of Directors may not grant an Incentive Stock Option to any
consultant who is not a salaried employee of the Company, or any of its
subsidiaries, nor may it grant an Incentive Stock Option to any stockholder who
at the time of the grant beneficially owns more than 10% of the Company's
outstanding voting securities, unless such option has an exercise price at the
time of the grant of at least 110% of the fair market value of the Common Stock,
and the option is not exercisable for more than five years from the date of
grant. Incentive Stock Options may not be granted to any person when the effect
would be to permit such person to first exercise options, in any calendar year,
for the purchase of shares of Common Stock having a fair market value in excess
of $100,000 (determined at the time of the grant of the options).
12
Incentive Stock Options and Nonqualified Stock Options may not be
transferred except by will or the laws of descent and distribution, and during
the lifetime of the optionee to whom granted, may be exercised only by such
optionee. Incentive Stock Options and Nonqualified Stock Options may be
exercised by the optionee within three months after termination of employment,
directorship or consulting relationship (unless the option expires earlier by
its terms), unless such termination was due to death or disability of the
optionee. In the event of the death of an optionee holding an Incentive Stock
Option or Nonqualified Stock Option while employed by, or serving as a director
or consultant of, the Company the option shall be exercisable by the person or
persons to whom such optionee's rights pass by will or by the laws of descent
and distribution at any time prior to the expiration date of the option or
within one year after the date of such death, whichever is earlier, but only to
the extent the optionee had the right to exercise such Incentive Stock Option or
Nonqualified Stock Option on the date of his death. In the event of the
disability of an optionee holding an Incentive Stock or Nonqualified Stock
Option while employed by, or serving as a director or consultant of, the
Company, which results in termination of such optionee's employment,
directorship or consulting relationship, the Board of Directors may allow an
Incentive Stock Option or Nonqualified Stock Option to be exercisable by the
optionee at any time prior to the expiration date of the Incentive Stock Option
or Nonqualified Stock Option or within one year after the date of such
termination, whichever is earlier, but only to the extent the optionee had the
right to exercise such option at the date of such termination.
The Board of Directors may amend the 1997 Plan at any time in any
manner; however, no amendment may, without the approval of the Company's
stockholders increase the maximum number of shares issuable under the 1997 Plan
except in the case of certain capital adjustments.
As of the date of this Proxy Statement, there were approximately 75
persons eligible to receive Incentive Stock Options and ten persons eligible to
receive Nonqualified Stock Options under the 1997 Plan, consisting of 6
executive officers, 5 non-officer directors and 70 other employees.
The Company has one additional stock option plan, the Amended 1992
Stock Option Plan (the "1992 Plan"), under which 207,500 shares are reserved for
issuance. As of the date of this Proxy Statement, options had been granted for
all but 130,000 shares reserved under the 1992 Plan. The Compensation Committee
administers the 1992 Plan.
The closing price for the Company's Common Stock on the Exchange on
March 31, 1997 was $18 3/4.
FEDERAL INCOME TAX CONSEQUENCES
There are no federal income tax consequences to the optionee or the
Company upon the grant of stock options under the 1997 Plan. The federal tax
consequences upon exercise will vary depending on whether the option is an
Incentive Stock Option or a Nonqualified Stock Option.
INCENTIVE STOCK OPTIONS. When an optionee exercises an Incentive
Stock Option, the optionee will not at that time recognize any income, nor will
the Company be entitled to a deduction. The optionee will recognize capital
gain or loss at the time of disposition of the shares acquired through the
exercise of an Incentive Stock Option if the disposition occurs more than two
years after the option was granted and if the shares have been held more than
one year after it was exercised. The Company will not be entitled to a tax
deduction if the optionee satisfies these holding requirements. The net federal
income tax effect to the holder of Incentive Stock Options is to defer, until
the acquired stock is sold, taxation of any increase in the stock's value from
the time of grant of the option to the time of its exercise, and to tax such
gain, at the time of sale, at capital gain rates rather than at ordinary income
rates.
If the holding requirements are not met, then upon sale of the shares
the optionee generally recognizes as ordinary income the excess of the fair
market value of the shares at the date of exercise over the exercise price, and
any increase in the value of the option stock subsequent to exercise is long or
short-term capital gain to the optionee depending on the optionee's holding
period for the stock. However, if the sale is for a price less than the value
of the shares on the date of exercise, the optionee might recognize ordinary
income only to the extent the sales price exceeded the option price. In either
case, the Company is entitled to a business expense deduction to the extent of
ordinary income recognized by the optionee.
NONQUALIFIED STOCK OPTIONS. When an optionee exercises a Nonqualified
Stock Option, the optionee recognizes ordinary income in the amount of the
excess of the fair market value of the shares received upon exercise
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over the aggregate amount paid for those shares, and the Company may deduct as
an expense the amount of income so recognized by the optionee. For capital gains
purposes, the holding period of the shares begins upon the exercise of the
option, and the optionee's basis in the shares is equal to the fair market value
of the shares on the date of exercise.
If, upon exercise of a Nonqualified Stock Option, the optionee pays
all or part of the purchase price by delivering to the Company shares of
already-owned stock, there are no federal income tax consequences to the
optionee or the Company to the extent of the number of shares so delivered. As
to any additional shares issued, the optionee recognizes ordinary income equal
to the aggregate fair market value of the additional shares received, less any
cash paid to the Company, and the Company is allowed to deduct as an expense the
amount of such income. For purposes of calculating tax upon disposition of the
shares acquired, the holding period and basis of the new shares, to the extent
of the number of old shares delivered, is the same as for those old shares. The
holding period for the additional shares begins on the date the option is
exercised, and the basis in those additional shares is equal to the taxable
income recognized by the optionee, plus the amount of any cash paid to Inland.
The affirmative vote, either in person or by proxy, of the holders of
more than 50% of the shares of Common Stock and Series B and D Preferred Stock
attending the Annual Meeting, voting as one class, is necessary to approve and
adopt the 1997 Plan. Accordingly, if a stockholder abstains from voting certain
shares on the approval and adoption of the 1997 Plan, or a beneficial owner
fails to deliver written instructions to his nominee holder of shares so that
the nominee holder is not able to vote such shares, it will have the effect of a
negative vote, but if a broker indicates that it does not have authority to vote
certain shares, those shares will not be considered as shares present and
entitled to vote with respect to the approval and adoption of the 1997 Plan and
therefore will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR APPROVAL
---
AND ADOPTION OF THE 1997 PLAN DESCRIBED ABOVE.
PROPOSAL 3
RATIFICATION OF AUDITORS
The Board of Directors has selected Grant Thornton, LLP to serve as the
Company's independent auditors for the year ending December 31, 1997.1998. The
Stockholders are being asked to ratify the Board's selection. Representatives of
Grant Thornton, LLP will be present at the Annual Meeting and will have the
opportunity to make a statement and will be available to answer appropriate
questions.
Ratification of the appointment of Grant Thornton, LLP as the Company's
independent auditors for the fiscal year ending December 31, 19971998 requires the
approval by a majority vote of the outstanding shares of Common Stock and Series
B and D Preferred Stock attending the Annual Meeting, either in person or by
proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEThe Board of Directors recommends a vote FOR THE ABOVE PROPOSAL 3.
---the above Proposal 2.
ANNUAL REPORT
The Annual Report to Stockholders, including consolidated financial
statements, for the year ended December 31, 1996,1997, accompanies the proxy material
being mailed to all Stockholders. The Annual Report is not a part of the proxy
solicitation material.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters
before the Annual Meeting and has not been informed that any other matters are
to be presented to the Annual Meeting by others. In the event that other matters
properly come before the Annual Meeting or any adjournments thereof it is
intended that the persons named in the accompanying proxy and acting thereunder
will vote in accordance with their best judgment.
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DEADLINE FOR SUBMISSION
OF PROPOSALS TO BE PRESENTED
AT THE 19981999 ANNUAL MEETING OF STOCKHOLDERS
Any Stockholder who intends to present a proposal at the 19981999 Annual
Meeting of Stockholders must file such proposal with the Company by December 30,
1997March 10,
1999 for possible inclusion in the Company's proxy statement and form of proxy
relating to the meeting.
By Order of the Board of Directors
Robert L. Griffis, Secretary
1513
GREENBRIAR CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSGreenbriar Corporation
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Greenbriar Corporation (the "Company"), to be held at
the offices of the Company at 4265 Kellway Circle, Addison, Texas, on May 22,
1997,July 31,
1998, beginning at 10:00 a.m., Dallas Time, and the Proxy Statement in
connection therewith and (2) appoints James R. Gilley and Gene S. Bertcher, and
each of them, the undersigned's proxies with full power of substitution for and
in the name, place and stead of the undersigned, to vote upon and act with
respect to all of the shares of Common Stock and Series B and CD Preferred Stock
of the Company standing in the name of the undersigned, or with respect to which
the undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof.
The undersigned directs that the undersigned's proxy be voted as
follows:
1. ELECTION OF [_][ ] FOR the Class III nominee [_]and [ ] WITHHOLD AUTHORITY [_][ ] ABSTAIN
DIRECTORS Class I nominees listed below (except as marked to vote for the Class III from voting
(except as marked to the nominee and Class I
contrary below) nomineenominees listed below voting
Class III nominee: Don C. BentonWilliam A. Shirley, Jr.
Class I nominees: James R. Gilley, Floyd B. Rhoades and Paul G. Chrysson
(Instruction: To withhold authority to vote any individual nominee, write that nominee's name on the
line provided below.)
----------------------------------------------------------------------------------------------------
2. APPROVE 1997 [_] FOR [_] AGAINST [_] ABSTAIN
STOCK OPTION PLAN approval approval from voting
3. RATIFY SELECTION OF [_][ ] FOR [_][ ] AGAINST [_][ ] ABSTAIN
GRANT THORNTON AS, LLP ratification ratification from voting
AS THE COMPANY'S
AUDITORS
4.3. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH
MAY PROPERLY COME BEFORE THE MEETING.
This proxy will be voted as specified above. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE CLASSIf no specification is
made, this proxy will be voted for the election of the Class III DIRECTOR NOMINEE IN
ITEMdirector
nominee and Class I director nominees in item 1 ABOVE, FOR THE APPROVAL IN ITEMabove and for the ratification
and approval in item 2 ABOVE, FOR THE RATIFICATION AND
APPROVAL IN ITEM 3 ABOVE, AND FOR THE RATIFICATION IN ITEM 4 ABOVE.above.
The undersigned hereby revokes any proxy heretofore given to vote or
act with respect to the Common Stock or Series B and CD Preferred Stock of the
Company and hereby ratifies and confirms all that the proxies, their
substitutes, or any of them may lawfully do by virtue hereof.
If more than one of the proxies named shall be present in person or by
substitute at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
Please date, sign and mail this proxy in the enclosed envelope. No
postage is required.
Date , 1997
---------------------
--------------------------------------________________ ____, 1998
---------------------------------------
Signature of Stockholder
-----------------------------------------------------------------------------
Signature of Stockholder
Please date this proxy and sign your name exactly as it
appears hereon. Where there is more than one owner, each
should sign. When signing as an attorney, administrator,
executor, guardian or trustee, please add your title as
such. If executed by a corporation, the proxy should be
signed by a duly authorized officer.
14