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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
GREENBRIAR CORPORATION
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(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
393648-10-0
-----------------------------------
(CUSIP Number)
Lone Star Opportunity Fund, L.P.
600 North Pearl Street, Suite 1550
Dallas, Texas 75201
Attention: Sam Hines
(214) 754-8300
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
with copy to:
W. Scott Wallace, Haynes and Boone, LLP
901 Main Street, Suite 3100, Dallas, TX 75202
(214) 651-5587
January 13, 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 which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) 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).
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CUSIP NO. 393648-10-0 Page 2 of 6 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Lone Star Opportunity Fund, L.P., a Delaware limited partnership
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
[ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF
1,257,143*
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
1,257,143*
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,257,143*
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.2%*
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14 TYPE OF REPORTING PERSON
PN
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* Beneficial ownership amounts disclosed herein assume conversion of shares of
Series F Senior Convertible Preferred Stock and Series G Senior Non-Voting
Convertible Preferred Stock of Greenbriar Corporation ("Greenbriar") into
shares of common stock of Greenbriar.
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Item 1. Security and Issuer.
This statement relates to the common stock, $0.01 par value per share (the
"Common Stock"), of Greenbriar Corporation, a Nevada corporation
("Greenbriar"). The address of the principal executive offices of Greenbriar
is 4265 Kellway Circle, Addison, Texas 75244. Beneficial ownership of the
Common Stock reported in this statement is attributable to beneficial ownership
of shares of the Preferred Stock (defined below) which are convertible into
shares of Common Stock after the earlier of (i) January 13, 2000 or (ii) the
occurrence of certain events more fully described in the Stock Purchase
Agreement dated as of December 31, 1997 between Greenbriar and Lone Star filed
as Exhibit 1 hereto (the "Stock Purchase Agreement"), the Certificate of Voting
Powers, Designations, Preferences and Relative, Participating, Optional or
Other Special Rights of Series F Senior Convertible Preferred Stock filed as
Exhibit 2 hereto (the "Series F Certificate of Designation") and the
Certificate of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of Series G Senior Non-Voting
Convertible Preferred Stock filed as Exhibit 3 hereto (the "Series G
Certificate of Designation," and together with the Series F Certificate of
Designation, the "Certificates of Designation").
Item 2. Identity and Background.
This statement is filed on behalf of Lone Star Opportunity Fund, L.P., a
Delaware limited partnership ("Lone Star"). The general partner of Lone Star
is Lone Star Partners, L.P., a Delaware limited partnership (the "Partners").
The general partner of the Partners is Lone Star Management Co., Ltd., a
Delaware corporation ("Management"). John P. Grayken ("Grayken") is the
controlling stockholder and sole director of Management. The executive
officers and Management are as follows: John P. Grayken ("Grayken"), a citizen
of the United States, President and Secretary, and Ellis Short ("Short"), a
citizen of the United States, Vice President, Assistant Secretary and
Treasurer. Partners, Management, Grayken and Short are herein referred to as
"Control Persons." LSOF Greenbriar, L.L.C., a Delaware limited liability
company ("LSOF Greenbriar"), is a subsidiary of Lone Star organized to be the
holder of record of the Preferred Stock. Lone Star is the managing member of
LSOF Greenbriar.
The address of the principal offices of Lone Star, Partners, Management and
LSOF Greenbriar is 600 N. Pearl Street, Suite 1550, Dallas, Texas 75201. The
business address of each of the "Control Persons" is 600 N. Pearl Street, Suite
1550, Dallas, Texas 75201.
Lone Star, Partners, Management and LSOF Greenbriar are all part of a private
investment partnership investing in a broad range of primarily real estate
related investments. Lone Star's investors are primarily pension funds and
other institutional investors. Grayken's principal occupation is serving in
the aforementioned offices of Management. Short's principal occupation is
serving in the aforementioned offices of Management.
None of Lone Star, Partners, Management or LSOF Greenbriar nor, to the best of
their knowledge, any Control Person, has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors).
Page 3 of 6
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None of Lone Star, Partners, Management or LSOF Greenbriar nor, to the best of
their knowledge, any Control Person has, during the last five years, been 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.
On January 13, 1998, Lone Star purchased (i) 1,400,000 shares of Greenbriar's
Series F Senior Convertible Preferred Stock (the "Series F Preferred"), $0.10
par value per share, at a purchase price of $10.00 per share and (ii) 800,000
shares of Greenbriar's Series G Senior Non-Voting Convertible Preferred Stock
$0.10 par value per share ("Series G Preferred"), at a purchase price of $10.00
per share. The Series F Preferred and Series G Preferred (collectively, the
"Preferred Stock") are convertible, subject to the terms of the Preferred
Stock, into shares of Common Stock, based on a conversion price of $17.50 per
share of Common Stock (subject to antidilution provisions). The aggregate
purchase price for the Preferred Stock is $22,000,000 and was funded by capital
contributions from Lone Star's partners.
Item 4. Purpose of the Transaction.
The transaction described in Item 3 above occurred as a result of a privately
negotiated transaction with Greenbriar. Lone Star acquired the Preferred Stock
for investment purposes. Lone Star intends to review its investment in
Greenbriar on a continuous basis and, depending upon the price of, and other
market conditions relating to, the Common Stock, subsequent developments
affecting Greenbriar, Greenbriar's business and prospects, other investment and
business opportunities available to Lone Star, general stock market and
economic conditions, tax considerations and other factors deemed relevant, Lone
Star may decide to increase or decrease the size of its investment in
Greenbriar.
The terms of the Series F Preferred and the Series G Preferred are
substantially similar except that the terms of the Series F Preferred include
the right of the holders of the Series F Stock, acting separately as a class,
to elect one member of the Board of Directors of Greenbriar and the right to
elect directors constituting 70% of the Board of Greenbriar in the event
Greenbriar breaches certain covenants contained in the Stock Purchase Agreement
and the Series F Certificate of Designation which relates to the transaction
described in Item 3 above. The terms of the Series F Preferred and the Series
G Preferred include the right of the holders of the Preferred Stock to vote as
classes on (i) any amendment, alteration or repeal of Greenbriar's Articles of
Incorporation of Bylaws, (ii) authorization, creation or issuance of, or the
increase in the authorized amount of, any securities ranking in parity with or
prior to the Preferred Stock in payment of dividends or in the distribution of
assets upon liquidation, dissolution or winding up of Greenbriar, or any
securities convertible into such securities, (iii) the merger or consolidation
of Greenbriar (subject to certain exceptions), or (iv) any reorganization,
restructuring, recapitalization, or other similar transaction of Greenbriar
(subject to certain exceptions). The terms of each class of Preferred Stock
also include certain other remedies available to the holders
Page 4 of 6
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of the Preferred Stock in the event Greenbriar breaches certain covenants
contained in the Stock Purchase Agreement and the Certificates of Designation,
including, but not limited to the right of the holders of the Preferred Stock
or require Greenbriar to repurchase the Preferred Stock.
Other than as described above, none of Lone Star, LSOF Greenbriar or any
Control Person has any present plans or intentions which would result in or
relate to any of the transactions described in subparagraphs (a) through (j) of
Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
Lone Star beneficially owns and has the power to vote and dispose of 1,257,143
shares of Common Stock as described above (which is approximately 15.2% of the
shares of Common Stock outstanding on December 31, 1997 based on information
provided to Lone Star by Greenbriar in the Stock Purchase Agreement).
Except as described herein, none of Lone Star, LSOF Greenbriar or any Control
Person has effected any transaction in any shares of Common Stock during the
past sixty days.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Certain rights relating to the Preferred Stock granted to Lone Star by
Greenbriar are set forth in the Stock Purchase Agreement. Additional rights
relating to the Preferred Stock granted to Lone Star by Greenbriar are set
forth in the Certificates of Designation. Certain registration rights granted
to Lone Star by Greenbriar are set forth in a Registration Rights Agreement
dated as of December 31, 1997 filed as Exhibit 4 hereto.
In connection with the purchase of the Preferred Stock, Greenbriar and Lone
Star entered into an Agreement filed as Exhibit 5 hereto which generally
provides that Greenbriar is obligated to make a cash payment to Lone Star
sufficient to provide a 20% annual rate of return on Lone Star's purchase of
the Preferred Stock (including dividends received by Lone Star) upon conversion
of the Preferred Stock into Common Stock, or in certain other events including,
a repurchase of the Preferred Stock by Greenbriar based upon a breach by
Greenbriar of certain provisions in the Stock Purchase Agreement.
Item 7. Material to be Filed as Exhibits.
1. Stock Purchase Agreement dated as of December 31, 1997 between
Greenbriar and Lone Star.
2. Certificate of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of Series F Senior
Convertible Preferred Stock of Greenbriar Corporation.
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3. Certificate of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of Series G Senior
Non-Voting Convertible Preferred Stock of Greenbriar Corporation.
4. Registration Rights Agreement dated as of January 13, 1998 between
Greenbriar and Lone Star.
5. Agreement dated as of December 31, 1997 between Greenbriar and Lone
Star.
SIGNATURE
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.
Date: January 22, 1998 Lone Star Opportunity Fund, L.P.,
a Delaware limited partnership
By: Lone Star Partners, L.P.,
its General Partner
By: Lone Star Management Co., Ltd.,
its General Partner
By: /s/ LOUIS PALETTA
--------------------------------
Louis Paletta
Vice President
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EXHIBIT INDEX
99.1 Stock Purchase Agreement dated as of December 31, 1997 between
Greenbriar and Lone Star.
99.2 Certificate of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of Series F Senior
Convertible Preferred Stock of Greenbriar Corporation.
99.3 Certificate of Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Special Rights of Series G Senior
Non-Voting Convertible Preferred Stock of Greenbriar Corporation.
99.4 Registration Rights Agreement dated as of January 13, 1998 between
Greenbriar and Lone Star.
99.5 Agreement dated as of December 31, 1997 between Greenbriar and Lone
Star.
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EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
BETWEEN
GREENBRIAR CORPORATION
AND
LONE STAR OPPORTUNITY FUND, L.P.
DATED AS OF DECEMBER 31, 1997
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TABLE OF CONTENTS
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PAGE
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Purchase and Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1. Purchase, Sale and Issuance of Preferred Stock and Conversion
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3. Representations and Warranties of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . 11
3.1. Due Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Validity of Sale, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Exchange Act Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4. Tribunal Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7. No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9. Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.10. Voting Agreements, Stockholders' Agreements, etc. . . . . . . . . . . . . . . . . . . . . . 15
3.11. Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12. Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.13. Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.17. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.19. Labor Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.21. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22. Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.23. Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.24. No Stabilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.25. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.26. Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.27. Foreign Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.28. Nevada Law Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1. Due Organization and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2. Purchase for Purchaser's Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1. Access and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2. Operation of the Businesses of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3. Restrictions on Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4. Required Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.6. No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.7. Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.8. Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Covenants of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2. Sale of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3. Rights Relating to Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5. Delivery Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6. Replacement of Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7. Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.8. Financial Statements, Reports and Documents . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9. Inspection of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.12. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.13. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.15. Authorizations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.16. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.17. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.19. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.20. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.21. Loans, Advances and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.22. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.23. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.24. Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.25. Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.26. Compliance with Laws and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.27. Maintenance of Stock Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.28. Total Liabilities to Equity Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.29. Total Long Term Debt to Equity Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.30. Dividend Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.31. Total Long Term Debt to Book Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 29
6.32. Total Debt to Adjusted Book Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 29
6.33. Total Debt and Capitalized Operating Lease Expense Obligations
to Adjusted Book Capitalization and Capitalized Operating Lease
Expense Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.34. Refinancing Existing Property Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.35. Total Net Property Debt to Real Property Book Value . . . . . . . . . . . . . . . . . . . . 30
6.36. HSR Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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Section 7. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1. Conditions to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2. Conditions to Obligations of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8. Post-Conversion Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1. Board Representation on Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.4. Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.5. Assignment, Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.6. Amendment and Waiver, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.7. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.10. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12. Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13. Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.14. Exculpation Among Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.15. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE> 5
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A-1 - Series F Certificate of Designation
Exhibit A-2 - Series G Certificate of Designation
Exhibit B - Registration Rights Agreement
Exhibit C - [INTENTIONALLY DELETED]
Exhibit D - Agreement
Exhibit E - Legal Opinions
Schedule A - List of Affiliates
Schedule B - Existing Property Group
Schedule C - Permitted Liens
Schedule 3.2(a) - Outstanding Options and Warrants of Greenbriar
Schedule 3.2(f) - Holders of Registration Rights of Greenbriar
Schedule 3.5 - Litigation of Greenbriar
Schedule 3.6 - Conflicts of Greenbriar
Schedule 3.8 - Ownership of Subsidiaries of Greenbriar
Schedule 3.15 - Affiliated Transactions of Greenbriar
Schedule 3.17 - Taxes of Greenbriar
Schedule 3.20 - Benefit Plans of Greenbriar
Schedule 3.25 - Title to Property of Greenbriar
Schedule 6.21 - Loans by Greenbriar
- iv -
<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of December 31, 1997 (this
"Agreement"), is entered into by and among Greenbriar Corporation, a Nevada
corporation ("Greenbriar"), and Lone Star Opportunity Fund, L.P., a Delaware
limited partnership ("Purchaser").
Purchaser, hereby subscribes for (i) an aggregate of 1,400,000 shares
of Greenbriar's Series F Senior Convertible Preferred Stock, $0.10 par value
per share (the "Series F Senior Preferred Stock"), at a purchase price of
$10.00 per share, with the rights, restrictions, preferences and privileges as
stated in the Series F Certificate of Designation with respect to the Series F
Senior Preferred Stock attached hereto as Exhibit A-1 (the "Series F
Certificate of Designation") and as provided by law and (ii) an aggregate of
800,000 shares of Greenbriar's Series G Senior Non-Voting Convertible Preferred
Stock, $0.10 par value per share (the "Series G Senior Non-Voting Preferred
Stock"), at a purchase price of $10.00 per share, with the rights,
restrictions, preferences and privileges as stated in the Certificate of
Designation with respect to the Series G Senior Non-Voting Preferred Stock
attached hereto as Exhibit A-2 (the "Series G Certificate of Designation") and
as provided by law. The Preferred Stock is convertible into shares of
Greenbriar's common stock, $0.01 par value per share (the "Greenbriar Common
Stock"), as stated in the Certificate of Designations. Accordingly, the parties
hereto agree as follows:
Section 1. Definitions
As used herein, the following terms shall have the following meanings:
"1996 Form 10-K" means Greenbriar's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
"Act" means the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the relevant time.
"Adjusted Book Capitalization" means Book Capitalization plus Total
Short Term Debt.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, with respect to any
fund or trust, any Person which is a participant in or beneficiary of such fund
or trust. For purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing provisions of this
definition (a) in no event shall any Purchaser (or any Affiliate thereof) be
deemed to be an Affiliate of Greenbriar and (b) the Persons listed on Schedule
A shall be deemed to be Affiliates of Greenbriar for purposes of this Agreement
and the other Transaction Documents.
<PAGE> 7
"Agreement" has the meaning set forth in the preamble.
"Articles of Incorporation" means the Articles of Incorporation of
Greenbriar, as in effect on the date hereof and as at any time amended or
otherwise modified.
"Asserted Liability" has the meaning set forth in Section 9.3(c).
"Book Capitalization" means Total Long Term Debt plus Total
Stockholders' Equity.
"Bylaws" means the bylaws of Greenbriar, as in effect on the date
hereof and as at any time amended or otherwise modified.
"Capital Lease" means any capital lease or sublease that is required
by GAAP to be capitalized on a balance sheet.
"Capitalized Operating Lease Expense Obligations" means the total
annual operating lease expense that is required to be considered an operating
lease expense on an income statement multiplied by eight (8).
"Certificate of Designations" means the Series F Certificate of
Designation and the Series G Certificate of Designation.
"Closing" has the meaning set forth in Section 2.2(a).
"Code" has the meaning set forth in Section 3.20.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the federal government administering the Act.
"Conversion Shares" means the shares of Greenbriar Common Stock into
which the Preferred Stock is convertible or converted in accordance with the
Certificate of Designations.
"Debt" of any Person means, at any time and without duplication (a)
all obligations required by GAAP to be classified upon that Person's balance
sheet as liabilities, (b) liabilities secured (or for which the holder of the
Debt has an existing Right, contingent or otherwise, to be so secured) by any
Lien existing on property owned or acquired by that Person, (c) obligations
that have been (or under GAAP should be) capitalized for financial reporting
purposes, and (d) all guaranties, endorsements, and other contingent
obligations for Debt of others.
"Distribution" means, with respect to any shares of any capital stock
or other equity securities issued by a Person (a) the retirement, redemption,
purchase, or other acquisition for value of those securities, (b) the
declaration or payment of any dividend on or with respect to those securities,
(c) any loan or advance by that Person to, or other investment by that Person
in, the holder of any of those securities and (d) any other payment by that
Person with respect to those securities.
- 2 -
<PAGE> 8
"EBITDA" means, for any period, net income before provision for
interest, taxes, depreciation and amortization that would be reflected on a
consolidated income statement of Greenbriar and the Subsidiaries prepared for
such period in accordance with GAAP.
"Environmental Indemnity Agreement" means, with respect to a company,
any agreement (including, without limitation, insurance policies) known to such
company or any of its subsidiaries by which such company, any of its
subsidiaries or a Predecessor is (or may reasonably claim to be) entitled to
receive reimbursement or other payment on account of any Environmental
Liability other than any agreements (a) in the nature of environmental
consulting or engineering agreements for professional services or (b) the terms
of which preclude such company, any of its subsidiaries or a Predecessor from
asserting a claim for reimbursement or other payment on account of any
Environmental Liability.
"Environmental Investigation" means, with respect to a company, any
health, safety, or environmental site assessment, investigation, study, review,
audit, compliance audit, or compliance review conducted at any time or from
time to time upon the order or request of any Tribunal, or at the voluntary
instigation of such company or any of its subsidiaries, concerning any Real
Property or the business operations or activities of such company or any of its
subsidiaries, including, without limitation (a) air, soil, groundwater, or
surface-water sampling and monitoring, (b) repair, cleanup, remediation, or
detoxification, (c) preparation and implementation of any closure, remedial,
spill, emergency, or other plans, and (d) any health, safety, or environmental
compliance audit or review.
"Environmental Law" means any applicable Law that relates to (a) the
condition of air, ground or surface water, soil, or other environmental media,
(b) the environment or natural resources, (c) safety or health, or (d) the
regulation of any contaminants, wastes, and Hazardous Substances, including,
without limitation, CERCLA, OSHA, the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251
et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.),
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
11001 et seq.), the Safe Drinking Water Act (42 U.S.C. Section 201 and Section
300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section 401 et seq.), the
Oil Pollution Act (33 U.S.C. Section 2701 et seq.), analogous state and local
Laws, and any analogous future enacted or adopted Law, or (c) to the Release or
threatened Release of Hazardous Substances.
"Environmental Liability" means any liability, loss, fine, penalty,
charge, lien, damage, cost, or expense of any kind that results directly or
indirectly, in whole or in part (a) from the violation of any Environmental
Law, (b) from the Release or threatened Release of any Hazardous Substance, (c)
from removal, remediation, or other actions in response to the Release or
threatened Release of any Hazardous Substance, (d) from personal injury, death,
or property damage which occurs as a result of any company's use, storage,
handling, or the Release or threatened Release of a Hazardous Substance, or (e)
from any Environmental Investigation performed at, on, or for any Real
Property.
"Environmental Permit" means any permit, license, or other
authorization from any Tribunal that is required under any Environmental Law
for the lawful conduct of any business, process, or other activity.
- 3 -
<PAGE> 9
"Environmental Report" means any written or verbal report
memorializing any Environmental Investigation.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Plans" has the meaning set forth in Section 3.20.
"Event of Default" has the meaning set forth in the Certificate of
Designations.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the relevant time.
"Existing Property Debt" means, as of any date, mortgage notes payable
collateralized by the Existing Property Group that would be reflected on a
consolidated balance sheet of Greenbriar and the Subsidiaries prepared as of
such date in accordance with GAAP.
"Existing Property Group" means the properties described on Schedule
B.
"Funded Debt" means, at any time and without duplication, the sum of
(a) the balance of any obligation for borrowed money that is required by GAAP
to be shown as a liability, plus (b) the total net rentals (net of any
interest, Taxes, or other expenses included in those rentals) payable under
Capital Leases.
"GAAP" means those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its
Accounting Principles Board or by the Financial Accounting Standards Board or
through other appropriate boards or committees thereof and which are
consistently applied for all periods to present fairly in all material respects
the financial position, results of operations and operating cash flow on a
consolidated basis of the party, except that any accounting principle or
practice required to be changed by the Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board or committee) in order
to continue as a generally accepted accounting principle or practice may be so
changed.
"Gilley Affiliates" means James R. Gilley, Sylvia Gilley, JRG
Investment Company, Inc., April Trust, September Trust, October Trust, November
Trust, December Trust, Nita Dry, Todd Dry, Donna Gilley, Elizabeth Gilley, W.
Michael Gilley, Caroline Gilley, or any other trusts controlled by James R.
Gilley.
"Greenbriar" has the meaning set forth in the preamble.
"Greenbriar Common Stock" has the meaning set forth in the preamble.
"Hazardous Substance" means (a) any substance that is reasonably
expected to require removal, remediation, or other response under any
Environmental Law, (b) any substance that is designated, defined or classified
as a hazardous waste, hazardous material, pollutant, contaminant, explosive,
corrosive, flammable, infectious, carcinogenic, mutagenic, radioactive,
dangerous, or toxic or hazardous substance under any Environmental Law,
including, without
- 4 -
<PAGE> 10
limitation, any hazardous substance within the meaning of Section 101(14) of
CERCLA, (c) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste
oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (d) asbestos and
asbestos-containing materials in any form, (e) polychlorinated biphenyls, or
(f) urea formaldehyde foam.
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976), as amended (including
any successor act), and the rules and regulations promulgated thereunder.
"Indemnitee" and "Indemnitor" have the respective meanings set forth
in Section 9.3(c).
"Laws" means all applicable statutes, laws, treaties, ordinances,
rules, regulations, orders, writs, injunctions, decrees, judgments, opinions,
and interpretations of any Tribunal.
"License" has the meaning set forth in Section 3.23.
"Lien" means any lien, mortgage, security interest, pledge,
assignment, charge, title retention agreement, or encumbrance of any kind and
any other arrangement for a creditor's claim to be satisfied from assets or
proceeds prior to the claims of other creditors or the owners.
"Litigation" means any action by or before any Tribunal.
"Loan Agreement" means that certain Loan Agreement dated October 8,
1997, by and among RHP, Greenbriar and Purchaser.
"Losses" means expenses, damages, deficiencies, liabilities, payments,
fines, penalties, litigation, demands, defenses, judgments, proceedings, costs
(including engineering costs, costs of remediation and related capital
expenditures), obligations, settlement costs, and reasonable attorneys',
accountants' and other professional advisors' fees (including costs of
investigation and preparation) of any kind or nature whatsoever.
"Material Adverse Effect" means any circumstance or event that,
individually or collectively, is reasonably expected to result in any (a)
material impairment of (i) the ability of Greenbriar to perform any of its
payment or other material obligations in connection with the Preferred Stock,
or (ii) the ability of any holder of Preferred Stock to enforce any of those
obligations or any of their respective rights in connection with the Preferred
Stock, (b) material and adverse effect on the assets, liabilities, prospects,
results of operations or financial condition of Greenbriar and the
Subsidiaries, taken as a whole or (c) Event of Default or Potential Default.
Circumstances or events will be deemed to have a material and adverse effect if
it or they would result in losses in excess of $250,000 individually or
$500,000 collectively; provided, however, for purposes of Sections 3.11 and
6.14, circumstances or events will be deemed to have a material and adverse
effect if it or they would result in losses in excess of $500,000 individually
or $1,000,000 collectively.
"Multiemployer Plan" means, with respect to a company, a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of
the Code to which such company or any of its subsidiaries (or any Person that,
for purposes of Title IV of ERISA, is
- 5 -
<PAGE> 11
a member of such company's controlled group or is under common control with
such company within the meaning of Section 414 of the Code) is making, or has
made, or is accruing, or has accrued, an obligation to make contributions.
"OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 et seq.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Combination" means (i) a Sale of Greenbriar or (ii) an
acquisition by Greenbriar in the ordinary course of its business as described
in the 1996 Form 10-K.
"Permitted Holders" means James R. Gilley and his Affiliates.
"Permitted Liens" means (a) liens described on Schedule C attached
hereto, (b) pledges or deposits made to secure payment of worker's compensation
insurance (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs, (c) liens imposed by mandatory provisions of law such as for
materialmen's, mechanics', warehousemen's and other like liens arising in the
ordinary course of business, securing debt whose payment is not yet due, (d)
for taxes, assessments and governmental charges or liens imposed upon a Person
or upon such Person's income, profits or property, if the same are not due and
payable or if the same are being contested in good faith and as to which
adequate cash reserves have been provided, (e) liens arising from good faith
deposits in connection with lenders, leases, real estate bids or contracts
(other than contracts involving the borrowing of money), pledges or deposits to
secure public or statutory obligations and deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the payment of
taxes, assessments, customs, duties or other similar charges, or (f)
encumbrances consisting of zoning restrictions, easements or other restrictions
on the use of Real Property, provided that such items do not impair the use of
such property for the purposes intended, and none of which is violated by
existing or proposed structures or land use.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization
or Tribunal.
"Potential Default" means any event's occurrence or any circumstance's
existence that would, upon any required notice, time lapse, or both, become an
Event of Default.
"Predecessor" means, with respect to a company, any Person for whose
obligations and liabilities such company or any of its subsidiaries is
reasonably expected to be liable as the result of any merger, de facto merger,
stock purchase, asset purchase or divestiture, combination, joint venture,
investment, reclassification, or other similar business transaction.
"Preferred Stock" means the Series F Senior Preferred Stock and the
Series G Senior Non-Voting Preferred Stock.
"Preferred Stock Representatives" means (i) a Person designated in
writing by a majority of the holders of the Series F Senior Preferred Stock to
represent such holders with respect to certain matters pursuant to this
Agreement and the other Transaction Documents
- 6 -
<PAGE> 12
and (ii) a Person designated in writing by a majority of the holders of the
Series G Senior Non-Voting Preferred Stock to represent such holders with
respect to certain matters pursuant to this Agreement and the other Transaction
Documents.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser Indemnitees" has the meaning set forth in Section 9.3(b).
"Real Property" means, with respect to a company, any land, buildings,
fixtures, and other improvements to land now or in the future directly or
indirectly owned by such company or any of its subsidiaries, leased to or
otherwise operated by such company or any of its subsidiaries, or subleased by
such company or any of its subsidiaries to any other Person.
"Real Property Book Value" means, as of any date, the value of the
Real Property of Greenbriar that would be reflected on a consolidated balance
sheet of Greenbriar and the Subsidiaries prepared as of such date in accordance
with GAAP.
"Redeemable Preferred Stock" means, as of any date, the redeemable
preferred stock of Greenbriar that would be reflected on a consolidated balance
sheet of Greenbriar and the Subsidiaries prepared as of such date in accordance
with GAAP.
"Registration Rights Agreement" means that certain Registration Rights
Agreement to be entered into at the Closing between Greenbriar and the holders
of the Preferred Stock and attached hereto as Exhibit B.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposal,
migrating, or other movement into the air, ground or surface water, or soil.
"Responsible Officer" means the chairman, president, chief executive
officer, chief financial officer, chief accounting officer, or treasurer of the
referenced company.
"Rights" means rights, remedies, powers, privileges, and benefits.
"Sale of Greenbriar" means (i) a merger or consolidation in which all
shares of Greenbriar Common Stock are exchanged for cash, securities of another
entity, or a combination of cash and securities of another entity or (ii) a
cash tender offer to purchase all of the outstanding shares of Greenbriar is
made to the stockholders of Greenbriar and accepted by a majority of such
stockholders.
"Senior Preferred Dividend" means, for any period, the dividend
payable to the holders of the Series F Senior Preferred Stock for such period
plus any unpaid dividends from prior periods payable to the holders of the
Series F Senior Preferred Stock.
"September 1997 Form 10-Q" means Greenbriar's Quarterly Report on Form
10-QSB for the period ended September 30, 1997.
- 7 -
<PAGE> 13
"Special Asset Sale Trigger" has the meaning set forth in the
Certificate of Designations.
"Series B Junior Preferred Stock" means Greenbriar's Series B
Preferred Stock, $0.10 par value per share.
"Series D Junior Preferred Stock" means Greenbriar's Series D
Preferred Stock, $0.10 par value per share.
"Series F Certificate of Designation" has the meaning set forth in the
preamble.
"Series F Senior Preferred Stock" has the meaning set forth in the
preamble.
"Series G Certificate of Designation" has the meaning set forth in the
preamble.
"Series G Senior Non-Voting Preferred Stock" has the meaning set forth
in the preamble.
"Spin-off" means the pro rata distribution by Greenbriar of the
outstanding shares of common stock of a Subsidiary to the holders of Greenbriar
Common Stock to effect the spin-off of such Subsidiary.
"Stock Option Plans" means Greenbriar's 1992 Stock Option Plan, as
amended, and Greenbriar's 1997 Stock Option Plan which shall be consistent with
the copies of such plans delivered to purchasers of the Preferred Stock prior
to the date of Closing, as the same may be amended from time to time with the
prior approval of each Preferred Stock Representative.
"Subsidiaries" means all the corporations, partnerships, joint
ventures, business trusts or other legal entities in which Greenbriar, either
directly or indirectly through one or more intermediaries, owns or holds
beneficial or record ownership of at least a majority of the outstanding voting
shares or equity interests. Each of the Subsidiaries is sometimes referred to
herein individually as a "Subsidiary."
"Syndication Program" means a program of selling real estate to public
or private syndications consisting of partnerships, limited liability
companies, or limited liability partnerships where ownership of such entities
is offered to passive investors for cash and/or notes.
"Taxes" mean, for any Person, taxes, assessments, or other
governmental charges or levies imposed upon it, its income, or any of its
properties, franchises or assets.
"Total Debt" means Total Long Term Debt plus Total Short Term Debt.
"Total Liabilities" means the total liabilities of Greenbriar that
would be reflected on a consolidated balance sheet of Greenbriar and the
Subsidiaries prepared as of such date in accordance with GAAP, but shall not
include the Preferred Stock, unless the Preferred Stock becomes Redeemable
Preferred Stock.
- 8 -
<PAGE> 14
"Total Long Term Debt" means, as of any date, the total long term debt
of Greenbriar that would be reflected on a consolidated balance sheet of
Greenbriar and the Subsidiaries prepared as of such date in accordance with
GAAP plus Redeemable Preferred Stock, if any; provided, however, Total Long
Term Debt shall not include (i) the Preferred Stock, unless the Preferred Stock
becomes Redeemable Preferred Stock or (ii) financing obligations of Greenbriar
that would be reflected on a consolidated balance sheet of Greenbriar and the
Subsidiaries prepared as of such date in accordance with GAAP.
"Total Net Property Debt" means, as of any date, mortgage notes
payable collateralized by Real Property of Greenbriar minus cash that would be
reflected on a consolidated balance sheet of Greenbriar and the Subsidiaries
prepared as of such date in accordance with GAAP.
"Total Short Term Debt" means, as of any date, the total short term
debt of Greenbriar that would be reflected on a consolidated balance sheet of
Greenbriar and the Subsidiaries prepared as of such date in accordance with
GAAP.
"Total Stockholders' Equity" means, as of any date, the total
stockholders' equity of Greenbriar that would be reflected on a consolidated
balance sheet of Greenbriar and the Subsidiaries prepared as of such date in
accordance with GAAP; provided, that in no event shall Total Stockholders'
Equity include the Preferred Stock.
"Transaction Documents" means this Agreement, the Certificate of
Designations, the Registration Rights Agreement, the Agreement dated the date
hereof between Greenbriar and Purchaser and attached hereto as Exhibit D and
the certificate(s) evidencing the Preferred Stock and any other related
documents.
"Tribunal" means any (a) local, state, territorial, federal, or
foreign judicial, executive, regulatory, administrative, legislative, or
governmental agency, board, bureau, commission, department, or other
instrumentality, including without limitation, the Commission, (b) private
arbitration board or panel, (c) central bank or (d) any subdivisions of the
entities listed in (a), (b) or (c) above.
"Voting Stock" means the total voting power of all classes of capital
stock then outstanding of a company and normally entitled to vote in elections
of directors of such company.
Section 2. Purchase and Sale of Securities
2.1 Purchase, Sale and Issuance of Preferred Stock
and Conversion Shares. Subject to the terms and conditions herein set forth,
at the Closing Greenbriar shall issue and sell to Purchaser, and Purchaser
shall purchase from Greenbriar, 1,400,000 shares of Series F Senior Preferred
Stock and 800,000 shares of Series G Senior Non- Voting Preferred Stock in
exchange for consideration payable to Greenbriar consisting of cash in the
amount of $22,000,000. Payment of such cash consideration for the Preferred
Stock shall be made on the date hereof by wire or intrabank transfer of
immediately available funds to Greenbriar.
- 9 -
<PAGE> 15
2.2 The Closing.
(a) The purchase and sale of the Preferred
Stock shall take place at the offices of Purchaser at 10:00 a.m., on
or about January 9, 1998, or at such other time and place as
Greenbriar and Purchaser shall mutually agree (such time and place are
hereby designated as the "Closing").
(b) Greenbriar shall deliver to Purchaser a
single certificate for the Series F Senior Preferred Stock and a
single certificate for the Series G Senior Non-Voting Preferred Stock,
registered in the name of Purchaser, except that, if Purchaser shall
notify Greenbriar in writing prior to such issuance that it desires
certificates for Preferred Stock to be issued in other denominations
or registered in the name or names of any Person or Persons, then the
certificates for Preferred Stock shall be issued to such Person or
nominee in the denominations and registered in the name or names
specified in such notice so long as such Person makes the same
representations as Purchaser set forth in Sections 4.2 and 4.3 hereof.
Concurrently with the issuance of the Preferred Stock, Greenbriar
shall pay to Purchaser, in immediately available funds, all expenses
described in Section 2.3 which have been incurred before Closing and
are in excess of the $25,000 deposit and $256,372.00 paid on October
16, 1997 to Purchaser by Greenbriar in connection with such expenses.
(c) Purchaser shall have made payment for
the Preferred Stock.
(d) At the Closing, Purchaser and
Greenbriar shall execute and deliver each of the Transaction Documents
to which it is a party.
2.3 Expenses. Whether or not the Preferred Stock is
sold to Purchaser, (a) Greenbriar shall pay all costs and expenses incurred by
Purchaser relating to the negotiation, execution and delivery of this
Agreement, the other Transaction Documents and the issuance of the Preferred
Stock (including, without limitation, (i) fees, office charges and expenses of
counsel to Purchaser, including, but not limited to, Haynes and Boone, LLP, and
reasonable third party, outside accounting and other out-of-pocket costs and
(ii) all costs and expenses related to the transactions between Greenbriar and
Lone Star contemplated before this Agreement); and (b) Greenbriar shall pay all
reasonable costs and expenses incurred by Purchaser (i) relating to any
amendments, waivers or consents under this Agreement and the other Transaction
Documents; and (ii) incident to the enforcement by Purchaser of, or the
protection or preservation of any right or remedy of Purchaser under, this
Agreement, the other Transaction Documents, the Articles of Incorporation, or
any other document or agreement furnished pursuant hereto or thereto or in
connection herewith or therewith (including, without limitation, fees and
expenses of counsel). Greenbriar shall pay all reasonable costs and expenses
incurred by Purchaser relating to any and all filings related to the HSR Act
(including, without limitation, fees, office charges and expenses of counsel to
Purchaser). Greenbriar shall pay such costs and expenses, to the extent then
payable, pursuant to the Loan Agreement, on the date of issuance of the
Preferred Stock or from time to time consistent with the terms of the Loan
Agreement within five business days of demand by Purchaser against
presentation, in each such case, of a statement thereof.
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Section 3. Representations and Warranties of Greenbriar
Greenbriar hereby represents and warrants to Purchaser that as of the
date of Greenbriar's execution of this Agreement and as of the date of the
Closing:
3.1 Due Organization and Authority. Greenbriar is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and authority
(a) to own and operate its properties and assets and to carry on its business
as now conducted and as set forth in the September 1997 Form 10-Q, (b) to
execute and deliver this Agreement and the other Transaction Documents to which
Greenbriar is a party, (c) to perform the terms hereof and thereof and (d) to
consummate the transactions contemplated hereby and thereby. Greenbriar is duly
qualified and is authorized to transact business and is in good standing as a
foreign corporation in each jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, except where
failure to so qualify would not have a Material Adverse Effect. Greenbriar has
taken all action necessary to authorize the execution, delivery and performance
of this Agreement, the other Transaction Documents and the issuance and sale of
the Preferred Stock and the conversion into the Conversion Shares. This
Agreement has been duly authorized, executed and delivered and constitutes a
legal, valid and binding obligation of Greenbriar, enforceable against
Greenbriar in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights generally. Each
of the Transaction Documents have been duly authorized by Greenbriar and, when
duly executed and delivered by Greenbriar will be a legal, valid and binding
obligation of Greenbriar, enforceable against Greenbriar in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally.
3.2 Validity of Sale, etc.
(a) On the date of this Agreement, there
are 7,396,647 shares of Greenbriar Common Stock, 128 shares of Series
B Preferred Stock, and 675,000 shares of Series D Preferred Stock
issued and outstanding. All of the issued shares of capital stock of
Greenbriar have been duly and validly authorized and issued, are fully
paid and non-assessable and have not been issued in violation of any
preemptive or other similar rights or applicable securities laws. Upon
the issuance of the Preferred Stock under this Agreement, the total
number of shares of capital stock which Greenbriar has authority to
issue will be 110,000,000 shares, consisting of 100,000,000 shares of
Greenbriar Common Stock and 10,000,000 shares of Preferred Stock, of
which 1,400,000 shares will be designated as Series F Senior Preferred
Stock, 800,000 shares will be designated as Series G Senior Non-Voting
Preferred Stock, 100,000 shares will be designated as Series B Junior
Preferred Stock and 675,000 shares will be designated as Series D
Junior Preferred Stock, and (ii) there will be 7,396,647 shares of
Greenbriar Common Stock, 1,400,000 shares of Series F Senior Preferred
Stock, 800,000 shares of Series G Senior Non-Voting Preferred Stock,
128 shares of Series B Junior Preferred Stock, 675,000 shares of
Series D Junior Preferred Stock issued and outstanding. On the date of
this Agreement and on the Closing Date, Greenbriar has and will have
no shares of treasury stock. There are no outstanding subscriptions,
rights, warrants, options, calls, exchangeable or convertible
securities,
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commitments of sale or liens related to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of,
or other ownership interest in, Greenbriar other than exchange rights,
convertible securities, options and warrants to purchase an aggregate
of 1,958,571 shares of Greenbriar Common Stock as set forth on
Schedule 3.2(a) hereto.
(b) The Preferred Stock shall, when issued
against payment therefor in accordance with this Agreement and the
other Transaction Documents, be duly authorized and validly issued,
fully paid and nonassessable and free from all taxes, liens and
charges. The Preferred Stock when issued will not be subject to any
preemptive or other similar rights of any security holder of
Greenbriar or any of the Subsidiaries other than any such rights
granted pursuant to the Agreement and the Transaction Documents.
(c) Greenbriar has reserved and has
available such number of Conversion Shares as shall permit the
compliance by Greenbriar with its obligations to deliver Conversion
Shares pursuant to the Certificate of Designations and the other
Transaction Documents. Greenbriar shall at all times reserve and keep
available, solely for the purpose of the conversion of the Preferred
Stock, the Greenbriar Shares in order to effect the conversion of the
Preferred Stock, subject to a reduction by the number of shares of
Greenbriar Common Stock that have previously been delivered in any
conversion of Preferred Stock; all of such shares of Greenbriar Common
Stock which are issuable to the holders of the Preferred Stock by way
of conversion are, and will be when issued, duly authorized and
validly issued, fully paid and nonassessable, and free from all taxes,
liens and charges. All Conversion Shares shall, when delivered, in
accordance with the provisions of the Certificate of Designations, be
duly authorized and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. Greenbriar shall take all such
actions as may be necessary to assure that all Conversion Shares may
be so delivered without violation of any applicable law or
governmental regulation or any requirements of any domestic securities
exchange or national market upon which the Conversion Shares may be
listed. The Conversion Shares shall not be subject to any preemptive
or other similar rights of any security holder of Greenbriar or any of
the Subsidiaries other than any such rights granted pursuant to the
Agreement and the Transaction Documents.
(d) No order suspending or preventing the
sale of the Preferred Stock or the Conversion Shares in any
jurisdiction has been issued or threatened or, to the knowledge of
Greenbriar, is contemplated.
(e) None of the issuance and sale by
Greenbriar of the Preferred Stock and delivery of the Conversion
Shares upon the conversion of the Preferred Stock, the execution or
delivery of this Agreement and the other Transaction Documents, the
performance by Greenbriar of its obligations hereunder and thereunder,
the consummation of the transactions contemplated herein and therein
and the conduct by Greenbriar and the Subsidiaries of their businesses
conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or results or will
result in the creation or imposition of any Lien upon any property or
assets of Greenbriar or any of the Subsidiaries pursuant to the terms
of: (i) the certificate of
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<PAGE> 18
incorporation, articles of incorporation or bylaws of Greenbriar or
any of the Subsidiaries, (ii) any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan, credit
agreement, purchase order, agreement or instrument evidencing an
obligation for borrowed money or other agreement or instrument to
which Greenbriar or any of the Subsidiaries is a party or by which
Greenbriar or any of the Subsidiaries may be bound or to which the
property or assets of Greenbriar or any of the Subsidiaries is subject
or affected or (iii) any Law applicable to Greenbriar or any of the
Subsidiaries of any Tribunal having jurisdiction over Greenbriar or
any of the Subsidiaries or any of their respective activities or
properties; except any violation or default under the foregoing
clauses (ii) or (iii) as would not have a Material Adverse Effect.
(f) There is not in effect on the date
hereof any agreement by Greenbriar (other than this Agreement and the
other Transaction Documents) pursuant to which any holders of
securities of Greenbriar have a right to cause Greenbriar to register
such securities under the Act other than as set forth on Schedule
3.2(f) hereto.
3.3 Exchange Act Filings. Greenbriar is subject to
Section 13 or 15(d) of the Exchange Act. The documents filed pursuant to the
Exchange Act, when they were filed with the Commission (or, if any amendment
with respect to any such document was filed, when such amendment was filed),
complied in all material respects with the requirements of the Exchange Act and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and any documents filed subsequent to the
date of this Agreement, when filed with the Commission, will conform in all
respects to the requirements of the Act and the Exchange Act, as applicable,
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. All reports and statements required to be
filed by Greenbriar under the Act and the Exchange Act have been filed,
together with all exhibits required to be filed therewith. The documents and
agreements so filed are in full force and effect on the date hereof.
3.4 Tribunal Consents. Neither the nature of
Greenbriar or of any Subsidiary, or of any of their respective businesses or
properties, nor any relationship between Greenbriar or any Subsidiary and any
other Person, nor (except as expressly provided for in this Agreement) any
circumstance in connection with the offer, issue or sale of the Preferred Stock
and the conversion into the Conversion Shares is such as to require consent,
approval or authorization of, or filing, registration or qualification with,
any Tribunal on the part of Greenbriar as a condition to the execution and
delivery of this Agreement and the other Transaction Documents, or the
execution and filing of the Certificate of Designations or any amendment of the
Articles of Incorporation required in connection with the authorization, offer,
sale, issuance and/or conversion of the Preferred Stock or the Conversion
Shares and the consummation of the Transactions contemplated by the Transaction
Documents, other than consents, approvals, etc., the absence of which or the
failure to obtain, individually or in the aggregate, cannot reasonably be
expected to have a Material Adverse Effect. No actions or filings of
Greenbriar, Purchaser or their Affiliates are
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<PAGE> 19
required under the HSR Act with respect to the execution and closing of the
transactions contemplated by this Agreement.
3.5 Litigation. Other than as described in the 1996
Form 10-K, the September 1997 Form 10-Q and Schedule 3.5 hereto, there is no
action, suit, proceeding, litigation or governmental proceeding pending or
threatened or, to the knowledge of Greenbriar, contemplated against (or
circumstances that are reasonably likely to give rise to the same), or
involving the properties or businesses of, Greenbriar or any of the
Subsidiaries which (i) questions the validity of the capital stock of
Greenbriar or any of the Subsidiaries, this Agreement, the other Transaction
Documents or any action taken or to be taken by Greenbriar or any of the
Subsidiaries pursuant to or in connection with this Agreement or the other
Transaction Documents or (ii) would have a Material Adverse Effect.
3.6 No Conflicts. Except as set forth in Schedule
3.6, neither Greenbriar nor any of the Subsidiaries (i) is in violation of its
certificate of incorporation, articles of incorporation or bylaws; (ii) is in
default in the performance of any obligation, agreement or condition contained
in any license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders' agreement, note,
loan, credit agreement, purchase order, agreement or instrument evidencing an
obligation for borrowed money or other agreement or instrument to which
Greenbriar or any of the Subsidiaries is a party or by which Greenbriar or any
of the Subsidiaries may be bound or to which the property or assets of
Greenbriar or any of the Subsidiaries is subject or affected; or (iii) is in
violation in any respect of any Law applicable to Greenbriar or any of the
Subsidiaries of any Tribunal having jurisdiction over Greenbriar or any of the
Subsidiaries or any of their respective activities or properties, except any
violation or default under the foregoing clauses (ii) or (iii) as would not
have a Material Adverse Effect, and no other party under any such agreement or
instrument to which either Greenbriar or any of the Subsidiaries is a party is,
to the knowledge of any executive officer of Greenbriar or any Subsidiary after
reasonable inquiry, in default in any material respect thereunder, other than
any such default that would not have a Material Adverse Effect.
3.7 No Material Misstatements. To the best of its
knowledge, no representation, warranty, or statement by Greenbriar in this
Agreement, the other Transaction Documents or in any written statement or
certificate furnished or to be furnished to Purchaser pursuant to this
Agreement or the other Transaction Documents contains any untrue statement of a
material fact or, when taken together, omits a material fact necessary to make
the statements made herein or therein not misleading.
3.8 Subsidiaries. Each Subsidiary is duly organized
and validly existing under the laws of its jurisdiction of organization and is
in good standing under such laws, with power and authority (corporate and
other) to own its properties and conduct its business as now conducted and as
presently proposed to be conducted, and has been duly qualified and is
authorized to transact business and is in good standing as a foreign
corporation in each jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except where failure
to so qualify would not have a Material Adverse Effect. Greenbriar does not own
or control, directly or indirectly, any corporation, association or other
entity other than the Subsidiaries. All of the Subsidiaries as of the date
hereof and the date of the Closing are set forth on Schedule 3.8. Except as set
forth on Schedule 3.8, Greenbriar owns, either directly or through other
Subsidiaries, good and marketable title to
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all of the outstanding shares of capital stock (capital stock for purposes of
this Agreement includes partnership interests and membership interests, in
addition to common stock and preferred stock) of each Subsidiary, in each case
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests defects or other restrictions or equities of any kind whatsoever; and
all of the outstanding shares of capital stock of the Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable and
not issued in violation of any preemptive or other similar rights or applicable
securities laws. There are no outstanding subscriptions, rights, warrants,
options, calls, exchangeable or convertible securities, commitments of sale or
liens related to or entitling any person to purchase or otherwise to acquire
any shares of the capital stock of, or other ownership interest in, any
Subsidiary.
3.9 Minute Books. The minute books of each of
Greenbriar and the Subsidiaries contain a complete summary of all meetings and
actions of the directors and stockholders of each of Greenbriar and the
Subsidiaries since the time of their respective incorporation and reflect all
transactions referred to in such minutes accurately in all respects.
3.10 Voting Agreements, Stockholders' Agreements, etc.
Neither Greenbriar nor any of the Subsidiaries is a party to or bound by any
instrument, agreement or other arrangement, including, but not limited to, any
voting trust agreement, stockholders' agreement or other agreement or
instrument, affecting any securities or rights or obligations of security
holders of Greenbriar or any of the Subsidiaries, other than in connection with
the Preferred Stock to be issued pursuant to this Agreement.
3.11 Material Adverse Effect. There has been no
action, condition, change or circumstance that has resulted, or to the
knowledge of Greenbriar will result, in a Material Adverse Effect since the
filing of the September 1997 Form 10-Q by Greenbriar with the Commission, other
than (i) litigation which could result in a write off of up to $4,300,000 of
mortgage notes and accrued interest and cash disbursements by Greenbriar in
excess of $1,500,000 in the aggregate in connection with the Southern Care v.
Medical Resources et al. litigation; (ii) a prepayment penalty not to exceed
$1,300,000 to Health and Retirement Properties Trust, and (iii) a judgment
which could result in cash disbursements by Greenbriar in excess of $1,000,000
in the aggregate in connection with the Carmen Puentes v. CareAmerica et al.
litigation.
3.12 Private Offering. Neither Greenbriar nor any
other Person acting on behalf of Greenbriar has offered any of the Preferred
Stock or any similar securities of Greenbriar for sale to, or solicited offers
to buy any thereof from, or otherwise approached or negotiated with respect
thereto with any prospective purchasers who are not accredited investors, as
defined in Rule 501 of Regulation D promulgated under the Act. Greenbriar
agrees that neither Greenbriar nor anyone acting on its behalf has offered or
will offer the Preferred Stock or any part thereof or any similar securities
for issue or sale to, or has solicited or will solicit any offer to acquire any
of the same from, anyone so as to bring the issuance and sale of the Preferred
Stock within the provisions of Section 5 of the Act.
3.13 Laws. Each of Greenbriar and the Subsidiaries
has complied in all respects with all Laws applicable to it or its businesses
other than violations which would not have a Material Adverse Effect.
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3.14 Investment Company Act. Neither Greenbriar nor
any Subsidiary is, and after giving effect to the issuance and sale of the
Preferred Stock, will be, an "investment company," or an entity "controlled" by
an "investment company," as such terms are defined in the United States
Investment Company Act of 1940, as amended.
3.15 Affiliate Transactions. To the best of its
knowledge and except as set forth on Schedule 3.15, no officer, director or 5%
or greater stockholder of Greenbriar or any of the Subsidiaries, or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Act) of any of the foregoing persons or entities, has, or has had
which will have a Material Adverse Effect going forward, either directly or
indirectly, (i) a material interest in any person or entity which (A) furnishes
or sells services or products which are furnished or sold or are proposed to be
furnished or sold by Greenbriar or any of the Subsidiaries or (B) purchases
from or sells or furnishes to Greenbriar or any of the Subsidiaries any goods
or services or (ii) a material beneficiary interest in any contract or
agreement to which Greenbriar or any of the Subsidiaries is a party or by which
Greenbriar or any of the Subsidiaries may be bound or affected. Except as set
forth in Schedule 3.15, there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among Greenbriar or any of the
Subsidiaries and any such officer, director, 5% or greater stockholder,
"affiliate" or "associate." For the purpose of this Section 3.15, interests
which may be excluded from disclosure pursuant to the instructions to items of
Regulation S-K shall be deemed to be per se not material.
3.16 Environmental Compliance. To the best of its
knowledge, neither Greenbriar nor any Subsidiary (i) has violated, or has been
notified or is otherwise aware that it is liable with respect to obligations
under, any applicable Environmental Law, lacks Environmental Permits or is
violating any term or condition of any Environmental Permit; (ii) owns or
occupies any Real Property on which there has been a Release of Hazardous
Substances, or which may reasonably be expected to be adversely affected by a
Release of Hazardous Substances released at another location; or (iii) is
otherwise exposed to any Environmental Liability, except as to clauses (i),
(ii) and (iii), for such instances of noncompliance or Releases of Hazardous
Substances which, either singly or in the aggregate, would not have a Material
Adverse Effect.
3.17 Taxes. To the best of its knowledge and except
as set forth on Schedule 3.17, all tax returns required to be filed by
Greenbriar or the Subsidiaries in all jurisdictions have been timely and duly
filed, other than those filings being contested in good faith or except where
the failure to so file any such returns could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. There are
no tax returns of Greenbriar or the Subsidiaries that are currently being
audited by state, local or federal taxing authorities or agencies (and with
respect to which Greenbriar or the Subsidiaries have received notice), where
the findings of such audit, if adversely determined, would result in a Material
Adverse Effect. All taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such entities
have been paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without penalty
or interest or except if the failure to so pay could not reasonably be expected
to have a Material Adverse Effect. No transfer tax, stamp duty or other similar
tax is payable by or on behalf of Purchaser in
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connection with (i) the issuance by Greenbriar of the Preferred Stock and the
conversion into the Conversion Shares, (ii) the purchase by Purchaser of the
Preferred Stock from Greenbriar or (iii) the consummation by Greenbriar of any
of its obligations under this Agreement.
3.18 Insurance. Each of Greenbriar and the
Subsidiaries maintains insurance covering its properties, operations, personnel
and businesses which insures against such losses and risks as are adequate in
accordance with its reasonable business judgment. Neither Greenbriar nor any
Subsidiary has received notice from any insurer or agent of such insurer that
substantial capital improvements or other expenditures will have to be made in
order to continue such insurance. All such insurance is outstanding and duly in
force on the date hereof and shall be outstanding and duly in force at the date
of the Closing.
3.19 Labor Issues. To the best of its knowledge,
Greenbriar and the Subsidiaries are in substantial compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving Greenbriar or any of the
Subsidiaries by the U.S. Department of Labor or any other governmental agency
responsible for the enforcement of such federal, state, local or foreign laws
and regulations. There is no unfair labor practice charge or complaint against
Greenbriar or any of the Subsidiaries pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving Greenbriar or any of the
Subsidiaries. No representation question exists respecting the employees of
Greenbriar or any of the Subsidiaries, and no collective bargaining agreement
or modification thereof is currently being negotiated by Greenbriar or any of
the Subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of Greenbriar or any of
the Subsidiaries. No material labor dispute with the employees of Greenbriar or
any of the Subsidiaries exists or, to the knowledge of Greenbriar after
reasonable inquiry, is imminent and neither Greenbriar nor any Subsidiary is
aware of any existing or imminent general labor disturbance by the employees of
any of its principal suppliers, manufacturers or contractors which could
reasonably be expected to have a Material Adverse Effect.
3.20 Benefit Plans. To the best of its knowledge,
except as identified on Schedule 3.20 attached hereto, neither Greenbriar nor
any of the Subsidiaries maintains, sponsors or contributes to any program or
arrangement that is an "employee pension benefit plan" an "employee welfare
benefit plan" or a "multi-employer plan" ("ERISA Plans") as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of ERISA.
Except as identified on Schedule 3.20 attached hereto, neither Greenbriar nor
any of the Subsidiaries maintains or contributes to, now or at any time
previously, a defined benefit plan as defined in Section 3(35) of ERISA. No
ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") which could subject
Greenbriar or any of the Subsidiaries to any material tax penalty on prohibited
transactions and which has not adequately been corrected. No "accumulated
funding deficiency" (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect to which
the 30-day notice under Section 4043 of ERISA has been waived) has occurred
with respect to any employee benefit plan which might reasonably be expected to
have a Material Adverse Effect. Each ERISA Plan is in compliance in all
material respects with the reporting, disclosure and other requirements of the
Code and ERISA as they relate
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to such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply
with Code Section 401(a) stating that such ERISA Plan and the attendant trust
are qualified thereunder. Neither Greenbriar nor any of the Subsidiaries has
ever completely or partially withdrawn from a Multiemployer Plan of Greenbriar.
3.21 Financial Statements. The audited consolidated
financial statements and the related notes of Greenbriar and the Subsidiaries
as of and for the year ended December 31, 1996 and the unaudited consolidated
financial statements and the related notes of Greenbriar and the Subsidiaries
as of and for the nine month period ended September 30, 1997, copies of which
have been delivered to Purchaser, have been prepared in conformity with GAAP
and fairly present in all material respects the consolidated financial
position, results of operations and cash flows of Greenbriar and the
Subsidiaries as of the dates and throughout the periods therein specified.
3.22 Accounting Matters. Each of Greenbriar and the
Subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (iii) access to
financial assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect thereto. Grant Thornton, who has audited certain
financial statements of Greenbriar and the Subsidiaries, is an independent
public accounting firm as defined by the Act and the rules and regulations of
the Commission thereunder.
3.23 Licenses. Each of Greenbriar and the
Subsidiaries holds all licenses, franchises, permits, consents, registrations,
certificates and other approvals (including, without limitation, those relating
to environmental matters and worker health and safety) (individually a
"License" and collectively, "Licenses") required for the conduct of its
business as now being conducted except where the failure to hold such Licenses,
individually or in the aggregate, cannot reasonably be expected to have a
Material Adverse Effect.
3.24 No Stabilization. To the best of its knowledge,
neither Greenbriar or any of the Subsidiaries, nor any of its Affiliates has
taken or will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the
Exchange Act or otherwise, stabilization or manipulation of the price of any
security of Greenbriar to facilitate the sale or resale of the Preferred Stock
or the Conversion Shares or otherwise.
3.25 Title to Property. Each of Greenbriar and the
Subsidiaries has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property which are
material to its business, in each case free and clear of all liens, mortgages,
charges, claims, encumbrances, pledges, security interests, defects and other
restrictions except the Permitted Liens, those disclosed in Schedule 3.25 or
those which are not material in amount and do not materially adversely affect
the use made or proposed to be made of such property.
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3.26 Stock Exchange. The Greenbriar Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and is approved for
trading on the American Stock Exchange under the symbol "GBR." Greenbriar has
taken no action that was designed to terminate, or that is likely to have the
effect of terminating, trading of the Greenbriar Common Stock on the American
Stock Exchange, nor has Greenbriar received any notification that the
Commission or the American Stock Exchange is contemplating terminating such
trading.
3.27 Foreign Compliance. To the best of its
knowledge, neither Greenbriar nor any of the Subsidiaries has, nor to the
knowledge of Greenbriar, has any officer, director or employee of Greenbriar or
any of the Subsidiaries or any other person acting on behalf of Greenbriar or
any of the Subsidiaries, for the benefit of Greenbriar or any such Subsidiaries
at any time during the last five years, (i) made any unlawful gift or
contribution to any candidate for federal, state, local or foreign political
office, or failed to disclose fully any such gift or contribution in violation
of law, or (ii) made any payment to any federal, state, local or foreign
governmental officer or official, which would be reasonably likely to subject
Greenbriar or any of the Subsidiaries to any significant damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign). Each of Greenbriar's and the Subsidiaries' internal accounting
controls are sufficient to cause Greenbriar and the Subsidiaries to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
3.28 Nevada Law Exemptions. None of the issuance by
Greenbriar and the purchase by Purchaser of the Preferred Stock and delivery to
Purchaser of the Conversion Shares upon the conversion of the Preferred Stock,
the execution or delivery of this Agreement and the other Transaction
Documents, and the consummation of the transactions contemplated herein and
therein (i) conflicts or will conflict with, (ii) violates or will result in
any violation of or (iii) restricts or will restrict any future transactions or
business combinations involving Purchaser or any of its affiliates and
Greenbriar, any Subsidiary, Greenbriar capital stock, Greenbriar, any of its
subsidiaries or Greenbriar capital stock pursuant to, in each case, any of the
provisions of Nevada law, including, but not limited to Sections 78.378-78.3793
and Sections 78.411-78.444 of Chapter 78 of the Nevada Revised Statutes.
Section 4. Representations and Warranties of Purchaser
Purchaser hereby represents, warrants and covenants to Greenbriar that
as of the date of Greenbriar's execution of this Agreement and as of the date
of the Closing:
4.1 Due Organization and Authorization. Purchaser is
a limited partnership duly organized and validly existing under the laws of the
State of Delaware and has all requisite power and authority (i) to own and
operate its properties and assets and to carry on its business as now conducted
and as presently proposed to be conducted, (ii) to execute and deliver this
Agreement and the other Transaction Documents, (iii) to perform the terms
hereof and thereof and (iv) to consummate the transactions contemplated hereby
and thereby. Purchaser has taken all action necessary to authorize the
execution, delivery and performance of this Agreement, the other Transaction
Documents and the purchase of the Preferred Stock and the conversion of the
Conversion Shares.
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4.2 Purchase for Purchaser's Account. Purchaser
represents and warrants to Greenbriar that it is purchasing and will purchase
the Preferred Stock, for its own account, with no present intention of
distributing or reselling the Preferred Stock or the Conversion Shares or any
part thereof and that such Purchaser is prepared to bear the economic risk of
retaining the Preferred Stock and the Conversion Shares for an indefinite
period, all without prejudice, however, to the right of such Purchaser at any
time, in accordance with this Agreement and the other Transaction Documents,
lawfully to sell or otherwise dispose of all or any part of the Preferred Stock
or the Conversion Shares held by it. Purchaser represents and warrants that it
is an accredited investor, as such term is defined in Rule 501 of Regulation D
promulgated under the Act.
4.3 Compliance. Purchaser acknowledges that
Greenbriar has not registered the Preferred Stock and that Greenbriar has not
registered the Conversion Shares under the Act, and Purchaser agrees that
neither the Preferred Stock nor the Conversion Shares shall be sold or offered
for sale without registration under the Act or the availability of an exemption
therefrom, nor in violation of any other law of the United States of America or
any state thereof, and the certificates representing such shares shall bear a
legend with respect thereto.
Section 5. Pre-Closing Covenants
5.1 Access and Investigation. Between the date of
this Agreement and the date of Closing, Greenbriar shall, and shall cause each
of its respective subsidiaries to, (a) afford Purchaser and its representatives
reasonably full and free access during normal business hours to Greenbriar's
and Greenbriar's personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Purchaser and its representatives with copies
of all such contracts, books and records, and other existing documents and data
as Purchaser may reasonably request, and (c) furnish Purchaser and its
representatives with such additional financial, operating, and other data and
information as Purchaser may reasonably request; provided, that Purchaser's
access under this Section 5.1 shall not unduly interfere with the operations of
Greenbriar.
5.2 Operation of the Businesses of Greenbriar.
Between the date of this Agreement and the date of Closing, except as otherwise
expressly permitted herein, Greenbriar shall, and shall cause each Subsidiaries
to:
(a) conduct the business of Greenbriar and
the Subsidiaries only in the ordinary course of business; and
(b) use commercially reasonable efforts to
preserve intact the current business organization of Greenbriar and
the Subsidiaries, keep available the services of the current officers,
employees, and agents of Greenbriar and the Subsidiaries, and maintain
the relations and goodwill with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships
with Greenbriar and the Subsidiaries.
5.3 Restrictions on Certain Actions. Except as
otherwise expressly permitted herein, from and after the date hereof to the day
immediately following the issuance of Preferred Stock hereunder, Greenbriar
shall not (without the written consent of
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Purchaser which, for the purposes of the filing of board resolutions, shall not
be unreasonably withheld):
(a) directly or indirectly declare, make,
incur any liability to make, or pay any Distribution, except for
Distributions to the holders of Series B Junior Preferred Stock and
Series D Junior Preferred Stock required pursuant to their respective
certificate of designations; or
(b) make, and shall not permit any of the
Subsidiaries to make, any amendment to the certificate of
incorporation or the articles of incorporation or bylaws of any such
company or file any resolution of the board of directors with its
respective Office of the Secretary of State.
5.4 Required Approvals. As promptly as practicable
after the date of this Agreement, Greenbriar and Purchaser shall make all
filings required to be made by them in order to consummate the transactions
contemplated by the Transaction Documents. Between the date of this Agreement
and the date of Closing, each party shall cooperate with the other party with
respect to all filings that a party elects to make or is required to make in
connection with the transactions contemplated by the Transaction Documents.
5.5 Notification. Between the date of this Agreement
and the date of Closing, each party shall promptly notify the other parties in
writing if it becomes aware of any fact or condition that causes or constitutes
a breach of any of its representations and warranties as of the date of this
Agreement, or if it becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. During the same period, each
party shall promptly notify the other parties of the occurrence of any breach
of any covenant in this Agreement or of the occurrence of any event that may
make the satisfaction of the conditions in this Agreement impossible or
unlikely.
5.6 No Negotiation. Until such time, if any, as this
Agreement is terminated pursuant to Section 9.2, Greenbriar, their Affiliates
and their representatives shall not directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Purchaser)
relating to any transaction which (i) contemplates replacing or finding a
substitute for Purchaser in any financing or equity transaction or (ii) places
Greenbriar in an economic position similar to that contemplated by the
Transaction Documents.
5.7 Public Disclosure. Prior to the Closing, none of
the parties hereto, nor any of their representatives shall, without the prior
written consent of the other parties, which shall not be unreasonably withheld,
make any statement, public announcement or release to the press or any other
third party with respect to their discussions or this Agreement or permit any
of its employees or agents to make any such statement, announcement or release,
until such time as any party may be required by law, regulation, order or other
requirement to make disclosure, including, but not limited to, disclosures made
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<PAGE> 27
by Greenbriar to respond to the Commission, the American Stock Exchange and
lender requirements.
5.8 Efforts. Between the date of this Agreement and
the date of Closing, each party shall use commercially reasonable efforts to
cause the conditions in this Agreement to be satisfied.
Section 6. Covenants of Greenbriar
Greenbriar hereby covenants to the holders of Preferred Stock that,
unless waived in writing by each Preferred Stock Representative, on the date of
this Agreement and thereafter:
6.1 Use of Proceeds. Greenbriar shall use the
proceeds of approximately $22,000,000 from the sale of the Preferred Stock (a)
to purchase real estate assets consistent with the description of Greenbriar's
business contained in 1996 Form 10-K, (b) to use for working capital, (c) to
pay down debt and (d) to invest in short term state and federal government
securities.
6.2 Sale of Greenbriar. Greenbriar shall not permit
a Sale of Greenbriar; provided, however, a Sale of Greenbriar will not be
considered a breach of this Agreement provided that the mandatory conversion
pursuant to Section 6.3 of each Certificate of Designation is consummated.
6.3 Rights Relating to Board of Directors.
Greenbriar will promptly execute and deliver to any individual elected to the
Board of Directors by the holders of Series F Senior Preferred Stock, an
agreement by Greenbriar to advance expenses, indemnify and hold harmless such
individual for any and all actions taken by such individual in his capacity as
a member of the Board of Directors to the fullest extent permitted by the laws
of the state of incorporation of Greenbriar. If the laws of the state of
incorporation of Greenbriar thereafter are amended to further permit
indemnification and advancement of expenses, then Greenbriar shall advance
expenses, indemnify and hold harmless to the fullest extent permitted by such
laws, as so amended. Any repeal or modification of this Section 6.3 shall be
prospective only and shall not adversely affect the rights set forth in this
Section 6.3 existing at the time of such repeal or modification.
6.4 Taxes. Greenbriar shall pay all Taxes (other
than federal, state or local income taxes) which may be payable in connection
with the execution and delivery of this Agreement and the other Transaction
Documents or the issuance and sale of the Preferred Stock and the conversion
into the Conversion Shares hereunder or in connection with any modification of
the Preferred Stock or Conversion Shares and shall save Purchaser harmless
without limitation as to time against any and all liabilities with respect to
or resulting from any delay in paying, or omission to pay such Taxes. The
obligations of Greenbriar under this Section 6.4 shall survive any redemption,
repurchase or acquisition of Preferred Stock or Conversion Shares by Greenbriar
and the termination of this Agreement. Greenbriar shall, and shall cause each
Subsidiary to, promptly pay when due any and all Taxes except Taxes that are
being contested in good faith by lawful and appropriate proceedings diligently
conducted, against which reserve or other provision required by GAAP has been
made, and in respect of which levy and execution of any Lien has been and
continues to be stayed. Greenbriar shall not, and shall not permit any
Subsidiary to, use any
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<PAGE> 28
proceeds of the sale of the Preferred Stock to pay the wages of employees
unless a timely payment to or deposit with the United States of America of all
amounts of Tax required to be deducted and withheld with respect to such wages
is also made.
6.5 Delivery Expenses. If any holder surrenders any
certificate for Preferred Stock or Conversion Shares to Greenbriar or a
transfer agent of Greenbriar for exchange for instruments of other
denominations or registered in another name or names, Greenbriar shall cause
such new instruments to be issued and shall pay the cost of delivering the
surrendered instrument and any new instruments issued in substitution or
replacement for the surrendered instrument to and from the office of Purchaser
from and to Greenbriar or its transfer agent, duly insured, other than any
required stamp, taxes or transfer taxes.
6.6 Replacement of Instruments. Upon receipt by
Greenbriar of evidence reasonably satisfactory to it of the ownership of and
the loss, theft, destruction or mutilation of any certificate or instrument
evidencing any Preferred Stock or Greenbriar Common Stock; and
(a) in the case of loss, theft or
destruction, Greenbriar, at its expense, shall execute, register and
deliver, in lieu thereof, a new certificate or instrument for (or
covering the purchase of) an equal number of shares of Series F Senior
Preferred Stock, Series G Senior Non-Voting Preferred Stock or
Greenbriar Common Stock upon receipt of indemnity reasonably
satisfactory to it (provided that, if the owner of the same is a
commercial bank or an institutional lender or investor, its own
agreement of indemnity shall be deemed to be satisfactory); or
(b) in the case of mutilation, upon
surrender and cancellation thereof, Greenbriar, at its expense, shall
execute, register and deliver, in lieu thereof, a new certificate or
instrument for (or covering the purchase of) an equal number of shares
of Series F Senior Preferred Stock, Series G Senior Non- Voting
Preferred Stock or Greenbriar Common Stock.
6.7 Rule 144. At all times, in order to permit
holders of Preferred Stock or Greenbriar Common Stock to sell the same, if they
so desire, pursuant to Rule 144 or 144A promulgated by the Commission (or any
successor to such rule), Greenbriar shall comply with all rules and regulations
of the Commission applicable in connection with use of Rule 144 and 144A (or
any successor rules thereto), including the provision of information concerning
Greenbriar and the timely filing of all reports with the Commission in order to
enable such holders, if they so elect, to utilize Rule 144 or 144A, and
Greenbriar shall cause any restrictive legends to be removed and any transfer
restrictions to be rescinded with respect to any sale of Preferred Stock or
Greenbriar Common Stock which is exempt from registration under the Act
pursuant to Rule 144 or 144A.
6.8 Financial Statements, Reports and Documents.
Greenbriar shall deliver to each Preferred Stock Representative, each of the
following:
(a) Quarterly Statements. Unless
duplicative of paragraph (d) below, as soon as available and in any
event within fifty (50) days after the end of each quarterly fiscal
period (except the last) of each fiscal year of Greenbriar, copies of
the consolidated and consolidating balance sheet of Greenbriar and the
consolidated
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Subsidiaries as of the end of such quarterly fiscal period, and
statements of income and retained earnings and changes in financial
position of Greenbriar and the consolidated Subsidiaries for that
quarterly fiscal period and for the portion of the fiscal year ending
with such period, in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all
in reasonable detail, and certified by the Chief Financial Officer of
Greenbriar as being true and correct and as having been prepared in
accordance with GAAP, subject to year-end audit adjustments;
(b) Annual Statements. Unless duplicative of paragraph
(d) below, as soon as available and in any event within one-hundred
and five (105) days after the close of each fiscal year of Greenbriar,
copies of the consolidated and consolidating balance sheet of
Greenbriar and the consolidated Subsidiaries as of the close of such
fiscal year and statements of income and retained earnings and changes
in financial positions of Greenbriar and the consolidated Subsidiaries
for such fiscal year, in each case setting forth in comparative form
the figures for the preceding fiscal year, all in reasonable detail
and accompanied by an opinion thereon (which shall not be qualified by
reason of any limitation imposed by Greenbriar) of Grant Thornton, or
of other independent public accountants of recognized national
standing selected by Greenbriar and satisfactory to each Preferred
Stock Representative, to the effect that such consolidated financial
statements have been prepared in accordance with GAAP consistently
maintained and applied (except for changes in which such accountants
concur) and that the examination of such accounts in connection with
such financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were
considered necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof,
one copy of each written report submitted to Greenbriar by independent
accountants in any annual, quarterly or special audit made, it being
understood and agreed that all audit reports which are furnished to
each Preferred Stock Representative pursuant to this Section 6.8 shall
be treated as confidential, but nothing herein contained shall limit
or impair the right of the holders of the Preferred Stock to disclose
such reports to any appropriate Tribunal, or to use such information
to the extent pertinent to an evaluation of the obligations of
Greenbriar under the Transaction Documents, or to enforce compliance
with the terms and conditions of the Transaction Documents, or to take
any lawful action which holders of the Preferred Stock deem necessary
to protect their interests under the Transaction Documents;
(d) SEC and Other Reports. Promptly upon its
becoming available, one copy of each financial statement, report,
notice or proxy statement sent by Greenbriar to stockholders generally
and of each regular or periodic report, registration statement or
prospectus filed by Greenbriar with any securities exchange or the
Commission or any successor agency, and of any order issued by any
Tribunal in any proceeding to which Greenbriar is a party; and
(e) Compliance Certificate. Within the earlier of (i)
the filing of a quarterly or annual report with the Commission or (ii)
fifty (50) days after the end of each quarterly fiscal period (except
the last) of each fiscal year of Greenbriar
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and one-hundred and five (105) days after the close of each fiscal
year of Greenbriar, a certificate executed by the Chief Financial
Officer or Chief Executive Officer of Greenbriar, stating that a
review of the activities of Greenbriar during such fiscal quarter has
been made under his supervision and that Greenbriar has observed,
performed and fulfilled each and every obligation and covenant
contained herein and is not in default under any of the same or, if
any such default shall have occurred, specifying the nature and status
thereof, and setting forth a computation in reasonable detail as of
the end of the period covered by such statements, of compliance with
Sections 6.28-6.35 hereof.
6.9 Inspection of Property. In addition to any
rights of the holders of the Preferred Stock under applicable law to inspect
the property of Greenbriar, Greenbriar shall permit each Preferred Stock
Representative or his representative, upon reasonable notice, during normal
business hours and while accompanied by a representative from Greenbriar, to
(i) visit and inspect any of the properties of Greenbriar and any Subsidiary,
(ii) examine the corporate and financial records of Greenbriar and the
Subsidiaries and make copies thereof or extracts therefrom and (iii) conduct
tests or investigations, subject to the rights of tenants.
6.10 Conduct of Business. Greenbriar shall carry on
and conduct, and cause each Subsidiary to carry on and conduct, its business in
the same manner and in the same fields of enterprise as it is conducted on the
date hereof, or in the real estate business; and do, and, unless merged into
Greenbriar, cause each Subsidiary to do, all things necessary to (i) remain
duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation, (ii) maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted and (iii) use commercially reasonable efforts to maintain all
licenses, permits, and franchises necessary for its business. Greenbriar shall
not, and shall not permit any Subsidiary to, directly or indirectly, engage in
any businesses other than those to which it is engaged as of the date hereof,
or discontinue any of its existing lines of business or substantially alter its
method of doing business except Greenbriar and any Subsidiary may engage in the
real estate business.
6.11 Insurance. Greenbriar shall maintain, and cause
each Subsidiary to maintain, insurance covering its properties, operations,
personnel and businesses which insures against such losses and risks as are
adequate in accordance with its reasonable business judgment.
6.12 Maintenance of Property. Greenbriar shall
maintain, and cause each Subsidiary to maintain, all of its tangible property
in good condition and repair and make all necessary replacements thereof and
operate the same properly, efficiently and in a prudent manner.
6.13 Books and Records. Greenbriar shall maintain,
and cause each Subsidiary to maintain, books, records, and accounts necessary
to prepare financial statements in accordance with GAAP.
6.14 Notices. Except as disclosed in the 1996 Form
10-K and the September 1997 Form 10-Q, this Agreement and the documents
referred to herein, Greenbriar shall promptly give notice to each Preferred
Stock Representative of (i) any
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Material Adverse Effect, (ii) the occurrence and the date of a Special Asset
Sale Trigger, (iii) the existence and status of any Litigation that, if
determined adverse to Greenbriar or any Subsidiary, would result in a Material
Adverse Effect or (iv) any default under any material agreement, contract or
other instrument to which Greenbriar or any Subsidiary is a party or by which
any of their properties are bound, or any acceleration of the maturity of any
Debt owing by Greenbriar or any Subsidiary; in each case, specifying the nature
thereof and what action Greenbriar has taken, is taking, or proposes to take.
6.15 Authorizations and Approvals. Greenbriar shall,
and shall cause each Subsidiary to, use commercially reasonable efforts to
promptly obtain, from time to time at its own expense, all such governmental
licenses, authorizations, consents, permits and approvals as may be required to
enable it to comply with its obligations hereunder and under the other
Transaction Documents.
6.16 Payment of Obligations. Greenbriar shall, and
shall cause each Subsidiary to, promptly pay (or renew and extend) as they
become due all of its material obligations and all lawful claims which, if
unpaid, might give rise to a Lien upon any of its properties or assets (unless
such obligations or claims are being contested in good faith by appropriate
proceedings).
6.17 Employee Plans. As soon as possible and within
30 days after Greenbriar knows or has reason to know that any event which would
constitute a reportable event under Section 4043(b) of Title IV of ERISA with
respect to any employee pension or other benefit plan of Greenbriar subject to
ERISA has occurred, or that the PBGC has instituted or will institute
proceedings under ERISA to terminate that plan, deliver a certificate of a
Responsible Officer of Greenbriar setting forth details as to that reportable
event and the action which Greenbriar proposes to take with respect to it,
together with a copy of any notice of that reportable event which may be
required to be filed with the PBGC, or any notice delivered by the PBGC
evidencing its intent to institute those proceedings or any notice to the PBGC
that the plan is to be terminated, as the case may be. For all purposes of this
section, Greenbriar is deemed to have all knowledge or knowledge of all facts
attributable to the plan administrator under ERISA.
Except where not a Material Adverse Effect, Greenbriar shall not, and
shall not permit any Subsidiary to, permit (i) any ERISA Plan to incur an
"accumulated funding deficiency" (as defined in Section 302 of ERISA or Section
412 of the Code), (ii) Greenbriar or any Subsidiary to incur liability, except
for liabilities for premiums that have been paid or that are not past due,
under ERISA to the PBGC in connection with any ERISA Plan, (iii) Greenbriar or
any Subsidiary to withdraw in whole or in part from participation in a
Multiemployer Plan, (iv) Greenbriar or any Subsidiary to engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code), (v) a "reportable event" (as defined in Section 4043 of ERISA) to
occur, excluding events for which the notice requirement is waived under
applicable PBGC regulations, (vi) Greenbriar, an Affiliate of Greenbriar or any
Subsidiary to have any liability under or be subject to any Lien under ERISA,
the Code, or any similar provisions of any Law of Canada or any of its
provinces to or on account of any employee benefit plan, program, scheme, or
arrangement established or maintained by Greenbriar, an Affiliate of Greenbriar
or any Subsidiary or to which Greenbriar, an Affiliate of Greenbriar or any
Subsidiary contributes or had an obligation to contribute, (vii) any ERISA Plan
not to comply in all material respects, both in
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<PAGE> 32
form and operation, with ERISA and the Code, and (viii) any Multiemployer Plan
of Greenbriar to be in reorganization within the meaning of Section 418 of the
Code.
6.18 Environmental Matters.
(a) Greenbriar shall make available to each Preferred
Stock Representative (i) a copy of all future Environmental Reports,
if any, and reports or notices to any Tribunal about any Release of
Hazardous Substances, if any, in Greenbriar's or any Subsidiary's
possession or prepared by or on behalf of Greenbriar or any Subsidiary
in respect of any Real Property, and (ii) a report within ten Business
Days after Greenbriar or any Subsidiary first has knowledge or reason
to believe that any unreported Release of a Hazardous Substance has
occurred at any Real Property that (A) requires or has resulted in any
report or other notice to any Tribunal under any Environmental Law or
(B) results or threatens to result in the presence of any Hazardous
Substance in the environment in a quantity, concentration, state, or
other condition that substantially exceeds any applicable standard for
the protection of human health or the environment under any
Environmental Law.
(b) Greenbriar shall, and shall cause each Subsidiary
to use commercially reasonable efforts to, (i) obtain and keep in
effect all Environmental Permits in substantial compliance with all
Environmental Laws, (ii) operate and manage its businesses, processes,
and other activities in substantial compliance with all Environmental
Laws, Environmental Permits, and Environmental Indemnity Agreements of
Greenbriar and in a manner to avoid incurring Environmental
Liabilities, to prevent any Release of Hazardous Substances in any
material amounts or in substantial violation of any Environmental Law,
and to minimize the risk of loss or damage in the event of any Release
of Hazardous Substances, (iii) keep each Environmental Indemnity
Agreement of Greenbriar in full force and effect according to its
terms, take all steps that may be necessary or appropriate to timely
assert and receive payment or all claims under it, and (to the extent
that the material remediation or indemnity protections or benefits
provided by it would be jeopardized) and (iv) continuously and
diligently carry out such removal, remedial, or other response actions
as may be necessary or appropriate (A) in respect of each matter that
constitutes substantial non-compliance with any Environmental Law and
(B) to prevent or minimize potential Environmental Liabilities from
any of those matters or any Release of Hazardous Substances, unless
the failure to do any of the foregoing actions in clauses (i) through
(iv) cannot reasonably be expected to have a Material Adverse Effect.
6.19 Distributions. Greenbriar shall not directly or
indirectly declare, make, incur any liability to make or pay any Distribution
except:
(a) Distributions paid in the form of additional
common stock;
(b) Distributions to the holders of Series B Junior
Preferred Stock and Series D Junior Preferred Stock required pursuant
to their respective certificate of designations;
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(c) Distributions paid to the holders of Series F
Preferred Stock and Series G Preferred Stock; and
(d) Distributions by Greenbriar if (i) no Event of
Default or Potential Default exists or would exist after giving effect
to the Distribution and (ii) the total (without duplication) of all of
those Distributions declared or paid (including the proposed
Distribution) over the 12 months prior to such proposed Distribution
do not exceed a 15% annualized yield based on the closing stock price
of the Greenbriar Common Stock on the date such Distribution is
declared.
Greenbriar shall not permit any Subsidiary to directly or indirectly
declare, make, incur any liability to make or pay any Distribution except
Distributions to Greenbriar or any Subsidiary; provided that any such
Distribution to a Subsidiary is ultimately paid to Greenbriar.
6.20 Transactions with Affiliates. Greenbriar shall
not, and shall not permit any Subsidiaries to, enter into any transaction with
any of its Affiliates (excluding Greenbriar and the Subsidiaries) except
transactions (i) in the ordinary course of business and upon fair and
reasonable terms not less favorable to Greenbriar and the Subsidiaries than
could be obtained in an arm's-length transaction with a Person that was not its
Affiliate or (ii) which do not exceed $60,000 individually and $100,000 in the
aggregate during any fiscal year.
6.21 Loans, Advances and Investments. Greenbriar
shall not, and shall not permit any Subsidiary to, make any loan, advance,
extension of credit, or capital contribution to any other Person, other than
(i) to Greenbriar or any Subsidiary, (ii) for an amount less than $50,000 in
the aggregate to such Person, (iii) as set forth on Schedule 6.21 or (iv) a
fully secured loan in connection with a purchase or sale of companies and/or
real estate.
6.22 Issuance of Shares. Greenbriar shall not permit
any Subsidiary to issue, sell or otherwise dispose of, any shares of its
capital stock or other securities, or rights, warrants or options to purchase
or acquire any shares or securities, other than to Greenbriar or any
Subsidiary.
6.23 Assignment. Greenbriar shall not, and shall not
permit any Subsidiary to, assign or transfer any of its Rights, duties, or
obligations under this Agreement.
6.24 Accounting Methods. Greenbriar shall not, and
shall not permit any Subsidiary to, change its method of accounting except (i)
to conform any new Subsidiary's accounting methods to Greenbriar's accounting
methods, (ii) as required by GAAP or (iii) as required by SEC rules and
regulations.
6.25 Government Regulations. Greenbriar shall not,
and shall not permit any Subsidiary to, conduct its business in a way that it
becomes regulated under the Investment Company Act of 1940, as amended, or the
Public Utility Holding Company Act of 1935, as amended.
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6.26 Compliance with Laws and Documents. Greenbriar
shall use commercially reasonable efforts not to, and shall use commercially
reasonable efforts not to permit any Subsidiary to, (i) violate the provisions
of the articles of incorporation or certificate of incorporation or bylaws of
Greenbriar or any Subsidiary; (ii) violate or be in default in the performance
of any obligation, agreement or condition contained in any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan, credit agreement,
purchase order, agreement or instrument evidencing an obligation for borrowed
money or other agreement or instrument to which Greenbriar or any of the
Subsidiaries is a party or by which Greenbriar or any of the Subsidiaries may
be bound or to which the property or assets of Greenbriar or any of the
Subsidiaries is subject or affected, if that violation or default alone, or
when aggregated with all other violations, would result in a Material Adverse
Effect; (iii) violate any Law applicable to Greenbriar or any of the
Subsidiaries of any Tribunal having jurisdiction over Greenbriar or any of the
Subsidiaries or any of their respective activities or properties, if that
violation alone, or when aggregated with all other violations, would result in
a Material Adverse Effect; or (iv) violate any obligation, provision,
condition, covenant or requirement contained in the Transaction Documents, if
that violation or default would result in a Material Adverse Effect.
6.27 Maintenance of Stock Listing. The Greenbriar
Common Stock shall, at all times, (i) be registered pursuant to Section 12(b)
of the Exchange Act, and (ii) be approved for trading on the American Stock
Exchange, the New York Stock Exchange or the Nasdaq National Market.
6.28 Total Liabilities to Equity Ratio. Greenbriar
shall not permit the ratio of Total Liabilities to Total Stockholders' Equity,
as of any fiscal quarter end, to be greater than 3 to 1.
6.29 Total Long Term Debt to Equity Ratio. Greenbriar
shall not permit the ratio of Total Long Term Debt to Total Stockholders'
Equity, as of any fiscal quarter end, to be greater than 2.75 to 1.
6.30 Dividend Coverage Ratio. Greenbriar shall not
permit the ratio of EBITDA (excluding all gains and losses attributable to
sales of real estate) to Senior Preferred Dividend, as reported in any fiscal
quarter, to be less than 1.5 to 1.
6.31 Total Long Term Debt to Book Capitalization.
Greenbriar shall not permit Total Long Term Debt to exceed seventy-five percent
(75%) of Book Capitalization, as of any fiscal quarter end.
6.32 Total Debt to Adjusted Book Capitalization.
Greenbriar shall not permit Total Debt to exceed seventy-five percent (75%) of
Adjusted Book Capitalization, as of any fiscal quarter end.
6.33 Total Debt and Capitalized Operating Lease
Expense Obligations to Adjusted Book Capitalization and Capitalized Operating
Lease Expense Obligations. Greenbriar shall not permit Total Debt plus
Capitalized Operating Lease Expense Obligations to exceed seventy-five percent
(75%) of Adjusted Book Capitalization plus Capitalized Operating Lease Expense
Obligations, as of any fiscal quarter end.
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6.34 Refinancing Existing Property Debt. Greenbriar
shall not, and shall not permit any Subsidiary to, refinance Existing Property
Debt, unless the aggregate loan amount does not exceed seventy-one percent
(71%) of the appraised value of the collateral in such refinancing.
6.35 Total Net Property Debt to Real Property Book
Value. Greenbriar shall not permit the level of Total Net Property Debt to
exceed seventy-one and eight-tenths (71.8%) of Real Property Book Value, as of
any fiscal quarter end.
6.36 HSR Filings. Greenbriar shall (a) upon
Purchaser's request, take all actions necessary to make the filings of it or
its Affiliates under the HSR Act with respect to the transactions contemplated
by this Agreement, (b) comply with any request for additional information
received by each party or its Affiliates from the Federal Trade Commission or
Antitrust Division of the Department of Justice pursuant to the HSR Act, (c)
cooperate with the other party in connection with such party's filings, if
necessary, under the HSR Act, and (d) request, if applicable or if necessary,
early termination of the applicable waiting period.
Section 7. Conditions to Closing
7.1 Conditions to Obligations of Purchaser. The
obligations of Purchaser hereunder are subject to the fulfillment, at or before
the Closing, of each of the following conditions (all or any of which may be
waived in whole or in part by Purchaser). Greenbriar shall use all commercially
reasonable efforts to fulfill, at or before the Closing, such of the following
conditions (or portions thereof) over which they have control.
(a) Greenbriar shall have delivered to
Purchaser (in form and substance satisfactory to Purchaser and its
counsel):
(i) a certificate, dated the
date hereof, of the Secretary or an Assistant Secretary of
Greenbriar (A) attaching a true and complete copy of the
resolutions of the Board of Directors of Greenbriar, and of
all documents evidencing other necessary corporate or
stockholder action (in form and substance satisfactory to
Purchaser and to its counsel) taken by Greenbriar in
connection with the matters contemplated by this Agreement
and the other Transaction Documents, (B) attaching a true
and complete copy of Bylaws of Greenbriar and each
Subsidiary, (C) setting forth the incumbency of the officer
or officers of Greenbriar who sign this Agreement and the
other Transaction Documents, including therein a signature
specimen of such officer or officers and (D) covering such
other matters, and with such other attachments thereto, as
Purchaser may reasonably request;
(ii) a certificate of
incorporation or articles of incorporation of Greenbriar and
each Subsidiary certified by the Office of the Secretary of
State under the laws of their respective states of
incorporation;
(iii) a certificate of good
standing (including tax status, if applicable) of Greenbriar
and each Subsidiary under the laws of their
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respective states of incorporation and as foreign
corporations in every state in which they own property or
conduct business;
(iv) an opinion of Glast,
Phillips & Murray, P.C. in the form attached hereto as
Exhibit E;
(v) such other documents and
evidence relating to the matters contemplated by this
Agreement or the other Transaction Documents as the holders
or their counsel shall reasonably require.
(b) The representations and warranties of
Greenbriar contained in Section 3, shall be true on and, in all
material respects, as of the Closing with the same effect as though
such representations and warranties had been made on and as of the
date of the Closing.
(c) Greenbriar shall have performed and
complied with all agreements, obligations, covenants and conditions
contained in this Agreement and the other Transaction Documents that
are required to be performed or complied with by it on or before the
Closing; and no Event of Default or Potential Default exists on or
before the Closing or as a result of the consummation of the
transactions contemplated hereby.
(d) The Chairman of the Board of Greenbriar
shall deliver to Purchaser at the Closing a certificate certifying, to
the best of his knowledge and as applicable to each of their
companies, that the conditions specified in paragraphs (b), (c), (e),
(i), (j), (k) and (l) have been fulfilled.
(e) All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of
the United States or of any state thereof that are required in
connection with the lawful issuance and sale of the Preferred Stock
and the conversion into the Conversion Shares pursuant to this
Agreement and the other Transaction Documents shall be duly obtained
and effective as of the Closing.
(f) Each of the Transaction Documents shall
have been duly executed and delivered by all of the respective parties
thereto (other than Purchaser) and shall be in full force and effect.
(g) Greenbriar shall have filed the
Certificate of Designations with the Secretary of State of the State
of Nevada.
(h) Greenbriar shall have paid all expenses
required to be paid by it pursuant to this Agreement and the Loan
Agreement.
(i) Greenbriar shall have received
approval, where required, to consummate the transactions contemplated
by the Transaction Documents from or pursuant to any applicable
governmental or regulatory authority or law and/or from any stock
exchange, including, but not limited to, the issuance and listing of
the Conversion Shares from the American Stock Exchange.
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<PAGE> 37
(j) There shall not be in effect on the
date of Closing any writ, judgment, injunction, decree, or similar
order of any court or governmental authority restraining, enjoining,
or otherwise preventing consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents.
(k) There shall not be instituted, pending,
or, to Greenbriar's knowledge, threatened, any action, suit,
investigation, or other proceeding in, before, or by any court,
governmental or regulatory authority, or other Person to restrain,
enjoin, or otherwise prevent consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents.
(l) Greenbriar shall have duly authorized,
approved and filed any and all amendments to the Articles of
Incorporation, resolutions or documents necessary to consummate the
transactions contemplated by the Transaction Documents.
(m) All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act,
if any, shall have expired or been terminated.
(n) The Preferred Stock ranks senior with
respect to the right to receive dividends and assets upon liquidation,
dissolution or winding up of Greenbriar to the Series B Junior
Preferred Stock and the Series D Junior Preferred Stock.
(o) Greenbriar has reserved and has
available the Conversion Shares in order to effect the conversion of
the Preferred Stock, which shares, when issued, will be duly
authorized and validly issued, fully paid and nonassessable, and free
from all taxes, liens and charges.
(p) Those documents provided for in the
Additional Delivery Agreement dated of even date herewith have been
delivered.
(q) Purchaser has notified Greenbriar that
Purchaser has received final approval of the consummation of the
transactions contemplated by this Agreement from its investment
committee.
(r) All indebtedness under the Loan
Agreement has been paid in full together with all accrued and unpaid
interest through such repayment date.
(s) All expenses described in Section 2.3
incurred through the date of Closing have been paid in full.
(t) The Purchaser and Greenbriar shall have
agreed to the terms of a promissory note as contemplated in Section 8.6
of the Series F Certificate of Designation and Section 8.5 of the
Series G Certificate of Designation.
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<PAGE> 38
7.2 Conditions to Obligations of Greenbriar. The
obligations of Greenbriar hereunder are subject to the fulfillment, at or
before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by Greenbriar). Purchaser shall use all
commercially reasonable efforts to fulfill, at or before the Closing, such of
the following conditions (or portions thereof) over which it has control.
(a) The representations and warranties of
Purchaser contained in Section 4 shall be true on and as of the
Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
(b) Purchaser shall have performed and
complied with all agreements, obligations, covenants and conditions
contained in this Agreement and the other Transaction Documents that
are required to be performed or complied with by it on or before the
Closing.
(c) All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of
the United States or of any state thereof that are required in
connection with the lawful purchase of the Preferred Stock and the
conversion into the Conversion Shares pursuant to this Agreement and
the other Transaction Documents shall be duly obtained and effective
as of the Closing.
(d) Each of the Transaction Documents shall
have been duly executed and delivered by all of the respective parties
thereto (other than Greenbriar) and shall be in full force and effect.
(e) Purchaser shall have made payment for
the Preferred Stock.
(f) All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act,
if any, shall have expired or been terminated.
Section 8. Post-Conversion Rights
8.1 Board Representation on Greenbriar. Subsequent
to a conversion by Purchaser of Preferred Stock for Conversion Shares and until
the earlier of (i) the first anniversary of the date that Purchaser no longer
owns any shares of Preferred Stock or (ii) the date that Purchaser no longer
owns at least 5% of the issued and outstanding shares of Greenbriar, Purchaser
shall have the right, at any time that there is not at least one director
serving on the Board of Directors of Greenbriar pursuant to this Section 8.1 or
any other provision contained in the Transaction Documents, to nominate at
least one member of the Board of Directors of Greenbriar, and Greenbriar shall
use its best efforts to cause such nominee to be elected to the Board of
Directors of Greenbriar as soon as possible, and in any event not later than
sixty days after such nomination is made. Any director elected pursuant to
this Section 8.1 is subject to removal, and any vacancy in the office of such
director shall be filled, only by Purchaser. If, for any reason whatsoever,
Purchaser does not have a member on the Board of Directors of Greenbriar during
the time period discussed above, Purchaser may appoint an observer who may
attend all meetings (including committee meetings) of the Board of Directors of
Greenbriar and who shall be entitled to the same expense reimbursement as the
Directors of Greenbriar.
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Section 9. Miscellaneous
9.1 Notices. All notices, notifications, demands,
requests, waivers, consents or other communications under this Agreement shall
be in writing and shall be deemed to have been duly given, unless explicitly
stated otherwise, (i) if mailed registered or certified mail, postage prepaid,
return receipt requested, three days after being deposited in the mail; (ii) if
sent via overnight courier, the next business day after being deposited with
such courier; (iii) if sent by telecopier (with written confirmation of
receipt), on that day, or if telecopied on a day that is not a business day,
the next day that is a business day, provided that a copy is mailed by
certified or registered mail (return receipt requested); or (iv) if delivered
by hand (with written confirmation of receipt) on that day, or if delivered on
a day that is not a business day, the next day that is a business day; in each
case, to the appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
If to Greenbriar: Greenbriar Corporation
4265 Kellway Circle
Addison, Texas 75244-2033
Attention: Gene S. Bertcher
Telecopy No.: (972) 407-8735
with copy to: Mark E. Bennett, Esq.
14933 Oaks North Drive
Dallas, TX 75231
Telecopy No.: (972) 407-8426
If to Purchaser: Lone Star Opportunity Fund, L.P.
600 N. Pearl Street
Suite 1550, LB 161
Dallas, Texas 76140
Attention: Sam F. Hines
Telecopy No.: (214) 754-8301
with copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: W. Scott Wallace
Telecopy No.: (214) 651-5940
If to any other Person who is the registered holder of any Preferred
Stock or Conversion Shares, to the address for the purpose of such holder as it
appears in the stock ledger of Greenbriar.
9.2 Termination.
(a) Termination Events. This Agreement may,
by notice given prior to or at the Closing, be terminated:
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(i) by either Greenbriar or
Purchaser if a material breach of any provision of this
Agreement has been committed by the other party and such
breach has not been waived in writing;
(ii) by Purchaser if any of the
conditions in Section 7.1 has not been satisfied as of the
date of Closing or if satisfaction of such a condition is or
becomes impossible (other than through the failure of
Purchaser to comply with its obligations under this
Agreement) and Purchaser has not waived such condition on or
before the date of Closing;
(iii) by Greenbriar if any of the
conditions in Section 7.2 has not been satisfied of the date
of Closing or if satisfaction of such a condition is or
becomes impossible (other than through the failure of
Greenbriar to comply with its obligations under this
Agreement) and Greenbriar has not waived such condition on
or before the date of Closing;
(iv) by mutual written consent of
Greenbriar and Purchaser; or
(v) by either Greenbriar or
Purchaser if the Closing has not occurred (other than
through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this
Agreement) on or before January 12, 1998, or such later date
as the parties may agree upon.
(b) Effect of Termination. Each party's
right of termination under this Section 9.2 is in addition to any
other rights it may have under this Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies.
If this Agreement is terminated pursuant to this Section 9.2, all
further obligations of the parties under this Agreement (other than the
obligations of Greenbriar under Section 2.3 and of all parties under
Section 9.3) shall terminate; provided, however, that if this Agreement
is terminated by a party because of the breach of the Agreement by the
other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result
of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies
shall survive such termination unimpaired.
9.3 Indemnification.
(a) Indemnification Obligations of
Greenbriar. Subject to the other provisions of this Section 9.3,
Greenbriar shall defend, indemnify, and hold harmless Purchaser and
its successors and assigns, and its officers, directors, stockholders,
agents, affiliates and employees (collectively, the "Greenbriar
Indemnitees"), from and against, and promptly reimburse them for, any
and all Losses, without regard to the cause or causes thereof,
directly or indirectly arising out of, resulting from, relating to or
in connection with (i) any breach of or inaccuracy in any
representation or warranty of Greenbriar contained in this Agreement,
any Transaction Document or any schedule or exhibit hereto or thereto;
or (ii) any breach
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<PAGE> 41
of or non-performance of any covenant of Greenbriar contained in this
Agreement, any Transaction Document or any schedule or exhibit hereto
or thereto.
(b) Indemnification Obligations of
Purchaser. Subject to the other provisions of this Section 9.3,
Purchaser shall defend, indemnify, and hold harmless Greenbriar and
its respective heirs, legal representatives, successors and assigns
(collectively, the "Purchaser Indemnitees"), from and against, and
promptly reimburse them for, any and all Losses, without regard to the
cause or causes thereof, directly or indirectly arising out of,
resulting from, relating to or in connection with (i) any breach of or
inaccuracy in any representation or warranty of Purchaser in this
Agreement, any Transaction Document or any schedule or exhibit hereto
or thereto; or (ii) any breach of or nonperformance of any covenant of
Purchaser in this Agreement, any Transaction Document or any schedule
or exhibit hereto or thereto.
(c) Notice and Opportunity to Defend.
(i) If any of Greenbriar
Indemnitees or Purchaser Indemnitees (each, an "Indemnitee")
receives notice of any claim or commencement of any action or
proceeding (an "Asserted Liability") with respect to which
another person (the "Indemnitor") is obligated to provide
indemnification pursuant to Section 9.3(a) or Section 9.3(b),
such Indemnitee shall promptly give the Indemnitor notice
thereof by certified mail, describing the Asserted Liability
in reasonable detail and indicating the amount (which may be
estimated) of the loss, expense, damage, liability, or
obligation that has been or may be asserted by the Indemnitee
against the Indemnitor.
(ii) The failure of the
Indemnitee to give such notice shall not result in a loss of
the Indemnitee's right to indemnification under this Section
9.3 unless such failure prejudices the Indemnitor's ability
to defend against the Asserted Liability.
(iii) No settlement or compromise
of an Asserted Liability may be made by the Indemnitee
without the written consent of the Indemnitor.
(iv) If the Indemnitor so elects,
the Indemnitor, at the Indemnitor's expense, shall assume
the defense of the Asserted Liability and shall have the
right to settle or compromise the same, except that if the
Indemnitee's counsel reasonably objects to such assumption
on the ground that there may be legal defenses available to
the Indemnitee that are different from or in addition to
those available to the Indemnitor, then the Indemnitee shall
have the right to employ separate counsel approved by the
Indemnitor at the Indemnitee's sole expense.
(v) If the Indemnitor assumes
the defense of the Asserted Liability, the Indemnitor shall
not be liable for the fees and expenses of the Indemnitee's
counsel incurred thereafter in connection with the Asserted
Liability.
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<PAGE> 42
(d) Survival. All warranties,
representations and covenants made by Greenbriar herein or in any
certificate or other instrument delivered by either of them or on
their behalf under this Agreement and the other Transaction Documents
shall be considered to have been relied upon by Purchaser and shall
survive the issuance of the Preferred Stock regardless of any
investigation made by or on behalf of Purchaser. All statements in any
such certificate or other instrument so delivered shall constitute
representations and warranties by Greenbriar, as applicable,
hereunder.
All representations, warranties and covenants
made by Purchaser herein shall be considered to have been relied upon
by Greenbriar and shall survive the issuance to Purchaser of the
Preferred Stock regardless of any investigation made by Greenbriar or
on their behalf.
9.4 Restrictive Legend. Unless and until otherwise
permitted by this Agreement, each certificate for Preferred Stock issued under
this Agreement and each certificate for any Preferred Stock issued to any
subsequent transferee of any such certificate shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and may be
reoffered and sold only if registered pursuant to the provisions of
said Securities Act or if an exemption from registration is
available."
9.5 Assignment, Successors and Assigns. Except as
otherwise expressly provided herein, this Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties
whether so expressed or not. This Agreement may not be assigned without the
written consent of all other parties; provided, however, Purchaser may assign
all of its rights and obligations hereunder to one of its subsidiaries,
provided that prior to the Closing no assignment may be made except to a
subsidiary with sufficient funds to satisfy Purchaser's payment obligations
under this Agreement.
9.6 Amendment and Waiver, etc. This Agreement may be
amended only with the written consent of Greenbriar and Purchaser. No failure
or delay on the part of Greenbriar or Purchaser in exercising any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to Greenbriar or Purchaser at law or in equity
or otherwise. No waiver of or consent to any departure by Greenbriar or
Purchaser from any provision of this Agreement shall be effective unless signed
in writing by the other parties.
9.7 Duplicate Originals. Two or more duplicate
originals of this Agreement may be signed by the parties, each of which shall
be an original but all of which together shall constitute one and the same
instrument.
9.8 Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other
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<PAGE> 43
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
9.9 Governing Law. This Agreement shall be construed
in accordance with and governed by the internal laws of the State of Texas,
without respect to conflicts of laws principles.
9.10 Specific Performance. Greenbriar and Purchaser
acknowledge that the other parties have no adequate remedy at law for breaches
by Greenbriar or Purchaser of its obligations hereunder or under the
Transaction Documents, and accordingly Greenbriar and Purchaser irrevocably
agree that the other parties shall be entitled to the remedy of specific
performance granted pursuant to Section 9.15 below, and waives any right
Greenbriar or Purchaser may have to object to such remedy.
9.11 Entire Agreement. This Agreement, the other
Transaction Documents and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
This Agreement supercedes that certain Stock Purchase
Agreement among Residential Healthcare Properties, Inc., Greenbriar and
Purchaser dated as of October 8, 1997 (the "October 8, 1997 Stock Purchase
Agreement") only in the event that the transactions contemplated by this
Agreement are closed, otherwise the October 8, 1997 Stock Purchase Agreement
shall remain in full force and effect.
9.12 Headings Descriptive. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
9.13 Finder's Fees. Each party represents that it
neither is nor will be obligated for any finder's fee or commission in
connection with this transaction, other than as specifically described below.
Purchaser agrees to indemnify and to hold harmless
Greenbriar from any liability for any commission or compensation in the nature
of a finder's fee (and the cost and expenses of defending against such
liability or asserted liability) for which Purchaser or any of its officers,
partners, employees, or representatives is responsible.
Greenbriar agrees to indemnify and hold harmless Purchaser
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which Greenbriar or any of their officers, employees,
or representatives is responsible, including without limitation, any fees owed
by Greenbriar to Southwest Securities.
9.14 Exculpation Among Purchasers. Purchaser
acknowledges that it is not relying upon any person, firm or corporation, other
than Greenbriar and its officers and directors, in making its investment or
decision to invest in Greenbriar. Purchaser agrees that neither it nor its
respective controlling persons, officers, directors, partners, agents or
employees shall be liable for any action heretofore or hereafter taken or
omitted to be taken
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<PAGE> 44
by any of them in connection with the Preferred Stock (and Greenbriar Common
Stock delivered upon conversion thereof).
9.15 Arbitration. THE PARTIES AGREE THAT IF ANY
DISPUTE SHOULD ARISE UNDER THE TERMS AND PROVISIONS OF THIS AGREEMENT, EACH
PARTY WAIVES ANY RIGHT TO COMMENCE LEGAL ACTION OR ARBITRATION OTHER THAN AS
PROVIDED UNDER THE TERMS OF THIS AGREEMENT, AND THIS AGREEMENT SHALL PROVIDE
THE SOLE AND EXCLUSIVE REMEDY FOR RESOLUTION OF DISPUTES.
(a) THE DETERMINATION OF THE ARBITRATOR
SHALL BE FINAL AND BINDING UPON EACH PARTY AND EACH PARTY SPECIFICALLY
WAIVES ANY RIGHT TO CLAIM THAT THE ARBITRATOR HAS EXCEEDED THE SCOPE
OF THE ARBITRATION, HAS DISREGARDED EVIDENCE OR PRINCIPLES OF LAW, AND
FURTHER WAIVES ANY RIGHT TO DISCLAIM THE QUALIFICATION OR FUNCTION OF
THE ARBITRATOR IN ANY MANNER OR FASHION.
(b) APPOINTMENT OF THE ARBITRATOR SHALL BE
MADE BY MUTUAL AGREEMENT OF THE PARTIES. IF THE PARTIES CANNOT AGREE
UPON THE IDENTIFICATION OF THE ARBITRATOR WITHIN THIRTY (30) DAYS FROM
THE MAILING OF THE OBJECTION, A PETITION FOR APPOINTMENT OF ARBITRATOR
SHALL BE FILED WITH THE SUPERIOR COURT OF THE COUNTY OF DALLAS, TEXAS.
THE ARBITRATION SHALL BE HELD IN DALLAS, TEXAS PURSUANT TO THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
(c) THE ARBITRATOR'S FEES AND FEES AND
COSTS OF PETITIONING FOR THE APPOINTMENT OF THE ARBITRATOR SHALL BE
PAID BY GREENBRIAR. THE ARBITRATOR UPON RENDERING ITS AWARD SHALL
DETERMINE THE PARTY THAT PREVAILED BASED UPON WRITTEN STATEMENTS MADE
BY EACH PARTY AT THE COMMENCEMENT OF THE ARBITRATION AS TO THE
POSITION OF THE PARTIES AND THEIR ALTERNATIVES FOR SETTLING THE
MATTER. A STATEMENT OF A PROPOSED SETTLEMENT SHALL NOT BE BINDING UPON
ANY PARTY AND SHALL NOT BE CONSIDERED AS EVIDENCE BY THE ARBITRATOR
EXCEPT TO THE EXTENT THAT THE ARBITRATOR UPON MAKING ITS SOLE AND
INDEPENDENT DETERMINATION SHALL DETERMINE THE PARTY WHICH PREVAILED
BASED UPON THE PROPOSALS FOR SETTLEMENT OF THE MATTER MADE BY EACH
PARTY AND SHALL DETERMINE THAT THE NON-PREVAILING PARTY SHALL PAY SOME
OR ALL OF THE COSTS OF ARBITRATION INCLUDING ANY COSTS INCURRED BY THE
ARBITRATOR AND IN EMPLOYING EXPERTS TO ADVISE THE ARBITRATOR IN REGARD
TO SPECIFIC SUBJECTS OR QUESTIONS. THE ARBITRATOR MAY FURTHER AWARD
THE COST OF ATTORNEYS FEES OR EXPERT WITNESSES CONSULTED OR EMPLOYED
IN THE PREPARATION OR PRESENTATION OF EVIDENCE TO THE ARBITRATOR BY
THE PREVAILING PARTY IF, IN THE ARBITRATOR'S DETERMINATION, THE
POSITION OF THE NONPREVAILING PARTY WAS NOT REASONABLY TAKEN OR
MAINTAINED OR WAS BASED
- 39 -
<PAGE> 45
UPON A FAILURE TO EXCHANGE OR COMMUNICATE PROPERLY INFORMATION WITH
THE PREVAILING PARTY IN REGARD TO THE SUBJECT SUBMITTED TO
ARBITRATION.
(d) THE ARBITRATOR'S DETERMINATION MAY
FURTHER PROVIDE FOR PROSPECTIVE ENFORCEMENT AND DIRECTIONS FOR THE
PARTIES TO COMPLY WITH INCLUDING WITHOUT LIMITATION PERMANENT
INJUNCTIVE RELIEF OR SPECIFIC PERFORMANCE. UNDER SUCH CIRCUMSTANCES,
THE ARBITRATOR'S AWARD SHALL BE BINDING UPON THE PARTIES AND SHALL BE
UNDERTAKEN AND PERFORMED BY EACH OF THE PARTIES UNTIL SUCH TIME AS THE
ARBITRATOR'S DIRECTIONS TO THE PARTY SHALL LAPSE BY THEIR TERM, OR THE
ARBITRATOR SHALL NOTIFY THE PARTIES THAT THOSE TERMS ARE NO LONGER IN
FORCE OR EFFECT OR SHALL MODIFY THOSE TERMS.
(e) NOTWITHSTANDING THE FOREGOING, ANY
PARTY MAY APPEAL THE ARBITRATOR'S DETERMINATION IF SUCH APPEAL IS
BASED SOLELY ON THE BASIS THAT THE ARBITRATOR HAS MADE AN INCORRECT
INTERPRETATION OF LAW.
- 40 -
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Stock Purchase Agreement as of the date first above written.
GREENBRIAR CORPORATION,
a Nevada corporation
By: /s/ GENE S. BERTCHER
---------------------------------
Gene S. Bertcher
Executive Vice President
LONE STAR OPPORTUNITY FUND, L.P.,
a Delaware limited partnership
By: Lone Star Partners, L.P., its
General Partner
By: Lone Star Management Co., Ltd.,
its General Partner
By: /s/ LOUIS PALETTA
------------------------------------
Name: Louis Paletta
----------------------------------
Title: Vice President
---------------------------------
- 41 -
<PAGE> 1
EXHIBIT 99.2
CERTIFICATE OF VOTING POWERS, DESIGNATIONS,
PREFERENCES, AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF
SERIES F SENIOR CONVERTIBLE PREFERRED STOCK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Ranking of the Series F Senior Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Dividends; Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Dividend Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Voting Rights of Series F Senior Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Special Rights in Electing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Class Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 Right of Holder to Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Mechanics of Conversion by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Mandatory Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Adjustments to Conversion Price for Diluting Issues
or Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 No Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Certificate as to Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.7 Notices of Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Covenants of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 Greenbriar Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Cash Reserves after a Special Asset Sale Trigger . . . . . . . . . . . . . . . . . . . . . 20
8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2 Dividends During Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.4 Put Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.5 Special Asset Sale Trigger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.6 Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.7 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9. No Reissuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
(i)
<PAGE> 3
GREENBRIAR CORPORATION
Certificate of Voting Powers, Designations,
Preferences, and Relative, Participating,
Optional or Other Special Rights of
Series F Senior Convertible Preferred Stock
We, Floyd B. Rhoades, President, and Robert L. Griffis, Secretary, of
Greenbriar ("Greenbriar"), a corporation organized and existing under Chapter
78 of the Nevada Revised Statutes, in accordance with the provisions of Section
78.1955 of the Nevada Revised Statutes thereof, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Articles of Incorporation, as amended, of Greenbriar, said Board of
Directors, at a meeting of the Board of Directors held pursuant to Chapter 78
of the Nevada Revised Statutes, duly adopted a resolution providing for the
issuance of one million four hundred thousand (1,400,000) shares of a new
series of preferred stock designated as Series F Senior Convertible Preferred
Stock (the "Series F Senior Preferred Stock"), which resolution is as follows:
RESOLVED, that pursuant to the Articles of Incorporation of
Greenbriar, there be and hereby is authorized and created a series of preferred
stock, to consist of 1,400,000 shares with a par value of $0.10 per share and a
stated value of $10.00 per share and that the voting powers, designations,
preferences, and relative, participating, optional or other special rights of
the Series F Senior Preferred Stock and the qualifications, limitations or
restrictions thereof be as follows:
1. Certain Definitions.
The following terms shall have the following meanings:
"1996 Form 10-K" means Greenbriar's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
"5-day Average Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the average
closing price of such common stock on the American Stock Exchange, New York
Stock Exchange or Nasdaq National Market over the 5-trading day period
immediately prior to such date.
"20-day Average Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the average
closing price of such common stock on the American Stock Exchange, New York
Stock Exchange or Nasdaq National Market over the 20-trading day period
immediately prior to such date.
"Act" means the Securities Act of 1933, as amended.
"Additional Shares of Greenbriar Nonpreferred Stock" means all shares
of Greenbriar Nonpreferred Stock issued by Greenbriar after the Closing Date
other than (i) any shares of Greenbriar Common Stock issued pursuant to
options, rights or warrants to purchase Greenbriar Common Stock issued pursuant
to the Stock Option Plans; provided that (a) such
<PAGE> 4
issuances do not exceed in the aggregate 500,000 shares and (b) the exercise
price under such options, rights and warrants shall be payable in cash and
shall be not less than the greater of the Conversion Price or the Fair Market
Price on the date of issuance of the option, right or warrant, (ii) shares of
Greenbriar Common Stock, either sold to employees of Greenbriar or contributed
as a matching contribution at a price not less than the then current Fair
Market Price pursuant to Greenbriar's 401(k) plan, (iii) any shares of
Greenbriar Common Stock issued to James R. Gilley pursuant to an option he
currently holds to purchase 400,000 shares, and, pursuant to his employment
agreement with Greenbriar, any shares of Greenbriar Common Stock issued
pursuant to options he will receive for 200,000 shares on December 31, 1997,
1998 and 1999, (iv) any shares of Greenbriar Common Stock issued to the April
Trust pursuant to a warrant to purchase 108,000 shares, (v) any shares of
Greenbriar Common Stock issued to the April Trust pursuant to a right to
convert Greenbriar Series D Preferred Stock into 337,500 shares, (vi) any
shares of Greenbriar Common Stock issued to Lone Star pursuant to a right to
convert Greenbriar Series F Senior Preferred Stock and Series G Senior Non-
Voting Preferred Stock, and (vii) any shares of Greenbriar Common Stock
exchanged with investors in the Syndication Program.
"Affiliate" has the meaning set forth in the Purchase Agreement.
"Asset Sale Repurchase Notice" has the meaning set forth in Section
8.5.
"Business Day" means any day other than a Saturday, a Sunday, any day
on which the New York Stock Exchange is closed or any other day on which
banking institutions in New York are authorized or required by law to be
closed.
"Certificate of Designation" means this Certificate of Voting Powers,
Designations, Preferences, and Relative, Participating, Optional or Other
Special Rights of Series F Senior Preferred Stock.
"Change in Management" has the meaning set forth in Section 8.6.
"Change in Management Repurchase Notice" has the meaning set forth in
Section 8.6.
"Change in Management Repurchase Shares" has the meaning set forth in
Section 8.6.
"Change of Control of Greenbriar" means, with respect to Greenbriar,
the occurrence of any of the following events: (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted
Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or after the passage of
time, directly or indirectly) of more than 40% of the Voting Stock of
Greenbriar; or (ii) individuals who at the date hereof constituted the Board of
Directors of Greenbriar (together with any new directors whose election by such
Board or whose nomination for election by the stockholders of Greenbriar was
approved by a vote of the majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office, other than
pursuant to the provisions of this Certificate of
2
<PAGE> 5
Designation or the Purchase Agreement; provided, however, a Sale of Greenbriar
is not considered a Change of Control of Greenbriar.
"Closing Date" means the date of the closing of the first sale of the
Series F Senior Preferred Stock.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the federal government administering the Act.
"Computation Date" means:
(i) with respect to Section 6.4(c), the earlier of (a)
the date on which Greenbriar shall enter into a firm contract for the
issuance of Additional Shares of Greenbriar Nonpreferred Stock or (b)
the date of actual issuance of Additional Shares of Greenbriar
Nonpreferred Stock; provided, that with respect to Section 6.4(c), the
Computation Date in connection with an acquisition by Greenbriar using
common stock as all or a part of the consideration shall mean the
effective date of issuance of Additional Shares of Greenbriar
Nonpreferred Stock;
(ii) with respect to Section 6.4(d), the earliest to occur
of (a) the date on which Greenbriar shall take a record of the holders
of its Greenbriar Nonpreferred Stock for the purpose of entitling them
to receive any warrants, options or other rights, (b) the date on
which Greenbriar shall enter into a firm contract for the issuance of
warrants, options or other rights and (c) the date of actual issuance
of warrants, options or other rights; and
(iii) with respect to Section 6.4(e), the earliest of (a)
the date on which Greenbriar shall take a record of the holders of its
Greenbriar Nonpreferred Stock for the purpose of entitling them to
receive any Greenbriar Convertible Securities, (b) the date on which
Greenbriar shall enter into a firm contract for the issuance of
Greenbriar Convertible Securities and (c) the date of actual issuance
of Greenbriar Convertible Securities.
"Conversion Price" initially means $17.50 and shall be adjusted and
readjusted from time to time as provided in Section 6.
"Default Date" has the meaning set forth in Section 8.2.
"Event of Default" means the occurrence of any of the following:
(i) Greenbriar shall fail to comply with any of the
covenants in Section 6 of the Purchase Agreement; provided, that in
the case of the covenants contained in Sections 6.4-6.18 and 6.24-6.27
of the Purchase Agreement, failure to comply shall not be considered
an Event of Default if such failure is cured or compliance is waived
in writing by the Preferred Stock Representative within 30 days after
the date on which the failure to comply first occurs; provided
further, that in the case of the covenants contained in Sections 6.28
and 6.29of the Purchase Agreement, failure to comply shall not be
considered an Event of Default if (i) compliance is waived in writing
by the Preferred Stock Representative within 30 days or (ii) the ratio
corresponding to each
3
<PAGE> 6
covenant is less than 4.5, 4.25 and 4.5, respectively, to 1 at the
quarter end on which the failure to comply first occurs and such
covenant is fully complied with at the next quarter end; provided
further, that in the case of the covenant contained in Sections 6.30 of
the Purchase Agreement, failure to comply shall not be considered an
Event of Default if (i) compliance is waived in writing by the
Preferred Stock Representative within 30 days or (ii) the ratio
contained in such covenant is 2 to 1 for the two quarter period
comprised of the quarter in which the failure to comply first occurs
and the following quarter; provided further, that in the case of the
covenants contained in Sections 6.31- 6.35 of the Purchase Agreement,
failure to comply shall not be considered an Event of Default if (i)
compliance is waived in writing by the Preferred Stock Representative
within 30 days or (ii) the percentage corresponding to each covenant is
less than 85% at the quarter end on which the failure to comply first
occurs and such covenant is fully complied with at the next quarter
end.
(ii) If Greenbriar fails to pay the holders of the Series
F Senior Preferred Stock all accrued dividends in full for two
quarters, whether or not such payment is legally permissible;
(iii) Greenbriar shall purport to take any action specified
in Section 5.2 of this Certificate of Designation without the
requisite vote of the holders of the Series F Senior Preferred Stock;
(iv) James R. Gilley and the Gilley Affiliates shall cease
to own at least 1,500,000 shares of Greenbriar Common Stock, subject
to appropriate adjustments in connection with a stock split or other
similar events;
(v) There shall occur a Change of Control of Greenbriar;
(vi) Greenbriar shall fail to comply with any of the
covenants contained in Section 7 of this Certificate of Designation;
provided that failure to comply shall not be considered an Event of
Default if such failure is cured or compliance is waived in writing by
the Preferred Stock Representative within 10 days after the date on
which the failure to comply first occurs;
(vii) The commencement of an involuntary case or other
proceeding against Greenbriar or any Subsidiary, which seeks
liquidation, reorganization or other relief with respect to it or its
debts or other liabilities under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or the entry of an order
for relief against Greenbriar or any Subsidiary in any such case under
the United States Bankruptcy Code which is not dismissed within 60
days; or
(viii) The commencement by Greenbriar or any Subsidiary of
or the approval by a majority of the Board of Directors of Greenbriar
or any Subsidiary of the commencement of a voluntary case or other
proceeding, seeking liquidation, reorganization or other relief with
respect to itself or its debts or other liabilities under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar
4
<PAGE> 7
official of it or any substantial part of its property, or consent to
any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced
against it, or the making by Greenbriar or any Subsidiary of a general
assignment for the benefit of creditors, or failure by Greenbriar or
any Subsidiary generally to or written admission of its inability to
pay its debts generally as they become due, or the taking of any
corporate action to authorize or effect any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Fair Market Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the greater of
(i) the 5-Day Average Price of such common stock or (ii) the 20-Day Average
Price of such common stock; provided, that the Fair Market Price of common
stock issued in connection with an acquisition by Greenbriar shall mean the
20-Day Average Price of such common stock. Notwithstanding any of the
foregoing, if the common stock that is being valued has not been listed on the
American Stock Exchange, New York Stock Exchange or Nasdaq National Market for
such 5 and 20 business day periods, then the Fair Market Price per share of
such common stock shall be deemed to be the greater of (i) the net book value
per share of common stock, determined in accordance with GAAP, or (ii) the fair
value per share of common stock determined pursuant to the Valuation Procedure.
"GAAP" means those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its
Accounting Principles Board or by the Financial Accounting Standards Board or
through other appropriate boards or committees thereof and which are
consistently applied for all periods to present fairly in all material respects
the financial position, results of operations and operating cash flow on a
consolidated basis of the party, except that any accounting principle or
practice required to be changed by the Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board or committee) in order
to continue as a generally accepted accounting principle or practice may be so
changed.
"Gilley Affiliates" means James R. Gilley, Sylvia Gilley, JRG
Investment Company, Inc., April Trust, September Trust, October Trust, November
Trust, December Trust, Nita Dry, Todd Dry, Donna Gilley, Elizabeth Gilley, W.
Michael Gilley, Caroline Gilley, or any other trusts controlled by James R.
Gilley.
"Greenbriar" means Greenbriar Corporation, a Nevada corporation.
"Greenbriar Common Stock" means Greenbriar's common stock, $0.01 par
value per share.
"Greenbriar Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for Additional Shares of Greenbriar Nonpreferred Stock, either immediately or
upon the arrival of a specified date or the happening of a specified event.
5
<PAGE> 8
"Greenbriar Nonpreferred Stock" means Greenbriar Common Stock and
shall also include stock of Greenbriar of any other class which is not
preferred as to dividends or assets to be received upon liquidation or
dissolution over any other class of stock of Greenbriar and which is not
subject to redemption.
"IRR" means compounded annual rate of return.
"Junior Stock" has the meaning set forth in Section 2.
"Liquidation Amount" means $10.00, plus a sum equal to all accumulated
but unpaid dividends (including dividends, if any, payable pursuant to Section
8.2) and interest thereon, if any, through the date of payment thereof, per
share of Series F Senior Preferred Stock.
"Liquidation Value" means the Liquidation Amount with respect to all
issued and outstanding Series F Senior Preferred Stock plus any unreimbursed
costs and expenses payable to the holders of the Series F Senior Preferred
Stock pursuant to the Purchase Agreement.
"Lone Star" means Lone Star Opportunity Fund, L.P., a Delaware limited
partnership.
"Mandatory Conversion Date" means the earlier of (i) the third
anniversary of the date of issuance of the Series F Senior Preferred Stock or
(ii) the date of a Sale of Greenbriar.
"Permitted Combination" means (i) a Sale of Greenbriar, (ii) an
acquisition by Greenbriar in the ordinary course of its business as described
in the 1996 Form 10-K, or (iii) where there is a Special Asset Sale Trigger.
"Permitted Holders" means James R. Gilley and his Affiliates.
"Permitted Investments" shall mean (a) marketable direct obligations
issued or unconditionally guaranteed by the United States government or issued
by an agency or instrumentality thereof and backed by the full faith and credit
of the United States of America, in each case maturing within 180 days after
the date of acquisition thereof; (b) marketable direct obligations issued by
any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within 180 days after
the date of acquisition thereof and, at the time of acquisition, having a
rating of "a" or higher from Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") and not listed in Credit Watch published by
S&P; (c) commercial paper maturing no more than 90 days after the date of
creation thereof and, at the time of acquisition, having a rating of at least
a-1 from S&P and P-1 from Moody's; (d) domestic and Eurodollar certificates of
deposit or time deposits or bankers acceptances maturing within 90 days after
the date of acquisition thereof issued by Escrow Agent or any commercial bank
organized under the laws of the United States of America or any state thereof
having a rating of "a" or higher from S&P and Moody's; and (e) money market
funds having an average portfolio maturity, at the time of acquisition thereof,
of not more than 90 days, which money market funds are required to invest at
least 95% of their assets in instruments described in this definition.
6
<PAGE> 9
"Potential Default" means any event's occurrence or any circumstance's
existence that would, upon any required notice, time lapse, or both, become an
Event of Default.
"Preferred Stock Representative" means a Person designated in writing
by a majority of the holders of the Series F Senior Preferred Stock to
represent such holders with respect to certain matters pursuant to this
Agreement and the Purchase Agreement.
"Purchase Agreement" means that certain Stock Purchase Agreement
between Greenbriar and Lone Star Opportunity Fund, L.P., whereby the Series F
Senior Preferred Stock is being issued, as amended from time to time in
accordance with the terms thereof. A copy of the Purchase Agreement, as so
amended, is maintained at the principal executive offices of Greenbriar and
will be furnished, upon written request, to any holders of the Series F Senior
Preferred Stock without charge.
"Repurchase Notice" has the meaning set forth in Section 8.4.
"Repurchase Promissory Note" has the meaning set forth in Section 8.6.
"Repurchase Shares" has the meaning set forth in Section 8.5.
"Sale of Greenbriar" means (i) a merger or consolidation in which all
shares of Greenbriar Common Stock are exchanged for cash, securities of another
entity, or a combination of cash and securities of another entity or (ii) a
cash tender offer to purchase all of the outstanding shares of Greenbriar is
made to the shareholders of Greenbriar and accepted by a majority of such
shareholders.
"Series B Junior Preferred Stock" means Greenbriar's Series B
Preferred Stock, $0.10 par value per share.
"Series D Junior Preferred Stock" means Greenbriar's Series D
Preferred Stock, $0.10 par value per share.
"Series F Senior Preferred Stock" has the meaning set forth in the
preamble.
"Series G Senior Non-Voting Preferred Stock" means Greenbriar's Series
G Senior Non-Voting Convertible Preferred Stock.
"Series G Certificate of Designation" means Greenbriar's Certificate
of Voting Powers, Designations, Preferences, and Relative, Participating,
Optional or Other Special Rights of Series G Senior Non-Voting Convertible
Preferred Stock as filed with the Secretary of State of Nevada.
"Special Asset Sale Trigger" means any sale, lease, sale/leaseback,
assignment, transfer or other disposition of assets, which when aggregated with
all sales, leases, sale/leasebacks, assignments, transfers or other
dispositions of assets in one or more independent or related transactions from
the later of the date hereof or the date of the last Special Asset Sale
Trigger, (i) have a total aggregate consideration received for such
dispositions in excess of $25 million of cash, indebtedness assumed and the
present fair value of any other consideration, including, but not limited to
the present fair value of any earnouts
7
<PAGE> 10
or (ii) dispose of a total aggregate number of operated properties of five. The
dispositions described above specifically include, but are not limited to,
sales of operating leases and management contracts and sales as a part of the
Syndication Program.
"Spin-off" means the pro rata distribution by Greenbriar of the
outstanding shares of common stock of a Subsidiary to the holders of Greenbriar
Common Stock to effect the spin-off of such Subsidiary.
"Stock Option Plans" means Greenbriar's 1997 Stock Option Plan and
Greenbriar's 1992 Stock Option Plan, as amended, which shall be consistent with
the copies of such plans delivered to purchasers of the Series F Senior
Preferred Stock prior to the Closing Date, as the same may be amended from time
to time with the prior approval of the Preferred Stock Representative.
"Subsidiaries" means all the corporations, partnerships, joint
ventures, business trusts or other legal entities in which Greenbriar, either
directly or indirectly through one or more intermediaries, owns or holds
beneficial or record ownership of at least a majority of the outstanding voting
shares or other equity interests. Each of the Subsidiaries is sometimes
referred to herein individually as a "Subsidiary."
"Syndication Program" means a program of selling real estate to public
or private syndications consisting of partnerships, limited liability
companies, or limited liability partnerships where ownership of such entities
is offered to passive investors for cash and/or notes.
"Tribunal" means any (a) local, state, territorial, federal, or
foreign judicial, executive, regulatory, administrative, legislative, or
governmental agency, board, bureau, commission, department, or other
instrumentality, (b) private arbitration board or panel or (c) central bank.
"Valuation Procedure" has the meaning set forth in Section 6.4(b).
"Voting Stock" means the total voting power of all classes of capital
stock then outstanding of a company and normally entitled to vote in elections
of directors of such company.
2. Ranking of the Series F Senior Preferred Stock.
So long as any shares of Series F Senior Preferred Stock shall be
outstanding, the Series F Senior Preferred Stock shall rank senior with respect
to the rights to receive dividends and to receive assets upon liquidation,
dissolution or winding up of Greenbriar to the Greenbriar Common Stock and to
all other series of preferred stock or classes or series of capital stock
hereafter or heretofore established by the Board of Directors of Greenbriar
(collectively, the "Junior Stock"), which includes, but is not limited to, the
Series B Junior Preferred Stock and the Series D Junior Preferred Stock. The
Series F Senior Preferred Stock shall rank pari passu with respect to the
rights to receive dividends and to receive assets upon liquidation, dissolution
or winding up of Greenbriar to Greenbriar's Series G Senior Non-Voting
Preferred Stock.
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3. Dividends; Restricted Payments.
3.1 Dividend Payment Dates. The holders of
Series F Senior Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors of Greenbriar out of funds legally available
for that purpose, a quarterly dividend of $0.15 per share payable in cash on
the last Business Day of March, June, September and December of each year
commencing on March 31, 1998, which payment shall include pro rated daily
dividends from the date of original issue of the Series F Senior Preferred
Stock. Dividends on the Series F Senior Preferred Stock shall be cumulative
from the date of original issue of the Series F Senior Preferred Stock, whether
or not at the time such dividend shall accrue or become due there shall be
funds legally available for the payment of dividends. All accrued and unpaid
dividends, whether or not earned or declared, shall bear interest from the
respective payment date until paid at an annual rate of 12% per annum.
3.2 Record Date. The Board of Directors shall fix a
record date for the determination of holders of the Series F Senior Preferred
Stock entitled to receive payment of a dividend declared thereon (including
dividends, if any, payable pursuant to Section 8.2), which record date shall be
not more than sixty (60) days prior to the date fixed for the payment thereof.
3.3 Restricted Payments. Unless full cumulative
dividends on the Series F Senior Preferred Stock have been paid (including
dividends, if any, payable pursuant to Section 8.2), no dividends or other
distributions shall be declared or paid or set apart for payment upon any
Junior Stock nor shall any Junior Stock be redeemed, purchased or otherwise
acquired by Greenbriar (other than upon conversion under the terms of said
Junior Stock for consideration consisting solely of shares of Greenbriar Common
Stock) for any consideration (or any payment made to or available for a sinking
fund for the redemption of any shares of such stock) by Greenbriar.
4. Liquidation Rights.
Upon any liquidation, dissolution or winding up of the affairs of
Greenbriar, no distribution shall be made or declared or set apart for payment
to the holders of any Junior Stock unless, prior to the first such
distribution, the holders of the Series F Senior Preferred Stock shall have
received the Liquidation Value. If the assets distributable in any such event
to the holders of the Series F Senior Preferred Stock are insufficient to
permit the payment to such holders of the full preferential amounts to which
they may be entitled, such assets shall be distributed ratably among the
holders of the Series F Senior Preferred Stock in proportion to the full
preferential amount each such holder would otherwise be entitled to receive.
5. Voting Rights of Series F Senior Preferred Stock.
5.1 Special Rights in Electing Directors. The holders of
the Series F Senior Preferred Stock shall at all times have the right following
the Closing, as a class, to elect at least one member of the Board of Directors
of Greenbriar who is subject to removal, and whose vacancy shall be filled,
only by the holders of the Series F Senior Preferred Stock; provided, that in
the event that the holders of the Series F Senior Preferred Stock do not
exercise their right to elect a board member, they may appoint an observer who
may attend
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all meetings (including committee meetings) of the Board of Directors of
Greenbriar and who shall be entitled to the same expense reimbursement as
Directors of Greenbriar. Any person elected or nominated for this position
shall provide to Greenbriar information required to be disclosed in filings
with the Commission.
5.2 Class Voting Rights. So long as any shares of Series
F Senior Preferred Stock are outstanding, in addition to any other vote or
consent of shareholders required by law or by the Articles of Incorporation of
Greenbriar, the approval of the holders of Series F Senior Preferred Stock,
acting as a single class, shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation or the Bylaws of
Greenbriar; including, but not limited to, any amendment, alteration,
repeal or filing of any Certificate of Designation of Greenbriar or
any resolution of the Board of Directors of Greenbriar filed with the
Office of the Secretary of State of Nevada;
(ii) The authorization, creation or issuance of, or the
increase in the authorized amount of, any shares of capital stock of
any class or series or any security convertible into shares of any
class or series of any security ranking prior to or on a parity with
the shares of Series F Senior Preferred Stock in the payment of
dividends or in the distribution of assets on any liquidation,
dissolution, or winding up of Greenbriar;
(iii) The merger or consolidation of Greenbriar with or
into any other corporation or other entity, other than a Permitted
Combination;
(iv) Any reorganization, restructuring, recapitalization
or other similar transaction of Greenbriar; other than a Permitted
Combination; or
(v) Any Spin-off.
With respect to any matter that requires the approval of holders of
Series F Senior Preferred Stock acting separately as a class or any action that
may be taken by the holders of Series F Senior Preferred Stock, such approval
shall be deemed to be given or such action taken by the affirmative vote of the
holders of a majority of the outstanding shares of Series F Senior Preferred
Stock, given in person or by proxy, by written consent or at the annual meeting
of Greenbriar's shareholders, or a special meeting in lieu thereof, or at a
special meeting of the holders of shares of Series F Senior Preferred Stock
called for the purpose of voting on such matter or action. Upon receipt of the
written request of the holders of 20% or more of the outstanding shares of
Series F Senior Preferred Stock, the Secretary of Greenbriar shall call and
give notice of a special meeting of the holders of the Series F Senior
Preferred Stock for the purpose specified in such request, which meeting shall
be held within 30 days after delivery of such request to Greenbriar at such
place in the continental United States as specified in such written request;
provided that the Secretary shall not be required to call such a special
meeting in the case of any such request received less than 30 days before the
date fixed for an annual meeting of Greenbriar's shareholders.
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6. Conversion.
The Series F Senior Preferred Stock shall be convertible as follows:
6.1 Right of Holder to Conversion. Each share of the
Series F Senior Preferred Stock shall be convertible, without the payment of
any additional consideration by the holder thereof and at the option of the
holder thereof, at any time after the earlier of (i) the second anniversary of
the date of original issuance of Series F Senior Preferred Stock, (ii) an Event
of Default under any of clauses (ii) through (viii) of the definition of "Event
of Default" or an Event of Default resulting from the failure of Greenbriar to
comply with Sections 6.1, 6.3, 6.10, 6.19, 6.20, 6.22, 6.27-6.35 or 6.37 of the
Purchase Agreement, in whole or in part, (iii) a Special Asset Sale Trigger or
(iv) a Change in Management, at the office of Greenbriar or any transfer agent
for the Series F Senior Preferred Stock, into a number of shares of Greenbriar
Common Stock determined by dividing the Liquidation Value of the shares so
converted by the Conversion Price, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Fair Market Price.
6.2 Mechanics of Conversion by Holder. In order for any
holder of the Series F Senior Preferred Stock to convert the same into
Greenbriar Common Stock, the holder shall surrender to Greenbriar at the office
of Greenbriar or of any transfer agent for the Series F Senior Preferred Stock,
the certificate or certificates representing such Series F Senior Preferred
Stock, accompanied by written notice to Greenbriar that the holder elects to
convert all or a specified number of such shares and stating therein the
holder's name or the name or names of the holder's nominees in which the holder
wishes the certificate or certificates for Greenbriar Common Stock to be issued
or transferred. Greenbriar shall, as soon as practicable thereafter, deliver at
such office to such holder of the Series F Senior Preferred Stock, or to the
holder's nominee or nominees, a certificate or certificates representing the
number of shares of Greenbriar Common Stock to which the holder shall be
entitled as aforesaid and, if less than the full number of shares of the Series
F Senior Preferred Stock evidenced by such surrendered certificate or
certificates being converted, a new certificate or certificates, of like tenor,
for the number of shares of the Series F Senior Preferred Stock evidenced by
such surrendered certificate less the number of such shares being converted.
Any conversion made at the election of a holder of the Series F Senior
Preferred Stock shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the Series F Senior
Preferred Stock to be converted, and the person or persons entitled to receive
the Greenbriar Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Greenbriar Common Stock on
such date.
6.3 Mandatory Conversion. On the Mandatory Conversion
Date, each share of the Series F Senior Preferred Stock must be converted into
shares of Greenbriar Common Stock based upon the conversion provisions herein
and subject to any adjustments as provided in this Agreement.
6.4 Adjustments to Conversion Price for Diluting Issues
or Other Transactions:
(a) Stock Dividends, Subdivisions and
Combinations. In case at any time or from time to time Greenbriar
shall:
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(1) take a record of the holders of its
Greenbriar Nonpreferred Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution
of, Greenbriar Nonpreferred Stock;
(2) subdivide its outstanding shares of
Greenbriar Nonpreferred Stock into a larger number of shares
of Greenbriar Nonpreferred Stock; or
(3) combine its outstanding shares of
Greenbriar Nonpreferred Stock into a smaller number of shares
of Greenbriar Nonpreferred Stock;
then the Conversion Price in effect immediately after the happening of any such
event shall be proportionately decreased, in case of the happening of events
described in subparagraphs (1) or (2) above, or proportionately increased, in
case of the happening of events described in subparagraph (3) above.
(b) Certain Other Dividends and Distributions. In case
at any time or from time to time Greenbriar shall take a record of the
holders of its Greenbriar Nonpreferred Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(1) cash, to the extent, but only to the
extent, that such distribution together with all such dividends
paid or declared after the date hereof, does not exceed the
consolidated net income, net of consolidated net losses, of
Greenbriar and its consolidated subsidiaries earned subsequent
to the date hereof determined in accordance with GAAP;
(2) any evidence of its indebtedness (other than
Greenbriar Convertible Securities), any shares of its stock
(other than Additional Shares of Greenbriar Nonpreferred Stock)
or any other securities or property of any nature whatsoever
(other than cash and other than Greenbriar Convertible
Securities or Additional Shares of Greenbriar Nonpreferred
Stock); or
(3) any warrants or other rights to subscribe
for or purchase any evidences of its indebtedness (other than
Greenbriar Convertible Securities), any shares of its stock
(other than Additional Shares of Greenbriar Nonpreferred Stock)
or any other securities or property of any nature whatsoever
(other than cash and other than Greenbriar Convertible
Securities or Additional Shares of Greenbriar Nonpreferred
Stock);
then the Conversion Price in effect shall be adjusted to that number
determined by multiplying the Conversion Price then in effect by a
fraction (x) the numerator of which shall be the Fair Market Price per
share of Greenbriar Common Stock immediately prior to the date of
taking such record minus the portion applicable to one share of
Greenbriar Common Stock of any such cash so distributable and of the
fair value of any and all such evidences of indebtedness, shares of
stock,
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<PAGE> 15
other securities or property, or warrants or other subscription or
purchase rights so distributable and (y) the denominator of which shall
be the Fair Market Price per share of Greenbriar Common Stock
immediately prior to the date of taking such record. The fair value of
any and all such evidences of indebtedness, shares of stock, other
securities or property, or warrants or other subscription or purchase
rights, shall be determined pursuant to the Valuation Procedure. The
"Valuation Procedure" is a determination of fair value of any property
made in good faith by the Board of Directors of Greenbriar; provided
that, if the Preferred Stock Representative objects to such
determination within 10 days of receipt of written notification
thereof, then the fair value of such property shall be determined in
good faith by a recognized national investment bank selected by
unanimous vote or consent of the Board of Directors of Greenbriar,
which investment bank is not reasonably objected to by the Preferred
Stock Representative. The fees and expenses of such investment bank
shall be paid by one-half by Greenbriar and one-half by the holders of
the Series F Senior Preferred Stock. A reclassification of the
Greenbriar Nonpreferred Stock into shares of Greenbriar Nonpreferred
Stock and shares of any other class of stock shall be deemed a
distribution by Greenbriar to the holders of its Greenbriar
Nonpreferred Stock of such shares of such other class of stock within
the meaning of this Section 6.4(b) and, if the outstanding shares of
Greenbriar Nonpreferred Stock shall be changed into a larger or smaller
number of shares of Greenbriar Nonpreferred Stock as a part of such
reclassification, shall be deemed a subdivision or combination, as the
case may be, of the outstanding shares of Greenbriar Nonpreferred Stock
within the meaning of Section 6.4(a).
(c) Issuance of Additional Shares of Greenbriar
Nonpreferred Stock. In case at any time or from time to time after the
Closing Date, Greenbriar shall (except as hereinafter provided) issue,
whether in connection with the merger of a corporation into Greenbriar
or otherwise, any Additional Shares of Greenbriar Nonpreferred Stock
for a consideration per share less than either the Conversion Price or
the Fair Market Price per share of Greenbriar Common Stock on the
Computation Date, then the Conversion Price shall be adjusted to the
lower of either:
(1) that number determined by multiplying the
Conversion Price in effect immediately prior to such adjustment
by a fraction (x) the numerator of which shall be the number of
shares of Greenbriar Nonpreferred Stock, plus the number of
shares of Greenbriar Nonpreferred Stock which the aggregate
consideration for the total number of such Additional Shares of
Greenbriar Nonpreferred Stock so issued would purchase at the
greater of the Conversion Price or the Fair Market Price per
share of Greenbriar Common Stock and (y) the denominator of
which shall be the number of shares of Greenbriar Nonpreferred
Stock plus the number of such Additional Shares of Greenbriar
Nonpreferred Stock so issued; or
(2) the value of the consideration per share
for which such Additional Shares of Greenbriar Nonpreferred
Stock were issued (or, in the case of adjustments under
Sections 6.4(d) or 6.4(e), are issuable).
No adjustment of the Conversion Price shall be made under this Section
6.4(c) upon the issuance of any Additional Shares of Greenbriar
Nonpreferred Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Greenbriar
Convertible Securities, if any such adjustment shall previously have
been made upon the issuance of such warrants or other rights or upon
the issuance of such
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Greenbriar Convertible Securities (or upon the issuance of any warrant
or other rights therefor) pursuant to Section 6.4(d) or 6.4(e).
(d) Issuance of Warrants, Options or Other Rights.
In case at any time or from time to time after the Closing Date,
Greenbriar shall take a record of the holders of its Greenbriar
Nonpreferred Stock for the purpose of entitling them to receive a
distribution of, or shall otherwise issue, any warrants, options or
other rights to subscribe for or purchase any Additional Shares of
Greenbriar Nonpreferred Stock or any Greenbriar Convertible Securities
and the consideration per share for which Additional Shares of
Greenbriar Nonpreferred Stock may at any time thereafter be issuable
pursuant to such warrants, options or other rights or pursuant to the
terms of such Greenbriar Convertible Securities shall be less than
either the Conversion Price or the Fair Market Price per share of
Greenbriar Common Stock on the Computation Date, then the Conversion
Price shall be adjusted as provided in Section 6.4(c). Such adjustment
shall be made on the basis that (i) the maximum number of Additional
Shares of Greenbriar Nonpreferred Stock issuable pursuant to all such
warrants, options or other rights or necessary to effect the conversion
or exchange of all such Greenbriar Convertible Securities shall be
deemed to have been issued as of the Computation Date, and (ii) the
aggregate consideration for such maximum number of Additional Shares of
Greenbriar Nonpreferred Stock shall be deemed to be the minimum
consideration received and receivable by Greenbriar for the issuance of
such Additional Shares of Greenbriar Nonpreferred Stock pursuant to
such warrants, options or other rights or pursuant to the terms of such
Greenbriar Convertible Securities.
(e) Issuance of Greenbriar Convertible Securities. In case
at any time or from time to time after the Closing Date, Greenbriar
shall take a record of the holders of its Greenbriar Nonpreferred Stock
for the purpose of entitling them to receive a distribution of, or
shall otherwise issue, any Greenbriar Convertible Securities and the
consideration per share for which Additional Shares of Greenbriar
Nonpreferred Stock may at any time thereafter be issuable pursuant to
the terms of such Greenbriar Convertible Securities shall be less than
either the Conversion Price or the Fair Market Price per share of
Greenbriar Common Stock on the Computation Date, then the Conversion
Price shall be adjusted as provided in Section 6.4(c). Such adjustments
shall be made on the basis that (i) the maximum number of Additional
Shares of Greenbriar Nonpreferred Stock necessary to effect the
conversion or exchange of all such Greenbriar Convertible Securities
shall be deemed to have been issued as of the Computation Date, and
(ii) the aggregate consideration for such maximum number of Additional
Shares of Greenbriar Nonpreferred Stock shall be deemed to be the
minimum consideration received and receivable by Greenbriar for the
issuance of such Additional Shares of Greenbriar Nonpreferred Stock
pursuant to the terms of such Greenbriar Convertible Securities. No
adjustment of the Conversion Price shall be made under this Section
6.4(e) upon the issuance of any Greenbriar Convertible Securities which
are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights pursuant to Section 6.4(d).
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(f) Superseding Adjustment of Conversion Price. If,
at any time after any adjustment of the Conversion Price shall have
been made pursuant to the foregoing Section 6.4(d) or 6.4(e) on the
basis of the issuance of warrants or other rights or the issuance of
other Greenbriar Convertible Securities, or after any new adjustment of
the Conversion Price shall have been made pursuant to this Section
6.4(f):
(1) all of such warrants, options or rights
or the right of conversion or exchange in such other Greenbriar
Convertible Securities shall expire, and none of such warrants,
options or rights, or the right of conversion or exchange in
respect of such other Greenbriar Convertible Securities, as the
case may be, shall have been exercised; or
(2) the consideration per share, for which
Additional Shares of Greenbriar Nonpreferred Stock are issuable
pursuant to all of such warrants, options or rights or the
terms of all of such other Greenbriar Convertible Securities,
shall be increased solely by virtue of provisions therein
contained for an automatic increase in such consideration per
share upon the arrival of a specified date or the happening of
a specified event, and none of such warrants, options or
rights, or the right of conversion or exchange in respect of
such other Greenbriar Convertible Securities, as the case may
be, shall have been exercised;
such previous adjustment shall be rescinded and annulled and the
Additional Shares of Greenbriar Nonpreferred Stock which were deemed to
have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to
have been issued by virtue of such computation. Thereupon, a
recomputation shall be made of the effect of such warrants, rights or
options or other Greenbriar Convertible Securities on the basis of
treating any such warrants, options or rights or any such other
Greenbriar Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of such
increase of the consideration per share for such Additional Shares of
Greenbriar Nonpreferred Stock are issuable under such warrants or
rights or other Greenbriar Convertible Securities; and, if and to the
extent called for by the foregoing provisions of this Section 6.4 on
the basis aforesaid, a new adjustment of the Conversion Price shall be
made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
(g) Other Provisions Applicable to Adjustments Under
this Section. The following provisions shall be applicable to the
making of adjustments of the Conversion Price hereinbefore provided for
in this Section 6.4:
(1) Treasury Stock. The sale or other
disposition of any issued shares of Greenbriar Nonpreferred
Stock owned or held by or for the account of Greenbriar shall
be deemed an issuance thereof for purposes of this Section 6.4.
(2) Computation of Consideration. To the
extent that any Additional Shares of Greenbriar Nonpreferred
Stock or any Greenbriar Convertible Securities or any warrants,
options or other rights to subscribe for or purchase
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any Additional Shares of Greenbriar Nonpreferred Stock or any
Greenbriar Convertible Securities shall be issued solely for
cash consideration, the consideration received by Greenbriar
therefor shall be deemed to be the amount of cash received by
Greenbriar therefor, or, if such Additional Shares of
Greenbriar Nonpreferred Stock or Greenbriar Convertible
Securities are offered by Greenbriar for subscription, the
subscription price, or, if such Additional Shares of Greenbriar
Nonpreferred Stock or Greenbriar Convertible Securities are
sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price, in
any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of
any compensation, discounts or expenses paid or incurred by
Greenbriar for and in the underwriting of, or otherwise in
connection with, the issue thereof. The consideration for any
Additional Shares of Greenbriar Nonpreferred Stock issuable
pursuant to any warrants, options or other rights to subscribe
for or purchase the same shall be the consideration received or
receivable by Greenbriar for issuing such warrant, options or
other rights, plus the additional consideration payable to
Greenbriar upon the exercise of such warrants, options or other
rights. The consideration for any Additional Shares of
Greenbriar Nonpreferred Stock issuable pursuant to the terms of
any Greenbriar Convertible Securities shall be the
consideration received or receivable by Greenbriar for issuing
any warrants or other rights to subscribe for or purchase such
Greenbriar Convertible Securities, plus the consideration paid
or payable to Greenbriar in respect of the subscription for or
purchase of such Greenbriar Convertible Securities, plus the
additional consideration, if any, payable to Greenbriar upon
the exercise of the right of conversion or exchange in such
Greenbriar Convertible Securities. To the extent that any
issuance shall be for a consideration other than solely for
cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the fair
value of such consideration at the time of such issuance as
determined pursuant to the Valuation Procedure.
(3) When Adjustments to be made. The
adjustments required by the preceding subsections of this
Section 6.4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except
that no adjustment of the Conversion Price that would otherwise
be required shall be made (except in the case of a subdivision
or combination of shares of the Greenbriar Nonpreferred Stock
as provided for in Section 6.4(a)) unless and until such
adjustment, either by itself or with other adjustments not
previously made, adds or subtracts at least $0.05 to the
Conversion Price, as determined in good faith by the Board of
Directors of Greenbriar. Any adjustment representing a change
of less than such minimum amount shall be carried forward and
made as soon as such adjustment, together with other
adjustments required by this Section 6.4 and not previously
made, would result in a minimum adjustment. For the purpose of
any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its
occurrence.
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(4) Fractional Interests. In computing adjustments
under this Section 6.4, fractional interests in Greenbriar
Nonpreferred Stock shall be taken into account to the nearest
one-thousandth of a share.
(5) When Adjustment Not Required. If Greenbriar
shall take a record of the holders of its Greenbriar
Nonpreferred Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution thereof to
shareholders, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(h) Merger, Consolidation or Disposition of Assets. In case
Greenbriar shall merge or consolidate into another corporation, or shall
sell, transfer or otherwise dispose of all or substantially all of its
property, assets or business to another corporation, except where there is a
Special Asset Sale Trigger, and pursuant to the terms of such merger,
consolidation or disposition, shares of common stock of the successor or
acquiring corporation are to be received by or distributed to the holders of
Greenbriar Nonpreferred Stock, then each holder of a share of the Series F
Senior Preferred Stock shall have the right thereafter to receive, upon
exercise of such share of the Series F Senior Preferred Stock, shares of
common stock each comprising the number of shares of common stock of the
successor or acquiring corporation receivable upon or as a result of such
merger, consolidation or disposition of assets by a holder of the number of
shares of Greenbriar Common Stock into which one share of the Series F
Senior Preferred Stock could be converted immediately prior to such event.
If, pursuant to the terms of such merger, consolidation or disposition of
assets, any cash, shares of stock or other securities or property of any
nature whatsoever (including warrants or other subscription or purchase
rights) are to be received by or distributed to the holders of Greenbriar
Nonpreferred Stock in addition to common stock of the successor or acquiring
corporation, then the Conversion Price in effect shall be adjusted to that
number determined by multiplying the Conversion Price then in effect by a
fraction (x) the numerator of which shall be the Fair Market Price per share
of Greenbriar Common Stock immediately prior to the closing of such merger,
consolidation or disposition minus the portion applicable to one share of
Greenbriar Common Stock of any such cash so distributable and of the fair
value of any such shares of stock or other securities or property so
received or distributed and (y) the denominator of which shall be the Fair
Market Price per share of Greenbriar Common Stock immediately prior to the
closing of such merger, consolidation or disposition. The fair value of any
such shares of stock or other securities or property shall be determined
pursuant to the Valuation Procedure. In case of any such merger,
consolidation or disposition of assets, the successor acquiring corporation
shall expressly assume the due and punctual observance and performance of
each and every covenant and condition hereof to be performed and observed by
Greenbriar and all of the obligations and liabilities hereunder, subject to
such modification as shall be necessary to provide for adjustments to the
Conversion Price which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 6.4. For the purposes of this
Section 6.4(h), "common stock of the successor or acquiring corporation"
shall include stock of such corporation of any class, which is not preferred
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as to dividends or assets over any other class of stock of such corporation
and which is not subject to redemption, and shall also include any evidences
of indebtedness, shares of stock or other securities which are convertible
into or exchangeable for any such stock, either immediately or upon the
arrival of a specified date or the happening of a specified event, and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 6.4(h) shall similarly apply to
successive mergers, consolidations or dispositions of assets.
(i) Purchases or Redemptions. In case at any time or
from time to time after the Closing Date, Greenbriar shall (except as
hereinafter provided) purchase or redeem any Greenbriar Common Stock,
warrants, options or other rights to subscribe for, purchase, convert into
or exchange for Greenbriar Common Stock for a consideration per share
greater than the Fair Market Price per share of Greenbriar Common Stock on
the Computation Date, then the Conversion Price shall be adjusted to the
lower of either:
(1) that number determined by multiplying the
Conversion Price in effect immediately prior to such
adjustment by a fraction (x) the numerator of which shall be
the number of shares of Greenbriar Common Stock plus the
number of such shares or share equivalents of Greenbriar
Common Stock, warrants, options or other rights to subscribe
for, purchase, convert into or exchange for Greenbriar Common
Stock so purchased or redeemed and (y) the denominator of
which shall be the number of shares of Greenbriar Common
Stock, plus the number of shares or share equivalents of
Greenbriar Common Stock which the aggregate consideration for
the total number of such Greenbriar Common Stock, warrants,
options or other rights to subscribe for, purchase, convert
into or exchange for Greenbriar Common Stock so purchased or
redeemed would purchase at the Fair Market Price per share of
Greenbriar Common Stock; or
(2) the value of the consideration per share for
which such Greenbriar Common Stock, warrants, options or other
rights to subscribe for, purchase, convert into or exchange
for Greenbriar Common Stock were purchased or redeemed.
No adjustment of the Conversion Price shall be made under this Section
6.4(c) upon the issuance of any Additional Shares of Greenbriar Nonpreferred
Stock which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any Greenbriar Convertible Securities, if
any such adjustment shall previously have been made upon the issuance of
such warrants or other rights or upon the issuance of such Greenbriar
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 6.4(d) or 6.4(e).
(j) Other Action Affecting Greenbriar Nonpreferred Stock.
In case at any time or from time to time Greenbriar shall take any action
affecting its Greenbriar Nonpreferred Stock, other than an action described
in any of the foregoing Sections 6.4(a) through (i), inclusive, then, unless
in the opinion of the Board of Directors such action will not have a
materially adverse effect upon the rights of the
18
<PAGE> 21
holders of the Series F Senior Preferred Stock, the Conversion Price shall
be adjusted in such manner and at such time as the Board of Directors may in
good faith determine to be equitable in the circumstances.
6.5 No Impairment. Other than in connection with the
amendment of its Articles of Incorporation approved by the requisite number of
stockholders, Greenbriar will not, through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid the observance or performance of any of the terms
to be observed or performed hereunder by Greenbriar but will at all times in
good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the holders of the Series F Senior
Preferred Stock against impairment. Without limiting the generality of the
foregoing, Greenbriar (i) will not permit the par value of any shares of stock
at the time receivable upon the conversion of the Series F Senior Preferred
Stock to exceed the Conversion Price then in effect, (ii) will take all such
action as may be necessary or appropriate in order that Greenbriar may validly
and legally deliver fully paid nonassessable shares of stock on the conversion
of the Series F Senior Preferred Stock, and (iii) will not issue any Additional
Shares of Greenbriar Nonpreferred Stock or Greenbriar Convertible Securities or
take any action which results in any adjustment of the Conversion Price if the
total number of shares of Greenbriar Common Stock required to be delivered
after such issuance or action upon the conversion of all the then outstanding
shares of Series F Senior Preferred Stock will exceed the number of shares of
Greenbriar Common Stock and available for the purpose of delivery upon such
conversion.
6.6 Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Section 6, Greenbriar at Greenbriar's expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
the Preferred Stock Representative a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by Greenbriar for any Additional Shares of Greenbriar
Nonpreferred Stock issued or sold or deemed to have been issued, (ii) the number
of shares of Greenbriar Nonpreferred Stock outstanding or deemed to be
outstanding, and (iii) the Conversion Price in effect immediately prior to such
issue or sale and as adjusted and readjusted on account thereof, showing how it
was calculated. Greenbriar shall, upon the written request at any reasonable
time of the Preferred Stock Representative, furnish or cause to be furnished to
such holder a like certificate setting forth (i) the Conversion Price at the
time in effect, showing how it was calculated, and (ii) the number of shares of
Greenbriar Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the Series F Senior Preferred
Stock.
6.7 Notices of Record Date. In the event of any taking by
Greenbriar of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, Greenbriar shall mail to each holder of the Series F
Senior Preferred Stock at least 10 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend or distribution.
19
<PAGE> 22
7. Covenants of Greenbriar.
Without the prior written consent of the Preferred Stock
Representative, Greenbriar shall comply with each of the following covenants.
7.1 Board of Directors. So long as any shares of the
Series F Senior Preferred Stock shall remain outstanding, Greenbriar shall not
increase the number of directors above nine except in connection with the right
of the holders of the Series F Senior Preferred Stock to appoint directors.
7.2 Greenbriar Common Stock. Greenbriar shall at all times
reserve and keep available enough shares of Greenbriar Common Stock to effect
the conversion of the Series F Senior Preferred Stock, subject to (i)
appropriate adjustments in connection with a stock split or other similar
events and (ii) a reduction by the number of shares of Greenbriar Common Stock
that have previously been delivered upon conversion of Series F Senior
Preferred Stock; all of such shares of Greenbriar Common Stock which are
issuable to the holders of the Series F Senior Preferred Stock by way of
conversion, will be when issued, duly authorized and validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges.
7.3 Cash Reserves after a Special Asset Sale Trigger.
Commencing on the date nine months after the date of a Special Asset Sale
Trigger, Greenbriar shall, at all times, maintain cash or Permitted Investments
in excess of the sum of (i) the current Liquidation Value of the Series F Senior
Preferred Stock and (ii) the current Liquidation Value (as defined in the Series
G Certificate of Designation) of the Series G Senior Non-Voting Preferred Stock.
8. Events of Default.
8.1 Notice of Event of Default. Upon an Event of Default
or Potential Default, Greenbriar shall provide written notice of such Event of
Default or Potential Default, including the date on which such event first
occurred, to the Preferred Stock Representative within 10 days after the
occurrence of such event. Any Event of Default or Potential Default may be
waived in writing by the Preferred Stock Representative at any time, in which
case Sections 8.2 through 8.4 shall not apply with respect to such Event of
Default or Potential Default; provided, however, that no such waiver of an
Event of Default or Potential Default shall be deemed to be a waiver of any
other Event of Default or Potential Default.
8.2 Dividends During Event of Default. Upon the
occurrence and during the continuance of an Event of Default resulting from (i)
the failure of Greenbriar to comply with any of the covenants contained in
Sections 6.1, 6.3, 6.8, 6.10, 6.19, 6.20, 6.22, 6.24 and 6.27-6.37 of the
Purchase Agreement or (ii) any of the events specified in clauses (ii) through
(viii) of the definition of "Event of Default," the holders of outstanding
shares of Series F Senior Preferred Stock shall be entitled to receive, in
addition to all other dividends payable hereunder to holders of shares of
Series F Senior Preferred Stock and when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
cumulative preferential cash dividends accruing from the date of the Event of
Default (the "Default Date") in an amount per share per annum equal to $1.20
per share,
20
<PAGE> 23
payable quarterly on the last Business Day of March, June, September and
December of each year. Dividends on the Series F Senior Preferred Stock shall
accrue (whether or not declared) on a daily basis and shall be cumulative
(whether or not in any Dividend Period there shall be funds of Greenbriar
legally available for the payment of such dividends). The first dividend shall
accrue from the Default Date through the last Business Day of the first
calendar quarter to end after the Default Date, and subsequent dividends shall
accrue on a daily basis during the dividend period for which they are payable.
8.3 Election of Directors. Upon the occurrence and
during the continuance of an Event of Default resulting from any of the events
specified in clauses (ii) through (viii) of the definition of "Event of
Default," the holders of shares of Series F Senior Preferred Stock shall have
the right, acting separately as a class, to elect a number of persons to the
Board of Directors of Greenbriar that will constitute 70% of the Board of
Directors. Upon the taking of such action, the maximum authorized number of
members of the Board of Directors shall automatically increase by the number of
directors so elected, and the vacancies so created shall be filled by the
persons elected pursuant to this Section 8.3. In the event that upon the
election of directors under this Section 8.3, Greenbriar is required under Rule
14f-1 under the Exchange Act to file with the Commission and transmit to its
stockholders certain information, Greenbriar shall take such action as promptly
as practicable, and the term of office of the directors so elected shall begin
upon the termination of the 10-day period prescribed by such Rule. A director
elected by the holders of Series F Senior Preferred Stock pursuant to this
Section 8.3 shall serve until his successor is duly elected and qualified,
until his removal or until his term terminates as provided below. Such a
director may be removed without cause at any time by action, and only by such
action, of the holders of shares of Series F Senior Preferred Stock. If the
office of a director elected pursuant to this Section 8.3 becomes vacant by
reason of death, resignation, retirement, disqualification, removal from office
or otherwise, such vacancy may be filled by the action, and only by such
action, of the holders of shares of Series F Senior Preferred Stock. At such
time as the Event of Default giving rise to this right to elect directors has
been cured, such right shall terminate, the terms of any directors elected
pursuant to this Section 8.3 shall terminate and the maximum number of
authorized members of the Board of Directors shall decrease automatically to
the maximum number of authorized members of the Board of Directors in effect
immediately before any action was taken pursuant hereto. At any time when the
special voting rights of the holders of the Series F Senior Preferred Stock
provided in this Section 8.3 shall have become operative and not have been
exercised, a proper officer of Greenbriar shall, upon the written request of
the holders of record of at least 20% of the shares of Series F Senior
Preferred Stock then outstanding addressed to the Secretary of Greenbriar, call
a special meeting of the holders of the Series F Senior Preferred Stock for the
purpose of electing the allotted directors to be elected by the Series F Senior
Preferred Stock. Such meeting shall be held within 30 days after delivery of
such request to Greenbriar at such place in the continental United States as
may be specified in such written request; provided that the Secretary shall not
be required to call such a special meeting in the case of any such request
received less than 30 days before the date fixed for an annual meeting of
Greenbriar's stockholders.
8.4 Put Option. Upon the occurrence of an Event of
Default resulting from (i) the failure of Greenbriar to comply with any of the
covenants contained in Sections 6.1, 6.3, 6.10, 6.19, 6.20, 6.22, 6.27-6.35 of
the Purchase Agreement or (ii) any of the events specified in clauses (iii)
through (viii) of the definition of "Event of Default," each holder of shares
of
21
<PAGE> 24
Series F Senior Preferred Stock shall have the right, by written notice to
Greenbriar (the "Repurchase Notice") within 90 days after the occurrence of the
Event of Default, to require that Greenbriar repurchase, out of funds legally
available therefor, any or all of such holder's shares of Series F Senior
Preferred Stock for an amount in cash equal to 120% of the Liquidation Value of
the shares of Series F Senior Preferred Stock to be repurchased as of the date
of the holder's Repurchase Notice. Any Repurchase Notice shall be accompanied
by duly endorsed certificates representing the shares of Series F Senior
Preferred Stock to be repurchased. Upon receipt of a Repurchase Notice,
Greenbriar shall make payment in cash of the appropriate amount to the holder
requiring repurchase with five Business Days of the date such Repurchase Notice
is received, unless prior to such payment, Greenbriar receives written notice
from such holder that such holder is withdrawing its requirement of the
repurchase of its shares of Series F Senior Preferred Stock.
8.5 Special Asset Sale Trigger. Upon a Special Asset
Sale Trigger, each holder of shares of Series F Senior Preferred Stock shall
have the right, by written notice to Greenbriar (the "Asset Sale Repurchase
Notice") within nine months after written notice to the Preferred Stock
Representative of the occurrence of a Special Asset Sale Trigger, to require
that Greenbriar repurchase, out of funds legally available therefor, a
specified number of such holder's shares (the "Repurchase Shares") of Series F
Senior Preferred Stock. The Repurchase Shares may be all or any portion of such
holder's total shares of Series F Senior Preferred Stock. The Repurchase Shares
shall be repurchased by Greenbriar for an amount in cash equal to the aggregate
Liquidation Value of the Repurchase Shares plus the greater of: (i) 20% of the
aggregate Liquidation Value of the Repurchase Shares or (ii) a 20% IRR on the
aggregate Liquidation Value of the Repurchase Shares, in each case, as of the
date of the holder's Asset Sale Repurchase Notice. Any Asset Sale Repurchase
Notice shall be accompanied by duly endorsed certificates representing the
Repurchase Shares. Upon receipt of a Asset Sale Repurchase Notice, Greenbriar
shall make payment in cash of the appropriate amount to the holder requiring
repurchase with five Business Days of the date such Asset Sale Repurchase
Notice is received, unless prior to such payment, Greenbriar receives written
notice from such holder that such holder is withdrawing its requirement of the
repurchase of the Repurchase Shares.
8.6 Change in Management. If at any time after the date
hereof, (i) James R. Gilley is not serving as Chairman of the Board of
Directors of Greenbriar for any reason and (ii) the Preferred Stock
Representative has proposed one or more candidates for Mr. Gilley's replacement
that is willing to serve regardless of whether or not any of such candidate(s)
are acceptable to Greenbriar, unless within 15 days of the date Mr. Gilley
ceases to serve as Chairman Mr. Gilley's replacement as Chairman is mutually
agreed upon by Greenbriar and the Preferred Stock Representative, there shall
have occurred a "Change in Management" which shall give to each holder of
shares of Series F Senior Preferred Stock the right, by written notice to
Greenbriar (the "Change in Management Repurchase Notice") within 90 days after
the occurrence of the Change in Management, to require that Greenbriar
repurchase, out of funds legally available therefor, a specified number of such
holder's shares (the "Change in Management Repurchase Shares") of Series F
Senior Preferred Stock. The Change in Management Repurchase Shares may be all
or any portion of such holder's total shares of Series F Senior Preferred
Stock. The Change in Management Repurchase Shares shall be repurchased by
Greenbriar for an amount in cash equal to the aggregate Liquidation Value of
the Change in Management Repurchase Shares plus the greater of: (i) 20% of the
aggregate Liquidation Value of the Change in Management Repurchase Shares or
(ii) a 20%
22
<PAGE> 25
IRR on the aggregate Liquidation Value of the Change in Management Repurchase
Shares, in each case, as of the date of the holder's Change in Management
Repurchase Notice. Any Change in Management Repurchase Notice shall be
accompanied by duly endorsed certificates representing the Change in Management
Repurchase Shares which shall be free and clear of all claims, liens and
encumbrances. Upon receipt of a Change in Management Repurchase Notice,
Greenbriar shall execute a full recourse promissory note for the appropriate
amount to the holder requiring repurchase (the "Repurchase Promissory Note")
within five Business Days of the date such Change in Management Repurchase
Notice is received, unless prior to such payment, Greenbriar receives written
notice from such holder that such holder is withdrawing its requirement of the
repurchase of the Change in Management Repurchase Shares. The Repurchase
Promissory Note shall be (a) in a form agreed to by Greenbriar and the initial
purchaser of the Series F Senior Preferred Stock, (b) for a term of one (1)
year from the date of the Change in Management Repurchase Notice, with 50% of
the principal together with all accrued interest due six (6) months from the
date of the Change in Management Repurchase Notice, (c) shall bear interest at
the lower of eighteen percent (18%) or the highest rate allowed by law, and (d)
shall be secured by the highest available lien on all of the property and
assets of Greenbriar and the Subsidiaries reasonably sufficient to secure such
holders right of repayment, including all ownership interests of all
subsidiaries of Greenbriar, except where such lien (i) is in violation of its
certificate of incorporation, articles of incorporation or bylaws of Greenbriar
or any of the Subsidiaries; (ii) would create a default in the performance of
any obligation, agreement or condition contained in any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan, credit agreement,
purchase order, agreement or instrument evidencing an obligation for borrowed
money or other agreement or instrument to which Greenbriar or any of the
Subsidiaries is a party or by which Greenbriar or any of the Subsidiaries may
be bound or to which the property or assets of Greenbriar or any of the
Subsidiaries is subject or affected; or (iii) would create a violation in any
respect of any Law applicable to Greenbriar or any of the Subsidiaries, that
would have a Material Adverse Effect. Such liens shall be of the same priority
as between all holders requiring repurchase. The Repurchase Promissory Note
shall be due and payable immediately if Greenbriar fails to perfect liens on
property and assets of Greenbriar and the Subsidiaries reasonably sufficient to
secure such holders right of repayment within ten Business Days of the date
such Change in Management Repurchase Notice is received, unless prior to such
delivery, Greenbriar receives written notice from such holder that such holder
is withdrawing its requirement of the repurchase of its shares of Series F
Senior Preferred Stock.
8.7 Remedies Cumulative. In addition to the remedies
stated herein, each holder of Series F Senior Preferred Stock will also have
any other rights that such holder may be entitled to under any agreement or
pursuant to applicable law.
9. No Reissuance.
No shares of Series F Senior Preferred Stock acquired by Greenbriar by
reason of redemption, purchase, conversion or otherwise shall be reissued as
Series F Senior Preferred Stock.
23
<PAGE> 1
EXHIBIT 99.3
CERTIFICATE OF VOTING POWERS, DESIGNATIONS,
PREFERENCES, AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF
SERIES G SENIOR NON-VOTING CONVERTIBLE PREFERRED STOCK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Ranking of the Series G Senior Non-Voting Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 8
3. Dividends; Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Dividend Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Voting Rights of Series G Senior Non-Voting Preferred Stock . . . . . . . . . . . . . . . . . . . . . 9
5.1 No Voting Rights in Electing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Class Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Right of Holder to Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Mechanics of Conversion by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Mandatory Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Adjustments to Conversion Price for Diluting Issues
or Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 No Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Certificate as to Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.7 Notices of Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Covenants of Greenbriar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Greenbriar Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Cash Reserves after a Special Asset Sale Trigger . . . . . . . . . . . . . . . . . . . . . 20
8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2 Dividends During Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Put Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.4 Special Asset Sale Trigger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.5 Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9. No Reissuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
(i)
<PAGE> 3
GREENBRIAR CORPORATION
Certificate of Voting Powers, Designations,
Preferences, and Relative, Participating,
Optional or Other Special Rights of
Series G Senior Non-Voting Convertible Preferred Stock
We, Floyd B. Rhoades, President, and Robert L. Griffis, Secretary, of
Greenbriar ("Greenbriar"), a corporation organized and existing under Chapter
78 of the Nevada Revised Statutes, in accordance with the provisions of Section
78.1955 of the Nevada Revised Statutes thereof, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Articles of Incorporation, as amended, of Greenbriar, said Board of
Directors, at a meeting of the Board of Directors held pursuant to Chapter 78
of the Nevada Revised Statutes, duly adopted a resolution providing for the
issuance of eight hundred thousand (800,000) shares of a new series of
preferred stock designated as Series G Senior Non-Voting Convertible Preferred
Stock (the "Series G Senior Non-Voting Preferred Stock"), which resolution is
as follows:
RESOLVED, that pursuant to the Articles of Incorporation of
Greenbriar, there be and hereby is authorized and created a series of preferred
stock, to consist of 800,000 shares with a par value of $0.10 per share and a
stated value of $10.00 per share and that the voting powers, designations,
preferences, and relative, participating, optional or other special rights of
the Series G Senior Non-Voting Convertible Preferred Stock and the
qualifications, limitations or restrictions thereof be as follows:
1. Certain Definitions.
The following terms shall have the following meanings:
"1996 Form 10-K" means Greenbriar's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
"5-day Average Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the average
closing price of such common stock on the American Stock Exchange, New York
Stock Exchange or Nasdaq National Market over the 5-trading day period
immediately prior to such date.
"20-day Average Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the average
closing price of such common stock on the American Stock Exchange, New York
Stock Exchange or Nasdaq National Market over the 20-trading day period
immediately prior to such date.
"Act" means the Securities Act of 1933, as amended.
"Additional Shares of Greenbriar Nonpreferred Stock" means all shares
of Greenbriar Nonpreferred Stock issued by Greenbriar after the Closing Date
other than (i) any shares of Greenbriar Common Stock issued pursuant to
options, rights or warrants to purchase Greenbriar Common Stock issued pursuant
to the Stock Option Plans; provided that (a) such issuances do not exceed in
the aggregate 500,000 shares and (b) the exercise price under such
<PAGE> 4
options, rights and warrants shall be payable in cash and shall be not less
than the greater of the Conversion Price or the Fair Market Price on the date
of issuance of the option, right or warrant, (ii) shares of Greenbriar Common
Stock, either sold to employees of Greenbriar or contributed as a matching
contribution at a price not less than the then current Fair Market Price
pursuant to Greenbriar's 401(k) plan, (iii) any shares of Greenbriar Common
Stock issued to James R. Gilley pursuant to an option he currently holds to
purchase 400,000 shares, and, pursuant to his employment agreement with
Greenbriar, any shares of Greenbriar Common Stock issued pursuant to options he
will receive for 200,000 shares on December 31, 1997, 1998 and 1999, (iv) any
shares of Greenbriar Common Stock issued to the April Trust pursuant to a
warrant to purchase 108,000 shares, (v) any shares of Greenbriar Common Stock
issued to the April Trust pursuant to a right to convert Greenbriar Series D
Preferred Stock into 337,500 shares, (vi) any shares of Greenbriar Common Stock
issued to Lone Star pursuant to a right to convert Greenbriar Series F Senior
Preferred Stock and Series G Senior Non-Voting Preferred Stock, and (vii) any
shares of Greenbriar Common Stock exchanged with investors in the Syndication
Program.
"Affiliate" has the meaning set forth in the Purchase Agreement.
"Asset Sale Repurchase Notice" has the meaning set forth in Section
8.4.
"Business Day" means any day other than a Saturday, a Sunday, any day
on which the New York Stock Exchange is closed or any other day on which
banking institutions in New York are authorized or required by law to be
closed.
"Certificate of Designation" means this Certificate of Voting Powers,
Designations, Preferences, and Relative, Participating, Optional or Other
Special Rights of Series G Senior Non-Voting Convertible Preferred Stock.
"Change in Management" has the meaning set forth in Section 8.5.
"Change in Management Repurchase Notice" has the meaning set forth in
Section 8.5.
"Change in Management Repurchase Shares" has the meaning set forth in
Section 8.5.
"Change of Control of Greenbriar" means, with respect to Greenbriar,
the occurrence of any of the following events: (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted
Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or after the passage of
time, directly or indirectly) of more than 40% of the Voting Stock of
Greenbriar; or (ii) individuals who at date hereof constituted the Board of
Directors of Greenbriar (together with any new directors whose election by such
Board or whose nomination for election by the stockholders of Greenbriar was
approved by a vote of the majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office, other than
pursuant to the provisions of this Certificate of Designation or the Purchase
Agreement; provided, however, a Sale of Greenbriar is not considered a Change
of Control of Greenbriar.
2
<PAGE> 5
"Closing Date" means the date of the closing of the first sale of the
Series G Senior Non-Voting Preferred Stock.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the federal government administering the Act.
"Computation Date" means:
(i) with respect to Section 6.4(c), the earlier of (a)
the date on which Greenbriar shall enter into a firm contract for the
issuance of Additional Shares of Greenbriar Nonpreferred Stock or (b)
the date of actual issuance of Additional Shares of Greenbriar
Nonpreferred Stock; provided, that with respect to Section 6.4(c), the
Computation Date in connection with an acquisition by Greenbriar using
common stock as all or a part of the consideration shall mean the
effective date of issuance of Additional Shares of Greenbriar
Nonpreferred Stock;
(ii) with respect to Section 6.4(d), the earliest to occur
of (a) the date on which Greenbriar shall take a record of the holders
of its Greenbriar Nonpreferred Stock for the purpose of entitling them
to receive any warrants, options or other rights, (b) the date on
which Greenbriar shall enter into a firm contract for the issuance of
warrants, options or other rights and (c) the date of actual issuance
of warrants, options or other rights; and
(iii) with respect to Section 6.4(e), the earliest of (a)
the date on which Greenbriar shall take a record of the holders of its
Greenbriar Nonpreferred Stock for the purpose of entitling them to
receive any Greenbriar Convertible Securities, (b) the date on which
Greenbriar shall enter into a firm contract for the issuance of
Greenbriar Convertible Securities and (c) the date of actual issuance
of Greenbriar Convertible Securities.
"Conversion Price" initially means $17.50 and shall be adjusted and
readjusted from time to time as provided in Section 6.
"Default Date" has the meaning set forth in Section 8.2.
"Event of Default" means the occurrence of any of the following:
(i) Greenbriar shall fail to comply with any of the
covenants in Section 6 of the Purchase Agreement; provided, that in
the case of the covenants contained in Sections 6.4-6.18 and 6.24-6.27
of the Purchase Agreement, failure to comply shall not be considered
an Event of Default if such failure is cured or compliance is waived
in writing by the Preferred Stock Representative within 30 days after
the date on which the failure to comply first occurs; provided
further, that in the case of the covenants contained in Sections 6.28
and 6.29of the Purchase Agreement, failure to comply shall not be
considered an Event
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<PAGE> 6
of Default if (i) compliance is waived in writing by the Preferred
Stock Representative within 30 days or (ii) the ratio corresponding to
each covenant is less than 4.5, 4.25 and 4.5, respectively, to 1 at
the quarter end on which the failure to comply first occurs and such
covenant is fully complied with at the next quarter end; provided
further, that in the case of the covenant contained in Sections 6.30
of the Purchase Agreement, failure to comply shall not be considered
an Event of Default if (i) compliance is waived in writing by the
Preferred Stock Representative within 30 days or (ii) the ratio
contained in such covenant is 2 to 1 for the two quarter period
comprised of the quarter in which the failure to comply first occurs
and the following quarter; provided further, that in the case of the
covenants contained in Sections 6.31-6.35 of the Purchase Agreement,
failure to comply shall not be considered an Event of Default if (i)
compliance is waived in writing by the Preferred Stock Representative
within 30 days or (ii) the percentage corresponding to each covenant
is less than 85% at the quarter end on which the failure to comply
first occurs and such covenant is fully complied with at the next
quarter end.
(ii) If Greenbriar fails to pay the holders of the Series
G Senior Non-Voting Preferred Stock all accrued dividends in full for
two quarters, whether or not such payment is legally permissible;
(iii) Greenbriar shall purport to take any action specified
in Section 5.2 of this Certificate of Designation without the
requisite vote of the holders of the Series G Senior Non-Voting
Preferred Stock;
(iv) James R. Gilley and the Gilley Affiliates shall cease
to own at least 1,500,000 shares of Greenbriar Common Stock, subject
to appropriate adjustments in connection with a stock split or other
similar events;
(v) There shall occur a Change of Control of Greenbriar;
(vi) Greenbriar shall fail to comply with any of the
covenants contained in Section 7 of this Certificate of Designation;
provided that failure to comply shall not be considered an Event of
Default if such failure is cured or compliance is waived in writing by
the Preferred Stock Representative within 10 days after the date on
which the failure to comply first occurs;
(vii) The commencement of an involuntary case or other
proceeding against Greenbriar or any Subsidiary, which seeks
liquidation, reorganization or other relief with respect to it or its
debts or other liabilities under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or the entry of an order
for relief against Greenbriar or any Subsidiary in any such case under
the United States Bankruptcy Code which is not dismissed within 60
days; or
(viii) The commencement by Greenbriar or any Subsidiary of
or the approval by a majority of the Board of Directors of Greenbriar
or any Subsidiary of the commencement of a voluntary case or other
proceeding, seeking liquidation, reorganization or other relief with
respect to itself or its debts or other liabilities under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or the making by Greenbriar or
any Subsidiary of a general assignment for the benefit of creditors,
or failure by Greenbriar or any Subsidiary generally to or written
admission of its inability to pay
4
<PAGE> 7
its debts generally as they become due, or the taking of any corporate
action to authorize or effect any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Fair Market Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the greater of
(i) the 5-Day Average Price of such common stock or (ii) the 20-Day Average
Price of such common stock; provided, that the Fair Market Price of common
stock issued in connection with an acquisition by Greenbriar shall mean the
20-Day Average Price of such common stock. Notwithstanding any of the
foregoing, if the common stock that is being valued has not been listed on the
American Stock Exchange, New York Stock Exchange or Nasdaq National Market for
such 5 and 20 business day periods, then the Fair Market Price per share of
such common stock shall be deemed to be the greater of (i) the net book value
per share of common stock, determined in accordance with GAAP, or (ii) the fair
value per share of common stock determined pursuant to the Valuation Procedure.
"GAAP" means those generally accepted accounting principles and
practices which are used in the United States and recognized as such by the
American Institute of Certified Public Accountants acting through its
Accounting Principles Board or by the Financial Accounting Standards Board or
through other appropriate boards or committees thereof and which are
consistently applied for all periods to present fairly in all material respects
the financial position, results of operations and operating cash flow on a
consolidated basis of the party, except that any accounting principle or
practice required to be changed by the Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board or committee) in order
to continue as a generally accepted accounting principle or practice may be so
changed.
"Gilley Affiliates" means James R. Gilley, Sylvia Gilley, JRG
Investment Company, Inc., April Trust, September Trust, October Trust, November
Trust, December Trust, Nita Dry, Todd Dry, Donna Gilley, Elizabeth Gilley, W.
Michael Gilley, Caroline Gilley, or any other trusts controlled by James R.
Gilley.
"Greenbriar" means Greenbriar Corporation, a Nevada corporation.
"Greenbriar Common Stock" means Greenbriar's common stock, $0.01 par
value per share.
"Greenbriar Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for Additional Shares of Greenbriar Nonpreferred Stock, either immediately or
upon the arrival of a specified date or the happening of a specified event.
"Greenbriar Nonpreferred Stock" means Greenbriar Common Stock and
shall also include stock of Greenbriar of any other class which is not
preferred as to dividends or assets to be received upon liquidation or
dissolution over any other class of stock of Greenbriar and which is not
subject to redemption.
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<PAGE> 8
"IRR" means compounded annual rate of return.
"Junior Stock" has the meaning set forth in Section 2.
"Liquidation Amount" means $10.00, plus a sum equal to all accumulated
but unpaid dividends (including dividends, if any, payable pursuant to Section
8.2) and interest thereon, if any, through the date of payment thereof, per
share of Series G Senior Non-Voting Preferred Stock.
"Liquidation Value" means the Liquidation Amount with respect to all
issued and outstanding Series G Senior Non-Voting Preferred Stock plus any
unreimbursed costs and expenses payable to the holders of the Series G Senior
Non-Voting Preferred Stock pursuant to the Purchase Agreement.
"Lone Star" means Lone Star Opportunity Fund, L.P., a Delaware limited
partnership.
"Mandatory Conversion Date" means the earlier of (i) the third
anniversary of the date of issuance of the Series G Senior Non-Voting Preferred
Stock or (ii) the date of a Sale of Greenbriar.
"Permitted Combination" means (i) a Sale of Greenbriar, (ii) an
acquisition by Greenbriar in the ordinary course of its business as described
in the 1996 Form 10-K, or (iii) where there is a Special Asset Sale Trigger.
"Permitted Holders" means James R. Gilley and his Affiliates.
"Permitted Investments" shall mean (a) marketable direct obligations
issued or unconditionally guaranteed by the United States government or issued
by an agency or instrumentality thereof and backed by the full faith and credit
of the United States of America, in each case maturing within 180 days after
the date of acquisition thereof; (b) marketable direct obligations issued by
any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within 180 days after
the date of acquisition thereof and, at the time of acquisition, having a
rating of "a" or higher from Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") and not listed in Credit Watch published by
S&P; (c) commercial paper maturing no more than 90 days after the date of
creation thereof and, at the time of acquisition, having a rating of at least
a-1 from S&P and P-1 from Moody's; (d) domestic and Eurodollar certificates of
deposit or time deposits or bankers acceptances maturing within 90 days after
the date of acquisition thereof issued by Escrow Agent or any commercial bank
organized under the laws of the United States of America or any state thereof
having a rating of "a" or higher from S&P and Moody's; and (e) money market
funds having an average portfolio maturity, at the time of acquisition thereof,
of not more than 90 days, which money market funds are required to invest at
least 95% of their assets in instruments described in this definition.
"Potential Default" means any event's occurrence or any circumstance's
existence that would, upon any required notice, time lapse, or both, become an
Event of Default.
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<PAGE> 9
"Preferred Stock Representative" means a Person designated in writing
by a majority of the holders of the Series G Senior Non-Voting Preferred Stock
to represent such holders with respect to certain matters pursuant to this
Agreement and the Purchase Agreement.
"Purchase Agreement" means that certain Stock Purchase Agreement
between Greenbriar and Lone Star Opportunity Fund, L.P., whereby the Series G
Senior Non-Voting Preferred Stock is being issued, as amended from time to time
in accordance with the terms thereof. A copy of the Purchase Agreement, as so
amended, is maintained at the principal executive offices of Greenbriar and
will be furnished, upon written request, to any holders of the Series G Senior
Non- Voting Preferred Stock without charge.
"Repurchase Notice" has the meaning set forth in Section 8.3.
"Repurchase Promissory Note" has the meaning set forth in Section 8.5.
"Repurchase Shares" has the meaning set forth in Section 8.4.
"Sale of Greenbriar" means (i) a merger or consolidation in which all
shares of Greenbriar Common Stock are exchanged for cash, securities of another
entity, or a combination of cash and securities of another entity or (ii) a
cash tender offer to purchase all of the outstanding shares of Greenbriar is
made to the shareholders of Greenbriar and accepted by a majority of such
shareholders.
"Series B Junior Preferred Stock" means Greenbriar's Series B
Preferred Stock, $0.10 par value per share.
"Series D Junior Preferred Stock" means Greenbriar's Series D
Preferred Stock, $0.10 par value per share.
"Series F Senior Preferred Stock" means Greenbriar's Series F Senior
Convertible Preferred Stock.
"Series F Certificate of Designation" means Greenbriar's Certificate
of Voting Powers, Designations, Preferences, and Relative, Participating,
Optional or Other Special Rights of Series F Senior Convertible Preferred Stock
as filed with the Secretary of State of Nevada.
"Series G Senior Non-Voting Preferred Stock" has the meaning set forth
in the preamble.
"Special Asset Sale Trigger" means any sale, lease, sale/leaseback,
assignment, transfer or other disposition of assets, which when aggregated with
all sales, leases, sale/leasebacks, assignments, transfers or other
dispositions of assets in one or more independent or related transactions from
the later of the date hereof or the date of the last Special Asset Sale
Trigger, (i) have a total aggregate consideration received for such
dispositions in excess of $25 million of cash, indebtedness assumed and the
present fair value of any other consideration, including, but not limited to
the present fair value of any earnouts or (ii) dispose of a total aggregate
number of operated properties of five. The dispositions described above
specifically include, but are not limited to, sales of operating leases and
management contracts and sales as a part of the Syndication Program.
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<PAGE> 10
"Spin-off" means the pro rata distribution by Greenbriar of the
outstanding shares of common stock of a Subsidiary to the holders of Greenbriar
Common Stock to effect the spin-off of such Subsidiary.
"Stock Option Plans" means Greenbriar's 1997 Stock Option Plan and
Greenbriar's 1992 Stock Option Plan, as amended, which shall be consistent with
the copies of such plans delivered to purchasers of the Series G Senior Non-
Voting Preferred Stock prior to the Closing Date, as the same may be amended
from time to time with the prior approval of the Preferred Stock
Representative.
"Subsidiaries" means all the corporations, partnerships, joint
ventures, business trusts or other legal entities in which Greenbriar, either
directly or indirectly through one or more intermediaries, owns or holds
beneficial or record ownership of at least a majority of the outstanding voting
shares or other equity interests. Each of the Subsidiaries is sometimes
referred to herein individually as a "Subsidiary."
"Syndication Program" means a program of selling real estate to public
or private syndications consisting of partnerships, limited liability
companies, or limited liability partnerships where ownership of such entities
is offered to passive investors for cash and/or notes.
"Tribunal" means any (a) local, state, territorial, federal, or
foreign judicial, executive, regulatory, administrative, legislative, or
governmental agency, board, bureau, commission, department, or other
instrumentality, (b) private arbitration board or panel or (c) central bank.
"Valuation Procedure" has the meaning set forth in Section 6.4(b).
"Voting Stock" means the total voting power of all classes of capital
stock then outstanding of a company and normally entitled to vote in elections
of directors of such company.
2. Ranking of the Series G Senior Non-Voting Preferred Stock.
So long as any shares of Series G Senior Non-Voting Preferred Stock
shall be outstanding, the Series G Senior Non-Voting Preferred Stock shall rank
senior with respect to the rights to receive dividends and to receive assets
upon liquidation, dissolution or winding up of Greenbriar to the Greenbriar
Common Stock and to all other series of preferred stock or classes or series of
capital stock hereafter or heretofore established by the Board of Directors of
Greenbriar (collectively, the "Junior Stock"), which includes, but is not
limited to, the Series B Junior Preferred Stock and the Series D Junior
Preferred Stock. The Series G Senior Non-Voting Preferred Stock shall rank
pari passu with respect to the rights to receive dividends and to receive
assets upon liquidation, dissolution or winding up of Greenbriar to
Greenbriar's Series F Senior Preferred Stock.
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<PAGE> 11
3. Dividends; Restricted Payments.
3.1 Dividend Payment Dates. The holders of Series G Senior
Non-Voting Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors of Greenbriar out of funds legally available
for that purpose, a quarterly dividend of $0.15 per share payable in cash on
the last Business Day of March, June, September and December of each year
commencing on March 31, 1998, which payment shall include pro rated daily
dividends from the date of original issue of the Series G Senior Non-Voting
Preferred Stock. Dividends on the Series G Senior Non-Voting Preferred Stock
shall be cumulative from the date of original issue of the Series G Senior
Non-Voting Preferred Stock, whether or not at the time such dividend shall
accrue or become due there shall be funds legally available for the payment of
dividends. All accrued and unpaid dividends, whether or not earned or declared,
shall bear interest from the respective payment date until paid at an annual
rate of 12% per annum.
3.2 Record Date. The Board of Directors shall fix a record date
for the determination of holders of the Series G Senior Non-Voting Preferred
Stock entitled to receive payment of a dividend declared thereon (including
dividends, if any, payable pursuant to Section 8.2), which record date shall be
not more than sixty (60) days prior to the date fixed for the payment thereof.
3.3 Restricted Payments. Unless full cumulative dividends on the
Series G Senior Non-Voting Preferred Stock have been paid (including dividends,
if any, payable pursuant to Section 8.2), no dividends or other distributions
shall be declared or paid or set apart for payment upon any Junior Stock nor
shall any Junior Stock be redeemed, purchased or otherwise acquired by
Greenbriar (other than upon conversion under the terms of said Junior Stock for
consideration consisting solely of shares of Greenbriar Common Stock) for any
consideration (or any payment made to or available for a sinking fund for the
redemption of any shares of such stock) by Greenbriar.
4. Liquidation Rights.
Upon any liquidation, dissolution or winding up of the affairs of
Greenbriar, no distribution shall be made or declared or set apart for payment
to the holders of any Junior Stock unless, prior to the first such
distribution, the holders of the Series G Senior Non-Voting Preferred Stock
shall have received the Liquidation Value. If the assets distributable in any
such event to the holders of the Series G Senior Non-Voting Preferred Stock are
insufficient to permit the payment to such holders of the full preferential
amounts to which they may be entitled, such assets shall be distributed ratably
among the holders of the Series G Senior Non-Voting Preferred Stock in
proportion to the full preferential amount each such holder would otherwise be
entitled to receive.
5. Voting Rights of Series G Senior Non-Voting Preferred Stock.
5.1 No Voting Rights in Electing Directors. The holders of the
Series G Senior Non-Voting Preferred Stock shall have no rights to vote in the
election of the Board of Directors of Greenbriar.
5.2 Class Voting Rights. So long as any shares of Series G Senior
Non-Voting Preferred Stock are outstanding, in addition to any other vote or
consent of shareholders
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<PAGE> 12
required by law or by the Articles of Incorporation of Greenbriar, the approval
of the holders of Series G Senior Non- Voting Preferred Stock, acting as a
single class, shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation or the Bylaws of
Greenbriar; including, but not limited to, any amendment, alteration,
repeal or filing of any Certificate of Designation of Greenbriar or
any resolution of the Board of Directors of Greenbriar filed with the
Office of the Secretary of State of Nevada;
(ii) The authorization, creation or issuance of, or the
increase in the authorized amount of, any shares of capital stock of
any class or series or any security convertible into shares of any
class or series of any security ranking prior to or on a parity with
the shares of Series G Senior Non-Voting Preferred Stock in the
payment of dividends or in the distribution of assets on any
liquidation, dissolution, or winding up of Greenbriar;
(iii) The merger or consolidation of Greenbriar with or
into any other corporation or other entity, other than a Permitted
Combination;
(iv) Any reorganization, restructuring, recapitalization
or other similar transaction of Greenbriar; other than a Permitted
Combination; or
(v) Any Spin-off.
With respect to any matter that requires the approval of holders of
Series G Senior Non-Voting Preferred Stock acting separately as a class or any
action that may be taken by the holders of Series G Senior Non-Voting Preferred
Stock, such approval shall be deemed to be given or such action taken by the
affirmative vote of the holders of a majority of the outstanding shares of
Series G Senior Non-Voting Preferred Stock, given in person or by proxy, by
written consent or at the annual meeting of Greenbriar's shareholders, or a
special meeting in lieu thereof, or at a special meeting of the holders of
shares of Series G Senior Non-Voting Preferred Stock called for the purpose of
voting on such matter or action. Upon receipt of the written request of the
holders of 20% or more of the outstanding shares of Series G Senior Non-Voting
Preferred Stock, the Secretary of Greenbriar shall call and give notice of a
special meeting of the holders of the Series G Senior Non-Voting Preferred
Stock for the purpose specified in such request, which meeting shall be held
within 30 days after delivery of such request to Greenbriar at such place in
the continental United States as specified in such written request; provided
that the Secretary shall not be required to call such a special meeting in the
case of any such request received less than 30 days before the date fixed for
an annual meeting of Greenbriar's shareholders.
6. Conversion.
The Series G Senior Non-Voting Preferred Stock shall be convertible as
follows:
6.1 Right of Holder to Conversion. Each share of the Series G
Senior Non-Voting Preferred Stock shall be convertible, without the payment of
any additional consideration by the holder thereof and at the option of the
holder thereof, at any time after the earlier of (i) the second anniversary of
the date of original issuance of Series G Senior Non-Voting
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<PAGE> 13
Preferred Stock, (ii) an Event of Default under any of clauses (ii) through
(viii) of the definition of "Event of Default" or an Event of Default resulting
from the failure of Greenbriar to comply with Sections 6.1, 6.3, 6.10, 6.19,
6.20, 6.22, 6.27-6.35 or 6.37 of the Purchase Agreement, in whole or in part,
(iii) a Special Asset Sale Trigger or (iv) a Change in Management, at the
office of Greenbriar or any transfer agent for the Series G Senior Non-Voting
Preferred Stock, into a number of shares of Greenbriar Common Stock determined
by dividing the Liquidation Value of the shares so converted by the Conversion
Price, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the Fair
Market Price.
6.2 Mechanics of Conversion by Holder. In order for any holder of
the Series G Senior Non-Voting Preferred Stock to convert the same into
Greenbriar Common Stock, the holder shall surrender to Greenbriar at the office
of Greenbriar or of any transfer agent for the Series G Senior Non-Voting
Preferred Stock, the certificate or certificates representing such Series G
Senior Non-Voting Preferred Stock, accompanied by written notice to Greenbriar
that the holder elects to convert all or a specified number of such shares and
stating therein the holder's name or the name or names of the holder's nominees
in which the holder wishes the certificate or certificates for Greenbriar
Common Stock to be issued or transferred. Greenbriar shall, as soon as
practicable thereafter, deliver at such office to such holder of the Series G
Senior Non-Voting Preferred Stock, or to the holder's nominee or nominees, a
certificate or certificates representing the number of shares of Greenbriar
Common Stock to which the holder shall be entitled as aforesaid and, if less
than the full number of shares of the Series G Senior Non-Voting Preferred
Stock evidenced by such surrendered certificate or certificates being
converted, a new certificate or certificates, of like tenor, for the number of
shares of the Series G Senior Non-Voting Preferred Stock evidenced by such
surrendered certificate less the number of such shares being converted. Any
conversion made at the election of a holder of the Series G Senior Non-Voting
Preferred Stock shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the Series G Senior
Non-Voting Preferred Stock to be converted, and the person or persons entitled
to receive the Greenbriar Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Greenbriar
Common Stock on such date.
6.3 Mandatory Conversion. On the Mandatory Conversion Date, each
share of the Series G Senior Non-Voting Preferred Stock must be converted into
shares of Greenbriar Common Stock based upon the conversion provisions herein
and subject to any adjustments as provided in this Agreement.
6.4 Adjustments to Conversion Price for Diluting Issues or Other
Transactions:
(a) Stock Dividends, Subdivisions and Combinations. In
case at any time or from time to time Greenbriar shall:
(1) take a record of the holders of its
Greenbriar Nonpreferred Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution
of, Greenbriar Nonpreferred Stock;
(2) subdivide its outstanding shares of
Greenbriar Nonpreferred Stock into a larger number of shares
of Greenbriar Nonpreferred Stock; or
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<PAGE> 14
(3) combine its outstanding shares of Greenbriar
Nonpreferred Stock into a smaller number of shares of
Greenbriar Nonpreferred Stock;
then the Conversion Price in effect immediately after the happening of
any such event shall be proportionately decreased, in case of the
happening of events described in subparagraphs (1) or (2) above, or
proportionately increased, in case of the happening of events
described in subparagraph (3) above.
(b) Certain Other Dividends and Distributions. In case
at any time or from time to time Greenbriar shall take a record of the
holders of its Greenbriar Nonpreferred Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(1) cash, to the extent, but only to the extent,
that such distribution together with all such dividends paid
or declared after the date hereof, does not exceed the
consolidated net income, net of consolidated net losses, of
Greenbriar and its consolidated subsidiaries earned subsequent
to the date hereof determined in accordance with GAAP;
(2) any evidence of its indebtedness (other than
Greenbriar Convertible Securities), any shares of its stock
(other than Additional Shares of Greenbriar Nonpreferred
Stock) or any other securities or property of any nature
whatsoever (other than cash and other than Greenbriar
Convertible Securities or Additional Shares of Greenbriar
Nonpreferred Stock); or
(3) any warrants or other rights to subscribe for
or purchase any evidences of its indebtedness (other than
Greenbriar Convertible Securities), any shares of its stock
(other than Additional Shares of Greenbriar Nonpreferred
Stock) or any other securities or property of any nature
whatsoever (other than cash and other than Greenbriar
Convertible Securities or Additional Shares of Greenbriar
Nonpreferred Stock);
then the Conversion Price in effect shall be adjusted to that number
determined by multiplying the Conversion Price then in effect by a
fraction (x) the numerator of which shall be the Fair Market Price per
share of Greenbriar Common Stock immediately prior to the date of
taking such record minus the portion applicable to one share of
Greenbriar Common Stock of any such cash so distributable and of the
fair value of any and all such evidences of indebtedness, shares of
stock, other securities or property, or warrants or other subscription
or purchase rights so distributable and (y) the denominator of which
shall be the Fair Market Price per share of Greenbriar Common Stock
immediately prior to the date of taking such record. The fair value of
any and all such evidences of indebtedness, shares of stock, other
securities or property, or warrants or other subscription or purchase
rights, shall be determined pursuant to the Valuation Procedure. The
"Valuation Procedure" is a determination of fair value of any property
made in good faith by the Board of Directors of Greenbriar; provided
that, if the Preferred Stock Representative objects to such
determination within 10 days of receipt of written notification
thereof, then the fair value of such property shall be determined in
good faith by a recognized national investment bank selected by
unanimous vote or consent of the Board of Directors of Greenbriar,
which investment bank is not reasonably objected to by the
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<PAGE> 15
Preferred Stock Representative. The fees and expenses of such
investment bank shall be paid by one-half by Greenbriar and one-half
by the holders of the Series G Senior Non-Voting Preferred Stock. A
reclassification of the Greenbriar Nonpreferred Stock into shares of
Greenbriar Nonpreferred Stock and shares of any other class of stock
shall be deemed a distribution by Greenbriar to the holders of its
Greenbriar Nonpreferred Stock of such shares of such other class of
stock within the meaning of this Section 6.4(b) and, if the
outstanding shares of Greenbriar Nonpreferred Stock shall be changed
into a larger or smaller number of shares of Greenbriar Nonpreferred
Stock as a part of such reclassification, shall be deemed a
subdivision or combination, as the case may be, of the outstanding
shares of Greenbriar Nonpreferred Stock within the meaning of Section
6.4(a).
(c) Issuance of Additional Shares of Greenbriar
Nonpreferred Stock. In case at any time or from time to time after
the Closing Date, Greenbriar shall (except as hereinafter provided)
issue, whether in connection with the merger of a corporation into
Greenbriar or otherwise, any Additional Shares of Greenbriar
Nonpreferred Stock for a consideration per share less than either the
Conversion Price or the Fair Market Price per share of Greenbriar
Common Stock on the Computation Date, then the Conversion Price shall
be adjusted to the lower of either:
(1) that number determined by multiplying the
Conversion Price in effect immediately prior to such
adjustment by a fraction (x) the numerator of which shall be
the number of shares of Greenbriar Nonpreferred Stock, plus
the number of shares of Greenbriar Nonpreferred Stock which
the aggregate consideration for the total number of such
Additional Shares of Greenbriar Nonpreferred Stock so issued
would purchase at the greater of the Conversion Price or the
Fair Market Price per share of Greenbriar Common Stock and (y)
the denominator of which shall be the number of shares of
Greenbriar Nonpreferred Stock plus the number of such
Additional Shares of Greenbriar Nonpreferred Stock so issued;
or
(2) the value of the consideration per share for
which such Additional Shares of Greenbriar Nonpreferred Stock
were issued (or, in the case of adjustments under Sections
6.4(d) or 6.4(e), are issuable).
No adjustment of the Conversion Price shall be made under this Section
6.4(c) upon the issuance of any Additional Shares of Greenbriar
Nonpreferred Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Greenbriar
Convertible Securities, if any such adjustment shall previously have
been made upon the issuance of such warrants or other rights or upon
the issuance of such Greenbriar Convertible Securities (or upon the
issuance of any warrant or other rights therefor) pursuant to Section
6.4(d) or 6.4(e).
(d) Issuance of Warrants, Options or Other Rights. In
case at any time or from time to time after the Closing Date,
Greenbriar shall take a record of the holders of its Greenbriar
Nonpreferred Stock for the purpose of entitling them to receive a
distribution of, or shall otherwise issue, any warrants, options or
other rights to subscribe for or purchase any Additional Shares of
Greenbriar Nonpreferred Stock or any Greenbriar Convertible Securities
and the consideration per share for which
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Additional Shares of Greenbriar Nonpreferred Stock may at any time
thereafter be issuable pursuant to such warrants, options or other
rights or pursuant to the terms of such Greenbriar Convertible
Securities shall be less than either the Conversion Price or the Fair
Market Price per share of Greenbriar Common Stock on the Computation
Date, then the Conversion Price shall be adjusted as provided in
Section 6.4(c). Such adjustment shall be made on the basis that (i)
the maximum number of Additional Shares of Greenbriar Nonpreferred
Stock issuable pursuant to all such warrants, options or other rights
or necessary to effect the conversion or exchange of all such
Greenbriar Convertible Securities shall be deemed to have been issued
as of the Computation Date, and (ii) the aggregate consideration for
such maximum number of Additional Shares of Greenbriar Nonpreferred
Stock shall be deemed to be the minimum consideration received and
receivable by Greenbriar for the issuance of such Additional Shares of
Greenbriar Nonpreferred Stock pursuant to such warrants, options or
other rights or pursuant to the terms of such Greenbriar Convertible
Securities.
(e) Issuance of Greenbriar Convertible Securities. In
case at any time or from time to time after the Closing Date,
Greenbriar shall take a record of the holders of its Greenbriar
Nonpreferred Stock for the purpose of entitling them to receive a
distribution of, or shall otherwise issue, any Greenbriar Convertible
Securities and the consideration per share for which Additional Shares
of Greenbriar Nonpreferred Stock may at any time thereafter be
issuable pursuant to the terms of such Greenbriar Convertible
Securities shall be less than either the Conversion Price or the Fair
Market Price per share of Greenbriar Common Stock on the Computation
Date, then the Conversion Price shall be adjusted as provided in
Section 6.4(c). Such adjustments shall be made on the basis that (i)
the maximum number of Additional Shares of Greenbriar Nonpreferred
Stock necessary to effect the conversion or exchange of all such
Greenbriar Convertible Securities shall be deemed to have been issued
as of the Computation Date, and (ii) the aggregate consideration for
such maximum number of Additional Shares of Greenbriar Nonpreferred
Stock shall be deemed to be the minimum consideration received and
receivable by Greenbriar for the issuance of such Additional Shares of
Greenbriar Nonpreferred Stock pursuant to the terms of such Greenbriar
Convertible Securities. No adjustment of the Conversion Price shall be
made under this Section 6.4(e) upon the issuance of any Greenbriar
Convertible Securities which are issued pursuant to the exercise of
any warrants or other subscription or purchase rights therefor, if any
such adjustment shall previously have been made upon the issuance of
such warrants or other rights pursuant to Section 6.4(d).
(f) Superseding Adjustment of Conversion Price. If, at
any time after any adjustment of the Conversion Price shall have been
made pursuant to the foregoing Section 6.4(d) or 6.4(e) on the basis
of the issuance of warrants or other rights or the issuance of other
Greenbriar Convertible Securities, or after any new adjustment of the
Conversion Price shall have been made pursuant to this Section 6.4(f):
(1) all of such warrants, options or rights or
the right of conversion or exchange in such other Greenbriar
Convertible Securities shall expire, and none of such
warrants, options or rights, or the right of conversion or
exchange in respect of such other Greenbriar Convertible
Securities, as the case may be, shall have been exercised; or
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(2) the consideration per share, for which
Additional Shares of Greenbriar Nonpreferred Stock are
issuable pursuant to all of such warrants, options or rights
or the terms of all of such other Greenbriar Convertible
Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such
consideration per share upon the arrival of a specified date
or the happening of a specified event, and none of such
warrants, options or rights, or the right of conversion or
exchange in respect of such other Greenbriar Convertible
Securities, as the case may be, shall have been exercised;
such previous adjustment shall be rescinded and annulled and the
Additional Shares of Greenbriar Nonpreferred Stock which were deemed
to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation. Thereupon,
a recomputation shall be made of the effect of such warrants, rights
or options or other Greenbriar Convertible Securities on the basis of
treating any such warrants, options or rights or any such other
Greenbriar Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of such
increase of the consideration per share for such Additional Shares of
Greenbriar Nonpreferred Stock are issuable under such warrants or
rights or other Greenbriar Convertible Securities; and, if and to the
extent called for by the foregoing provisions of this Section 6.4 on
the basis aforesaid, a new adjustment of the Conversion Price shall be
made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
(g) Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the making
of adjustments of the Conversion Price hereinbefore provided for in
this Section 6.4:
(1) Treasury Stock. The sale or other
disposition of any issued shares of Greenbriar Nonpreferred
Stock owned or held by or for the account of Greenbriar shall
be deemed an issuance thereof for purposes of this Section
6.4.
(2) Computation of Consideration. To the extent
that any Additional Shares of Greenbriar Nonpreferred Stock or
any Greenbriar Convertible Securities or any warrants, options
or other rights to subscribe for or purchase any Additional
Shares of Greenbriar Nonpreferred Stock or any Greenbriar
Convertible Securities shall be issued solely for cash
consideration, the consideration received by Greenbriar
therefor shall be deemed to be the amount of cash received by
Greenbriar therefor, or, if such Additional Shares of
Greenbriar Nonpreferred Stock or Greenbriar Convertible
Securities are offered by Greenbriar for subscription, the
subscription price, or, if such Additional Shares of
Greenbriar Nonpreferred Stock or Greenbriar Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts or expenses
paid or incurred by Greenbriar for and in the underwriting of,
or otherwise in
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<PAGE> 18
connection with, the issue thereof. The consideration for any
Additional Shares of Greenbriar Nonpreferred Stock issuable
pursuant to any warrants, options or other rights to subscribe
for or purchase the same shall be the consideration received
or receivable by Greenbriar for issuing such warrant, options
or other rights, plus the additional consideration payable to
Greenbriar upon the exercise of such warrants, options or
other rights. The consideration for any Additional Shares of
Greenbriar Nonpreferred Stock issuable pursuant to the terms
of any Greenbriar Convertible Securities shall be the
consideration received or receivable by Greenbriar for issuing
any warrants or other rights to subscribe for or purchase such
Greenbriar Convertible Securities, plus the consideration paid
or payable to Greenbriar in respect of the subscription for or
purchase of such Greenbriar Convertible Securities, plus the
additional consideration, if any, payable to Greenbriar upon
the exercise of the right of conversion or exchange in such
Greenbriar Convertible Securities. To the extent that any
issuance shall be for a consideration other than solely for
cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the fair
value of such consideration at the time of such issuance as
determined pursuant to the Valuation Procedure.
(3) When Adjustments to be made. The adjustments
required by the preceding subsections of this Section 6.4
shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that no adjustment
of the Conversion Price that would otherwise be required shall
be made (except in the case of a subdivision or combination of
shares of the Greenbriar Nonpreferred Stock as provided for in
Section 6.4(a)) unless and until such adjustment, either by
itself or with other adjustments not previously made, adds or
subtracts at least $0.05 to the Conversion Price, as
determined in good faith by the Board of Directors of
Greenbriar. Any adjustment representing a change of less than
such minimum amount shall be carried forward and made as soon
as such adjustment, together with other adjustments required
by this Section 6.4 and not previously made, would result in a
minimum adjustment. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close
of business on the date of its occurrence.
(4) Fractional Interests. In computing
adjustments under this Section 6.4, fractional interests in
Greenbriar Nonpreferred Stock shall be taken into account to
the nearest one-thousandth of a share.
(5) When Adjustment Not Required. If Greenbriar
shall take a record of the holders of its Greenbriar
Nonpreferred Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution
thereof to shareholders, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and
annulled.
(h) Merger, Consolidation or Disposition of Assets. In
case Greenbriar shall merge or consolidate into another corporation,
or shall sell, transfer or otherwise
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<PAGE> 19
dispose of all or substantially all of its property, assets or
business to another corporation, except where there is a Special Asset
Sale Trigger, and pursuant to the terms of such merger, consolidation
or disposition, shares of common stock of the successor or acquiring
corporation are to be received by or distributed to the holders of
Greenbriar Nonpreferred Stock, then each holder of a share of the
Series G Senior Non-Voting Preferred Stock shall have the right
thereafter to receive, upon exercise of such share of the Series G
Senior Non-Voting Preferred Stock, shares of common stock each
comprising the number of shares of common stock of the successor or
acquiring corporation receivable upon or as a result of such merger,
consolidation or disposition of assets by a holder of the number of
shares of Greenbriar Common Stock into which one share of the Series G
Senior Non-Voting Preferred Stock could be converted immediately prior
to such event. If, pursuant to the terms of such merger, consolidation
or disposition of assets, any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) are to be received by or
distributed to the holders of Greenbriar Nonpreferred Stock in
addition to common stock of the successor or acquiring corporation,
then the Conversion Price in effect shall be adjusted to that number
determined by multiplying the Conversion Price then in effect by a
fraction (x) the numerator of which shall be the Fair Market Price per
share of Greenbriar Common Stock immediately prior to the closing of
such merger, consolidation or disposition minus the portion applicable
to one share of Greenbriar Common Stock of any such cash so
distributable and of the fair value of any such shares of stock or
other securities or property so received or distributed and (y) the
denominator of which shall be the Fair Market Price per share of
Greenbriar Common Stock immediately prior to the closing of such
merger, consolidation or disposition. The fair value of any such
shares of stock or other securities or property shall be determined
pursuant to the Valuation Procedure. In case of any such merger,
consolidation or disposition of assets, the successor acquiring
corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition hereof to be
performed and observed by Greenbriar and all of the obligations and
liabilities hereunder, subject to such modification as shall be
necessary to provide for adjustments to the Conversion Price which
shall be as nearly equivalent as practicable to the adjustments
provided for in this Section 6.4. For the purposes of this Section
6.4(h), "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class, which is not preferred
as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption, and shall also
include any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or
the happening of a specified event, and any warrants or other rights
to subscribe for or purchase any such stock. The foregoing provisions
of this Section 6.4(h) shall similarly apply to successive mergers,
consolidations or dispositions of assets.
(i) Purchases or Redemptions. In case at any time or
from time to time after the Closing Date, Greenbriar shall (except as
hereinafter provided) purchase or redeem any Greenbriar Common Stock,
warrants, options or other rights to subscribe for, purchase, convert
into or exchange for Greenbriar Common Stock for a consideration per
share greater than the Fair Market Price per share of Greenbriar
Common Stock on the Computation Date, then the Conversion Price shall
be adjusted to the lower of either:
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(1) that number determined by multiplying the
Conversion Price in effect immediately prior to such
adjustment by a fraction (x) the numerator of which shall be
the number of shares of Greenbriar Common Stock plus the
number of such shares or share equivalents of Greenbriar
Common Stock, warrants, options or other rights to subscribe
for, purchase, convert into or exchange for Greenbriar Common
Stock so purchased or redeemed and (y) the denominator of
which shall be the number of shares of Greenbriar Common
Stock, plus the number of shares or share equivalents of
Greenbriar Common Stock which the aggregate consideration for
the total number of such Greenbriar Common Stock, warrants,
options or other rights to subscribe for, purchase, convert
into or exchange for Greenbriar Common Stock so purchased or
redeemed would purchase at the Fair Market Price per share of
Greenbriar Common Stock; or
(2) the value of the consideration per share for
which such Greenbriar Common Stock, warrants, options or other
rights to subscribe for, purchase, convert into or exchange
for Greenbriar Common Stock were purchased or redeemed.
No adjustment of the Conversion Price shall be made under this Section
6.4(c) upon the issuance of any Additional Shares of Greenbriar
Nonpreferred Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Greenbriar
Convertible Securities, if any such adjustment shall previously have
been made upon the issuance of such warrants or other rights or upon
the issuance of such Greenbriar Convertible Securities (or upon the
issuance of any warrant or other rights therefor) pursuant to Section
6.4(d) or 6.4(e).
(j) Other Action Affecting Greenbriar Nonpreferred Stock.
In case at any time or from time to time Greenbriar shall take any
action affecting its Greenbriar Nonpreferred Stock, other than an
action described in any of the foregoing Sections 6.4(a) through (i),
inclusive, then, unless in the opinion of the Board of Directors such
action will not have a materially adverse effect upon the rights of
the holders of the Series G Senior Non-Voting Preferred Stock, the
Conversion Price shall be adjusted in such manner and at such time as
the Board of Directors may in good faith determine to be equitable in
the circumstances.
6.5 No Impairment. Other than in connection with the amendment of
its Articles of Incorporation approved by the requisite number of stockholders,
Greenbriar will not, through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid the observance or performance of any of the terms to be
observed or performed hereunder by Greenbriar but will at all times in good
faith assist in the carrying out of all the provisions of this Section 6 and in
the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series G Senior Non-Voting
Preferred Stock against impairment. Without limiting the generality of the
foregoing, Greenbriar (i) will not permit the par value of any shares of stock
at the time receivable upon the conversion of the Series G Senior Non-Voting
Preferred Stock to exceed the Conversion Price then in effect, (ii) will take
all such action as may be necessary or appropriate in order that Greenbriar may
validly and legally
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deliver fully paid nonassessable shares of stock on the conversion of the
Series G Senior Non-Voting Preferred Stock, and (iii) will not issue any
Additional Shares of Greenbriar Nonpreferred Stock or Greenbriar Convertible
Securities or take any action which results in any adjustment of the Conversion
Price if the total number of shares of Greenbriar Common Stock required to be
delivered after such issuance or action upon the conversion of all the then
outstanding shares of Series G Senior Non-Voting Preferred Stock will exceed
the number of shares of Greenbriar Common Stock and available for the purpose
of delivery upon such conversion.
6.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
Greenbriar at Greenbriar's expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Preferred
Stock Representative a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration received
or to be received by Greenbriar for any Additional Shares of Greenbriar
Nonpreferred Stock issued or sold or deemed to have been issued, (ii) the
number of shares of Greenbriar Nonpreferred Stock outstanding or deemed to be
outstanding, and (iii) the Conversion Price in effect immediately prior to such
issue or sale and as adjusted and readjusted on account thereof, showing how it
was calculated. Greenbriar shall, upon the written request at any reasonable
time of the Preferred Stock Representative, furnish or cause to be furnished to
such holder a like certificate setting forth (i) the Conversion Price at the
time in effect, showing how it was calculated, and (ii) the number of shares of
Greenbriar Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the Series G Senior Non-Voting
Preferred Stock.
6.7 Notices of Record Date. In the event of any taking by
Greenbriar of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, Greenbriar shall mail to each holder
of the Series G Senior Non- Voting Preferred Stock at least 10 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
7. Covenants of Greenbriar.
Without the prior written consent of the Preferred Stock
Representative, Greenbriar shall comply with each of the following covenants.
7.1 Greenbriar Common Stock. Greenbriar shall at all times
reserve and keep available enough shares of Greenbriar Common Stock to effect
the conversion of the Series G Senior Non-Voting Preferred Stock, subject to
(i) appropriate adjustments in connection with a stock split or other similar
events and (ii) a reduction by the number of shares of Greenbriar Common Stock
that have previously been delivered upon conversion of Series G Senior
Non-Voting Preferred Stock; all of such shares of Greenbriar Common Stock which
are issuable to the holders of the Series G Senior Non-Voting Preferred Stock
by way of conversion, will be when issued, duly authorized and validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges.
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7.2 Cash Reserves after a Special Asset Sale Trigger. Commencing
on the date nine months after the date of a Special Asset Sale Trigger,
Greenbriar shall, at all times, maintain cash or Permitted Investments in
excess of the sum of (i) the current Liquidation Value of the Series F Senior
Preferred Stock and (ii) the current Liquidation Value (as defined in the
Series G Certificate of Designation) of the Series G Senior Non-Voting
Preferred Stock.
8. Events of Default.
8.1 Notice of Event of Default. Upon an Event of Default or
Potential Default, Greenbriar shall provide written notice of such Event of
Default or Potential Default, including the date on which such event first
occurred, to the Preferred Stock Representative within 10 days after the
occurrence of such event. Any Event of Default or Potential Default may be
waived in writing by the Preferred Stock Representative at any time, in which
case Sections 8.2 through 8.4 shall not apply with respect to such Event of
Default or Potential Default; provided, however, that no such waiver of an
Event of Default or Potential Default shall be deemed to be a waiver of any
other Event of Default or Potential Default.
8.2 Dividends During Event of Default. Upon the occurrence and
during the continuance of an Event of Default resulting from (i) the failure of
Greenbriar to comply with any of the covenants contained in Sections 6.1, 6.3,
6.8, 6.10, 6.19, 6.20, 6.22, 6.24, 6.27-6.35 of the Purchase Agreement or (ii)
any of the events specified in clauses (ii) through (viii) of the definition of
"Event of Default," the holders of outstanding shares of Series G Senior Non-
Voting Preferred Stock shall be entitled to receive, in addition to all other
dividends payable hereunder to holders of shares of Series G Senior Non-Voting
Preferred Stock and when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, cumulative preferential
cash dividends accruing from the date of the Event of Default (the "Default
Date") in an amount per share per annum equal to $1.20 per share, payable
quarterly on the last Business Day of March, June, September and December of
each year. Dividends on the Series G Senior Non- Voting Preferred Stock shall
accrue (whether or not declared) on a daily basis and shall be cumulative
(whether or not in any Dividend Period there shall be funds of Greenbriar
legally available for the payment of such dividends). The first dividend shall
accrue from the Default Date through the last Business Day of the first
calendar quarter to end after the Default Date, and subsequent dividends shall
accrue on a daily basis during the dividend period for which they are payable.
8.3 Put Option. Upon the occurrence of an Event of Default
resulting from (i) the failure of Greenbriar to comply with any of the
covenants contained in Sections 6.1, 6.3, 6.10, 6.19, 6.20, 6.22, 6.27-6.35 of
the Purchase Agreement or (ii) any of the events specified in clauses (iii)
through (viii) of the definition of "Event of Default," each holder of shares
of Series G Senior Non-Voting Preferred Stock shall have the right, by written
notice to Greenbriar (the "Repurchase Notice") within 90 days after the
occurrence of the Event of Default, to require that Greenbriar repurchase, out
of funds legally available therefor, any or all of such holder's shares of
Series G Senior Non-Voting Preferred Stock for an amount in cash equal to 120%
of the Liquidation Value of the shares of Series G Senior Non-Voting Preferred
Stock to be repurchased as of the date of the holder's Repurchase Notice. Any
Repurchase Notice shall be accompanied by duly endorsed certificates
representing the shares of Series G Senior Non-Voting Preferred Stock to be
repurchased. Upon receipt of a Repurchase Notice, Greenbriar shall make payment
in cash of the appropriate amount to the holder requiring repurchase with five
Business Days of the date such Repurchase Notice is
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received, unless prior to such payment, Greenbriar receives written notice from
such holder that such holder is withdrawing its requirement of the repurchase
of its shares of Series G Senior Non-Voting Preferred Stock.
8.4 Special Asset Sale Trigger. Upon a Special Asset Sale
Trigger, each holder of shares of Series G Senior Non-Voting Preferred Stock
shall have the right, by written notice to Greenbriar (the "Asset Sale
Repurchase Notice") within nine months after written notice to the Preferred
Stock Representative of the occurrence of a Special Asset Sale Trigger, to
require that Greenbriar repurchase, out of funds legally available therefor, a
specified number of such holder's shares (the "Repurchase Shares") of Series G
Senior Non-Voting Preferred Stock. The Repurchase Shares may be all or any
portion of such holder's total shares of Series G Senior Non-Voting Preferred
Stock. The Repurchase Shares shall be repurchased by Greenbriar for an amount
in cash equal to the aggregate Liquidation Value of the Repurchase Shares plus
the greater of: (i) 20% of the aggregate Liquidation Value of the Repurchase
Shares or (ii) a 20% IRR on the aggregate Liquidation Value of the Repurchase
Shares, in each case, as of the date of the holder's Asset Sale Repurchase
Notice. Any Asset Sale Repurchase Notice shall be accompanied by duly endorsed
certificates representing the Repurchase Shares. Upon receipt of a Asset Sale
Repurchase Notice, Greenbriar shall make payment in cash of the appropriate
amount to the holder requiring repurchase with five Business Days of the date
such Asset Sale Repurchase Notice is received, unless prior to such payment,
Greenbriar receives written notice from such holder that such holder is
withdrawing its requirement of the repurchase of the Repurchase Shares.
8.5 Change in Management. If at any time after the date hereof,
(i) James R. Gilley is not serving as Chairman of the Board of Directors of
Greenbriar for any reason and (ii) the Preferred Stock Representative has
proposed one or more candidates for Mr. Gilley's replacement that is willing to
serve regardless of whether or not any of such candidate(s) are acceptable to
Greenbriar, unless within 15 days of the date Mr. Gilley ceases to serve as
Chairman Mr. Gilley's replacement as Chairman is mutually agreed upon by
Greenbriar and the Preferred Stock Representative, there shall have occurred a
"Change in Management" which shall give to each holder of shares of Series G
Senior Non-Voting Preferred Stock the right, by written notice to Greenbriar
(the "Change in Management Repurchase Notice") within 90 days after the
occurrence of the Change in Management, to require that Greenbriar repurchase,
out of funds legally available therefor, a specified number of such holder's
shares (the "Change in Management Repurchase Shares") of Series G Senior
Non-Voting Preferred Stock. The Change in Management Repurchase Shares may be
all or any portion of such holder's total shares of Series G Senior Non-Voting
Preferred Stock. The Change in Management Repurchase Shares shall be
repurchased by Greenbriar for an amount in cash equal to the aggregate
Liquidation Value of the Change in Management Repurchase Shares plus the
greater of: (i) 20% of the aggregate Liquidation Value of the Change in
Management Repurchase Shares or (ii) a 20% IRR on the aggregate Liquidation
Value of the Change in Management Repurchase Shares, in each case, as of the
date of the holder's Change in Management Repurchase Notice. Any Change in
Management Repurchase Notice shall be accompanied by duly endorsed certificates
representing the Change in Management Repurchase Shares which shall be free and
clear of all claims, liens and encumbrances. Upon receipt of a Change in
Management Repurchase Notice, Greenbriar shall execute a full recourse
promissory note for the appropriate amount to the holder requiring repurchase
(the "Repurchase Promissory Note") within five Business Days of the date such
Change in Management Repurchase Notice is received, unless prior to such
payment, Greenbriar receives written notice from such holder that such holder
is withdrawing its requirement of
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the repurchase of the Change in Management Repurchase Shares. The Repurchase
Promissory Note shall be (a) in a form agreed to by Greenbriar and the initial
purchaser of the Series G Senior Non-Voting Preferred Stock, (b) for a term of
one (1) year from the date of the Change in Management Repurchase Notice, with
50% of the principal together with all accrued interest due six (6) months from
the date of the Change in Management Repurchase Notice, (c) shall bear interest
at the lower of eighteen percent (18%) or the highest rate allowed by law, and
(d) shall be secured by the highest available lien on all of the property and
assets of Greenbriar and the Subsidiaries reasonably sufficient to secure such
holders right of repayment, including all ownership interests of all
subsidiaries of Greenbriar, except where such lien (i) is in violation of its
certificate of incorporation, articles of incorporation or bylaws of Greenbriar
or any of the Subsidiaries; (ii) would create a default in the performance of
any obligation, agreement or condition contained in any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan, credit agreement,
purchase order, agreement or instrument evidencing an obligation for borrowed
money or other agreement or instrument to which Greenbriar or any of the
Subsidiaries is a party or by which Greenbriar or any of the Subsidiaries may
be bound or to which the property or assets of Greenbriar or any of the
Subsidiaries is subject or affected; or (iii) would create a violation in any
respect of any Law applicable to Greenbriar or any of the Subsidiaries, that
would have a Material Adverse Effect. Such liens shall be of the same priority
as between all holders requiring repurchase. The Repurchase Promissory Note
shall be due and payable immediately if Greenbriar fails to perfect liens on
property and assets of Greenbriar and the Subsidiaries reasonably sufficient to
secure such holders right of repayment within ten Business Days of the date
such Change in Management Repurchase Notice is received, unless prior to such
delivery, Greenbriar receives written notice from such holder that such holder
is withdrawing its requirement of the repurchase of its shares of Series G
Senior Non-Voting Preferred Stock.
8.6 Remedies Cumulative. In addition to the remedies stated
herein, each holder of Series G Senior Non- Voting Preferred Stock will also
have any other rights that such holder may be entitled to under any agreement
or pursuant to applicable law.
9. No Reissuance.
No shares of Series G Senior Non-Voting Preferred Stock acquired by
Greenbriar by reason of redemption, purchase, conversion or otherwise shall be
reissued as Series G Senior Non-Voting Preferred Stock.
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<PAGE> 1
EXHIBIT 99.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
January 13, 1998, by and between Greenbriar Corporation, a Nevada corporation
("Greenbriar"), and Lone Star Opportunity Fund, L.P., a Delaware limited
partnership ("Purchaser"). Greenbriar proposes to issue and sell to the
Purchaser, upon the terms set forth in a Stock Purchase Agreement dated as of
December 31, 1997 (the "Purchase Agreement"), 1,400,000 shares of Greenbriar's
Series F Senior Convertible Preferred Stock (the "Series F Senior Preferred
Stock") and 800,000 shares of Greenbriar's Series G Senior Non-Voting
Convertible Preferred Stock (the "Series G Senior Non-Voting Preferred Stock").
The Series F Senior Preferred Stock and the Series G Senior Non-Voting
Preferred Stock are convertible into Common Stock (as defined below) as
provided in the Purchase Agreement. As an inducement to the Purchaser to enter
into the Purchase Agreement and in satisfaction of a condition to the
Purchaser's obligations thereunder, Greenbriar agrees with the Purchaser, for
the benefit of the Purchaser and the other Holders (as defined below), as
follows:
1. Certain Definitions.
As used in this Agreement, the following initially capitalized terms
have the following meanings:
"Agreement" is defined in the preamble to this Agreement.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, $0.01 par value per share, of
Greenbriar.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"Greenbriar" is defined in the preamble to this Agreement.
"Holder" means a Person owning Registrable Securities.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Prospectus" means the prospectus included in the Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such prospectus.
"Purchase Agreement" is defined in the preamble to this Agreement.
"Purchaser" is defined in the preamble to this Agreement.
<PAGE> 2
"Registrable Securities" means (i) shares of Common Stock issued or
transferred pursuant to the conversion of the Series F Senior Preferred Stock
and the Series G Senior Non-Voting Preferred Stock and (ii) any Common Stock
issued as a dividend or other distribution with respect to or in exchange for
or in replacement of the shares referenced in (i) above.
"Registration Statement" means any registration statement under the
Securities Act that is filed by Greenbriar to register sales of Registrable
Securities by Holders, whether or not such registration statement also
registers the issuance or sale of other securities.
"Request Notice" means a written request, approved by Holders of not
less than a majority of the outstanding Registrable Securities, that Greenbriar
effect a registration of all or part of the Registrable Securities.
"Series F Senior Preferred Stock" is defined in the preamble to this
Agreement.
"Series G Senior Non-Voting Preferred Stock" is defined in the
preamble to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute and the rules and regulations thereunder, all
as the same shall be in effect from time to time.
"Underwritten Offering" means a registration in which securities of
Greenbriar are sold to an underwriter for re-offering to the public.
2. Requested Registration.
(a) The Holders of not less than a majority of the
outstanding Registrable Securities may, at any time, issue a Request Notice to
Greenbriar, requesting Greenbriar to effect registration under the Securities
Act of all or any part of the Registrable Securities, for sale in the manner
specified in the Request Notice, provided that such sale will have an aggregate
offering price of at least $3,000,000. Greenbriar shall give written notice of
the proposed registration to all other Holders within 5 business days of
receipt by Greenbriar of the Request Notice. Greenbriar shall use its best
efforts to include in such registration all the Registrable Securities
specified by any other Holder in a written request and received by Greenbriar
within 25 days after the notice to other Holders is mailed or delivered by
Greenbriar.
The Request Notice shall specify the number of shares of Registrable
Securities proposed to be sold by the Holders making such demand request.
Greenbriar shall file a registration statement for the registration of the
Registrable Securities requested to be registered in the Request Notice as soon
as practicable and in any event within 60 days after receiving the demand
request (the "Required Filing Date") and shall use all commercially reasonable
efforts to cause the same to be declared effective by the Commission as
promptly as practicable after such filing; provided, that, subject to Section
2(d), Greenbriar need effect only two demand registrations pursuant to this
Section 2.
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<PAGE> 3
(b) Greenbriar will not effect any other registration of
any of its securities, whether for its own account or that of any other
security holder, from the date of receipt of a Request Notice until the
completion of the distribution of all securities thereunder; provided that on
or after the 60th day after the effective date of a Registration Statement
filed in connection with a Request Notice, Greenbriar may effect the
registration of (i) debt securities by the Company only for its own account or
(ii) equity securities by the Company only for its own account, which equity
securities will be issued as consideration for an acquisition by the Company.
(c) If any of the Registrable Securities included under
the Registration Statement are to be sold in an Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of 50 percent of the
Registrable Securities to be registered, provided, however, that such managing
underwriters shall be reasonably satisfactory to Greenbriar.
(d) A registration shall not count as a Demand
Registration until it has become effective (unless the Requesting Holders
withdraw all their Registrable Securities, in which case such demand shall
count as a Demand Registration unless the Requesting Holders pay all
registration expenses in connection with such withdrawn registration); provided
that if, after it has become effective, an offering of Registrable Securities
pursuant to a registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court, such registration shall be deemed not to have been effected.
(e) Notwithstanding the foregoing, the provisions of this
Section 2 are subject to the terms of the existing registration rights
agreements listed on and the waivers contained in Exhibit A hereto, except to
the extent waived.
3. Piggyback Registration.
(a) If Greenbriar proposes at any time to register any of
its securities either for its own account or the account of a security holder
or holders (other than a registration relating solely to employee benefit
plans, a registration on Form S-4 or a registration relating solely to a Rule
145 transaction) Greenbriar will promptly, but in no event less than 45 days
prior to the initial filing with the Commission of such registration statement,
give written notice to the Holders. Such notice shall specify, to the extent
known, the anticipated filing date, the number of securities proposed to be
registered and the general distribution arrangements. Greenbriar will use its
best efforts to include in such registration and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder and received by Greenbriar within 30 days after
the written notice from Greenbriar is mailed or delivered by Greenbriar. Such
written request may specify all or a part of a Holder's Registrable Securities.
(b) Greenbriar may, at any time prior to the
effectiveness of any such registration, abandon the proposed offering;
provided, however, Greenbriar shall give written notice of such abandonment to
each Holder as soon as practical, but in no event more than 20 days after the
determination to abandon such registration.
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<PAGE> 4
(c) The number of Registrable Securities to be included
in such registration may be reduced or eliminated if and to the extent, in the
reasonable opinion of the managing underwriter of such offering, such inclusion
would materially jeopardize the successful marketing of the securities proposed
to sold therein. If the aggregate number of securities must be limited
pursuant to this Section, the total number of securities that may be included
shall be allocated first to Greenbriar or Holders initiating a request for
registration under Section 2, and then pro rata among the Holders and other
security holders requesting their securities of Greenbriar to be registered
pursuant to similar piggy-back registration rights on the basis of the number
of shares requested to be included in such registration by each Holder or other
holder having similar piggy-back registration rights. If a Holder is not
entitled to include all of its Registrable Securities in such registration,
then such Holder may elect to withdraw its request to include any or all of its
Registrable Securities in such registration.
(d) All Holders proposing to distribute their securities
through such underwriting shall, if reasonably requested by Greenbriar or the
managing underwriter in connection with such registration, (i) agree to sell
such Registrable Securities on the basis provided in any underwriting
arrangements entered into in connection therewith, (ii) complete and execute
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents that are required under the terms of such underwriting
arrangements and (iii) promptly provide any information requested, in writing,
by Greenbriar or the managing underwriter.
(e) If a Holder decides not to include all of its
Registrable Securities in any registration pursuant to this Section, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent Registration Statement(s) as may be filed by
Greenbriar.
4. Registration on Form S-3.
(a) Greenbriar shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms. After
Greenbriar has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of Section 2, the Holders of Registrable
Securities shall have the right to request registrations on Form S-3 (such
requests shall be in writing and shall state the number of shares of
Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders); provided, however, that
Greenbriar shall not be obligated to effect any such registration if (i) the
Holders, together with the holders of any other securities of Greenbriar
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $3,000,000 or (ii) in a given twelve-month period,
Greenbriar has effected one (1) such registration in any such period.
(b) If a request complying with the requirements of
Section 4(a) is delivered to Greenbriar, the provisions of Sections 2(b) and
(c) hereof shall apply to such registration.
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<PAGE> 5
(c) Notwithstanding the foregoing, the provisions of this
Section 4 are subject to the terms of the existing registration rights
agreements listed on and the waivers contained in Exhibit A hereto, except to
the extent waived.
5. Registration Procedures.
In connection with any registration to permit the sale or resale of
Registrable Securities pursuant to this Agreement, Greenbriar shall use its
reasonable best efforts to:
(a) Keep such registration effective for a period of 120
days or until the Holders have completed the distribution as specified in the
Request Notice, whichever first occurs; provided, however, (i) that such
120-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at
the request of an underwriter of any securities of Greenbriar; and (ii) in the
case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 145, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Securities
Act governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment that (A) includes any Prospectus required
by Section 10(a)(3) of the Securities Act or (B) reflects facts or events
representing a material or fundamental change in the information set forth in
the Registration Statement, the incorporation by reference of information
required to be included in (A) and (B) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the
Registration Statement;
(b) Furnish to each Holder, prior to the filing thereof
with the Commission, a copy of the Registration Statement and each amendment
thereto or each amendment or supplement to the Prospectus included therein and
shall make Greenbriar's representatives available for discussion of such
document and other customary due diligence matters, and shall use its best
efforts to reflect in each such document, when so filed with the Commission,
such comments as any Holder reasonably may propose;
(c) Take any and all actions as may be necessary so that
(i) the Registration Statement and any amendment thereto and the Prospectus
complies in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) the Registration Statement and any amendment
thereto (in either case, other than with respect to written information
furnished to Greenbriar by or on behalf of any Holder specifically for
inclusion therein) does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make any statement therein not misleading and
(iii) the Prospectus (other than with respect to such information from Holders)
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
5
<PAGE> 6
(d) Keep the Registration Statement continuously
effective and provide all requisite financial statements for the period
specified in Section 5(a); and upon the occurrence of any event that would
cause the Registration Statement or any amendment thereto or the Prospectus (i)
to contain a material misstatement or omission or (ii) not to be effective and
usable for resale of Registrable Securities during the period required by this
Agreement, Greenbriar shall file promptly an appropriate amendment or
supplement to the Registration Statement, in the case of clause (i), correcting
any such misstatement or omission, and, in the case of either clause (i) or
(ii), use its reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter;
(e) Prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 5(a); cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
sellers thereof set forth in the Registration Statement or supplement to the
Prospectus;
(f) As soon as practicable, advise the Holders (which
advice pursuant to clauses (ii)-(iv) shall be deemed to include an instruction
to suspend the use of the Prospectus until the requisite changes have been
made) and, if requested by such Persons, to confirm such advice in writing:
i. when the Prospectus or any supplement or amendment
thereto has been filed with the Commission and when
the Registration Statement or any post-effective
amendment thereto has become effective;
ii. of any request by the Commission for amendments to
the Registration Statement or amendments or
supplements to the Prospectus or for additional
information relating thereto;
iii. of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration
Statement under the Securities Act or of the
suspension by any state securities commission of the
qualification of the Registrable Securities for
offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding
purposes; and
iv. of the existence of any fact or the happening of any
event that makes any statement of a material fact
made in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that
requires the making of any additions to or changes in
the Registration Statement or the Prospectus so that
the Registration Statement and the Prospectus do not
contain an untrue statement of a material fact and do
not omit
6
<PAGE> 7
to state a material fact required to be stated
therein or necessary to make the statements therein
not misleading;
(g) If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Registrable
Securities under state securities or blue sky laws, obtain the withdrawal or
lifting of such order at the earliest possible time;
(h) Furnish to each Holder and each of the
underwriter(s), if any, without charge, at least one copy of the Registration
Statement and each post-effective amendment thereto, including all financial
statements and schedules, documents incorporated by reference therein and, if
the Holder so requests in writing, all exhibits (including exhibits
incorporated therein by reference);
(i) Deliver to each Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) included in the Registration Statement
and any amendment or supplement thereto as such Persons may reasonably request;
and Greenbriar consents to the use of the Prospectus by each of the selling
Holders and each of the underwriter(s), if any, in connection with the offering
and the sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(j) Prior to any public offering pursuant to the
Registration Statement, register or qualify or cooperate with the Holders of
Registrable Securities registered thereunder, the underwriter(s), if any, and
their respective counsel in connection with the registration and qualification
of such Registrable Securities under the securities or blue sky laws of such
jurisdictions as such Holders or underwriters reasonably request in writing and
do any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of such Registrable Securities; provided,
however, that Greenbriar will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not then so subject;
(k) Cause the Registrable Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller
or sellers thereof or the underwriter(s), if any, to consummate the disposition
of such Registrable Securities, subject to the provision contained in Section
5(f); provided, however, that Greenbriar's obligations pursuant to this Section
5(k) shall not extend to actions necessary to enable the seller or sellers of
Registrable Securities or the underwriter(s), if any, to consummate the
disposition of such Registrable Securities if such actions are necessary only
as a result of the status of such seller or sellers or underwriter(s) as
regulated entities under any regulatory regime other than the securities laws
of the United States or any state thereof;
(l) Unless any Registrable Securities shall be in
book-entry form only, cooperate with the Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold under the
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<PAGE> 8
Registration Statement, free of any restrictive legends and in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request in connection with the sales of Registrable
Securities pursuant to the Registration Statement;
(m) Upon the occurrence of any event contemplated by
Section 5(f)(ii)-(iv), file (and have declared effective as soon as possible) a
post-effective amendment to the Registration Statement or an amendment or
supplement to the Prospectus or any document incorporated by reference therein
or file any other required document so that, as thereafter delivered to the
purchasers of Registrable Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in light of the circumstances under which they were
made not misleading. Each Holder of Registrable Securities registered under
the Registration Statement agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from Greenbriar of the existence of any fact
of the kind described in Section 5(f)(ii)-(iv) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement until such Holder receives copies of the supplemented or
amended Prospectus contemplated by this Section 5(m), or until such Holder is
advised in writing by Greenbriar that the use of the Prospectus may be resumed,
and such Holder has received copies of any additional or supplemental filings
which are incorporated by reference in the Prospectus. If so directed by
Greenbriar, each Holder will deliver to Greenbriar (at Greenbriar's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice. In the event Greenbriar shall give any such notice,
the time period regarding Greenbriar's obligations to maintain the
effectiveness of the Registration Statement set forth in Section 5(a) hereof
shall be extended by the number of days during the period from and including
the date of the giving of such notice pursuant to Section 5(f) hereof to and
including the date when such Holder shall have received the copies of the
supplemented or amended Prospectus contemplated by this Section 5(m);
(n) Provide CUSIP numbers for all Registrable Securities
at the time of any distribution thereof to Holders, in each case not later than
the effective date of the Registration Statement, and provide a transfer agent
and registrar for the Common Stock;
(o) Cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its best efforts to cause the Registration Statement to become
effective and approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Registrable Securities to consummate
the disposition of such securities;
(p) Comply with all applicable rules and regulations of
the Commission, and make generally available to its security holders or
otherwise provide in accordance with Section 11(a) of the Securities Act, as
soon as practicable after the effective date of the Registration Statement, an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act;
(q) Request a Holder of Registrable Securities to furnish
to Greenbriar such information regarding such Holder and the distribution of
such Holder's securities thereunder
8
<PAGE> 9
as Greenbriar may from time to time reasonably require for inclusion in the
Registration Statement and Greenbriar may exclude from such registration the
Registrable Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request;
(r) If requested by the Holders of Registrable Securities
being sold in an Underwritten Offering or the underwriter(s) thereof, promptly
incorporate in the Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment, if necessary, such information as such
Holders and underwriter(s), if any, may reasonably request to have included
therein, which may include, without limitation, information relating to the
plan of distribution of the Registrable Securities, information with respect to
the amount of Registrable Securities being sold to such underwriter(s), the
purchase price being paid therefor and with respect to any other terms of the
offering of the Registrable Securities to be sold in such offering; and shall
make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after Greenbriar is notified of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
(s) Enter into such customary agreements (including an
underwriting agreement in customary form, if applicable) and take all such
other appropriate actions in order to expedite or facilitate the disposition of
the Registrable Securities pursuant to the Registration Statement, and in
connection therewith, Greenbriar shall (i) make such representations and
warranties to the Holders of Registrable Securities registered thereunder and
the underwriter(s), if any, in form, substance and scope as are customarily
made by issuers to underwriters in primary underwritten offerings; (ii) obtain
opinions of counsel to Greenbriar and updates thereof (which counsel and
opinions, in form, scope and substance, shall be reasonably satisfactory to
such underwriters and the Holders of a majority of the outstanding Registrable
Securities being sold) addressed to each such Holder and underwriter covering
such matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Holders
and underwriters; (iii) if and to the extent permitted by Statement of Auditing
Standards No. 72, obtain comfort letters and updates thereof from Greenbriar's
independent certified public accountants addressed to the underwriters
requesting the same, such letters to be in customary form and covering matters
of the type customarily covered in comfort letters in connection with primary
underwritten offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to the underwriting or other agreement, without
exception; (iv) in connection with an Underwritten Offering only, set forth in
full or incorporate by reference in the underwriting agreement the
indemnification provisions and procedures of Section 8 hereof with respect to
all parties to be indemnified pursuant to said Section; and (v) deliver such
documents and certificates as may be reasonably requested by such Holders or
underwriters to evidence compliance with Section 5(m) and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by Greenbriar pursuant to this Section 5(s). The foregoing actions set
forth in clauses (i), (ii), (iii), (iv) and (v) of this Section 5(s) shall be
performed at each closing under any underwriting or similar agreement as and to
the extent required thereunder. If at any time the representations and
warranties of Greenbriar contemplated in clause (i) above cease to be true and
correct, Greenbriar shall so advise the Purchaser and the underwriter(s), if
any, and each selling Holder promptly and, if requested by such Persons, shall
confirm such advice in writing;
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<PAGE> 10
(t) Make available at reasonable times for inspection by
the Holders of the Registrable Securities, any underwriter participating in any
disposition pursuant to the Registration Statement, and any attorney or
accountant retained by any such Holders or underwriters, all financial and
other records, pertinent corporate documents and properties of Greenbriar and
its subsidiaries; and cause Greenbriar's officers, directors and employees to
supply all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with the Registration Statement subsequent
to the filing thereof as is customary for similar due diligence examinations;
provided, however, that any information that is designated in writing by
Greenbriar, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by such Holders or any such underwriter,
attorney or accountant, unless such disclosure is made in connection with a
court proceeding or required by law, or such information becomes available to
the public generally or through a third party without an accompanying
obligation of confidentiality; and provided, further that the foregoing
inspection and information gathering shall, to the greatest extent possible, be
coordinated on behalf of the Holders and the other parties entitled thereto by
one counsel designated by and on behalf of such Holders and other parties;
(u) Subject to any applicable rules thereto, cause all
Common Stock included among the Registrable Securities to be listed on each
securities exchange on which the Common Stock is listed;
(v) Provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section 13
and Section 15 of the Exchange Act.
6. Registration Expenses.
(a) Greenbriar shall bear all expenses incurred in
connection with the performance of or compliance with its obligations under
this Agreement, including without limitation all registration filing,
application and qualification fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger, delivery and
telephone expenses and fees, and disbursements of counsel for Greenbriar, all
independent certified public accountants and other persons retained by
Greenbriar, all of Greenbriar's internal expenses relating to such registration
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by Greenbriar are then
listed.
(b) Each Holder will pay any discounts and commissions
incurred upon the sale of securities by it under such registration.
7. Prior Approval of Subsequent Registration Rights. From and
after the date of this Agreement and until no Registrable Securities remain
outstanding, without the prior written consent of the Holders, Greenbriar shall
not grant (i) any new demand registration rights to any Person or (ii) any new
piggy-back registration rights to any Person unless such rights are expressly
made subject to the prior right of Holders to include any or all of their
Registrable Securities before such other Person includes any shares in any
registration relating to an underwritten public offering with respect to which,
in the opinion of the
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<PAGE> 11
managing underwriter, the inclusion in the offering of all shares requested to
be registered by all Persons holding registration rights would materially
jeopardize the successful marketing of the securities to be sold.
8. Indemnification and Contribution.
(a) In connection with any Registration Statement,
Greenbriar shall indemnify and hold harmless each Holder, its officers,
directors, partners, employees, representatives and agents, and each Person who
controls such Holder within the meaning of the Securities Act or the Exchange
Act against any and all losses, claims, damages, liabilities or expenses,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) which arise out of or are based upon any untrue or alleged
untrue statement of material fact contained in the Registration Statement, or
any Prospectus or preliminary Prospectus or any amendment thereof or supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and agrees to reimburse each such
indemnified Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, expense or action, as such expenses are incurred; provided,
however, that Greenbriar will not be liable in any case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
Greenbriar by or on behalf of any such Holder and contained in, on the
effective date of, a Registration Statement or any amendment thereto.
Greenbriar also agrees to indemnify or contribute to losses of, as
provided in Section 8(d), any underwriters of Registrable Securities, their
officers, directors, partners, employees, representatives and agents and each
Person, if any, who controls any such underwriter (within the meaning of the
Securities Act) on substantially the same basis as that of the indemnification
of the Holders provided in Section 8(a) and shall, if requested by any Holder,
enter into an underwriting agreement reflecting such agreement.
(b) Each selling Holder, severally and not jointly, shall
indemnify and hold harmless Greenbriar, its officers, directors, partners,
employees, representatives and agents and each Person, if any, who controls
Greenbriar (within the meaning of the Securities Act) against any and all
losses, claims, damages, liabilities or expenses to the same extent as the
foregoing indemnity contained in Section 8(a) hereof resulting from any untrue
or alleged untrue statement of material fact contained in the Registration
Statement or any amendment thereof or supplement thereto or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading to the extent, but
only to the extent, that such loss, claim, damage or liability relates to or
arises from information relating to such Holder furnished in writing by such
Holder specifically for use in the Registration Statement; provided, however,
that the obligation to indemnify will be individual to each Holder and will be
limited to the amount of net proceeds received by such Holder from the sale of
Registrable Securities pursuant to the Registration Statement.
(c) Any Person entitled to indemnification hereunder
shall give notice as promptly as reasonably practicable to each indemnifying
party of any claim or action
11
<PAGE> 12
commenced against it in respect of which indemnity may be sought hereunder;
provided, however, that failure to so notify an indemnifying party shall not
relieve such indemnifying party from any obligation that it may have pursuant
to this Section except to the extent that it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such failure;
provided further, however, that the failure to notify the indemnifying party
shall not relieve it from any liability that it may have to an indemnified
party otherwise than on account of this indemnity agreement. If any such claim
or action shall be brought against an indemnified party, the indemnifying party
shall be entitled to participate therein and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume the
defense thereof with counsel satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that an indemnified party will have the
right to employ its own counsel in any such action, but the fees, expenses and
other charges of such counsel will be at the expense of such indemnified party
unless (i) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (ii) the indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from
or in addition to those available to the indemnifying party, (iii) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party
or parties. Each indemnified party, as a condition to the indemnity agreements
contained in Sections 8(a) and 8(b), shall use all efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement or any such action
effected without its written consent, but if settled with its written consent
or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party, then
each applicable indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect the relative fault of Greenbriar on the one hand and the Holders on the
other in connection with the actions, statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any
12
<PAGE> 13
other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to information supplied by Greenbriar on the one hand or the Holders on the
other, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof), shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceedings.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled any contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Holders' obligations in this Section 8(d) to contribute are several in
proportion and not joint.
9. Rules 144 and 144A. Greenbriar shall use commercially
reasonable efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time
Greenbriar is not required to file such reports, it will, upon the written
request of any Holder of Registrable Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. Greenbriar covenants that it will take such
further action as any Holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such Holder to sell
securities pursuant to Rules 144 and 144A (including the requirements of Rule
144A(d)(4)).
10. Miscellaneous.
(a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless Greenbriar
has obtained the written consent of the Holders. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of the Holders of
Registrable Securities being sold pursuant to the Registration Statement and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of the Registrable Securities being sold.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
certified mail (return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:
i. if to a Holder, at the address of such Holder
maintained by Greenbriar;
ii. if to the Purchaser, at the address set forth in the
Purchase Agreement;
iii. if to Greenbriar, at its address set forth in the
Purchase Agreement;
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<PAGE> 14
or to such other addresses as the recipient party has specified to the sending
party by prior written notice to the sending party.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, certified, return receipt requested and
postage prepaid, if mailed; when receipt is acknowledged by the recipient's
telecopier machine, if telecopied; and on the next business day, if delivered
to a next-day air courier.
(c) Remedies. In the event of a breach by Greenbriar or
by a Holder of any of their respective obligations under this Agreement, each
Holder or Greenbriar, as the case may be, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
Greenbriar and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(d) Severability. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(e) No Inconsistent Agreements. Greenbriar will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders in this
Agreement. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders
of Greenbriar's securities under any agreement in effect on the date hereof.
(f) Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of their respective heirs, executors, administrators,
successors, legal representatives and assigns. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which are
for the benefit of Holders are also for the benefit of, and enforceable by, any
subsequent Holder.
(g) Counterparts. This Agreement may be executed in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same Agreement.
(h) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
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<PAGE> 15
(i) Governing Law. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
(j) Entire Agreement. This Agreement together with the
other operative documents described in the Purchase Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by
Greenbriar with respect to the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Registration Rights Agreement as of the date first above written.
GREENBRIAR CORPORATION,
a Nevada corporation
By: /s/ GENE S. BERTCHER
------------------------------------
Name: Gene S. Bertcher
-------------------------------
Title: Executive Vice President
------------------------------
LONE STAR OPPORTUNITY FUND, L.P.,
a Delaware limited partnership
By: Lone Star Partners, L.P., its
General Partner
By: Lone Star Management Co., Ltd.,
its General Partner
By: /s/ LOUIS PALETTA
----------------------------
Name: Louis Paletta
-----------------------
Title: Vice President
----------------------
16
<PAGE> 1
EXHIBIT 99.5
AGREEMENT
THIS AGREEMENT (this "Agreement") dated as of December 31, 1997, and
effective upon the date of issuance of shares of Series F Senior Convertible
Preferred Stock and Series G Senior Non-Voting Convertible Preferred Stock of
Greenbriar, is entered into by and between Greenbriar Corporation, a Nevada
corporation ("Greenbriar"), and Lone Star Opportunity Fund, L.P., a Delaware
limited partnership ("Lone Star").
Section 1. Definitions.
"5-day Average Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the average
closing price of such common stock on the American Stock Exchange, New York
Stock Exchange or Nasdaq National Market over the 5-trading day period
immediately prior to such date.
"20-day Average Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the average
closing price of such common stock on the American Stock Exchange, New York
Stock Exchange or Nasdaq National Market over the 20-trading day period
immediately prior to such date.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Dividends" means dividends paid by Greenbriar and received by Lone
Star on the Series F Senior Preferred Stock and the Series G Senior Non-Voting
Preferred Stock.
"Fair Market Price" per share of common stock, for purposes of any
provision herein at the date specified in such provision, means the lesser of
(i) the 5-Day Average Price of such common stock or (ii) the 20-Day Average
Price of such common stock; provided, that if such common stock has not been
listed on the American Stock Exchange, New York Stock Exchange or Nasdaq
National Market for such periods, then the Fair Market Price per share of such
common stock shall be deemed to be the lesser of (i) the net book value per
share of common stock, determined in accordance with GAAP, or (ii) the fair
value per share of common stock determined pursuant to the Valuation Procedure.
"Greenbriar" means Greenbriar Corporation, a Nevada corporation.
"Greenbriar Common Stock" means the common stock, par value $0.01 per
share, of Greenbriar.
"Lone Star" has the meaning set forth in the preamble to this
Agreement.
"Make Whole Amount" means the greater of (i) Present Value # 1.2t and
(ii) zero. Please refer to Exhibit A for sample calculations of the Make Whole
Amount.
"Payment Date" means ten business days after the date on which all of
the Series F Senior Preferred Stock and all of the Series G Senior Non-Voting
Preferred Stock have been (i) converted to Greenbriar Common Stock or (ii)
repurchased by Greenbriar from Lone Star
<PAGE> 2
pursuant to the terms of Sections 8.4, 8.5 and 8.6 of the Series F Certificate
of Designation or Sections 8.3, 8.4 and 8.5 of the Series G Certificate of
Designation.
"Present Value" means $22,000,000 - Sigma ((Dividends(t) + Value
Received (t)) / 1.2(t))
"Series F Certificate of Designation" means the Certificate of
Designation of Greenbriar relating to the Series F Senior Preferred Stock.
"Series F Senior Preferred Stock" means the Series F Senior
Convertible Preferred Stock, par value $0.01 per share, of Greenbriar.
"Series G Certificate of Designation" means the Certificate of
Designation of Greenbriar relating to the Series G Senior Non-Voting Preferred
Stock.
"Series G Senior Non-Voting Preferred Stock" means the Series G Senior
Non-Voting Convertible Preferred Stock, par value $0.01 per share, of
Greenbriar.
"Special Sale Trigger" means any sale, lease, sale/leaseback,
assignment, transfer or other disposition of assets, which (i) has a total
aggregate consideration received for such dispositions in excess of $125
million of cash, indebtedness assumed, and potential earnouts and the present
fair value of any other consideration, and (ii) assigns or subleases
substantially all of Greenbriar's operated properties which are leased from
others, except where the consent is required from the landlord of such property
and such landlord fails to consent to such assignment or sublease. The
dispositions described above specifically include, but are not limited to,
sales of operating leases and management contracts and sales as a part of the
Syndication Program.
"Syndication Program" means a program of selling real estate to public
or private syndications consisting of partnerships, limited liability
companies, or limited liability partnerships where ownership of such entities
is offered to passive investors for cash and/or notes.
"t" means the time elapsed from the date hereof expressed in fractions
of years.
"Valuation Procedure" means a determination of fair value of any
property made in good faith by the Board of Directors; provided that, if Lone
Star objects to such determination within 10 days of receipt of written
notification thereof, then the fair value of such property shall be determined
in good faith by a recognized national investment bank selected by unanimous
vote or consent of the Board of Directors, which investment bank is not
reasonably objected to by Lone Star. The fees and expenses of such investment
bank shall be paid by one-half by Greenbriar and one-half by Lone Star.
"Value Received" means, as of any date that shares of the Series F
Senior Preferred Stock or the Series G Senior Non-Voting Preferred Stock are
converted, exchanged or repurchased, the sum of (i) the Fair Market Price of
Greenbriar Common Stock on the date such stock was converted multiplied by the
number of shares of Greenbriar Common Stock issued to Lone Star in connection
with the conversion of the Series F Senior Preferred Stock on such date, (ii)
the Fair Market Price of Greenbriar Common Stock on the date such stock was
exchanged multiplied by the number of shares of Greenbriar Common Stock
transferred
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<PAGE> 3
to Lone Star in exchange for the Series G Senior Non-Voting Preferred Stock on
such date, (iii) the amount of cash received by Lone Star for the repurchase of
the Series F Senior Preferred Stock on such date and (iv) the amount of cash
received by Lone Star for the repurchase of the Series G Senior Non-Voting
Preferred Stock on such date.
Section 2. Payment Obligation. On the Payment Date, Greenbriar
shall pay to Lone Star cash in an amount equal to the Make Whole Amount by wire
transfer to an account designated by Lone Star at least two business days
before the Payment Date.
Section 3. Termination. This Agreement shall terminate upon the
earlier of:
(a) Payment in full of the payment obligation set forth
in Section 2 above;
(b) A determination pursuant to the terms of this
Agreement that the Make Whole Amount is zero (0) as of the Payment Date; and
(c) One year after the date on which Lone Star receives
written notice from Greenbriar of a Special Sale Trigger, but in no event
earlier than one year after the actual date upon which a Special Sale Trigger
occurs.
Section 4. Miscellaneous.
(a) Notices. All notices, notifications, demands,
requests, waivers, consents or other communications under this Agreement shall
be in writing and shall be deemed to have been duly given, unless explicitly
stated otherwise, (i) if mailed certified mail, postage prepaid, return receipt
requested, three days after being deposited in the mail; (ii) if sent via
overnight courier, the next business day after being deposited with such
courier; (iii) if sent by telecopier (with written confirmation of receipt), on
that day, or if telecopied on a day that is not a business day, the next day
that is a business day; provided that a copy is mailed by certified mail
(return receipt requested); or (iv) if delivered by hand (with written
confirmation of receipt) on that day, or if delivered on a day that is not a
business day, the next day that is a business day; in each case, to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the
other parties):
If to Greenbriar: Greenbriar Corporation
4265 Kellway Circle
Addison, Texas 75244-2033
Attention: Gene Bertcher
Telecopy No.: (972) 407-8726
with copy to: Mark E. Bennett
14933 Oaks North Drive
Dallas, Texas 75240
Telecopy No.: (214) 373-6810
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<PAGE> 4
If to Lone Star: Lone Star Opportunity Fund, L.P.
600 N. Pearl Street
Suite 1550, LB 161
Dallas, Texas 76140
Attention: Sam F. Hines
Telecopy No.: (214) 754-8301
with copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: W. Scott Wallace
Telecopy No.: (214) 651-5940
(b) Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties whether so expressed or
not.
(c) Amendment and Waiver, etc. This Agreement may be
amended only with the written consent of Greenbriar and Lone Star. No failure
or delay on the part of Greenbriar or Lone Star in exercising any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to Greenbriar or Lone Star at law or in equity
or otherwise. No waiver of or consent to any departure by Greenbriar or Lone
Star from any provision of this Agreement shall be effective unless signed in
writing by the other parties.
(d) Duplicate Originals. Two or more duplicate originals
of this Agreement may be signed by the parties, each of which shall be an
original but all of which together shall constitute one and the same
instrument.
(e) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(f) Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Texas,
without respect to conflicts of laws principles.
(g) Entire Agreement. This Agreement constitutes the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
(h) Headings Descriptive. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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<PAGE> 5
(i) Arbitration. THE PARTIES AGREE THAT IF ANY DISPUTE
SHOULD ARISE UNDER THE TERMS AND PROVISIONS OF THIS AGREEMENT, EACH PARTY
WAIVES ANY RIGHT TO COMMENCE LEGAL ACTION OR ARBITRATION OTHER THAN AS PROVIDED
UNDER THE TERMS OF THIS AGREEMENT, AND THIS AGREEMENT SHALL PROVIDE THE SOLE
AND EXCLUSIVE REMEDY FOR RESOLUTION OF DISPUTES.
(i) THE DETERMINATION OF THE ARBITRATOR SHALL BE
FINAL AND BINDING UPON EACH PARTY AND EACH PARTY SPECIFICALLY WAIVES
ANY RIGHT TO CLAIM THAT THE ARBITRATOR HAS EXCEEDED THE SCOPE OF THE
ARBITRATION, HAS DISREGARDED EVIDENCE OR PRINCIPLES OF LAW, AND
FURTHER WAIVES ANY RIGHT TO DISCLAIM THE QUALIFICATION OR FUNCTION OF
THE ARBITRATOR IN ANY MANNER OR FASHION.
(ii) APPOINTMENT OF THE ARBITRATOR SHALL BE MADE
BY MUTUAL AGREEMENT OF THE PARTIES. IF THE PARTIES CANNOT AGREE UPON
THE IDENTIFICATION OF THE ARBITRATOR WITHIN THIRTY (30) DAYS FROM THE
MAILING OF THE OBJECTION, A PETITION FOR APPOINTMENT OF ARBITRATOR
SHALL BE FILED WITH THE SUPERIOR COURT OF THE COUNTY OF DALLAS, TEXAS.
THE ARBITRATION SHALL BE HELD IN DALLAS, TEXAS PURSUANT TO THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
(iii) THE ARBITRATOR'S FEES AND FEES AND COSTS OF
PETITIONING FOR THE APPOINTMENT OF THE ARBITRATOR SHALL BE PAID BY
GREENBRIAR. THE ARBITRATOR UPON RENDERING ITS AWARD SHALL DETERMINE
THE PARTY THAT PREVAILED BASED UPON WRITTEN STATEMENTS MADE BY EACH
PARTY AT THE COMMENCEMENT OF THE ARBITRATION AS TO THE POSITION OF THE
PARTIES AND THEIR ALTERNATIVES FOR SETTLING THE MATTER. A STATEMENT OF
A PROPOSED SETTLEMENT SHALL NOT BE BINDING UPON ANY PARTY AND SHALL
NOT BE CONSIDERED AS EVIDENCE BY THE ARBITRATOR EXCEPT TO THE EXTENT
THAT THE ARBITRATOR UPON MAKING ITS SOLE AND INDEPENDENT DETERMINATION
SHALL DETERMINE THE PARTY WHICH PREVAILED BASED UPON THE PROPOSALS FOR
SETTLEMENT OF THE MATTER MADE BY EACH PARTY AND SHALL DETERMINE THAT
THE NON-PREVAILING PARTY SHALL PAY SOME OR ALL OF THE COSTS OF
ARBITRATION INCLUDING ANY COSTS INCURRED BY THE ARBITRATOR AND IN
EMPLOYING EXPERTS TO ADVISE THE ARBITRATOR IN REGARD TO SPECIFIC
SUBJECTS OR QUESTIONS. THE ARBITRATOR MAY FURTHER AWARD THE COST OF
ATTORNEYS FEES OR EXPERT WITNESSES CONSULTED OR EMPLOYED IN THE
PREPARATION OR PRESENTATION OF EVIDENCE TO THE ARBITRATOR BY THE
PREVAILING PARTY IF, IN THE ARBITRATOR'S DETERMINATION, THE POSITION
OF THE NONPREVAILING PARTY WAS NOT REASONABLY TAKEN OR MAINTAINED OR
WAS BASED UPON A FAILURE TO PROPERLY EXCHANGE OR COMMUNICATE
INFORMATION WITH THE PREVAILING PARTY IN REGARD TO THE SUBJECT
SUBMITTED TO ARBITRATION.
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<PAGE> 6
(iv) THE ARBITRATOR'S DETERMINATION MAY FURTHER
PROVIDE FOR PROSPECTIVE ENFORCEMENT AND DIRECTIONS FOR THE PARTIES TO
COMPLY WITH INCLUDING WITHOUT LIMITATION PERMANENT INJUNCTIVE RELIEF
OR SPECIFIC PERFORMANCE. UNDER SUCH CIRCUMSTANCES, THE ARBITRATOR'S
AWARD SHALL BE BINDING UPON THE PARTIES AND SHALL BE UNDERTAKEN AND
PERFORMED BY EACH OF THE PARTIES UNTIL SUCH TIME AS THE ARBITRATOR'S
DIRECTIONS TO THE PARTY SHALL LAPSE BY THEIR TERM, OR THE ARBITRATOR
SHALL NOTIFY THE PARTIES THAT THOSE TERMS ARE NO LONGER IN FORCE OR
EFFECT OR SHALL MODIFY THOSE TERMS.
(v) NOTWITHSTANDING THE FOREGOING, ANY PARTY MAY
APPEAL THE ARBITRATOR'S DETERMINATION IF SUCH APPEAL IS BASED SOLELY
ON THE BASIS THAT THE ARBITRATOR HAS MADE AN INCORRECT INTERPRETATION
OF LAW.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
GREENBRIAR CORPORATION,
a Nevada corporation
By: /s/ GENE S. BERTCHER
-------------------------------------
Name: Gene S. Bertcher
--------------------------------
Title: Executive Vice President
-------------------------------
LONE STAR OPPORTUNITY FUND, L.P.,
a Delaware limited partnership
By: Lone Star Partners, L.P., its
General Partner
By: Lone Star Management Co., Ltd.,
its General Partner
By: /s/ LOUIS PALETTA
-----------------------------
Name: Louis Paletta
------------------------
Title: Vice President
-----------------------
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