-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AXCUY3V1I4GtQAiqsstBSmU+p+ne00SwYUBg2lYx+RWD3MEzl6tOOUrdOHpf2yUm 7YBrUagHewYJhgKNgahWEg== 0001010549-01-500629.txt : 20020413 0001010549-01-500629.hdr.sgml : 20020413 ACCESSION NUMBER: 0001010549-01-500629 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011228 FILED AS OF DATE: 20011214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENBRIAR CORP CENTRAL INDEX KEY: 0000105744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 752399477 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-08187 FILM NUMBER: 1813502 BUSINESS ADDRESS: STREET 1: 14185 DALLAS PKWY STREET 2: STE 650 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9724078400 MAIL ADDRESS: STREET 1: 14185 DALLAS PKWY STREET 2: STE 650 CITY: DALLAS STATE: TX ZIP: 75204 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 DEF 14A 1 greenbriarsc141201.txt GREENBRIAR CORPORATION 14185 Dallas Parkway, Suite 650 Dallas, Texas 75254 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held December 28, 2001 Dear Stockholders of Greenbriar Corporation: You are cordially invited to attend the annual meeting of stockholders of Greenbriar Corporation to be held at 10:00 AM, local time on December 28, 2001 at 14185 Dallas Parkway, Suite 650, Dallas, Texas 75254, to consider and vote upon the following matters: Proposal 1. Election of two Class I directors to hold office in accordance with the Articles of Incorporation and Bylaws of the company, and the transaction of such other business that may properly come before the meeting or any adjournment or postponement thereof. Only stockholders of record at the close of business on November 30, 2001 can vote at the meeting. You are cordially invited to attend the annual meeting in person. Even if you plan to attend the meeting, you are still requested to sign, date and return the accompanying proxy in the enclosed addressed envelope. If you attend, you may vote in person if you wish, even though you have sent your proxy. By Order of the Board of Directors /s/ Oscar Smith - --------------- Oscar Smith, Secretary December 3, 2001 GREENBRIAR CORPORATION 14185 Dallas Parkway, Suite 650 Dallas, Texas 75254 (972)407-8400 PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS To Be Held December 28, 2001 The company is sending this proxy statement and the accompanying proxy card to the holders of common stock and Series B preferred stock, of Greenbriar Corporation, in connection with a solicitation of proxies by the board of directors of the company from the stockholders for use at the annual meeting of stockholders of the company. We are mailing this proxy statement and the enclosed form of proxy beginning on or about December 7, 2001. VOTING AND PROXY INFORMATION Who May Vote Holders of record of common stock and Series B preferred stock at the close of business on November 30, 2001 are entitled to receive notice of and to vote at the annual meeting. At the close of business on the record date there were outstanding 293,248 shares of common stock and 615 shares of Series B preferred Stock, the only outstanding securities of the company entitled to vote at the annual meeting. The common stock is held by approximately 525 stockholders of record and the preferred stock is closely held. Required Votes Each stockholder is entitled to one vote per share on all matters properly brought before the stockholders at the annual meeting. Such votes may be cast in person or by proxy. Abstentions may be specified as to the approval of the Proposal and will not be counted toward the vote on the Proposal. Under the rules of the American Stock Exchange, brokers holding shares for customers have authority to vote on certain matters when they have not received instructions from the beneficial owners and do not have such authority as to certain other matters. The Exchange rules allow member firms of the Exchange to vote on the Proposal without specific instructions from beneficial owners. The directors will be elected by a plurality of the votes cast in person or by proxy. How to Vote Votes may be cast in person at the annual meeting or by proxy using the enclosed proxy card. A facsimile of the proxy will be accepted. All shares of common stock and preferred stock that are represented at the annual meeting by properly executed proxies received by the company prior to or at the annual meeting and not revoked will be voted at the annual meeting in accordance with the instructions indicated in their proxies. Unless instructions to the contrary are specified in the proxy, each such proxy will be voted FOR the election as a director of the nominees listed herein. Proxies Can Be Revoked Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by filing with the Secretary of the company, before the vote is taken at the annual meeting, a written notice of revocation bearing a date later than the date of the proxy, duly executing and delivering a subsequent proxy relating to the same shares or attending the annual meeting and voting in person (although attendance at the annual meeting will not in and of itself constitute a revocation of a proxy). Any written notice of revocation should be sent to: Corporate Secretary, Greenbriar Corporation, 14185 Dallas Parkway, Suite 650, Dallas, Texas 75254. 1 Expenses of Solicitation The company will bear the expense of this solicitation, including the reasonable costs incurred by custodians, nominees, fiduciaries and other agents in forwarding the proxy material to you. The company will also reimburse brokerage firms and other custodians and nominees for their expenses in distributing proxy material to you. In addition to the solicitation made by this proxy statement, certain directors, officers and employees of the company may solicit proxies by telephone and personal contact. PROPOSAL 1 ELECTION OF DIRECTORS Nominees At the annual meeting, two Class I directors will be elected to hold office until the 2004 annual meeting of stockholders. The company's Articles of Incorporation provide that the directors are divided into three classes of equal or approximately equal number and that the number of directors constituting the board of directors will from time to time be fixed and determined by a vote of a majority of the company's directors serving at the time of such vote. The board of directors is now comprised of four members, with Class I consisting of two member and Classes II and III consisting of one member each. It is intended that the accompanying proxy, unless contrary instructions are set forth therein, will be voted for the election of the nominees for election as directors as set forth in the following table. If the nominees become unavailable for election to the board of directors, the persons named in the proxy may act with discretionary authority to vote the proxy for such other persons as may be designated by the board of directors. However, the board is not aware of any circumstances likely to render the nominees unavailable for election. The withholding of authority or abstention will have no effect upon the election of directors by holders of common stock and Series B preferred stock because under Nevada law directors are elected by a plurality of the votes cast, assuming a quorum is present. The presence of a majority of the outstanding shares of common stock and Series B preferred stock, voting as one class, will constitute a quorum. The shares held by each holder of common stock and Series B preferred stock who signs and returns the enclosed form of proxy will be counted for purposes of determining the presence of a quorum at the meeting. The following table sets forth certain information with respect to the persons who will be the nominees for election at the annual meeting and the other incumbent directors and executive officers of the company. Included within the information below is information concerning the business experience of each such person during the past five years. The number of shares of common stock beneficially owned by each of the directors who own stock as of November 30, 2001 is set forth below in "Securities Ownership of Certain Beneficial Owners." 2 Nominees and Business Experience Class I Being elected at the Annual Meeting to Term to expire in 2004 - ------------------------------------------------------------- James R. Gilley Mr. Gilley has been Chairman of the company since November Age 66 1989 and was President and Chief Executive Officer from November 1989 until December 16, 1996. He was re-elected as President and Chief Executive Officer on October 2, 1998. Gene S. Bertcher Mr. Bertcher has been Executive Vice President, Chief Age 52 Financial Officer and Treasurer of the company since November 1989 and was a director from November 1989 until September 1996. He was re-elected to the Board in 2000. Mr. Bertcher is a certified public accountant Incumbent Directors and Business Experience Class II Term expires in 2002 - -------------------- Victor L. Lund Mr. Lund has been a director of the company since 1996. He Age 71 founded Wedgwood Retirement Inns, Inc. ("Wedgwood") in 1977. Wedgwood became a wholly owned subsidiary of the company on March 31, 1996. For most of Wedgwood's existence, Mr. Lund was Chairman of the Board, President and Chief Executive Officer, positions he held until Wedgwood was acquired by the company. He continues to serve as Chairman of the board of Wedgwood. Class III Term expires in 2003 - -------------------- Don C. Benton Mr. Benton has been a director of the company since June Age 46 1994. He currently serves as a consultant to various Twelve Step ministry programs. He was Director of Twelve Step Ministries, Lovers Lane United Methodist Church of Dallas from 1991 until 1997 and has been a consultant for Spiritual Counseling and Education for the Addiction Recovery Center since 1993. He also served in that capacity for the Argyle Specialty Hospital. Mr. Benton is a Licensed Chemical Dependency Counselor and a Certified Alcohol and Drug Abuse Counselor. Securities Ownership of Certain Beneficial Owners The following table sets forth as of November 30, 2001, certain information with respect to all stockholders known by the company to own beneficially more than 5% of the outstanding common stock (which is the only outstanding class of securities of the company, except for Series B preferred stock, the ownership of which is immaterial), as well as information with respect to the company's common stock owned beneficially by each director, director nominee, and current executive officer whose compensation from the company in 2000 exceeded $100,000, and by all directors and executive officers as a group. Unless otherwise indicated, each of these stockholders has sole voting and investment power with respect to the shares beneficially owned. All share numbers have been adjusted to reflect the company's one for twenty-five reverse stock split at the close of business on November 30, 2001. 3 Common Stock --------------------- Number Percent Name and Address of of of Beneficial Owner Shares Class ------------------- ------ ------- James R. Gilley(1 & 2) 115,074 34.4% 4265 Kellway Circle Addison TX 75001 Sylvia M. Gilley(1 & 2) 115,074 34.4% 6211 Georgian Court Dallas TX 75240 Victor L. Lund(3) 48,598 16.7% 816 NE 87th Avenue Vancouver WA 98664 Floyd B. Rhoades(4) 38,119 12.7% 95 Argonaut Street Aliso Viego CA 92656 Gene S. Bertcher(5) 3,160 1.1% 4265 Kellway Circle Addison TX 75001 William A. Shirley, Jr.(6) 25,620 8.5% 2621 State Street Dallas TX 75204 American Realty Trust, Inc.(7) 3,900 1.3% 10670 North Central Expressway Suite 300 Dallas TX 75231 Basic Capital Management, Inc.(7) 5,650 1.9% 10670 North Central Expressway Suite 600 Dallas TX 75231 Nevada Sea Investments, Inc.(7) 2,912 1.0% 10670 North Central Expressway Suite 501 Dallas TX 75231 International Health Products, Inc.(7) 9,963 3.4% 10670 North Central Expressway Suite 410 Dallas TX 75231 Davister Corporation (7) 10,048 3.5% 10670 North Central Expressway Suite 410 Dallas TX 75231 Institutional Capital Corporation (7) 9,700 3.3% 10670 North Central Expressway Suite 411 Dallas TX 75231 All executive officers, directors and 166,312 49.7% director nominees as a group (five persons) (1) The shares are owned by a grantor trust for the benefit of Mr. and Mrs. Gilley. Sylvia M. Gilley is the spouse of James R. Gilley. (2) Consists of 36,914 shares of common stock owned by JRG Investments Co., Inc., a corporation wholly owned by James R. Gilley ("JRG"); 12,400 shares of common stock owned by a grantor trust for the benefit of James R. and Sylvia M. Gilley; options to James R. Gilley to purchase 8,000 shares of common stock at $331.875 per share, exercisable through December 31, 2006; options to James R. Gilley to purchase 8,000 shares of common stock at $437.50 per share, exercisable through December 31, 2007; options to James R. Gilley to purchase 8,000 shares of common stock at $62.50 per share, exercisable through December 31, 2008; options to James R. Gilley to purchase 8,000 shares of common stock at $17.25 per share exercisable through December 31, 2009; options to James R. Gilley to purchase 8,000 shares of common stock at $9.50 per share, exercisable through December 1, 2010; a warrant to purchase 4,320 shares at an exercise price of $250.00 per share, exercisable through October 1, 2006, owned by the grantor trust for the benefit of Mr. and Mrs. Gilley; and 21,440 shares of common stock owned of record by Mrs. Gilley. Other than shares owned by the grantor trust, Mrs. Gilley disclaims any beneficial ownership of the shares owned by Mr. Gilley and JRG. Mr. Gilley and JRG disclaim beneficial ownership of the shares owned by Mrs. Gilley. Mr. Gilley has pledged all of his shares in JRG to Institutional Capital Corporation (formerly known as MS Holding Corp.), a non-affiliated entity, as collateral for repayment of a promissory note payable by JRG to Institutional Capital Corporation in the remaining principal amount of $2,996,373. Of the shares of common stock owned by the grantor trust, 8,000 shares were acquired by the trust from the company in November 1993 in consideration of a $2,250,000 partial recourse promissory note executed by the grantor trust and Mr. Gilley (as co-maker). This note bears interest at an annual rate of 5.5% until November 2003, when the entire principal balance and all accrued interest is due. The note is collateralized by the 8,000 shares purchased by the grantor trust, and the grantor trust and Mr. Gilley (as co-maker) have personal recourse only for the first 20% of the principal balance. 4
(3) Consists of 48,598 shares of common stock owned by Mr. Lund. (4) Consists of 30,072 shares of common stock owned by Mr. Rhoades, options to Mr, Rhoades to purchase 8,000 shares of common stock at $437.50 per share, and 47 shares owned by his spouse. Mr Rhoades disclaims beneficial ownership of shares owned by his spouse. (5) Consists of 1,840 shares of common stock issued for promissory notes of $92,500, for which 520 shares are currently pledged as collateral, options to purchase 800 shares of common stock for $281.25 per share, all of which are vested. (6) Includes 16,497 shares of common stock owned of record by Mr. Shirley and 9,123 shares of common stock which Mr. Shirley may acquire upon conversion of certain limited partnership units. (7) Based on a Schedule 13D, dated April 8, 1998, filed by each of these entities and by Gene E. Phillips, each of these entities owns of record the number of shares set forth for such entity in the table above and each of such entities and Mr. Phillips disclaim they filed such Schedule 13D as a "group". According to the Schedule 13D, Basic Capital Management, Inc. may be deemed to beneficially own 12,462 shares, including the shares owned of record by American Realty Trust, Inc. and Nevada Sea Investments, Inc., and Mr. Phillips may be deemed to beneficially own all 42,173 shares owned of record and beneficially by these six entities. In the Schedule 13D, Mr. Phillips does not affirm beneficial ownership of any of these shares. EXECUTIVE COMPENSATION The following tables set forth the compensation paid by the company for services rendered during the fiscal years ended December 31, 2000, 1999 and 1998 to the Chief Executive Officer of the company and to the other executive officers of the company whose total annual salary in 2000 exceeded $100,000, the number of options granted to any of such persons during 2000 and the value of the unexercised options held by any of such persons on December 31, 2000. Summary Compensation Table Long Term Compensation- Number of Shares of Name and Annual Common Stock All Principal Compensation- Underlying Other Position Year Salary Options Compensation(1) --------- ---- ------------- ------------- --------------- James R. Gilley, 2000 $460,000 8,000 $5,500 Chairman, President and 1999 479,000 8,000 6,500 Chief Executive Officer 1998 414,000 8,000 6,500 Gene S. Bertcher, 2000 185,000 - 4,500 Executive Vice President and 1999 198,000 8,000 4,500 Chief Financial Officer 1998 162,000 4,000 - Robert L. Griffis (2) 2000 100,000 - - Senior Vice President 1999 111,000 - - 1998 90,000 1,200 -
(1) Constitutes directors' fees paid by the company to the named individuals. (2) Mr. Griffis is no longer employed by the company. 5
Option Grants Table (Option Grants in Last Fiscal Year) Percent of Number of Securities Total Options Underlying Granted to Exercise or Options Employees in Base Price Expiration Name Granted Fiscal Year Per Share Date ---- ---------- ------------- ----------- ---------- James R. Gilley 8,000 100% $9.50 12/31/10 Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values Value of Unexercised Number of Securities In-the-Money Underlying Unexercised Options at 2000 Shares Acquired Value Options at 2000 FY-End FY-End Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- --------------- -------- ----------- ------------- ----------- ------------- James R. Gilley -- -- 40,000 -- -- -- Gene S. Bertcher -- -- 800 -- -- -- Robert L. Griffis -- -- -- -- -- --
Stock Option Plan The board of directors administers the company's 1992 Stock Option Plan, as amended (the "1992 Plan"), 1997 Stock Option Plan (the "1997 Plan"), and 2000 Stock Option Plan (the "2000 Plan"), each of which provides for grants of incentive and non-qualified stock options to the company's executive officers, as well as its directors and other key employees and consultants in the case of the 1997 Plan. Under the Plans, options are granted to provide incentives to participants to promote long-term performance of the company and specifically, to retain and motivate senior management in achieving a sustained increase in stockholder value. Currently, none of the plans has a pre-set formula or criteria for determining the number of options that may be granted. The exercise price for an option granted under both Plans is determined by the board of directors, in an amount not less than 100 percent of the fair market value of the company's common stock on the date of grant. The board of directors reviews and evaluates the overall compensation package of the executive officers and determines the awards based on the overall performance of the company and the individual performance of the executive officers. The company currently has reserved 8,700 shares of common stock for issuance under the 1992 Plan, 20,000 shares of common stock under the 1997 Plan and 20,000 shares of common stock under the 2000 Plan. As of the date of this proxy statement options have been granted for all shares reserved under the 1992 Plan and all but 444 shares under the 1997 Plan. 6 Employment Agreements Until October 18, 2001, the company had an employment agreement with James R. Gilley, Chairman, President and Chief Executive Officer, dated January 1, 1997, that provided for a three year term that recommenced each day. The agreement provided for a base salary of $460,000 and 8,000 fully vested, non-qualified stock options each year in lieu of any cash bonus. Until October 18, 2001, the company had an employment agreement with Gene S. Bertcher, Executive Vice President and Chief Financial Officer. The agreement, dated January 1, 1997, provided for a two year term that recommenced each day. The agreement provided for compensation of $180,000 per year and discretionary bonus. On October 3, 2001 the company settled a dispute with a significant preferred shareholder. As part of the settlement the company transferred eleven assisted living communities to that shareholder. While the company and its senior executives believe the settlement was very favorable to the company they also recognized that, due to the reduced size of the company, it would be necessary to reduce overhead costs. On October 18, 2001 the employment contracts with Messrs. Gilley and Bertcher were amended to reduce the cash drain to the company. The original employment contracts provided that any reduction in compensation would trigger a required severance payment within five days to Messrs. Gilley and Bertcher of $1,380,000 and $360,000 respectively. Messrs. Gilley and Bertcher have agreed to accept notes from the company for the amounts if paid timely. These notes are non-interest bearing and are not due until December 31, 2004. There are certain acceleration provisions that will only be effective if the company violates the terms of the amended employment contracts. The amended employment contracts provide that Messrs. Gilley and Bertcher will receive a salary of $12,000 per year. In addition, as in his previous employment agreement Mr. Gilley will annually receive stock options for 8,000 shares of common stock. These options are exercisable at the market price of the company's stock at the time the options are granted and are in lieu of any cash bonus Mr. Gilley might have otherwise received. The amended employment contracts also provide for incentive compensation for Messrs. Gilley and Bertcher. The company has agreed to conduct its future business through the use of limited partnerships. Messrs. Gilley and Bertcher will receive partnership interests in each of these partnerships. Depending on the circumstances Mr. Gilley will receive a limited partner interest of between 8% and 25.9%. Mr. Bertcher will receive a limited partner interest of between 4% and 10.5%. The company has agreed that during the term of the employment contacts, which expire on December 31, 2004, all property acquisitions shall be made using a partnership structure. An affiliate of Mr. Gilley will serve as the general partner for the partnerships for no additional compensation. Compensation Review The compensation paid to the company's executive officers is reviewed and approved annually by the independent members of the board of directors. In addition to approving annual compensation for the company's executive officers, the independent directors approve any incentive awards for executive officers and other key employees, any stock option grants and additional benefits such as the company's 401(k) plan. The company's compensation philosophy is to attract, retain and reward executives who have shown they are capable of leading the company in achieving its business objectives and performance goals. These objectives include preserving and increasing the company's asset value; positioning the company's operations in geographic markets offering long term, profitable growth opportunities; preserving and enhancing shareholder value and keeping the company competitive in its marketing and operations. The accomplishment of these objectives is measured against conditions prevalent in the assisted living industry. In recent years the industry has grown to be a highly competitive industry for residents, real estate and services in a rapidly changing regional and national environment. 7 The board of directors determined that the primary forms of executive compensation should be the incentive system discussed above. The company's performance is a key consideration (to the extent that such performance can be fairly attributed or related to an executive's performance) and each executive's responsibilities and capabilities are key considerations. The independent directors strive to keep executive compensation competitive for comparable positions in other corporations where possible. In addition, the independent directors believe in equity compensation wherein executives will be additionally rewarded based on increasing the company's shareholder value. Base salaries are predicated on a number of factors, including: o recommendation of the Chief Executive Officer; o knowledge of similarly situated executives at other companies; o the executive's position and responsibilities within the company; o the board of directors' subjective evaluation of the executive's contribution to the company's performance; o the executive's experience and o the term of the executive's tenure with the company. Chief Executive Officer Compensation The board of directors reviewed the compensation of the Chief Executive Officer in connection with the amendment to his Employment Agreement described above. The board approved the compensation plan set forth in that agreement as the best means to accomplish the company's objectives. 8 PERFORMANCE GRAPH The following graph compares the cumulative total return on a $100 investment in the company's common stock on December 31, 1996 through December 31, 2000, based on the company's closing stock price on December 31, for each of those years. The same information is provided for the Standard & Poor's 500 index and, from 1996 through 2000 for an industry peer group1. - ----------------------------- 1 The company considers its peer group to be public companies whose business is primarily in the assisted living industry. Those companies are Alterra Healthcare Corporation, ARV Assisted Living, Inc., Assisted Living Concepts, Inc., Emeritus Corporation, Regent Assisted Living, Inc. and Sunrise Assisted Living, Inc. Since December 31, 2000, Assisted Living Comcepts and Regent Assisted Living, Inc. have been removed from major stock exchange listing. 9 Certain Relationships and Related Transactions The following paragraphs describe certain transactions between the company and any stockholder beneficially owning more than 5% of the outstanding common stock, the executive officers and directors of the company and members of the immediate family or affiliates of any of them, which occurred since the beginning of the 1998 fiscal year. On November 19, 1993 the company sold 8,000 unregistered shares of its common stock to The April Trust, a grantor trust for the benefit of James R. Gilley, Chairman, President and Chief Executive Officer of the company, and his wife, at a price equal to the closing price of the shares on the American Stock Exchange on that date ($281.25) per share for consideration consisting of a $2,250,000 promissory note (for which Mr. Gilley is a co-maker) for the full purchase price thereof, of which 20% of the principal amount of the note is a recourse obligation of Mr. Gilley and the grantor trust and the balance of the note is non- recourse. The note bears interest at a rate of 5.5% per annum, which accrues and is payable along with all principal upon maturity on November 18, 2003, and is secured by a pledge of the stock back to the company to hold as collateral for payment of the note pending payment in full. On December 16,1996, the compensation committee extended the due date of the note to November 18, 2008. Gene S. Bertcher, an officer of the company, is indebted to the company for an aggregate of $92,500, for notes issued in payment for shares of Common Stock. Mr. Bertcher's notes are secured by a pledge of 520 shares of common stock. Such notes bear interest at a rate equal to any cash or stock dividends declared on the purchased stock and are due in a single installment for each such note on or before October 1, 2002. As part of the Wedgwood Acquisition and as an accommodation to the sellers to assist them to help achieve a tax-free acquisition, James R. Gilley and members of his family agreed to contribute a retail property in North Carolina to the company in exchange for 27,000 shares of the company's Series D preferred stock. Mr. Gilley and his family had owned the retail property for over five years. The consideration received by James R. Gilley and members of his family, valued at $3,375,000, was based upon an independent appraisal of the North Carolina shopping center. The Series D preferred stock is unregistered, has no trading market unless converted to common stock and is entitled to one vote per share on all matters to come before a meeting of stockholders. The Series D preferred stock bears a cumulative quarterly dividend of 9.5% per year, which approximates the cash flow Mr. Gilley and his family members were receiving from the retail property prior to its contribution to the company. Mr. Gilley and his family members and affiliates transferred all of the shares of Series D preferred stock to The April Trust effective April 1997. On July 1, 2001 the Series D Preferred Stock was converted to a note due June 30, 2004. The note bears interest at the rate of 10% per annum. The company agreed to register the shares of common stock into which the Series E preferred stock was converted, in connection with the Wedgwood Acquisition, a large percentage of which is held by Victor L. Lund, under limited circumstances, as follows: commencing two years after the closing of the Wedgwood Acquisition, the company agreed to give the holders of such shares the right to demand registration of all or a portion of the common stock provided at least a majority of the shares join in such demand and the company agreed to give the holders of the common stock "piggy-back" registration rights to include all or a portion of the shares in any other registration statement filed by the company under the Securities Act (other than on Form S-8 or Form S-4), subject to certain rights of the company not to include all or a portion of such shares under certain circumstances. The company agreed to pay all expenses of the demand or piggy-back registration, other than underwriting fees, discounts and commissions. The company's executive officers will participate in the profits and loss derived from the company's future involvement in real estate and senior living properties (see Employment Agreements above). It is the policy of the company that all transactions between the company and any officer or director, or any of their affiliates, must be approved by non-management members of the board of directors of the company. All of the transactions described above were approved. 10 Organization of the Board of Directors During the year 2000 the board of directors held two meetings. The executive committee men once, the audit committee met twice and the compensation committee met twice. During the year 2001, due to the resignation of certain directors, the board of directors has been reduced to four persons. Due to the relatively small number of board members it was decided by the board to eliminate the committees and conduct all business directly with either the full board or, in certain circumstances, with the two non-management directors. Any stockholder who wishes to recommend a prospective nominee for the board of directors for consideration by the board for the election in 2002 may write: Corporate Secretary, 14185 Dallas Parkway, Suite 650, Dallas, Texas 75254, on or before January 1, 2002. Compensation of Directors The company pays each director a fee of $2,500 per year plus a meeting fee of $1,000 for members of management and $2,000 for non-management directors for each board meeting attended. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of Forms 3, 4 and 5 furnished to the company pursuant to Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), or upon written representations received by the company, the company is not aware of any failure by any director, officer or beneficial owner of more than 10% of the company's common stock to file with the Securities and Exchange Commission, on a timely basis, any Form 3, 4 or 5 relating to 1998. ANNUAL REPORT The annual report to stockholders, including consolidated financial statements, for the year ended December 31, 2000, accompanies the proxy material being mailed to all stockholders. The annual report is not a part of the proxy solicitation material. The annual report is the company's Form 10-K for 2000, including the financial statements and schedules, as filed with the Securities Exchange Commission. A stockholder may also request copies of any exhibit to the Form 10-K, and the company will charge a fee to cover expenses to prepare and send any exhibits. You may request these from: Corporate Secretary, Greenbriar Corporation, 14185 Dallas Parkway, Suite 650, Dallas, Texas 75254. OTHER MATTERS The board of directors does not intend to bring any other matters before the annual meeting and has not been informed that any other matters are to be presented to the annual meeting by others. In the event that other matters properly come before the annual meeting or any adjournments thereof it is intended that the persons named in the accompanying proxy and acting thereunder will vote in accordance with their best judgment. 11 DEADLINE FOR SUBMISSION OF PROPOSALS TO BE PRESENTED AT THE 2002 ANNUAL MEETING OF STOCKHOLDERS Any stockholder who intends to present a proposal at the 2002 annual meeting of stockholders must file such proposal with the company by March 2, 2002 for possible inclusion in the company's proxy statement and form of proxy relating to the meeting. By Order of the Board of Directors /s/ Oscar Smith Oscar Smith, Secretary 12 Greenbriar Corporation This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby acknowledges receipt of the notice of annual meeting of stockholders of Greenbriar Corporation, to be held at the offices of the company at 14185 Dallas Parkway, Suite 650, Dallas, Texas 75254, on December 28, 2001, beginning at 10:00 a.m., Dallas Time, and the proxy statement in connection therewith and appoints James R. Gilley and Gene S. Bertcher, and each of them, the undersigned's proxies with full power of substitution for and in the name, place and stead of the undersigned, to vote upon and act with respect to all of the shares of common stock and Series B preferred stock of the company standing in the name of the undersigned, or with respect to which the undersigned is entitled to vote and act, at the meeting and at any adjournment thereof. The undersigned directs that the undersigned's proxy be voted as follows: 1. ELECTION OF [ ] FOR the Class 1 nominees [ ] WITHHOLD AUTHORITY DIRECTORS listed below (except as marked to vote for the Class I to the contrary below) nominees listed below Class I nominees: James R. Gilley, Gene S. Bertcher (Instruction: To withhold authority to vote any individual nominee, write that nominee's name on the line provided below.) ----------------------------------------------------------------------------- 2. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING. This proxy will be voted as specified above. If no specification is made, this proxy will be voted for the election of the Class I director nominees in item 1 above. The undersigned hereby revokes any proxy heretofore given to vote or act with respect to the common stock or Series B preferred stock of the company and hereby ratifies and confirms all that the proxies, their substitutes, or any of them may lawfully do by virtue hereof. If more than one of the proxies named shall be present in person or by substitute at the meeting or at any adjournment thereof, the majority of the proxies so present and voting, either in person or by substitute, shall exercise all of the powers hereby given. Please date, sign and mail this proxy in the enclosed envelope. No postage is required. Date , 2001 ------------- ------------------------------ Signature of Stockholder ------------------------------ Signature of Stockholder Please date this proxy and sign your name exactly as it appears hereon. Where there is more than one owner, each should sign. When signing as an attorney, administrator, executor, guardian or trustee, please add your title as such. If executed by a corporation, the proxy should be signed by a duly authorized officer. -----END PRIVACY-ENHANCED MESSAGE-----