<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
GREENBRIAR CORPORATION
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
393648100
- --------------------------------------------------------------------------------
(CUSIP Number)
Robert A. Waldman
10670 North Central Expressway, Suite 600
Dallas, Texas (214) 692-4700
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
April 8, 1998
------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on the following pages)
<PAGE> 2
CUSIP No. 393648100 SCHEDULE 13D Page 2 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
American Realty Trust, Inc.
54-0697989
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Georgia
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
197,500
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 197,500
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
197,500
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 3
CUSIP No. 393648100 SCHEDULE 13D Page 3 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Basic Capital Management, Inc.
75-23322719
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
141,260
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 141,260
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
141,260
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 4
CUSIP No. 393648100 SCHEDULE 13D Page 4 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Nevada Sea Investments, Inc.
75-2604949
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
72,800
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 72,800
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
72,800
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 5
CUSIP No. 393648100 SCHEDULE 13D Page 5 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Davister Corp.
75-2338496
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
251,200
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 251,200
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
251,200
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 6
CUSIP No. 393648100 SCHEDULE 13D Page 6 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
International Health Products, Inc.
75-2302531
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
249,085
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 249,085
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
249,085
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 7
CUSIP No. 393648100 SCHEDULE 13D Page 7 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Institutional Capital Corporation
75-2442090
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC/OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
242,500
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 242,500
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
242,500
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.7%
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14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 8
CUSIP No. 393648100 SCHEDULE 13D Page 8 of 8 Pages
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gene E. Phillips
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
-------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY -------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON -0-
WITH -------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
-0-
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
-0-
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE> 9
GREENBRIAR CORPORATION
CUSIP NO. 393 648 100
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock, $.01 par value (the
"Shares"), of Greenbriar Corporation (the "Company"). The principal executive
offices of the Company are located at 4265 Kellway Circle, Addison, Texas 75244.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed on behalf of American Realty Trust, Inc.
("ART"), Basic Capital Management, Inc. ("BCM"), Nevada Sea Investments, Inc.
("NSI"), International Health Products, Inc. ("IHPI"), Davister Corp.
("Davister"), Institutional Capital Corporation ("ICC"), and Gene E. Phillips
(collectively, the "Reporting Persons").
BCM owns approximately 49.1% of the outstanding securities of ART and
serves as the advisor to ART. NSI is a wholly owned subsidiary of BCM. BCM is
beneficially owned by a trust established for the benefit of the children of
Gene E. Phillips (the "May Trust"), who formerly served as Chief Executive
Officer (1989 - 1992) and Chairman of the Board of Directors (1989) of BCM, and
as Chief Executive Officer (1982 - 1991) and Chairman of the Board of Directors
(1984 - 1992) of ART. Although Mr. Phillips no longer serves as an officer or
director of BCM or ART, he continues to have substantial contact with the
management of BCM and has a significant influence on its advisory services and
investment decisions as a representative of the May Trust. In addition, BCM's
Securities Manager, who is responsible for the purchase and disposition of
securities for BCM, is also an officer of ART and NSI and manages investments in
securities for those entities as well as BCM.
IHPI is owned by a separate trust established for the benefit of the
wife and children of Gene E. Phillips (the "Martin Trust"). IHPI is managed by
F. Terry Shumate, who also manages several other private entities owned by Mr.
Phillips or his family trusts. Mr. Shumate consults on a regular basis with Mr.
Phillips and/or the Securities Manager for BCM regarding investments in
securities made by IHPI.
Davister and ICC are each owned by different parties but share the same
principal place of business and the same principal office as IHPI. Davister and
ICC are managed by the same personnel who manage IHPI and other private
companies
<PAGE> 10
owned by Gene E. Phillips or his family trusts. These personnel consult on a
regular basis with Mr. Phillips and/or the Securities Manager for BCM regarding
investments in securities by Davister and ICC.
(I) ART is a real estate investment company organized and existing as a
Georgia corporation. ART's principal business activities include investments in
real estate and in other business ventures. The principal place of business and
principal office of ART are located at 10670 North Central Expressway, Suite
300, Dallas, Texas 75231.
The following is a list of each executive officer and director of ART:
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
Oscar W. Cashwell Director
Al Gonzalez Director
Cliff Harris Director
Roy E. Bode Director
Karl L. Blaha Director/President
Thomas A. Holland Executive Vice President and
Chief Financial Officer
Bruce A. Endendyk Executive Vice President
Randall M. Paulson Executive Vice President
Robert A. Waldman Senior Vice President,
Secretary and General
Counsel
Drew D. Potera Vice President and Treasurer
</TABLE>
Mr. Cashwell's business address is 10670 North Central Expressway,
Suite 600, Dallas, Texas 75231. Mr. Cashwell is a real estate consultant for
BCM. Mr. Cashwell is a citizen of the United States of America.
Mr. Gonzalez's business address is 4455 Alpha Road, Building 2, Dallas,
Texas 75244. Mr. Gonzalez's present
2
<PAGE> 11
principal occupation is President of AGE Refining, Inc. Mr. Gonzalez is a
citizen of the United States of America.
Mr. Harris's business address is 2838 Woodside Street, Dallas, Texas
75204. Mr. Harris's present principal occupation is President of Energy Transfer
Group, L.L.C. Mr. Harris is a citizen of the United States of America.
Mr. Bode's business address is 2435 E. FM 879, Palmer, Texas 75152. Mr.
Bode's present principal occupation is Vice President for Public Affairs at
University of Texas Southwestern Medical Center at Dallas. Mr. Bode is a citizen
of the United States of America.
Mr. Blaha's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Blaha's present principal occupation is Executive
Vice President - Commercial Asset Management of BCM. Mr. Blaha is a citizen of
the United States of America.
Mr. Holland's business address is 10670 North Central Expressway, Suite
600 Dallas, Texas 75231. Mr. Holland's present principal occupation is Executive
Vice President and Chief Financial Officer of BCM. Mr. Holland is a citizen of
the United States of America.
Mr. Endendyk's business address is 10670 North Central Expressway,
Suite 600, Dallas, Texas 75231. Mr. Endendyk's present principal occupation is
Executive Vice President of BCM. Mr. Endendyk is a citizen of the United States
of America.
Mr. Paulson's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Paulson's present principal occupation is
President of BCM. Mr. Paulson is a citizen of the United States of America.
Mr. Waldman's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Waldman's present principal occupation is Senior
Vice President, Secretary and General Counsel of BCM. Mr. Waldman is a citizen
of the United States of America.
Mr. Potera's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Potera's present principal occupation is Vice
President and Treasurer of BCM. Mr. Potera is a citizen of the United States of
America.
3
<PAGE> 12
(II) BCM is a corporation organized and existing under the laws of the
State of Nevada. BCM's principal business activity is the provision of advisory
services for real estate investment trusts. Its principal place of business and
principal office are located at 10670 North Central Expressway, Suite 600,
Dallas, Texas 75231.
BCM is owned by Realty Advisors, Inc., a Nevada corporation. Realty
Advisors, Inc. is owned by a trust established for the benefit of the children
of Gene E. Phillips. The directors and executive officers of BCM are as follows:
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
Ryan T. Phillips Director
Mickey Ned Phillips Director
Randall M. Paulson President
Thomas A. Holland Executive Vice President and
Chief Financial Officer
Clifford C. Towns, Jr. Executive Vice President -
Finance
Karl L. Blaha Executive Vice President -
Commercial Asset Management
Bruce A. Endendyk Executive Vice President
A. Cal Rossi, Jr. Executive Vice President
Cooper B. Stuart Executive Vice President
Dan S. Allred Senior Vice President - Land
Development
Robert A. Waldman Senior Vice President, General
Counsel and Secretary
Drew D. Potera Vice President, Treasurer and
Securities Manager
</TABLE>
Information with respect to Messrs. Paulson, Holland, Blaha, Endendyk,
Waldman and Potera is disclosed in (I) above.
4
<PAGE> 13
Mr. R. Phillips's business address is 10670 North Central Expressway,
Suite 600, Dallas, Texas 75231. Mr. Phillips's present principal occupation is
an independent real estate investor. Mr. Phillips is a citizen of the United
States of America.
Mr. M. Phillips's business address is 264 Rolling Hills Circle,
Gaffney, South Carolina 29340. Mr. Phillips's present principal occupation is
owner of Phillips Remodeling Co. Mr. Phillips is a citizen of the United States
of America.
Mr. Towns's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Towns's present principal occupation is Executive
Vice President of BCM. Mr. Towns is a citizen of the United States of America.
Mr. Rossi's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Rossi's present principal occupation is Executive
Vice President of BCM. Mr. Rossi is a citizen of the United States of America.
Mr. Stuart's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Stuart's present principal occupation is Executive
Vice President of BCM. Mr. Stuart is a citizen of the United States of America.
Mr. Allred's business address is 10670 North Central Expressway, Suite
600, Dallas, Texas 75231. Mr. Allred's present principal occupation is Senior
Vice President - Land Development of BCM. Mr. Allred is a citizen of the United
States of America.
(III) NSI is a corporation organized and existing under the laws of the
State of Nevada. NSI's principal business activity is investments in real estate
and marketable securities. Its principal place of business and principal office
are located at 10670 North Central Expressway, Suite 501, Dallas, Texas 75231.
NSI is owned by BCM. The directors and executive officers of NSI are as
follows:
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
Randall M. Paulson Director and President
Robert A. Waldman Director and Secretary
</TABLE>
5
<PAGE> 14
<TABLE>
<S> <C>
Bruce A. Endendyk Vice President
Drew D. Potera Treasurer
</TABLE>
Information with respect to Messrs. Paulson, Waldman, Endendyk and
Potera is disclosed in (I) above.
(IV) IHPI is a corporation organized and existing under the laws of the
State of Nevada. IHPI's principal business activity is investments in real
estate and marketable securities. IHPI's principal place of business and its
principal office are located at 10670 North Central Expressway, Suite 410,
Dallas, Texas 75231.
IHPI is owned by the Martin Trust, which was established for the
benefit of the wife and children of Gene E. Phillips. The directors and
executive officers of IHPI are as follows:
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
F. Terry Shumate Director, President and Treasurer
Mary K. Willett Secretary
</TABLE>
Mr. Shumate's business address is 10670 North Central Expressway, Suite
410, Dallas, Texas 75231. Mr. Shumate's present principal occupation is Vice
President of Syntek West, Inc., a private company which is wholly owned by Mr.
Gene Phillips. Mr. Shumate is a citizen of the United States of America.
Ms. Willett's business address is 10670 North Central Expressway, Suite
410, Dallas, Texas 75231. Ms. Willett's present principal occupation is
Controller of Syntek West, Inc. and other private companies owned by Mr. Gene
Phillips or his family trusts. Ms. Willett is a citizen of the United States of
America.
(V) Davister is a corporation organized and existing under the laws of
the State of Nevada. Davister's principal business activity is investments in
real estate and marketable securities, and its day-to-day operations are managed
by F. Terry Shumate. Its principal place of business and its principal office
are located at 10670 North Central Expressway, Suite 410, Dallas, Texas 75231.
6
<PAGE> 15
Davister is owned by a group of eleven individuals. F. Terry Shumate
owns 18% of Davister and is the largest shareholder of the company. The
directors and executive officers of Davister are as follows:
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
Ronald F. Akin Director, President, Secretary and
Treasurer
Ronald F. Bruce Director
</TABLE>
Mr. Akin's business address is 10670 North Central Expressway, Suite
405, Dallas, Texas 75231. Mr. Akin's present principal occupation is President
of Sunridge Management Group, Inc., a company that provides real estate
management services to the various real estate entities advised by BCM as well
as other unrelated entities. Mr. Akin is a citizen of the United States of
America.
Mr. Bruce's business address is 10670 North Central Expressway, Suite
400, Dallas, Texas 75231. Mr. Bruce's present principal occupation is President
of Grapat Group Incorporated, a company that provides real estate management
services to the real estate entities advised by BCM as well as other unrelated
entities. Mr. Bruce is a citizen of the United States of America.
(VI) ICC is a corporation organized and existing under the laws of the
State of Nevada. ICC's principal business activity is investments in real estate
and marketable securities, and its day-to-day operations are managed by F. Terry
Shumate. ICC's principal place of business and its principal office are located
at 10670 North Central Expressway, Suite 411, Dallas, Texas 75231.
ICC is owned by Electrical Networks, Inc. and Starr Investments. The
directors and executive officers of ICC are as follows:
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
J.T. Tackett Director, Chairman and Chief
Executive Officer
E. Wayne Starr Director, President and Treasurer
</TABLE>
7
<PAGE> 16
Mr. Tackett's business address is Electrical Networks, Inc., 2521
Weaver Street, Suite A, Fort Worth, Texas 76117. Mr. Tackett's present principal
occupation is electrical contractor. Mr. Tackett is a citizen of the United
States of America.
Mr. Starr's business address is Century 21 -- Starr Associates, Inc.,
418 East Cooper Avenue, Suite 202, Aspen, Colorado 81611. Mr. Starr's present
principal occupation is real estate investments. Mr. Starr is a citizen of the
United States of America.
(VII) Gene E. Phillips's principal business address is 10670 North
Central Expressway, Suite 600, Dallas, Texas 75231. Mr. Phillips's present
principal occupation is investments in real estate. Mr. Phillips is a citizen of
the United States of America.
During the last five (5) years, (i) none of the persons enumerated in
(I) through (VII) above has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) and (ii) none of such persons was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The aggregate amount of funds used by ART to purchase Shares of the
Company is $1,622,430. The sources of such funds are from ART's working capital
and margin loans extended by the broker-dealers disclosed under Item 6 below.
The aggregate amount of funds used by BCM to purchase Shares of the
Company is $2,204,361. The sources of such funds are from BCM's working capital
and margin loans extended by the broker-dealers disclosed under Item 6 below.
The aggregate amount of funds used by NSI to purchase Shares of the
Company is $1,249,205. The sources of such funds are from NSI's working capital
and margin loans extended by the broker-dealers disclosed under Item 6 below.
8
<PAGE> 17
The aggregate amount of funds used by Davister to purchase Shares of
the Company is $4,834,948. The sources of such funds are from Davister's working
capital and margin loans extended by the broker-dealers disclosed under Item 6
below. Davister acquired 125,000 Shares of the Company from ICC in return for a
promissory note.
The aggregate amount of funds used by ICC to purchase Shares of the
Company is $3,938,602. The sources of such funds are from ICC's working capital
and margin loans extended by the broker-dealers disclosed under Item 6 below.
ICC acquired 237,149 Shares as payment of interest and principal on a promissory
note from JRG Investment Company, Inc., as disclosed in Item 6 below. ICC
transferred 116,149 Shares of the Company that it acquired from JRG Investment
Company, Inc. to IHPI as payment on a promissory note from ICC to IHPI.
The aggregate amount of funds used by IHPI to purchase Shares of the
Company is $4,103,142. The sources of such funds are from IHPI's working capital
and margin loans extended by the broker-dealers disclosed under Item 6 below.
IHPI acquired 116,149 Shares of the Company from ICC in satisfaction of a
promissory note from ICC to IHPI in the amount of $2,090,682.
ITEM 4. PURPOSE OF TRANSACTION
Each of the Reporting Persons owning Shares acquired the Shares
described in Item 5 below in order to obtain a significant investment position
in the Company. The Reporting Persons have no present plans or proposals to
acquire additional Shares of the Company or dispose of any or all of the Shares
now owned by the Reporting Persons, but each of the Reporting Persons reserves
the right to acquire additional Shares of the Company or dispose of any or all
of the Shares of the Company now owned based on such Reporting Person's
evaluation of the Company's business prospects and financial condition, the
market for Shares of the Company, the availability of other investment
opportunities, general economic conditions, and other future developments. Any
such further purchase or disposition of Shares of the Company may be made in the
open market, in privately negotiated transactions, or otherwise.
None of the Reporting Persons has any present plan or proposal which
relates to or would result in:
9
<PAGE> 18
(a) an extraordinary corporate transaction, such
as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries;
(b) a sale or transfer of a material amount of
assets of the Company or any of its subsidiaries;
(c) any change in the present Board of Directors or
management of the Company, including any plans or
proposals to change the number or term of directors
or to fill any existing vacancies on the Board;
(d) any material change in the present capitalization
or dividend policy of the Company;
(e) any other material change in the Company's business
or corporate structure;
(f) changes in the Company's charter, bylaws or
instruments corresponding thereto or other actions
which might impede the acquisition of control of the
Company by any person;
(g) Shares of the Company being delisted from the
American Stock Exchange;
(h) a class of equity securities of the Company becoming
eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or
(i) any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Share Ownership
The following tables show the Shares owned directly and beneficially by
the Reporting Persons on the date of this statement:
10
<PAGE> 19
<TABLE>
<CAPTION>
Shares Owned Directly
---------------------
Number Percent of
Name of Shares Class (1)
- ---- --------- ---------
<S> <C> <C>
ART 97,500 1.5%
BCM 141,260 2.2%
NSI 72,800 1.1%
IHPI 249,085 3.8%
Davister 251,200 3.8%
ICC 242,500 3.7%
Total 1,054,345 16.1%
</TABLE>
<TABLE>
<CAPTION>
Shares Owned Beneficially
-------------------------
Number Percent of
Name of Shares Class (1)
- ---- --------- ---------
<S> <C> <C>
ART 97,500 1.5%
BCM (2) 311,560 4.8%
NSI 72,800 1.1%
IHPI 249,085 3.8%
Davister 251,200 3.8%
ICC (3) 242,500 3.7%
Gene E. Phillips (4) 1,054,345 16.1%
Total Shares
beneficially
owned by Reporting
Persons 1,054,345 16.1%
</TABLE>
(1) Percentage calculations are based upon 6,547,049 Shares outstanding on
November 17, 1997.
(2) May be deemed to be a beneficial owner of the Shares held directly by ART
and NSI by virtue of the relationships to ART and NSI described in Item 2. BCM
does not affirm beneficial ownership of such Shares.
(3) Does not include any shares held by JRG Investment Company, Inc., the
outstanding stock of which is pledged to ICC as collateral for a promissory
note, as disclosed in Item 6 below.
(4) May be deemed to be a beneficial owner of the Shares held directly by ART,
BCM, NSI, IHPI, Davister, and ICC by reason of the relationships with those
entities described in Item 2. Mr. Phillips does not affirm beneficial
ownership of any of such Shares.
11
<PAGE> 20
(b) Voting and Disposition Power
Each of the directors of ART shares voting and disposition power over
all of the Shares owned by ART. Each of the directors of BCM shares voting and
disposition power over all of the Shares held by BCM. Each of the directors of
NSI shares voting and disposition power over all of the Shares owned by NSI.
Gene E. Phillips, as a representative of the May Trust, has a
significant influence on decisions relating to the purchase and disposition of
securities made by BCM, ART and NSI. Drew D. Potera, who manages investments in
securities made by BCM as the Securities Manager for that entity, also manages
investments in securities made by ART and NSI as an officer of each of those
companies. Mr. Potera's activities at BCM, ART and NSI are subject to the
oversight of the directors of each of those companies. The directors of BCM, ART
and NSI have not agreed that these companies will act in concert with each other
or with any other Reporting Person with respect to the acquisition or
disposition of Shares of the Company.
Each of the directors of IHPI shares voting and disposition power over
all of the Shares held by IHPI. Each of the directors of Davister shares voting
and disposition power over all of the Shares held by Davister. Each of the
directors of ICC shares voting and disposition power over all of the Shares
owned by ICC.
F. Terry Shumate, who is a director of IHPI and makes investments for
that entity, also makes investments on behalf of Davister and ICC. Mr. Shumate
consults on a regular basis with Gene E. Phillips and/or the Securities Manager
for BCM with respect to the purchase and disposition of marketable securities on
behalf of IHPI, Davister and ICC. The directors of IHPI, Davister and ICC have
not agreed that IHPI, Davister and ICC will act in concert with each other or
with any other Reporting Person with respect to the acquisition or disposition
of Shares of the Company.
(c) Transactions in Securities
No transactions in the Shares were effected by the Reporting Persons
during the past 60 days.
12
<PAGE> 21
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
(I) Loan from ICC to JRG Investment Company, Inc.
ICC holds 2,500 shares, which constitute all of the issued and
outstanding stock of JRG Investment Company, Inc. ("JRG") as collateral for a
promissory note in the amount of $5,700,000 from JRG to ICC. JRG is owned by
James R. Gilley, the Chief Executive Officer of the Company and the Chairman of
its Board of Directors. Prior to 1997, the $5,700,000 promissory note from JRG
to ICC was also collateralized by 1,210,100 Shares of the Company owned by JRG.
The pledge agreement between James R. Gilley and ICC does not provide
ICC with the power to vote or direct the vote of any Shares of the Company. ICC
has the power to dispose or direct the disposition of the shares of JRG only if
there is an event of default under the terms of the agreement.
The pledge agreement between James R. Gilley and ICC arose in
connection with the following series of transactions:
On May 23, 1991, Syntek Finance Corporation, a subsidiary of Syntek
West, Inc., which is wholly owned by Gene E. Phillips, sold 1,714,113 shares of
non-voting Series A preferred stock of the Company to JRG in return for a
promissory note in the amount of $1,686,471. The 1,714,113 shares of preferred
stock were pledged as collateral for the note. Also on May 23, 1991, IHPI sold
87,272 Shares of the Company and stock purchase warrants to purchase 830,000
Shares of the Company to JRG in return for a promissory note in the amount of
$3,313,529. The 87,272 Shares and the stock purchase warrants purchased by JRG
were pledged as collateral for the note to IHPI.
Syntek Finance Corporation subsequently pledged the $1,686,471
promissory note from JRG, together with two promissory notes from Gene Phillips,
to ART as collateral for a $3,840,000 loan from ART to Syntek Finance
Corporation. During the second quarter of 1992, ART foreclosed on the three
promissory notes pledged as collateral. In September 1992, ART sold the three
notes to ICC for $4,100,000, consisting of $200,000 in cash and a promissory
note from ICC in the amount of $3,900,000. The three promissory notes sold to
ICC were pledged as collateral for the $3,900,000 note from ICC to ART.
13
<PAGE> 22
On September 30, 1992, ICC made a $1,900,000 payment to ART, and ART
released its security interest in the $1,686,471 note from JRG. ICC made the
$1,900,000 payment with funds borrowed from BCM, which it subsequently repaid.
At the same time that it acquired the $1,686,471 JRG note from ART, ICC
also acquired the $3,313,529 JRG note from IHPI in return for a promissory note
in the same principal amount.
After acquiring the two promissory notes issued by JRG, ICC released
the stock purchase warrants and 1,037,500 shares of the preferred stock held as
collateral to enable JRG to tender such shares of preferred stock to the Company
for redemption at $1.00 per share and use the proceeds to exercise the stock
purchase warrants to purchase 830,000 Shares of the Company.
On November 9, 1992, the two promissory notes from JRG were
consolidated into a new five-year promissory note from JRG to ICC in the amount
of $5,700,000. In consideration of this consolidation and extension of the two
notes, JRG transferred 87,272 Shares of the Company to ICC. As security for the
consolidated note, JRG pledged 1,210,000 Shares of the Company, 905,507 shares
of non-voting Series A preferred stock of the Company, and a $600,000 note
payable to JRG from a third party. In addition, James R. Gilley pledged all of
the outstanding shares of JRG as security for the consolidated note.
On May 23, 1994 and May 31, 1995, JRG made interest payments on the
$5,700,000 promissory note by transferring shares of preferred stock of the
Company to ICC. ICC subsequently delivered 1,085,000 shares of preferred stock
to the Company for redemption at $1.00 per share. ICC did not receive payment
for the shares of preferred stock, and sold the $1,085,000 receivable from the
Company to NSI. The Company then transferred a judgment that it held against
Wespac Investors Trust III, a real estate investment company, to NSI in
satisfaction of the receivable.
On February 11 and March 10, 1997, JRG transferred 237,149 Shares of
the Company to ICC to pay interest on the $5,700,000 promissory note and to
reduce the principal amount by $2,703,627. On April 30, 1997, ICC transferred
116,149 of the Shares received from JRG to IHPI in partial payment of the note
that it issued to IHPI on September 30, 1992.
14
<PAGE> 23
On April 22, 1997, ICC released its security interest in the remaining
972,851 Shares of the Company that it held as collateral under the pledge
agreement with JRG.
As of December 31, 1997, the outstanding principal amount of the
promissory note from JRG to ICC was $2,996,373.
(II) Pledges.
ART has pledged 97,500 Shares of the Company to secure margin debt at
the following firms in the following amounts: 38,600 Shares to Bear Stearns &
Co., Inc.; 7,100 Shares to Deutsche Morgan Grenfell; 7,100 Shares to Dean
Witter; 2,500 Shares to First Southwest; 7,100 Shares to McDonald & Company;
7,100 Shares to Principal Financial Securities, Inc.; and 28,000 Shares to
Wedbush Morgan Securities.
BCM has pledged 82,860 Shares of the Company to secure margin debt at
the following firms in the following amounts: 1,500 Shares to American Express;
33,000 Shares to Bear Stearns & Co., Inc.; 4,200 Shares to Dean Witter; 1,000
Shares to Hambrecht & Quist LLC; 8,260 Shares to J.C. Bradford; 2,000 Shares to
Legg Mason Wood Walker, Incorporated; 3,000 Shares to Morgan Keegan & Company,
Inc.; 10,000 Shares to Rauscher Pierce Refsnes, Inc.; 2,000 Shares to Raymond
James Associates, Inc.; 900 Shares to Regions Investment Company, Inc.; 4,500
Shares to Southland Securities Corporation; 3,500 Shares to Principal Financial
Securities, Inc.; 8,000 Shares to Wedbush Morgan Securities; and 1,000 Shares to
Wheat First Butcher Singer. BCM has also pledged 26,400 Shares of the Company to
NationsBank as collateral for a loan to a private company in which NSI holds an
interest.
NSI has pledged 72,800 Shares of the Company to secure margin debt at
the following firms in the following amounts: 25,600 Shares to Rauscher Pierce
Refsnes, Inc.; and 47,200 Shares to Wedbush Morgan Securities.
IHPI has pledged 205,449 Shares of the Company to secure margin debt at
the following firms in the following amounts: 20,000 Shares to BA Investment
Services, Inc.; 16,000 Shares to Bear Stearns & Co., Inc.; 6,800 Shares to
Chatfield Dean & Co., Inc.; 20,000 Shares to Cutter & Company, Inc.; 31,500
Shares to Everen Securities; 20,000 Shares to Legg Mason Wood Walker; 36,149
Shares to McDonald & Company; 35,000 Shares to Morgan Keegan & Company, Inc.;
and 20,000 Shares to Principal Financial Securities, Inc. IHPI has also pledged
43,636
15
<PAGE> 24
Shares of the Company to NationsBank as collateral for a loan to a private
company in which NSI holds an interest.
Davister has pledged 251,200 Shares of the Company to secure margin
debt at the following firms in the following amounts: 95,000 Shares to Bear
Stearns & Co., Inc.; 69,100 Shares to Rauscher Pierce Refsnes, Inc.; and 87,100
Shares to Southland Securities Corporation.
ICC has pledged 201,500 Shares of the Company to secure margin debt at
the following firms in the following amounts: 73,900 Shares to Bear Stearns &
Co., Inc.; 20,000 Shares to J.C. Bradford; 20,000 Shares to Hambrecht & Quist
LLC; 39,100 Shares to Prudential Securities, Inc.; 40,000 Shares to Rauscher
Pierce Refsnes, Inc.; and 44,500 Shares to Wedbush Morgan Securities.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
(1) Extended and Consolidated Pledge Agreement between
JRG and M.S. Holding Co. Corp. (predecessor to ICC).
(2) Pledge Agreement between James R. Gilley and M.S. Holding Co.,
Corp. (predecessor to ICC).
16
<PAGE> 25
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 8, 1998
AMERICAN REALTY TRUST, INC.
By: /s/ Karl L. Blaha
-----------------------------------------
Karl L. Blaha
President
BASIC CAPITAL MANAGEMENT, INC.
By: /s/ Drew D. Potera
-----------------------------------------
Drew D. Potera
Vice President and Treasurer
NEVADA SEA INVESTMENTS, INC.
By: /s/ Randall M. Paulson
-----------------------------------------
Randall M. Paulson
President
DAVISTER CORP.
By: /s/ Ronald F. Akin
-----------------------------------------
Ronald F. Akin
President
17
<PAGE> 26
INSTITUTIONAL CAPITAL CORPORATION
By: /s/ E. Wayne Starr
-----------------------------------------
E. Wayne Starr
President
INTERNATIONAL HEALTH PRODUCTS, INC.
By: /s/ F. Terry Shumate
-----------------------------------------
F. Terry Shumate
President
GENE E. PHILLIPS
/s/ Gene E. Phillips
-----------------------------------------
18
<PAGE> 1
EXTENDED AND CONSOLIDATED
PLEDGE AGREEMENT
AGREEMENT made effective as of the 23rd of day May, 1992, between JRG
INVESTMENT CO., INC., a Nevada corporation, referred to herein as the "Pledgor"
and M.S. HOLDING CO. CORP., a Nevada corporation referred to herein as the
"Secured Party".
WHEREAS, Pledgor executed a pledge agreement and that note in the
original amount of $1,686,471.18 Dated May 23, 1991 to Syntek Finance
Corporation and due May 23, 1992 (the "Syntek Loan"), which was sold to American
Realty and further sold to Secured Party;
WHEREAS, Pledgor executed a pledge agreement and that note in the
original amount of $3,313,528.82 Dated May 23, 1991 to International Health
Products, Inc. and due May 23, 1992 (the "International Loan") as sold to
Secured Party;
WHEREAS, to induce Secured Party to extend and accrue the Syntek Loan
and the International Loan (together the "Loan"), the Pledgor has agreed to
execute an extended and consolidated note and continue the pledge of certain
stock as security and will transfer to Secured Party 436,363 shares of Medical
Resource Companies of America, a Nevada corporation ("Medical Resource");
WHEREAS, to induce Secured Party to reduce the interest rate in the
Extended and Consolidated Promissory Note, Pledgor will deposit with the Secured
Party 2,281,818 shares of common stock of Medical Resource.
NOW THEREFORE, in consideration of the extension of the Prior Notes,
and for other valuable consideration, the receipt of which is hereby
acknowledged, Pledgor agrees with Secured Party as follows:
1. Event of Default. The term "Event of Default" means (a)
the occurrence of any Event of Default under the Note (hereinafter
defined).
2. Pledge. Upon the terms hereof, Pledgor hereby pledges and
grants to Secured Party a first lien on and security interest (the "Security
Interest") in and to all of the right, title and interest of Pledgor in and to
all of the following instruments and property (all of the following being herein
sometimes called the "Collateral"):
(a) (i) 905,557 shares of the issued and outstanding Series A
preferred stock of Medical Resource, together with all certificates,
options, rights or other distributions issued as an addition to, in
substitution or in exchange for, or on account of, any such shares, as
represented by a true and
<PAGE> 2
correct copy of certificate NO. P0009 (the "Preferred Certificates",
whether one or more) being held in trust for the Secured Party and
incorporated herein by reference representing 905,557 shares of the
Series A preferred stock of Medical Resource, the originals of this
certificate having been deposited with a trustee or the Secured Party
simultaneously with the Pledgor's execution hereof, (ii) 3,550,000
shares of the issued and outstanding common stock of Medical Resource,
together with all certificates, options, rights or other distributions
issued as an addition to, in substitution or in exchange for, or on
account of, any such shares, as represented by a true and correct copy
of certificates NO. 3687, 3688, 3689, 3690, 3691 (the "Converted
Certificates", whether one or more) being held in trust for the Secured
Party and incorporated herein by reference representing 3,550,000
shares of the common stock of Medical Resource, the originals of the
Certificate having been deposited with a trustee or the Secured Party
simultaneously with the Pledgor's execution hereof (iii) 2,281,818
shares of the issued and outstanding common stock of Medical Resource,
together with all certificates, options, rights or other distributions
issued as an addition to, in substitution or in exchange for, or on
account of, any such shares, as represented by a true and correct copy
of certificates NO. __________________________ (the "New Certificates",
whether one or more, and known together with the Preferred Certificates
and the Converted Certificates as the "Certificates") being held in
trust for the Secured Party and incorporated herein by reference
representing 2,281,818 shares of the common stock of Medical Resource,
the originals of the Certificate having been deposited with a trustee
or the Secured Party simultaneously with the Pledgor's execution
hereof; and (iv) a note payable to Pledgor from Professional Investors
Insurance Group, Inc. in the amount of Six Hundred Thousand Dollars
($600,000), and all of the security therefor;
(b) All securities and other property, rights or interests of
any description at any time issued or issuable as an addition to, in
substitution or exchange for, with respect to, incident to or in lieu
of such shares described in Sections 2(a) hereof or with respect to,
incident to or in lieu of the Collateral (i) due to any dividend,
stock-split, stock dividend or distribution on dissolution, on partial
or total liquidation, or other corporate reorganization, or for any
other reason; (ii) in connection with a reduction of capital, capital
surplus or paid-in surplus; or (iii) in connection with any spin-off,
split-off, reclassification, readjustment, merger, consolidation, sale
of assets, combination of shares or any other plan of distribution
affecting the companies which have issued the shares described in
Section 2(a) hereof;
2
<PAGE> 3
(c) Any subscription or other rights or options issued in
connection with the shares described in Sections 2 (a) hereof,
including, but not limited to preemptive rights and, if exercised by
the Pledgor, all new shares or other securities so acquired by the
Pledgor, which shall immediately be assigned and delivered to Secured
Party and held under the terms of this agreement (the "Pledge
Agreement") in the same manner as the shares originally pledged
hereunder;
(d) Any and all proceeds, monies, income and benefits arising
from or by virtue of, and all dividends and distributions (cash or
otherwise) payable and/or distributable with respect to, all or any of
the shares or other securities and rights and interests described
herein.
3. Obligations Secured. This Pledge Agreement and the Security
Interest granted hereby secure the prompt repayment of that certain extended and
consolidated promissory note executed by Pledgor of even date herewith (the
"Note").
4. Warranties. Pledgor represents, warrants, covenants and agrees
to and with Secured Party that: (a) Pledgor is the legal and beneficial owner of
the Collateral; (b) the Collateral is duly authorized and issued, fully paid,
and nonassessable; (c) no dispute, right of setoff, counterclaim or defense
exists with respect to all or any part of the Collateral; (d) all of the shares
of the Collateral are owned by the Pledgor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest or purchase right
or option on the part of any third person in such shares or the proceeds
thereof, except the Security Interest and those restrictions legended on the
stock certificate which restrictions Pledgor acknowledges are operative only so
long as no Event of Default has occurred; (e) there are no restrictions upon the
transfer of any of the shares constituting the Collateral, other than those
which are operative only so long as no Event of Default has occurred and which
appear on the face of the Certificates; (f) the Pledgor has the full power,
authority and legal right to transfer and pledge the Collateral free of any
encumbrances and without obtaining the consent of the other shareholders of the
issuer of the Collateral; (g) the execution and delivery of this Pledge
Agreement, and the performance of its terms, will not result in any violation of
any provision of the Pledgor's certificate of incorporation or bylaws, or
violate or constitute a default under the terms of any agreement, indenture or
other instrument, license, judgment, decree, order, law, statute, ordinance or
other governmental rule or regulation, applicable to the Pledgor or any of its
property; (h) this Pledge Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and, to
the extent that such instruments
3
<PAGE> 4
require or may require, enforcement by a court of equity, such principles of
equity as the court may have jurisdiction to impose; and (i) upon delivery of
the Collateral to the Secured Party, this Pledge Agreement will create a valid
and perfected first priority lien upon, and security interest in, the Collateral
and the proceeds thereof, securing the payment of the Note. The delivery at any
time by the Pledgor to the Secured Party of Collateral shall constitute a
representation and warranty by the Pledgor under this Pledge Agreement that,
with respect to such Collateral and each item thereof: (1) Pledgor is the owner
of the Collateral; and (2) the matters heretofore warranted in clauses (a)
through (i) of this section are true and correct.
5. Covenants. Pledgor further covenants and agrees: (a) from time
to time promptly to execute, assign, endorse and deliver to Secured Party all
applications, acceptances, stock powers, chattel paper, documents, instruments
or other evidences of payment or writing constituting or relating to any of the
Collateral, and all such other assignments, certificates, supplemental writings,
and financing statements and do all other acts or things as Secured Party may
reasonably request in order more fully to evidence and perfect the Security
Interest; (b) promptly to furnish Secured Party with any information or writings
which Secured Party may reasonably request concerning the Collateral; (c) to
allow Secured Party to inspect all records of Pledgor relating to the Collateral
or to the Note, and to make and take away copies of such records during normal
business hours; (d) promptly to notify Secured Party of any change in any fact
or circumstance warranted or represented by Pledgor in this Pledge Agreement or
in any other writing furnished by Pledgor to Secured Party in connection with
the Collateral or the Note; (e) promptly to notify Secured Party of any claim,
action or proceeding affecting title to the Collateral, or any part thereof, or
the Security Interest, and at the request of Secured Party, appear in and
defend, at Pledgor's expense, any such action or proceeding; (f) promptly to pay
to Secured Party the amount of all court costs and reasonable attorneys' fees
incurred by Secured Party hereunder; (g) except to the extent prohibited by
applicable law, pay all reasonable expenses incurred in the custody,
preservation, use or operation of the Collateral; and (h) promptly to deliver to
Secured Party, in the exact form received, all securities and other property
described in Section 2(b), Section 2(c) and Section 2(d) hereof which comes into
the possession, custody or control of the Pledgor. Pledgor further covenants and
agrees that, without the prior written consent of Secured Party, Pledgor shall
not (x) sell, assign or transfer Pledgor's rights in the Collateral, or (y)
create any other lien or security interest in, or otherwise encumber any of the
Collateral, or permit any of the Collateral ever to be or become subject to any
lien, attachment, execution, sequestration, other legal or equitable process, or
any lien or encumbrance of any kind. Pledgor further agrees that it will (1)
cause the issuers of the Collateral not to issue any stock or other securities
in addition to or in substitution for the Collateral issued by the issuer,
except
4
<PAGE> 5
to the Pledgor, and (2) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of stock or
other securities of the Collateral. All assignments and endorsements by the
Pledgor shall be in such form and substance as may be satisfactory to the
Secured Party. Should any covenant, duty or agreement of the Pledgor fail to be
performed in accordance with its terms hereunder, the Secured Party may, but
shall never be obligated to, perform or attempt to perform such covenant, duty
or agreement on behalf of the Pledgor, and any amount expended by the Secured
Party in such performance or attempted performance shall become part of the
Note, except to the extent prohibited by applicable law, and, at the request of
the Secured Party, or unless otherwise agreed, the Pledgor agrees to pay such
amount promptly to the Secured Party.
6. Adjustments and Distributions Concerning Collateral. Should
the Collateral, or any part thereof, ever be converted in any manner by its
issuer into another type of property or any money or other proceeds ever be paid
or delivered to Pledgor as a result of Pledgor's rights in the Collateral, then
in any such event (except as provided in Section 7 hereof), all such property,
money and other proceeds shall immediately be and become part of the Collateral,
and Pledgor covenants to pay forthwith and deliver all such property, money or
other proceeds so received to Secured Party; and, if Secured Party deems it
necessary and so requests, to endorse properly or assign any and all such other
proceeds to Secured Party and to deliver to Secured Party any and all such other
proceeds which require perfection by possession under the Uniform Commercial
Code in effect in the State of Texas or other appropriate jurisdiction (the
"UCC"). With respect to any of such property of a kind requiring an additional
security agreement, financing statement or other writing to perfect a security
interest therein in favor of Secured Party, Pledgor will forthwith execute and
deliver to Secured Party whatever Secured Party shall deem necessary or proper
for such purpose.
7. Cash Dividends. Unless an Event of Default shall have
occurred, the Pledgor shall be entitled to receive for its own use cash
dividends on the Collateral paid out of earned surplus. Upon the occurrence of
an Event of Default, the Secured Party may require any such cash dividends to be
delivered to the Secured Party as additional Collateral hereunder or applied
toward repayment of the Note.
8. Registration of Collateral in Name of Secured Party. After an
Event of Default, the Secured Party, at its option, may have any or all of the
Collateral registered in its name or that of its nominee including any "clearing
corporation" or "custodian bank" as defined in the UCC and any nominee of any of
the foregoing, and the Pledgor hereby covenants that, upon the Secured Party's
request, the Pledgor will cause the issuer of the Collateral to effect such
registration. Immediately after an Event of Default and with or
5
<PAGE> 6
without notice, whether or not the Collateral shall have been registered in the
name of the Secured Party or its nominee, the Secured Party or its nominee shall
have, with respect to the Collateral, the right to exercise all voting rights
and all other corporate rights and all conversion, exchange, subscription or
other rights, privileges or options pertaining thereto as if it were the
absolute owner thereof, including, without limitation, the right to exchange any
or all of the Collateral upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof, or upon the
exercise by such issuer of any right, privilege, or option pertaining to any of
the Collateral, and, in connection therewith, to deliver any of the Collateral
to any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine, all without liability
except to account for property actually received by it; but the Secured Party
shall have no duty to exercise any of the aforesaid rights, privileges or
options and shall not be responsible for any failure to do so, delay in doing
so, or depreciation in the value of the Collateral by reason of doing so.
9. Default. Upon the occurrence of an Event of Default, in
addition to any and all other rights and remedies which Secured Party may then
have hereunder, under the UCC or otherwise, Secured Party may at its discretion
and without notice to the Pledgor do any one or more of the following, without
liability except to account for property actually received by it, and Pledgor
agrees that it is commercially reasonable for Secured Party to do any of the
following: (a) declare the entire unpaid balance of principal of and all
accrued, unpaid interest on the Note immediately due and payable without notice,
including without limitation, notice of acceleration and notice of intent to
accelerate, demand, or presentment, which are hereby waived; (b) transfer to or
register in its name or the name of its nominee (if the same has not already
been done) any of the Collateral with or without indication of the security
interest herein created, and whether or not so transferred or registered,
receive the income, dividends and other distributions thereon and hold them or
apply them to the Note in any order of payment; (c) exercise or cause to be
exercised all voting and corporate powers with respect to any of the Collateral
so registered or transferred, including all rights to conversion, exchange,
subscription or any other rights, privileges or options pertaining to such
Collateral, as if the absolute owner thereof; (d) insure any of the Collateral;
(e) exchange any of the Collateral for other property upon a reorganization,
recapitalization or other readjustment and, in connection therewith, deposit any
of the Collateral with any committee or depository upon such terms as the
Secured Party may determine; (f) in its name or in the name of the Pledgor
demand, sue for, collect or receive any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral and, in
connection therewith, endorse notes, checks, drafts, money orders, documents of
title or other evidences of payment, shipment
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<PAGE> 7
or storage in the name of the Pledgor; (g) make any compromise or settlement
deemed advisable with respect to any of the Collateral; (h) renew, extend, or
otherwise change the terms and conditions of any of the Collateral or the Note;
(i) take or release any other collateral as security for any of the Collateral
or the Note; 0) add or release any guarantor, indorser, surety or other party to
any of the Collateral or the Note; (k) reduce its claim to judgment or foreclose
or otherwise enforce the Security Interest, in whole or in part, by any
available judicial procedure; (1) without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other person
(all of which are, to the extent permitted by law, hereby expressly waived),
forthwith realize upon the Collateral or any part thereof, and may forthwith
sell or otherwise dispose of or deliver the Collateral or any part thereof or
interest therein, in one or more parcels at public or private sale or sales (it
being understood and agreed that a sale of all the Collateral at once may
adversely affect the price paid for the Collateral), on any national or regional
exchange or recognized market (including without limitation on the New York
Stock Exchange or in the over-the-counter market by a registered broker dealer
at the current market price), broker's board or at the Secured Party's office or
elsewhere, at such prices and on such terms including, but without limitation, a
requirement that any purchaser of all or any part of the Collateral purchase the
shares constituting the Collateral for investment without any intention to make
any distribution thereof) as it may deem best (it being agreed that the sale of
any part of the Collateral shall not exhaust Secured Party's power of sale, but
sales may be made from time to time until all of the Collateral has been sold or
until the Note has been paid in full without any intention to make any
distribution thereof), for cash or on credit, or for future delivery without
assumption of any credit risk, with the right of the Secured Party or any
purchaser to purchase upon any such sale the whole or any part of the Collateral
free from any right or equity of redemption in the Pledgor, which right or
equity is hereby expressly waived and released, and at any such sale it shall
not be necessary to exhibit the Collateral; (m) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
thereof, and Pledgor hereby consents to any such appointment; (n) at its
discretion, retain the Collateral in satisfaction of the Note whenever the
circumstances are such that Secured Party is entitled to do so under the UCC or
otherwise; (o) exercise any and all other rights it may have hereunder or under
the UCC or otherwise; (p) buy the Collateral at any public sale; and (q) buy the
Collateral at any private sale if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of widely
distributed standard price quotations. Pledgor hereby grants to Secured Party an
irrevocable proxy coupled with an interest to exercise as to such Collateral,
upon the occurrence of an Event of Default, all rights, powers and remedies of
an owner and all of the rights, powers and remedies hereinabove set forth, the
proxy herein
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<PAGE> 8
granted to exist until the Note has been paid and performed in full. The
proceeds of any disposition of the Collateral or other action by the Secured
Party shall be applied as follows:
(1) First, to the cost and expenses incurred in
connection therewith or incidental thereto or to the
care or safekeeping of any of the Collateral or in
any way relating to the rights of the Secured Party
hereunder, including reasonable attorneys' fees and
legal expenses;
(2) Then, to the satisfaction of the Note in such order
as the Secured Party may elect;
(3) Then, to the payment of any other amounts required
by applicable law; and
(4) Then, to the Pledgor to the extent of any surplus
proceeds.
In addition to the rights and remedies granted to the Secured Party in
this Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to the Note, the Secured Party shall have all rights and
remedies of a secured party under the UCC. The Pledgor further agrees to waive
and agrees not to assert any rights or privileges which it may acquire under the
UCC with respect to collateral not owed by the debtor, and the Pledgor shall be
liable for the deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all amounts to which the Secured Party is
entitled and the fees and expenses of any attorneys employed by the Secured
Party to collect such deficiency. The Secured Party will be under no duty to
exercise or to withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Secured Party in this Pledge
Agreement and shall not be responsible for any failure to do so or delay in so
doing.
10. Laws and Agreements. Pledgor agrees that there may be legal
and/or practical restrictions or limitations affecting Secured Party in
attempting to dispose of certain portions of the Collateral and enforce its
rights hereunder, because of the Securities Act of 1933, as amended, or any
other laws or regulations, or for other reasons, including an order to obtain
any required approval of the purchase or purchaser by any governmental
regulatory agency or officers. For these reasons, Secured Party is hereby
authorized by Pledgor, but not obligated, in the event of the occurrence of an
Event of Default, to sell all or any part of the Collateral at private sale,
subject to investment letter or in any other manner which will not require the
Collateral, or any part thereof, to be registered in accordance with any laws
or regulations, including but not limited to the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, or make it
necessary to
8
<PAGE> 9
obtain any required approval of purchaser or the purchase by any governmental
regulatory agency or officer, at the best price reasonably obtainable by Secured
Party at such private sale or other disposition in the manner mentioned above.
Secured Party is also hereby authorized by Pledgor, but not obligated, to take
such actions, give such notices, obtain such consents and do such other things
as Secured Party may deem necessary or appropriate in the event of sale or
disposition of any of the Collateral. Pledgor understands that Secured Party may
in its discretion approach a restricted number of potential purchasers and that
a sale under such circumstances may yield a lower price for the Collateral, or
any part or parts thereof, than would otherwise be obtainable if same were
either offered to a large number of potential purchasers, or registered and sold
in the open market. The Pledgor agrees (i) that at such private sale or sales,
the Secured Party shall have the right to rely upon the advice and opinion of
any member firm of a national securities exchange as to the best price
reasonably obtainable upon such private sale thereof, and that such reliance
shall be conclusive evidence that the Secured Party handled such matter in a
commercially reasonable manner under applicable law, and (ii) that the Secured
Party has no obligation to delay sale of any Collateral to permit the issuer
thereof to register it for public sale under any applicable federal or state
securities laws, and (iii) that the Secured Party shall not be liable or
accountable to Pledgor, nor shall the Note be subject to any reduction by reason
of the fact that the proceeds of sale subject to any such limitation or
restriction are less than otherwise might have been obtained.
11. Notification of Sale. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Pledgor and to any other person
entitled under the UCC to notice; provided that if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Secured Party may sell or otherwise dispose of the Collateral
without notification, advertisement, or other notice of any kind. It is agreed
that notice sent or given not less than five (5) calendar days prior to the
taking of the action to which the notice relates is reasonable notification and
notice for the purposes of this paragraph.
12. Satisfaction of Obligations. Upon the repayment in full of the
Note and the satisfaction of all additional costs and expenses of the Secured
Party as provided herein, this Pledge Agreement shall terminate, and the Secured
Party shall deliver to the Pledgor, at the Pledgor's expense, such of the
Collateral as shall not have been sold or otherwise applied pursuant to this
Pledge Agreement.
13. Duties of Secured Party. The Secured Party's duty with respect
to any Collateral now or hereafter in the possession of the
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<PAGE> 10
Secured Party is solely to use reasonable care in the custody and preservation
of the Collateral. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation in the Collateral if the
Collateral is accorded treatment substantially equal to that which the Secured
Party accords its own property, it being understood that the Secured Party shall
not have any responsibility for ascertaining or taking action with respect to
fixing or preserving rights against prior parties to the Collateral, calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral or for informing Pledgor of such matters whether or not the Secured
Party has or is deemed to have any knowledge of such matters. The Secured Party
shall not be required to take any steps necessary to preserve any rights in the
Collateral against prior parties or to protect, perfect, preserve or maintain
any security interest given to secure the Collateral. Secured Party shall never
be liable for its failure to use due diligence in the collection of the Note, or
any part thereof, or for its failure to give notice to the Pledgor of default in
the payment of the Note, or any part thereof, or in the payment of or upon any
security, whether pledged hereunder or otherwise. The Secured Party shall not be
liable for a decline in the market value of the Collateral.
14. Indemnification. The Pledgor hereby agrees to indemnity and to
hold Secured Party harmless from and against any loss, claim, demand or expense
(including attorneys' fees) by reason, or in any manner related to, the
Collateral, including any such claim as may arise by reason of any alleged
breach of warranty concerning the Collateral, by reason of the failure of the
Pledgor to comply with any state or federal statute, rule, regulation, order or
decree, or by reason of the Secured Party's efforts to enforce payment of the
Note, including expenses incurred in satisfying any applicable securities and
banking laws.
15. Expenses. The Pledgor will upon demand pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Secured Party may incur in connection with (i) the administration of this Pledge
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Secured Party hereunder, or (iv) the
failure by the Pledgor to perform or observe any of the provisions hereof
16. Security Interest Absolute. All rights of the Secured Party
and the pledge and Security Interest hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional in all respects and shall
not be released, diminished, impaired, or affected for any reason, including
without limitation the occurrence of any one or more of the following events:
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<PAGE> 11
(a) The taking or accepting of any other security or assurance
for the Note;
(b) Any change in the time, manner or place of payment of, or in
any other term of the Note;
(c) Any exchange, release, subordination, surrender, loss or
non-perfection of any other collateral at any time existing in
connection with the Note, or any release or amendment or
waiver of or consent to departure from any guaranty, or other
security for the Note;
(d) Any neglect, delay, omission, failure, or refusal of the
Secured Party to take or prosecute any action in connection
with this Pledge Agreement or the Note;
(e) The insolvency, bankruptcy, or lack of corporate power of
the Pledgor; or
(f) Any other circumstance which might otherwise constitute a
defense available to a discharge of the Pledgor in respect of
the obligations of the Pledgor in respect of this Pledge
Agreement.
17. Waivers. Except as otherwise required by the terms hereof or
by applicable law, the Pledgor hereby waives all notices, including but not
limited to demand, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of intent to accelerate, notice of acceleration and
all other notices, and without further notice hereby consents to any and all
renewals, extensions, amendments, modifications, indulgences, releases,
subordinations, waivers or changes in the terms of the Note or this Pledge
Agreement.
18. Benefit. This Pledge Agreement shall be binding upon and inure
to the benefit of Pledgor and Secured Party, and their respective heirs, legal
representatives, successors and assigns; provided, that Pledgor may not, without
the prior written consent of Secured Party, assign any rights, powers, duties or
obligations hereunder.
19. Remedies Cumulative. The rights and remedies provided herein
and in the Note are cumulative and are in addition to and not exclusive of any
rights or remedies provided by law, including, but without limitation, the
rights and remedies of a secured party under the UCC.
20. Amendment. This agreement may be amended only by written
instrument signed by both parties.
21. Course of Dealings. No course of dealing between the Pledgor
and the Secured Party, nor any failure to exercise, nor any
11
<PAGE> 12
delay in exercising any right, power or privilege of, the Secured Party
hereunder or under the Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
22. Invalidity of Any Provision. The invalidity of any one or more
phrases, sentences, clauses, paragraphs or sections hereof shall not affect the
remaining portions of this Pledge Agreement, all of which are being inserted
conditionally on their being held legally valid. In the event that any one or
more of the phrases, sentences, clauses, paragraphs or sections contained herein
should be invalid, or should operate to render this Pledge Agreement invalid,
then this Pledge Agreement shall be construed as if such invalid phrase or
phrases, sentence or sentences, clause or clauses, paragraph or paragraphs, or
section or sections had not been inserted.
23. Application of Payments. If at any time Pledgor's liabilities
to the Secured Party are in the excess of the Pledgor's indebtedness to Secured
Party under the Note, the Secured Party may, at its option, first apply all
payments made to Pledgor or collected with respect to the Collateral, toward
payment of Pledgor's liabilities in excess of that evidenced by the Note.
24. Stock Powers. Secured Party shall hold the Collateral in the
form in which it is delivered to it unless and until it is entitled under the
terms hereof to register, to sell or to dispose of the same as hereinabove
provided, in which event Pledgor hereby authorizes and irrevocably appoints the
Secured Party as the Pledgor's Attorney-in-Fact to transfer such Collateral on
the books of the issuer thereof, in whole or in part, to the name of the Secured
Party or such other person or persons as the Secured Party may designate. The
powers of attorney granted by, attached to, or pursuant to this Pledge Agreement
and all authority hereby conferred, are made, granted and conferred subject to
and in consideration of the interest of the Secured Party for the purpose of
assuring payment of the Note. Accordingly, such powers of attorney shall be
deemed coupled with an interest and irrevocable prior to the payment in full of
the Note and shall not be terminated prior thereto or affected by any act of
Pledgor, or any other person or by operation of law, including but not limited
to, the dissolution, death, disability or incompetency of any person,
determination of any trust, or the occurrence of any other event. If the
Pledgor, the issuer of the Collateral or any other person should be dissolved or
die or become disabled or incompetent, or an other event should occur before the
payment in full of the Note such Attorney-in-Fact is nevertheless authorized to
act under such powers of attorney as if such dissolution, death, disability or
incompetency or other event had not occurred and regardless of notice thereof.
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<PAGE> 13
25. GOVERNING LAW. THIS PLEDGE AGREEMENT IS BEING EXECUTED AND
DELIVERED, AND IS INTENDED TO BE PERFORMED, IN THE STATE OF TEXAS, AND THE
SUBSTANTIVE LAWS OF SUCH STATE SHALL GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT, UNLESS THE LAWS OF ANOTHER
STATE REQUIRE THE APPLICATION OF THE LAWS OF SUCH STATE. THIS PLEDGE AGREEMENT
IS PERFORMABLE IN DALLAS, TEXAS.
26. Severability of Security. Pledgor hereby agrees that this
Agreement may, upon request by the Secured Party, be substituted by five (5) new
Pledge Agreements each securing one-fifth (1/5) of the Collateral secured
hereby. Upon substitution of this Agreement with five (5) new Pledge Agreements,
this Agreement will be marked to read "Substituted with Five (5) Pledge
Agreements" and returned to Pledgor. At such time, Pledgor shall cause Medical
Resource to issue five new stock certificates in equal amounts of shares to
replace the Collateral.
27. Notice. Any notice, request, demand, instruction or other
communication to be given to either party hereunder, except those required to be
delivered at Closing, shall be in writing, and shall be deemed to be given upon
receipt, if hand delivered or delivered by express delivery service, or three
(3) days after deposit of such notice in registered or certified mail, return
receipt requested (provided that any notice of termination shall be effective
immediately upon deposit in registered or certified mail, return receipt
requested), addressed as follows:
IF TO PLEDGOR:
JRG Investment Co., Inc.
Attn.: Mr. James R. Gilley
4265 Kellway Circle
Dallas, TX 75244
IF TO SECURED PARTY:
M.S. HOLDING CO. CORP.
Attn.: Mr. P. Terry Shumate
10670 N. Central Expressway, Suite 640
Dallas, Texas 75231
COPY TO:
Mark E. Bennett, Esq.
10670 N. Central Expressway, Suite 200
Dallas, Texas 75231
The addresses and addressees for the purpose of this article may be
changed by either party by giving notice of such change to the other party in
the manner provided herein for giving notice. For the purpose of changing such
addresses or addressees only,
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<PAGE> 14
unless and until such written notice is received, the last address and addressee
stated herein shall be deemed to continue in effect for all purposes.
28. Supplement. Pledgor agrees to supplement this agreement
with all reasonable documentation necessary to accomplish the
intention of this agreement.
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as
of the day and year first above written.
PLEDGOR:
JRG INVESTMENT CO., INC.,
a Nevada corporation
By: /s/ James R. Gilley
---------------------------------
James R. Gilley,
President
SECURED PARTY:
M.S. HOLDING CO. CORP., a
Nevada corporation
By: /s/ F. Terry Shumate
---------------------------------
F. Terry Shumate,
Vice President
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<PAGE> 1
PLEDGE AGREEMENT
AGREEMENT made effective as of the 23rd day of May, 1992, between JAMES
R. GILLEY, an individual referred to herein as the "Pledgor" and M.S. HOLDING
CO. CORP., a Nevada corporation referred to herein as the "Secured Party".
WHEREAS, Pledgor is the sole shareholder of JRG Investment Co., Inc., a
Nevada corporation ("JRG");
WHEREAS, JRG executed a pledge agreement and that note in the original
amount of $1,686,471.18 Dated May 23, 1991 to Syntek Finance Corporation and due
May 23, 1992 (the "Syntek Loan"), which was sold to American Realty and further
sold to Secured Party;
WHEREAS, JRG executed a pledge agreement and that note in the original
amount of $3,313,528.82 Dated May 23, 1991 to International Health Products,
Inc. and due May 23, 1992 (the "International Loan") as sold to Secured Party;
WHEREAS, at the time of the execution of this Agreement (the "Pledge
Agreement"), Pledgor has requested that Secured Party renew and extend the
Syntek Loan and the International Loan; and
WHEREAS, to induce Secured Party to renew and extend the Syntek Loan
and the International Loan, the Pledgor has agreed to pledge certain stock with
the Secured Party as security for the repayment of the Loan;
NOW THEREFORE, in consideration of the sum of $3,313,528.82 loaned by
Secured Party to JRG, and for other valuable consideration, the receipt of which
is hereby acknowledged, Pledgor agrees with Secured Party as follows:
1. Event of Default. The term "Event of Default" means the
occurrence of any Event of Default under the Note (hereinafter
defined).
2. Pledge. Upon the terms hereof, Pledgor hereby pledges and
grants to Secured Party a first lien on and security interest (the "Security
Interest") in and to all of the right, title and interest of Pledgor in and to
all of the following instruments and property (all of the following being herein
sometimes called the "Collateral"):
(a) 2,500 shares of the issued and outstanding common stock of
JRG, together with all certificates, options, rights or other
distributions issued as an addition to, in substitution or in exchange
for, or on account of, any such shares, as represented
<PAGE> 2
by a true and correct copy of Certificate No. 001 attached hereto and
incorporated herein by reference representing 2,500 shares of the
common stock of JRG, the originals of this certificate having been
deposited in the physical possession of Secured Party simultaneously
with the Pledgor's execution hereof:
(b) All securities and other property, rights or interests of any
description at any time issued or issuable as an addition to, in
substitution or exchange for, with respect to, incident to or in lieu
of such shares described in Sections 2(a) hereof or with respect to,
incident to or in lieu of the Collateral (i) due to any dividend,
stock-split, stock dividend or distribution on dissolution, on partial
or total liquidation, or other corporate reorganization, or for any
other reason; (ii) in connection with a reduction of capital, capital
surplus or paid-in surplus; or (iii) in connection with any spin-off,
split-off, reclassification, readjustment, merger, consolidation, sale
of assets, combination of shares or any other plan of distribution
affecting the companies which have issued the shares described in
Section 2(a) hereof;
(c) Any subscription or other rights or options issued in
connection with the shares described in Sections 2(a) hereof,
including, but not limited to preemptive rights and, if exercised by
the Pledgor, all new shares or other securities so acquired by the
Pledgor, which shall immediately be assigned and delivered to Secured
Party and held under the terms of this Pledge Agreement in the same
manner as the shares originally pledged hereunder;
(d) Any and all proceeds, monies, income and benefits arising from
or by virtue of and all dividends and distributions (cash or otherwise)
payable and/or distributable with respect to, all or any of the shares
or other securities and rights and interests described herein;
3. Obligations Secured. This Pledge Agreement and the Security
Interest granted hereby secure the prompt repayment of that certain extended and
consolidated promissory note executed by JRG of even date herewith (the "Note").
4. Warranties. Pledgor represents, warrants, covenants and agrees
to and with Secured Party that: (a) Pledgor is the legal and beneficial owner of
the Collateral and that the Collateral constitutes all of the issued and
outstanding stock of JRG; (b) the Collateral is duly authorized and issued,
fully paid, and nonassessable; (c) no dispute, right of setoff, counterclaim or
defense exists with respect to all or any part of the Collateral; (d) all of the
shares of the Collateral are owned by the Pledgor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance or security interest or purchase right
or option on the
2
<PAGE> 3
part of any third person in such shares or the proceeds thereof, except the
Security Interest and those restrictions legended on the stock certificate which
restrictions Pledgor acknowledges are operative only so long as no Event of
Default has occurred; (e) there are no restrictions upon the transfer of any of
the shares constituting the Collateral; (f) the Pledgor has the full power,
authority and legal right to transfer and pledge the Collateral free of any
encumbrances and without obtaining the consent of the issuer of the Collateral;
(g) the execution and delivery of this Pledge Agreement, and the performance of
its terms, will not violate or constitute a default under the terms of any
agreement, indenture or other instrument, license, judgment, decree, order, law,
statute, ordinance or other governmental rule or regulation, applicable to the
Pledgor or any of his property; (h) this Pledge Agreement has been duly
authorized, executed and delivered by the Pledgor and constitutes a legal, valid
and binding obligation of the Pledgor enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and, to
the extent that such instruments require or may require, enforcement by a court
of equity, such principles of equity as the court may have jurisdiction to
impose; and (i) upon delivery of the Collateral to the Secured Party, this
Pledge Agreement will create a valid and perfected first priority lien upon, and
security interest in, the Collateral and the proceeds thereof, securing the
payment of the Note. The delivery at any time by the Pledgor to the Secured
Party of Collateral shall constitute a representation and warranty by the
Pledgor under this Pledge Agreement that, with respect to such Collateral and
each item thereof: (1) Pledgor is the owner of the Collateral; and (2) the
matters heretofore warranted in clauses (a) through (i) of this section are true
and correct.
5. Covenants. Pledgor further covenants and agrees: (a) from time
to time promptly to execute, assign, endorse and deliver to Secured Party all
chattel paper, documents, instruments or other evidences of payment or writing
constituting or relating to any of the Collateral, and all such other
assignments, certificates, supplemental writings, and financing statements and
do all other acts or things as Secured Party may reasonably request in order
more fully to evidence and perfect the Security Interest; (b) promptly to
furnish Secured Party with any information or writings which Secured Party may
reasonably request concerning the Collateral; (c) to allow Secured Party to
inspect all records of Pledgor relating to the Collateral or to the Note, and to
make and take away copies of such records during normal business hours; (d)
promptly to notify Secured Party of any change in any fact or circumstance
warranted or represented by Pledgor in this Pledge Agreement or in any other
writing furnished by Pledgor to Secured Party in connection with the Collateral
or the Note; (e) promptly to notify Secured Party of any claim, action or
proceeding affecting title to the Collateral, or any part thereof, or the
Security Interest, and at the request of Secured Party, appear in and defend, at
Pledgor's expense, any such
3
<PAGE> 4
action or proceeding; (f) promptly to pay to Secured Party the amount of all
court costs and reasonable attorneys' fees incurred by Secured Party hereunder;
(g) except to the extent prohibited by applicable law, pay all reasonable
expenses incurred in the custody, preservation, use or operation of the
Collateral; and (h) promptly to deliver to Secured Party, in the exact form
received, all securities and other property described in Section 2(b), Section
2(c) and Section 2(d) hereof which comes into the possession, custody or control
of the Pledgor. Pledgor further covenants and agrees that, without the prior
written consent of Secured Party, Pledgor shall not (x) sell, assign or transfer
Pledgor's rights in the Collateral, or (y) create any other lien or security
interest in, or otherwise encumber any of the Collateral, or permit any of the
Collateral ever to be or become subject to any lien, attachment, execution,
sequestration, other legal or equitable process, or any lien or encumbrance of
any kind. Pledgor further agrees that it will (1) cause the issuers of the
Collateral not to issue any stock or other securities in addition to or in
substitution for the Collateral issued by the issuer, except to the Pledgor, and
(2) pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of the
Collateral. All assignments and endorsements by the Pledgor shall be in such
form and substance as may be satisfactory to the Secured Party. Should any
covenant, duty or agreement of the Pledgor fail to be performed in accordance
with its terms hereunder, the Secured Party may, but shall never be obligated
to, perform or attempt to perform such covenant, duty or agreement on behalf of
the Pledgor, and any amount expended by the Secured Party in such performance or
attempted performance shall become part of the Note, except to the extent
prohibited by applicable law.
6. Adjustments and Distributions Concerning Collateral. Should
the Collateral, or any part thereof, ever be converted in any manner by its
issuer into another type of property or any money or other proceeds ever be paid
or delivered to Pledgor as a result of Pledgor's rights in the Collateral, then
in any such event (except as provided in Section 7 hereof), all such property,
money and other proceeds shall immediately be and become part of the Collateral,
and Pledgor covenants to pay forthwith and deliver all such property, money or
other proceeds so received to Secured Party; and, if Secured Party deems it
necessary and so requests, to endorse properly or assign any and all such other
proceeds to Secured Party and to deliver to Secured Party any and all such other
proceeds which require perfection by possession under the Uniform Commercial
Code in effect in the State of Texas or other appropriate jurisdiction (the
"UCC"). With respect to any of such property of a kind requiring an additional
security agreement, financing statement or other writing to perfect a security
interest therein in favor of Secured Party, Pledgor will forthwith execute and
deliver to Secured Party whatever Secured Party shall deem necessary or proper
for such purpose.
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7. Intentionally Ommitted.
8. Registration of Collateral in Name of Secured Party. After an
Event of Default, the Secured Party, at its option, may have any or all of the
Collateral registered in its name or that of its nominee including any "clearing
corporation" or "custodian bank" as defined in the UCC and any nominee of any of
the foregoing, and the Pledgor hereby covenants that, upon the Secured Party's
request, the Pledgor will cause the issuer of the Collateral to effect such
registration. Immediately after an Event of Default and with or without notice,
whether or not the Collateral shall have been registered in the name of the
Secured Party or its nominee, the Secured Party or its nominee shall have, with
respect to the Collateral, the right to exercise all voting rights and all other
corporate rights and all conversion, exchange, subscription or other rights,
privileges or options pertaining thereto as if it were the absolute owner
thereof, including, without limitation, the right to exchange any or all of the
Collateral upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, or upon the exercise by such issuer of
any right, privilege, or option pertaining to any of the Collateral, and, in
connection therewith, to deliver any of the Collateral to any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to account for
property actually received by it; but the Secured Party shall have no duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so, delay in doing so, or depreciation in the
value of the Collateral by reason of doing so.
9. Default. Upon the occurrence of an Event of Default, in
addition to any and all other rights and remedies which Secured Party may then
have hereunder, under the UCC or otherwise, Secured Party may at its discretion
and without notice to the Pledgor do any one or more of the following, without
liability except to account for property actually received by it, and Pledgor
agrees that it is commercially reasonable for Secured Party to do any of the
following: (a) declare the entire unpaid balance of principal of and all
accrued, unpaid interest on the Note immediately due and payable without notice,
including without limitation, notice of acceleration and notice of intent to
accelerate, demand, or presentment, which are hereby waived; (b) transfer to or
register in its name or the name of its nominee (if the same has not already
been done) any of the Collateral with or without indication of the security
interest herein created, and whether or not so transferred or registered,
receive the income, dividends and other distributions thereon and hold them or
apply them to the Note in any order of payment; (c) exercise or cause to be
exercised all voting and corporate powers with respect to any of the Collateral
so registered or transferred, including all rights to conversion, exchange,
subscription or any other rights, privileges or options pertaining to such
Collateral,
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as if the absolute owner thereof; (d) insure any of the Collateral; (e) exchange
any of the Collateral for other property upon a reorganization, recapitalization
or other readjustment and, in connection therewith, deposit any of the
Collateral with any committee or depository upon such terms as the Secured Party
may determine; (f) in its name or in the name of the Pledgor demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral and, in connection
therewith, endorse notes, checks, drafts, money orders, documents of title or
other evidences of payment, shipment or storage in the name of the Pledgor; (g)
make any compromise or settlement deemed advisable with respect to any of the
Collateral; (h) renew, extend, or otherwise change the terms and conditions of
any of the Collateral or the Note; (i) take or release any other collateral as
security for any of the Collateral or the Note; (j) add or release any
guarantor, indorser, surety or other party to any of the Collateral or the Note;
(k) reduce its claim to judgment or foreclose or otherwise enforce the Security
Interest, in whole or in part, by any available judicial procedure; (1) without
demand of performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or private sale)
to or upon the Pledgor or any other person (all of which are, to the extent
permitted by law, hereby expressly waived), forthwith realize upon the
Collateral or any part thereof, and may forthwith sell or otherwise dispose of
or deliver the Collateral or any part thereof or interest therein, in one or
more parcels at public or private sale or sales (it being understood and agreed
that a sale of all the Collateral at once may adversely affect the price paid
for the Collateral), on any national or regional exchange or recognized market
(including without limitation on the New York Stock Exchange or in the
over-the-counter market by a registered broker dealer at the current market
price), broker's board or at the Secured Party's office or elsewhere, at such
prices and on such terms including, but without limitation, a requirement that
any purchaser of all or any part of the Collateral purchase the shares
constituting the Collateral for investment without any intention to make any
distribution thereof) as it may deem best (it being agreed that the sale of any
part of the Collateral shall not exhaust Secured Party's power of sale, but
sales may be made from time to time until all of the Collateral has been sold or
until the Note has been paid in full without any intention to make any
distribution thereof), for cash or on credit, or for future delivery without
assumption of any credit risk, with the right of the Secured Party or any
purchaser to purchase upon any such sale the whole or any part of the Collateral
free from any right or equity of redemption in the Pledgor, which right or
equity is hereby expressly waived and released, and at any such sale it shall
not be necessary to exhibit the Collateral; (m) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
thereof, and Pledgor hereby consents to any such appointment; (n) at its
discretion, retain the Collateral in satisfaction of the Note whenever the
circumstances are such that Secured Party is entitled
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to do so under the UCC or otherwise; (o) exercise any and all other rights it
may have hereunder or under the UCC or otherwise; (p) buy the Collateral at any
public sale; and (q) buy the Collateral at any private sale if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations. Pledgor hereby grants
to Secured Party an irrevocable proxy coupled with an interest to exercise as to
such Collateral, upon the occurrence of an Event of Default, all rights, powers
and remedies of an owner and all of the rights, powers and remedies hereinabove
set forth, the proxy herein granted to exist until the Note has been paid and
performed in full. The proceeds of any disposition of the Collateral or other
action by the Secured Party shall be applied as follows:
(1) First, to the cost and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping
of any of the Collateral or in any way relating to the rights
of the Secured Party hereunder, including reasonable
attorneys' fees and legal expenses;
(2) Then, to the satisfaction of the Note in such order as the
Secured Party may elect;
(3) Then, to the payment of any other amounts required by
applicable law; and
(4) Then, to the Pledgor to the extent of any surplus proceeds.
In addition to the rights and remedies granted to the Secured Party in
this Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to the Note, the Secured Party shall have all rights and
remedies of a secured party under the UCC. The Pledgor further agrees to waive
and agrees not to assert any rights or privileges which it may acquire under the
UCC with respect to collateral not owed by the debtor, and the Collateral shall
be subject to any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all amounts to which the Secured Party is
entitled and the fees and expenses of any attorneys employed by the Secured
Party to collect such deficiency. The Secured Party will be under no duty to
exercise or to withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Secured Party in this Pledge
Agreement, and shall not be responsible for any failure to do so or delay in so
doing.
10. Laws and Agreements. Pledgor agrees that there may be legal
and/or practical restrictions or limitations affecting Secured Party in
attempting to dispose of certain portions of the Collateral and enforce its
rights hereunder, because of the Securities Act of 1933, as amended, or any
other laws or regulations, or for other reasons, including an order to obtain
any required approval of the
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purchase or purchaser by any governmental regulatory agency or officers. For
these reasons, Secured Party is hereby authorized by Pledgor, but not obligated,
in the event of the occurrence of an Event of Default, to sell all or any part
of the Collateral at private sale, subject to investment letter or in any other
manner which will not require the Collateral, or any part thereof, to be
registered in accordance with any laws or regulations, including but not limited
to the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder, or make it necessary to obtain any required approval of
purchaser or the purchase by any governmental regulatory agency or officer, at
the best price reasonably obtainable by Secured Party at such private sale or
other disposition in the manner mentioned above. Secured Party is also hereby
authorized by Pledgor, but not obligated, to take such actions, give such
notices, obtain such consents and do such other things as Secured Party may deem
necessary or appropriate in the event of sale or disposition of any of the
Collateral. Pledgor understands that Secured Party may in its discretion
approach a restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Collateral, or any part or parts
thereof, than would otherwise be obtainable if same were either offered to a
large number of potential purchasers, or registered and sold in the open market.
The Pledgor agrees (i) that at such private sale or sales, the Secured Party
shall have the right to rely upon the advice and opinion of any member firm of a
national securities exchange as to the best price reasonably obtainable upon
such private sale thereof, and that such reliance shall be conclusive evidence
that the Secured Party handled such matter in a commercially reasonable manner
under applicable law, and (ii) that the Secured Party has no obligation to delay
sale of any Collateral to permit the issuer thereof to register it for public
sale under any applicable federal or state securities laws, and (iii) that the
Secured Party shall not be liable or accountable to Pledgor, nor shall the Note
be subject to any reduction by reason of the fact that the proceeds of sale
subject to any such limitation or restriction are less than otherwise might have
been obtained.
11. Notification of Sale. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Pledgor and to any other person
entitled under the UCC to notice; provided that if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, Secured Party may sell or otherwise dispose of the Collateral
without notification, advertisement, or other notice of any kind. It is agreed
that notice sent or given not less than five (5) calendar days prior to the
taking of the action to which the notice relates is reasonable notification and
notice for the purposes of this paragraph.
12. Satisfaction of Obligations. Upon the repayment in full
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of the Note and the satisfaction of all additional costs and expenses of the
Secured Party as provided herein, this Pledge Agreement shall terminate, and the
Secured Party shall deliver to the Pledgor, at the Pledgor's expense, such of
the Collateral as shall not have been sold or otherwise applied pursuant to this
Pledge Agreement.
13. Duties of Secured Party. The Secured Party's duty with respect
to any Collateral now or hereafter in the possession of the Secured Party is
solely to use reasonable care in the custody and preservation of the Collateral.
The Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation in the Collateral if the Collateral is accorded
treatment substantially equal to that which the Secured Party accords its own
property, it being understood that the Secured Party shall not have any
responsibility for ascertaining or taking action with respect to fixing or
preserving rights against prior parties to the Collateral, calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral or
for informing Pledgor of such matters whether or not the Secured Party has or is
deemed to have any knowledge of such matters. The Secured Party shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties or to protect, perfect, preserve or maintain any security
interest given to secure the Collateral. Secured Party shall never be liable for
its failure to use due diligence in the collection of the Note, or any part
thereof, or for its failure to give notice to the Pledgor of default in the
payment of the Note, or any part thereof, or in the payment of or upon any
security, whether pledged hereunder or otherwise. The Secured Party shall not be
liable for a decline in the market value of the Collateral.
14. Indemnification. The Collateral is subject to an indemnity to
hold Secured Party harmless from and against any loss, claim, demand or expense
(including attorneys' fees), with Secured Party looking solely to the Collateral
for payment, by reason, or in any manner related to, the Collateral, including
any such claim as may arise by reason of any alleged breach of warranty
concerning the Collateral, by reason of the failure of the Pledgor to comply
with any state or federal statute, rule, regulation, order or decree, or by
reason of the Secured Party's efforts to enforce payment of the Note, including
expenses incurred in satisfying any applicable securities and banking laws.
15. Expenses. The Collateral is, subject to demand by the Secured
Party, subject the amount of any and all reasonable expenses of Secured Party,
with Secured Party looking solely to the Collateral for payment, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Secured Party may incur in connection with (i) the administration of this
Pledge Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights
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of the Secured Party hereunder, or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
16. Security Interest Absolute. All rights of the Secured Party
and the pledge and Security Interest hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional in all respects and shall
not be released, diminished, impaired, or affected for any reason, including
without limitation the occurrence of any one or more of the following events:
(a) The taking or accepting of any other security or assurance
for the Note;
(b) Any change in the time, manner or place of payment of, or in
any other term of the Note;
(c) Any exchange, release, subordination, surrender, loss or
non-perfection of any other collateral at any time existing in connection with
the Note, or any release or amendment or waiver of or consent to departure from
any guaranty, or other security for the Note;
(d) Any neglect, delay, omission, failure, or refusal of the
Secured Party to take or prosecute any action in connection with this Pledge
Agreement or the Note;
(e) The insolvency, or bankruptcy of the Pledgor; or
(f) Any other circumstance which might otherwise constitute a
defense available to a discharge of the Pledgor in respect of the obligations of
the Pledgor in respect of this Pledge Agreement.
17. Waivers. Except as otherwise required by the terms hereof or
by applicable law, the Pledgor hereby waives all notices, including but not
limited to demand, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of intent to accelerate, notice of acceleration and
all other notices, and without further notice hereby consents to any and all
renewals, extensions, amendments, modifications, indulgences, releases,
subordinations, waivers or changes in the terms of the Note or this Pledge
Agreement.
18. Benefit. This Pledge Agreement shall be binding upon and inure
to the benefit of Pledgor and Secured Party, and their respective heirs, legal
representatives, successors and assigns; provided, that Pledgor may not, without
the prior written consent of Secured Party, assign any rights, powers, duties or
obligations hereunder.
19. Remedies Cumulative. The rights and remedies provided herein
and in the Note are cumulative and are in addition to and not exclusive of any
rights or remedies provided by law, including, but without limitation, the
rights and remedies of a secured party under the UCC.
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20. Amendment. This agreement may be amended only by written
instrument signed by both parties.
21. Course of Dealing. No course of dealing between the Pledgor
and the Secured Party, nor any failure to exercise, nor any delay in exercising
any right, power or privilege of, the Secured Party hereunder or under the Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
22. Invalidity of Any Provision. The invalidity of any one or more
phrases, sentences, clauses, paragraphs or sections hereof shall not affect the
remaining portions of this Pledge Agreement, all of which are being inserted
conditionally on their being held legally valid. In the event that any one or
more of the phrases, sentences, clauses, paragraphs or sections contained herein
should be invalid, or should operate to render this Pledge Agreement invalid,
then this Pledge Agreement shall be construed as if such invalid phrase or
phrases, sentence or sentences, clause or clauses, paragraph or paragraphs, or
section or sections had not been inserted.
23. Application of Payments. If at any time JRG's liabilities to
the Secured Party are in excess of JRG's indebtedness to Secured Party under the
Note, the Secured Party may, at its option, first apply all payments collected
with respect to the Collateral, toward payment of JRG's liabilities in excess of
that evidenced by the Note.
24. Stock Powers. Secured Party shall hold the Collateral in the
form in which it is delivered to it unless and until it is entitled under the
terms hereof to register, to sell or to dispose of the same as hereinabove
provided, in which event Pledgor hereby authorizes and irrevocably appoints the
Secured Party as the Pledgor's Attorney-in-Fact to transfer such Collateral on
the books of the issuer thereof, in whole or in part, to the name of the Secured
Party or such other person or persons as the Secured Party may designate. The
powers of attorney granted by, attached to, or pursuant to this Pledge Agreement
and all authority hereby conferred, are made, granted and conferred subject to
and in consideration of the interest of the Secured Party for the purpose of
assuring payment of the Note. Accordingly, such powers of attorney shall be
deemed coupled with an interest and irrevocable prior to the payment in full of
the Note and shall not be terminated prior thereto or affected by any act of
Pledgor, or any other person or by operation of law, including but not limited
to, the dissolution, death, disability or incompetency of any person,
determination of any trust, or the occurrence of any other event. If the
Pledgor, the issuer of the Collateral or any other person should be dissolved or
die or become disabled or incompetent, or an other event should occur before the
payment in full of the Note, such Attorney-in-Fact is nevertheless authorized to
act under such powers of attorney as if such dissolution, death, disability or
incompetency or other event had not occurred and regardless of notice thereof.
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25. Governing Law. This Pledge Agreement is being executed and
delivered, and is intended to be performed, in the State of Texas, and the
substantive laws of such State shall govern the validity, construction,
enforcement and interpretation of this Agreement, unless the laws of another
state require the application of the laws of such state. This Pledge Agreement
is performable in Dallas, Texas.
26. Severability of Security. Pledgor hereby agrees that this
Agreement may, upon request by the Secured Party, be substituted by five (5) new
Pledge Agreements each securing one-fifth (1/5) of the Collateral secured
hereby. Upon substitution of this Agreement with five (5) new Pledge Agreements,
this Agreement will be marked to read "Substituted with Five (5) Pledge
Agreements" and returned to Pledgor. At such time, Pledgor shall cause JRG to
issue five new stock certificates in equal amounts of shares to replace the
Collateral.
27. Notice. Any notice, request, demand, instruction or other
communication to be given to either party hereunder, except those required to be
delivered at Closing, shall be in writing, and shall be deemed to be given upon
receipt, if hand delivered or delivered by express delivery service, or three
(3) days after deposit of such notice in registered or certified mail, return
receipt requested (provided that any notice of termination shall be effective
immediately upon deposit in registered or certified mail, return receipt
requested), addressed as follows:
IF TO PLEDGOR:
Mr. James R. Gilley
4265 Kellway Circle
Dallas, TX 75244
IF TO SECURED PARTY:
M.S. HOLDING CO. CORP.
Attn.: Mr. F. Terry Shumate
10670 N. Central Expressway, Suite 640
Dallas, Texas 75231
COPY TO:
Mark E. Bennett, Esq.
10670 N. Central Expressway, Suite 200
Dallas, Texas 75231
The addresses and addressees for the purpose of this article may be
changed by either party by giving notice of such change to the other party in
the manner provided herein for giving notice. For the purpose of changing such
addresses or addressees only, unless and until such written notice is received,
the last address and addressee stated herein shall be deemed to continue in
effect for all purposes.
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28. NOTWITHSTANDING ANY OTHER PROVISION TO THE CONTRARY, NEITHER
PLEDGOR NOR HIS ESTATE IS OBLIGATED HEREIN OR UNDER THE NOTE EXCEPT FOR THE
PLEDGE OF THE COLLATERAL, AND THE NOTE SHALL BE NON-RECOURSE AS TO PLEDGOR.
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as
of the day and year first above written.
PLEDGOR:
/s/ James R. Gilley
----------------------------------
JAMES R. GILLEY
SECURED PARTY:
M.S. HOLDING CO. CORP., a
Nevada corporation
By: /s/ F. Terry Shumate
-------------------------------
F. Terry Shumate,
Vice President
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