<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
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 75231 (214) 692-4700
------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
November 6, 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
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
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) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
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
NUMBER OF 97,500
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
97,500
--------------------------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
- -------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
97,500
- -------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
CUSIP No. 393648100 SCHEDULE 13D Page 3 of 8 Pages
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
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) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
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
NUMBER OF 141,260
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
141,260
--------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
CUSIP No. 393648100 SCHEDULE 13D Page 4 of 8 Pages
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
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) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF/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
NUMBER OF 72,800
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
72,800
--------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
CUSIP No. 393648100 SCHEDULE 13D Page 5 of 8 Pages
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
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) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF/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
NUMBER OF 251,200
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
251,200
--------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
CUSIP No. 393648100 SCHEDULE 13D Page 6 of 8 Pages
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
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) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF/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
NUMBER OF 249,085
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
249,085
--------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
CUSIP No. 393648100 SCHEDULE 13D Page 7 of 8 Pages
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Institutional Capital Corporation
75-2442090
- -------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF/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
NUMBER OF 242,500
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
242,500
--------------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
CUSIP No. 393648100 SCHEDULE 13D Page 8 of 8 Pages
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
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) [X]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------
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
Texas
- -------------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES --------------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -0-
REPORTING --------------------------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-0-
--------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<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"). This statement amends the Schedule 13D
filing made by these Reporting Persons on April 9, 1998.
BCM owns approximately 53.2% 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
Treasurer, 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 BCM's Treasurer regarding investments in marketable securities
by IHPI. IHPI generally makes such investments with funds borrowed from BCM.
<PAGE> 10
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 owned by Gene E. Phillips or his family trusts. These personnel
consult on a regular basis with Mr. Phillips and/or BCM's Treasurer regarding
investments in marketable securities by Davister and ICC. Davister and ICC
generally make such investments with funds borrowed from BCM.
In April 1997, ICC issued preferred stock: (i) to BCM to repay advances
in the amount of $3,909,941; and (ii) to IHPI in the amount of $3,361,889 to
repay its debt to IHPI under an existing note. In December 1997, IHPI
transferred its ICC preferred stock to BCM to repay advances made to IHPI by
BCM.
(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>
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>
2
<PAGE> 11
Mr. Gonzalez's business address is 4455 Alpha Road, Building 2, Dallas,
Texas 75244. Mr. Gonzalez's present 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
3
<PAGE> 12
of BCM. Mr. Potera is a citizen of the United States of America.
(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 and Treasurer
</TABLE>
4
<PAGE> 13
Information with respect to Messrs. Paulson, Holland, Blaha, Endendyk,
Waldman and Potera is disclosed in (I) above.
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 - Finance 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>
<S> <C>
Name Positions
- ---- ---------
</TABLE>
5
<PAGE> 14
<TABLE>
<S> <C>
Randall M. Paulson Director and President
Robert A. Waldman Director and Secretary
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
Diane L. Shovary 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 Gene
E. Phillips. Mr. Shumate is a citizen of the United States of America.
Ms. Shovary's business address is 10670 North Central Expressway, Suite
410, Dallas, Texas 75231. Ms. Shovary's present principal occupation is Accounts
Payable Manager of Syntek West, Inc. and other private companies owned by Gene
E. Phillips or his family trusts. Ms. Shovary 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
6
<PAGE> 15
principal office are located at 10670 North Central Expressway, Suite 410,
Dallas, Texas 75231.
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
401, 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 410, Dallas, Texas 75231.
The common stock of ICC is owned by Electrical Networks, Inc. and Starr
Investments. The preferred stock of ICC is owned by BCM. The directors and
executive officers of ICC are as follows:
7
<PAGE> 16
<TABLE>
<CAPTION>
Name Positions
- ---- ---------
<S> <C>
J.T. Tackett Director, Chairman and Chief
Executive Officer
E. Wayne Starr Director, President and Treasurer
Mary K. Willett Secretary
</TABLE>
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.
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 Gene E.
Phillips or his family trusts. Ms. Willett 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
8
<PAGE> 17
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.
The aggregate amount of funds used by Davister to purchase Shares of the
Company is $4,834,948. Davister acquired 125,000 Shares of the Company from ICC
in return for a promissory note. The sources of the funds used to acquire the
remaining Shares of the Company owned by Davister were loans extended by the
broker-dealers disclosed under Item 6 below and advances made by BCM pursuant to
a $10,000,000 Revolving Credit Note dated May 1, 1992. All of the common stock
of Davister was pledged to BCM as collateral for the Revolving Credit Note.
Davister has since repaid its borrowings from BCM under the Revolving Credit
Note.
The aggregate amount of funds used by ICC to purchase Shares of the
Company is $3,938,602. 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 sources of the funds used to acquire the remaining Shares of
the Company owned by ICC were margin loans extended by the broker-dealers
disclosed under Item 6 below and advances made by BCM pursuant to a $10,000,000
Revolving Credit Note dated January 15, 1996. ICC has since repaid its
borrowings from BCM under the Revolving Credit Note. ICC issued preferred stock
to BCM to satisfy $3,909,941 of its indebtedness under the Revolving Credit
Note.
The aggregate amount of funds used by IHPI to purchase Shares of the
Company is $4,103,142. As disclosed in 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. The sources of the funds used to acquire the
remaining Shares of the Company owned by IHPI were margin
9
<PAGE> 18
loans extended by the broker-dealers disclosed under Item 6 below, and advances
made by BCM pursuant to a $7,500,000 Revolving Credit Note dated June 30, 1996.
IHPI has since repaid its borrowings from BCM under the Revolving Credit Note
by, among other things, transferring its ICC preferred stock to BCM.
Syntek Finance Corporation, a subsidiary of Syntek West, Inc., which is
wholly owned by Gene E. Phillips, now provides working capital loans to IHPI,
Davister, and ICC.
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:
(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;
10
<PAGE> 19
(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:
<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) 1,054,345 16.1%
</TABLE>
11
<PAGE> 20
<TABLE>
<S> <C> <C>
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, NSI, IHPI, Davister and ICC by virtue of the relationships with
these entities described in Item 2.
(3) Does not include any Shares of the Company 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.
(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.
Although 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, Gene E.
Phillips and BCM may have the ability to influence the voting and disposition of
the Shares of the Company held by ART and NSI by reason of the relationships
described herein.
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 Treasurer of that entity, also manages
investments in securities made by ART and NSI as an officer of
12
<PAGE> 21
each of those companies. Mr. Potera consults with Mr. Phillips regarding
investments made by BCM, ART and NSI.
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. Although 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, Gene E. Phillips and BCM may have the ability to influence the
voting and disposition of the Shares held by each of such companies by reason of
the relationships described herein.
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 BCM's Treasurer with
respect to the purchase and disposition of marketable securities on behalf of
IHPI, Davister and ICC. In addition, IHPI, Davister and ICC have generally made
their investments in marketable securities with funds borrowed from BCM under
lines of credit extended by BCM to each of those companies. Syntek Finance
Corporation also provides working capital loans to IHPI, Davister and ICC.
(c) Transactions in Securities
No transactions in the Shares were effected by the Reporting Persons
during the past 60 days.
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 of JRG Investment Company, Inc. ("JRG"), which
constitutes all of the issued and outstanding stock of 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
13
<PAGE> 22
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 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 E. 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.
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
14
<PAGE> 23
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.
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.
As of April 8, 1998, ART had 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
15
<PAGE> 24
Securities, Inc.; and 28,000 Shares to Wedbush Morgan Securities. As of November
6, 1998, no Shares of the Company owned by ART were subject to any pledge
agreement.
As of April 8, 1998, BCM had 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; 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. In addition, as of April 8, 1998, BCM had
pledged 26,400 Shares of the Company to NationsBank as collateral for a loan to
a private company in which NSI holds an interest. As of November 6, 1998, no
Shares of the Company owned by BCM were subject to any pledge agreement.
As of April 8, 1998, NSI had 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. As of November 6, 1998, no Shares of the Company owned by NSI were
subject to any pledge agreement.
As of April 8, 1998, IHPI had 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. In
addition, as of April 8, 1998, IHPI had pledged 43,636 Shares of the Company to
NationsBank as collateral for a loan to a private company in which NSI holds an
interest. As of November 6, 1998, no Shares of the Company owned by IHPI were
subject to any pledge agreement.
As of April 8, 1998, ICC had pledged 237,500 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,
16
<PAGE> 25
Inc.; 40,000 Shares to Rauscher Pierce Refsnes, Inc.; and 44,500 Shares to
Wedbush Morgan Securities. As of November 6, 1998, no Shares of the Company
owned by ICC were subject to any pledge agreement.
As of April 8, 1998, Davister had 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. As of November 6,
1998, no Shares of the Company owned by Davister were subject to any pledge
agreement.
In connection with its interest in a third-party bankruptcy, Davister has
placed certain Shares of the Company in an escrow account. ICC and IHPI have
also placed Shares of the Company in this escrow account on behalf of Davister.
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).
(3) Revolving Credit Note dated June 30, 1996, from IHPI to BCM.
(4) Revolving Credit Note dated May 1, 1992, from Davister to National
Realty Advisors, Inc. (predecessor to BCM).
(5) Revolving Credit Note dated January 15, 1996, from M.S. Holding
Co., Corp. (predecessor to ICC) to BCM.
17
<PAGE> 26
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: November 6, 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
18
<PAGE> 27
INSTITUTIONAL CAPITAL CORPORATION
By: /s/ Mary K. Willett
-----------------------------------
Mary K. Willett
Secretary
INTERNATIONAL HEALTH PRODUCTS, INC.
By: /s/ Diane L. Shovary
-----------------------------------
Diane L. Shovary
Secretary
GENE E. PHILLIPS
/s/ Gene E. Phillips
-----------------------------------
19
<PAGE> 1
EXHIBIT 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
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<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
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<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
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<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.
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<PAGE> 14
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.
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
EXHIBIT 2
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
<PAGE> 2
exchange for, or on account of, any such shares, as represented 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
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<PAGE> 3
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; (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
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<PAGE> 4
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 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
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<PAGE> 5
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. 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
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<PAGE> 6
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 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
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<PAGE> 7
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 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.
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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 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
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<PAGE> 9
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 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.
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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 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.
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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 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
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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.
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
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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.
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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<PAGE> 1
EXHIBIT 1
REVOLVING CREDIT NOTE
$7,500,000.00 June 30, 1996
FOR VALUE RECEIVED, the undersigned, INTERNATIONAL HEALTH PRODUCTS,
INC., a Nevada corporation, having its principal place of business at 10670
North Central Expressway, Suite 501, Dallas, Texas 75231 (the "Company"), hereby
unconditionally promises to pay on Demand to the order of BASIC CAPITAL
MANAGEMENT, INC., a Nevada corporation (the "Lender"), at its office located at
10670 North Central Expressway, Suite 600, Dallas, Texas 75231 (or at such other
place as the holder of this Note may designate by written notice to the
Company), in lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a) SEVEN MILLION FIVE
HUNDRED THOUSAND DOLLARS ($7,500,000.00), and (b) the aggregate unpaid principal
amount of all advances of the Loan made by the Lender to the Company pursuant to
this Note. The Company further agrees to pay interest in like money at such
office (or such other location) on the unpaid principal amount hereof from time
to time outstanding from the date hereof until such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise) at a rate
per annum equal to 10%. Interest shall be payable monthly on the last business
day of each calendar month commencing on the first such date to occur after the
date hereof, and upon the due date and payment (including prepayment) in full of
the unpaid principal amount hereof. The holder of this Note is authorized to
endorse the date and amount of each advance and each payment of principal with
respect thereto on the schedule annexed hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof,
which endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed.
This Revolving Credit Note is given in renewal and replacement of
that certain Revolving Credit Note dated June 30, 1993 in the original principal
amount of $1,600,000 executed by the Company and payable to the order of the
Lender.
Anything to the contrary notwithstanding, the Lender shall not
charge, take or receive, and the Company shall not be obligated to pay to the
Lender, any amounts constituting interest on the principal amount hereof from
time to time outstanding in excess of the maximum rate permitted by applicable
law.
If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in the State of Texas are
authorized or required by law to close, the maturity thereof shall be extended
to the next succeeding business day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
All parties now and hereafter liable with respect to this note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby wive
presentation for payment, demand, notice of nonpayment or dishonor, protest and
notice of protest.
<PAGE> 2
Upon the occurrence of any events of default on this Note or other
borrowings by the Company, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
therein.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to the choice of law
principles thereof.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed and delivered by its duly authorized officers as of the day and year
first above written.
INTERNATIONAL HEALTH PRODUCTS, INC.
a Nevada corporation
By: /s/ F. Terry Shumate
--------------------------------
F. Terry Shumate, President
2
<PAGE> 1
EXHIBIT 2
REVOLVING CREDIT NOTE
$10,000,000.00 May 1, 1992
FOR VALUE RECEIVED, the undersigned, DAVISTER CORP., a Nevada
corporation, having its principal place of business at 10670 North Central
Expressway, Dallas, Texas 75231 (the "Company"), hereby unconditionally promises
to pay on May 1, 1997 to the order of NATIONAL REALTY ADVISORS, INC., a Nevada
corporation (the "Lender"), at its office located at 10670 North Central
Expressway, Dallas, Texas 75231 (or at such other place as the holder of this
Note may designate by written notice to the Company), in lawful money of the
United States of America and in immediately available funds, the principal
amount of the lesser of (a) TEN MILLION DOLLARS ($10,000,000.00), and (b) the
aggregate unpaid principal amount of all advances of the Loan made by the Lender
to the Company pursuant to this Note. This Note evidences further advances to
the Company by Lender and represents the consolidation of the Company's
indebtedness under such further advances with certain original indebtedness of
the Company to Lender as evidenced by a certain Revolving Credit Note dated June
27, 1991 in the original principal amount of $5,000,000.00.
The Company further agrees to pay interest in like money at such
office (or such other location) on the unpaid principal amount hereof from time
to time outstanding from the date hereof until such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise) at a
fluctuating rate per annum equal to 2% above the Prime Rate (as hereinafter
defined), and thereafter equal to 4% above the Prime Rate until paid in full
(both before and after judgment). Interest shall be payable monthly in cash or
accrual on the last business day of each calendar month commencing on the first
such date to occur after the date hereof, and upon the due date and payment
(including prepayment) in full of the unpaid principal amount hereof. The holder
of this Note is authorized to endorse the date and amount of each advance and
each payment of principal with respect hereto on the schedule annexed hereto and
made a part hereof, which endorsement shall constitute prima facie evidence of
the accuracy of the information endorsed.
As used herein, the "Prime Rate" shall mean the rate of interest
announced from time to time by First City-Dallas as its "prime rate" or "prime
lending rate". Any change in the interest rate resulting from a change in the
Prime Rate shall become effective (without notice to the Company) as of the
opening of business on the day on which such change in the Prime Rate occurs.
One hundred percent (100%) of the Company's Common Stock is pledged
as collateral for the Note.
Anything to the contrary notwithstanding, the Lender shall not
charge, take or receive, and the Company shall not be obligated to pay to the
Lender, any amounts constituting interest on the principal amount hereof from
time to time outstanding in excess of the maximum rate permitted by applicable
law.
<PAGE> 2
If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in the State of Texas are
authorized or required by law to close, the maturity thereof shall be extended
to the next succeeding business day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentation for payment, demand, notice of nonpayment or dishonor protest and
notice of protest.
Upon the occurrence of any events of default on this Note or other
borrowings by the Company, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
herein.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to the choice of law
principles thereof.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed and delivered by its duly authorized officers as of the day and year
first above written.
DAVISTER CORPORATION
By: /s/ F. Terry Shumate
-----------------------------
F. Terry Shumate
Treasurer
Attest:
/s/ Patricia A. Jenkins
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2
<PAGE> 1
EXHIBIT 3
REVOLVING CREDIT NOTE
$10,000,000.00 January 15, 1996
FOR VALUE RECEIVED, the undersigned, MS HOLDING CORP., a Nevada
corporation, having its principal place of business at 10670 North Central
Expressway, Dallas, Texas 75231 (the "Company"), hereby unconditionally promises
to pay on September 28, 1997 to the order of BASIC CAPITAL MANAGEMENT, INC., a
Nevada corporation, (the "Lender"), at its office located at 10670 North Central
Expressway, Dallas, Texas 75231 (or at such other place as the holder of this
Note may designate by written notice to the Company), in lawful money of the
United States of America and in immediately available funds, the principal
amount of the lesser of (a) TEN MILLION DOLLARS ($10,000,000), and (b) the
aggregate unpaid principal amount of all advances of the Loan made by the Lender
to the Company pursuant to this Note. This Note evidences an increase in the
total principal amount which may be borrowed from lender and replaces the prior
Revolving Credit Note dated December 7, 1994 in the principal amount of
$5,000,000.00.
The Company further agrees to pay interest in like money at such
office (or such other location) on the unpaid principal amount hereof from time
to time outstanding from the date hereof until such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise) at ten
percent (10%) per annum. Interest shall be payable annually on September 28,
1996 and 1997 until the unpaid principal is paid in full. The unpaid principal
will be due on demand. The holder of this Note is authorized to endorse the date
and amount of each advance and each payment of principal with respect hereto on
the schedule annexed hereto and made a part hereof, which endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
Anything to the contrary notwithstanding, the Lender shall not
charge, take or receive, and the trust shall not be obligated to pay to the
Lender, any amounts constituting interest on the principal amount hereof from
time to time outstanding in excess of the maximum rate permitted by applicable
law.
If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in the State of Texas are
authorized or required by law to close, the maturity thereof shall be extended
to the next succeeding business day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentation for payment, demand, notice of nonpayment or dishonor, protest and
notice of protest.
Upon the occurrence of any events of default on this Note or other
borrowings by the Company, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
therein.
<PAGE> 2
This Note shall be governed by and construed in accordance with the
laws of the State of Texas, without giving effect to the choice of law
principles thereof.
IN WITNESS WHEREOF, the undersigned has caused this note to be
executed and delivered by its duly authorized officers as of the day and year
first above written.
MS HOLDING CORP.
a Nevada Corporation
By: /s/ Jamal Zoukari
----------------------------
Jamal Zoukari
Vice President
WITNESS:
/s/ Pam Benson
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2
